State
can skip teacher pension payments
Thursday, April 03, 2008 •
BY DUNSTAN McNICHOL • Star-Ledger Staff
A judge yesterday rejected attempts by the state's largest teachers union to order billions of dollars in state payments into an underfunded teachers retirement fund, saying lawmakers are free to skip payments into the account as long as it remains solvent. The ruling by Superior Court Judge Linda Feinberg in Mercer County removes the threat that lawmakers, already grappling with a strained state budget, would have to find $2.6 billion to make up for pension contributions that have been skipped since 2003. Attorneys for the New Jersey Education Association had argued the state's decision to skip pension contributions actuaries said were needed to keep the fund flush amounted to a breach of contract terms with the 200,000 teachers enrolled in the fund. Feinberg rejected that contention, saying since the $35 billion retirement account still has enough to pay benefits for decades to come, the state has the right to balance the need to support retirement benefits against other priorities. "Only the most egregious violation will support a judicial determination to interject itself into the budgetary process," she said in her ruling. However, she cautioned "the State should not construe this opinion as a 'green light' to continue substantial deviations from the statutory requirements." Since 2003, lawmakers have skipped $5.6 billion in payments due to be made to the teachers fund and to six other public employee retirement accounts. The budget Gov. Jon Corzine presented to lawmakers earlier this year would continue that, paying less than half the $2.3 billion actuaries say the state should put into the funds. As a result of the skipped payments and the 2002 collapse of the stock markets, the accounts now hold $19.2 billion less than actuaries say is needed to pay the benefits already promised to more than 700,000 working and retired employees. Feinberg said despite the shortfall the teachers fund is in no imminent danger of insolvency. But she said continued underfunding will eventually jeopardize the fund's solvency, and "the state should develop an adequate funding method to ensure benefits." Steve Baker, a spokesman for the NJEA, said the union is weighing its options, including the possibility of an appeal. Corzine welcomed the judge's ruling, but pledged to continue to seek ways to fund the retirement accounts while meeting other state obligations. "My administration will continue to make responsible contributions to the pension fund, but until we deal with the state's massive debt and ever increasing debt service payments, pension contributions will continue to face increased competition for state dollars," he said. In dismissing the lawsuit, Feinberg suggested lawmakers might want to consider reducing benefits to teachers hired in the future. "The failure to make required contributions or appropriate less than the statutory required amounts over an extended period most likely will, at some point in time, reach a level where the receipt of benefits is jeopardized and the security and integrity of the fund is at risk," she wrote. "Clearly, given budgetary concerns, the competition for resources and a diverse number of other complex fiscal issues, the state may, at some point in time, elect to offer a different choice or choices," she said.
Dunstan McNichol may be reached at dmcnichol@starledger.com
or (609) 989-0341. |