Prieto, Jimenez, Giblin & Caputo Bill Asking Voters to Ensure Public Employee Pension Funding Begins Second Leg of Two-Year Approval Process

Voters Would Consider Requiring ½ Payment Starting in 2017 & Full Payment Starting in 2021

Legislation sponsored by Assembly Speaker Vincent Prieto and Assembly Democrats Angelica Jimenez, Thomas Giblin and Ralph Caputo asking voters to amend the state Constitution to require the state to fund the pensions of public employees on a timely basis was approved by the Assembly Judiciary Committee on Monday.

The constitutional amendment was previously approved by both houses of the Legislature at the end of the last legislative session. In order to be placed on the ballot, it must be approved by a simple majority of both houses in two consecutive years.

“The discussion regarding public employee pension funding in this state is littered with broken promises and irresponsibility,” said Prieto (D-Bergen/Hudson). “This is a pragmatic solution to a two-fold problem – fulfilling our commitment to public employees and re-establishing financial stability and long-term solvency for our state. It’s time to hear what the voters have to say about this important issue.”

Under the provisions set forth in the 2011 pension and benefits overhaul law, state and local government employers were required to make annual contributions to the various pension systems administered by the State: Teachers’ Pension and Annuity Fund; Judicial Retirement System; Prison Officers’ Pension Fund; Public Employees’ Retirement System; Consolidated Police and Firemen’s Pension Fund; Police and Firemen’s Retirement System; and the State Police Retirement System.

However, a 2015 decision by the New Jersey Supreme Court held the contractual obligation of the state to make its annual required contributions to the pension systems unenforceable because it was “subject to appropriation” and contravened the Debt Limitation Clause of the Constitution unless approved by the voters.
The proposed amendment (ACR-109) would reverse the 2015 Supreme Court decision and require quarterly state payments into the pension system.

“This amendment would overrule the Supreme Court’s holding and ensure that the commitment and requirement for annual pension payments is protected by the New Jersey Constitution,” said Jimenez (D-Bergen/Hudson). “This is a responsible approach to gaining control over these funds once and for all.”

“This would accelerate the return on investment of the pension systems,” said Giblin (D-Essex/Passaic). “It’s a sound fiscal approach that will go a long way toward easing the burden while also creating a stronger financial foundation for our state.”

“For decades now we’ve seen the impact that kicking the can down the road can have on state finances,” said Caputo (D-Essex). “This measure will put an end to the games once and for all and get us back on the road to financial solvency.”

The required contribution to be made by the state shall be paid in each state fiscal year to each system and fund on the following schedule: at least 25 percent by Aug. 1; at least 50 percent by Nov. 1; at least 75 percent by Feb. 1; and at least 100 percent by May 1.

Under the measure, the state shall commence making its annual required contribution in full to each retirement system and pension fund for public employees administered by the state in the state fiscal year that commences July 1, 2021 and shall make the required contribution in full in each fiscal year thereafter.

Commencing July 1, 2017, the state shall make a payment to each retirement system and pension fund of at least one-half of the full annual required contribution for each system and fund. The payment would increase by at least 1/8 of the full annual required contribution for each system and fund for each subsequent fiscal year until July 1, 2021.

As a proposed constitutional amendment, the bill must now sit on the desks of lawmakers for 20 days before being considered by the full Assembly. It must also receive a public hearing.