The New Jersey Education Association will sue New Jersey Gov. Chris Christie challenging his underfunding of the pension system in the fiscal year 2015 budget, a NJEA spokesman said July 1.
New Jersey's Senate and House of Representatives passed a $34.1 billion spending plan. With votes from Democratic members of the legislature, the budget was to include tax increases on high earners and corporations. It would also have funded the state's pension system according to an agreement reached in 2011 that ramped up funding over seven years.
On Monday Christie vetoed the tax increases and reduced spending on the pension system to $681 million instead of the $2.25 billion that he had promised in the 2011 agreement.
Christie's reduction of the pension payment comes after he reduced the pension payment for fiscal year 2014 by $884 million.
The ratings agencies have dropped New Jersey to A-plus or the equivalent in the last few months, pointing in part to the state's large unfunded pension liability.
When Christie announced plans in May to deviate from the 2011 ramp-up plan not only in fiscal 2014 but also in fiscal 2015, Fitch Ratings called the plans a credit negative. Standard & Poor's has its rating on negative credit watch, in part because of the governor's handling of pension funding.
In May government worker unions sued Christie concerning his pension funding plans for both fiscal 2014 and fiscal 2015. The judge said the state did not have the money to make the payment in fiscal 2014. On June 25 she said the government had not yet passed a fiscal 2015 budget so she could not rule on it yet. But she said that the unions had a contractual right to the pension payment.
The original suit concerning fiscal 2015 will be reissued, said NJEA spokesman Steve Wollmer. "Given the fact that it is very clear that the funding is a contractual right, we have every optimistic feeling right now that we may be able to prevail on this," he said.
