Why judge's pension ruling is blow to Christie's political brand

New Jersey Gov. Chris Christie, still on an unofficial campaign tour as he jousts with other GOP presidential hopefuls in the early contests for key supporters and donor funds, returned home this week to address his state’s own pressing need for cash.

It’s budget season in New Jersey, and the famously brash governor had been planning to revisit one of his signature issues as a fiscal conservative in charge of a liberally leaning state: hewing a bipartisan path to revamp the state’s perpetually underfunded public-employee pension plans.

It’s a crushing problem afflicting state after state, Governor Christie told the state legislature during his annual budget address on Tuesday. And his “innovative” new plan, a roadmap negotiated for months with his arch foes in the teachers’ union, even, could become a “national model,” he said.

But even before his address, his new plan has suddenly been thrown into disarray. On Monday, a state judge ruled that Christie had broken his own 2011 pension reform law, illegally cutting $1.57 billion from required payments to the state’s employee pension fund the 2015 fiscal year. The state has until June to find a way to pay up.

It was yet another blow to his political brand. Four years ago, Christie was hailed for his bipartisan chops, getting state employees to agree to contribute more to their pensions in exchange for guaranteed contributions from the state. It was indeed a “national model,” and one of the primary reasons the new Republican governor was thought to be presidential material.

But last year, facing an unexpected budget shortfall from New Jersey’s lackluster economy, Christie reneged on his plan. He cut the required $1.6 billion pension contribution to about $700 million.

Last June, the judge, Mary Jacobson of the Mercer County Superior Court, ruled that Christie’s FY 2014 cuts could go forward as an emergency measure, after the state’s municipal unions sued.

This fiscal year, he cut the required contribution again from $2.25 billion to $681 million, but this time, the judge did not go along. 

“He can’t go to that well two times in a row, this ruling says,” notes Matthew Hale, professor of political science and public affairs at Seton Hall University in South Orange, N.J.  “Last time, Judge Jacobson said, it’s OK for emergency measures, but essentially he’s trying to claim an emergency again for the 2015 fiscal year, and that won’t fly.”

The Christie administration also argued that the 2011 reform law violated the state constitution, which requires a balanced budget and gives the governor line-item veto power – a position that appeared to raise the judge’s eyebrows.

“The Governor now takes the unusual position in this court of claiming that this legislative contractual guarantee, which embodied significant reforms for which he took substantial credit with great national fanfare, violates the New Jersey Constitution,” Judge Jacobson wrote.

She also ruled that the state cannot “simply walk away from its financial obligations,” especially when the state created them. And despite the pressure to come up with $1.7 billion by June, Jacobson wrote the state’s statutory obligations cannot “be delayed further simply because it may be inconvenient for the Legislature and the Governor to go back to the drawing board in the middle of a budget cycle.”

Christie's office vowed it would appeal the decision on Monday, and said it was it was “liberal judicial activism” usurping what should be an executive decision.

Even so, Christie went ahead and proposed his new “road map” to again address the long-term problems with funding the public employee pension plan, which covers nearly 800,000 teachers, law enforcement personnel, and other state workers.

He proposed freezing the the existing pension plan and replacing it with a “cash balance pension plan,” which allows for a measure of market fluctuations and risk to the plan, rather than defined benefits guaranteed by the state, and which the unions would oversee.

The “road map” also requires the unions to identify cuts to their health costs. In return, Christie proposed a constitutional amendment requiring the state to make its annual contributions.

Though the unions had generally agreed to the road map, no agreement has been reached, officials said on Tuesday. And after Jacobson’s ruling, the unions may be less inclined to cooperate with the governor's second “innovative” bipartisan plan in four years.

“They got burned,” said New Jersey Senate President Stephen Sweeney, a Democrat who helped Christie pass his 2011 reforms, according to The New York Times.

But the state’s pension woes stem from the generally tepid state of the New Jersey economy. Companies such as Mercedes Benz, which had its headquarters in the state for 40 years, is moving to Georgia, and the state’s essential pharmaceutical industry has lost jobs to Massachusetts. At the same time, the gambling industry in Atlantic City has shed more jobs than any region in the country.

Raising taxes is out of the question, Christie says. But unless Jacobson’s ruling is overturned, the governor and the state legislature need to come up with $1.7 billion in a matter of months.

“The governor has been masterful at finding every little way, every gimmick, every one-time cut, every fund that he can possibly raid, to pay Peter and not pay Paul,” says Professor Hale. “But he’s sort of reached, from all I can tell, the end of the line.”