NJ Supreme Court Hears Case for Restoring COLAs

By Briana Vannozzi

Right from the start, Supreme Court Justice Barry Albin questioned the ambiguity of the legislation.

“How are the citizens of the state, the employees who work for the state and municipal governments supposed to guide their lives if they cannot read a statute and expect the plain language of the statute to rule the day?” he asked.

Attorneys arguing Gov. Chris Christie’s case said that the laws governing the state’s retirement system aren’t the same ones protecting cost of living adjustments — or COLAs — that were cut in 2011 as part of a landmark pension and benefits reform.

“The non-forfeitable right statute does not even mention COLAs, much less create an unequivocal contractual right to them,” said Assistant Attorney General Jean Reilly.

In the 2011 deal, the state froze cost of living increases for public worker retirees and asked current employees to contribute more toward benefits. In return, Christie’s administration agreed to make scheduled payments into the underfunded pension system. Freezing COLAs was expected to save the state tens of billions of dollars over the next 30 years.

“These contractual non-forfeitable rights, these promises were codified in a 1997 law that’s been discussed this morning. The law was clear, it was specific and it intended to protect all pension benefits for public employees,” said Appellant Charles Ouslander.

The attorney representing retirees argued that the legislative intent in a 1997 law guaranteed cost of living increases and other benefits promised when workers were hired. But that same law — which established pension plans like the public employee retirement system — makes no mention of COLAs, even though it referred to other items like disability and health benefits.

“Even if a COLA is a benefit, that’s irrelevant to the question of whether the Legislature intended to include it within the laws governing the retirement system. If the laws governing the retirement system is read super broad to include everything, including all those benefits outside of the PERS Act, there’s no limiting principle,” Reilly said.

Plaintiffs are asking the state to restore cost of living increases for all public workers who retired before the 2011 law. At stake is billions of dollars, according to Moody’s Investors Service. The creditor says the state’s portion of the unfunded pension liability would jump from $40 billion to roughly $53 billion if COLAs are reinstated. A decision is expected from the court within the next few weeks.