Voters Would Consider Requiring ½ Payment Starting in 2017 & Full Payment Starting in 2021
(TRENTON) – Legislation Assembly Speaker Vincent Prieto sponsored to ask voters to amend the state Constitution is to require the state to fund the pensions of public employees on a timely basis received a required public hearing Thursday by the Assembly Judiciary Committee.
Current law requires the state to do this under the provisions set forth in a 2011 law. However, currently these provisions cannot be enforced by the courts of this state.
“The discussion regarding public employee pension funding in this state is littered with broken promises and irresponsibility,” said Prieto (D-Hudson/Bergen). “It’s time to hear what the voters have to say about this important issue.”
The 2011 law requires the state and local government employers 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 State Police Retirement System.
The proposed amendment (ACR-3) would reverse a 2015 decision of the New Jersey Supreme Court, which 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.
“This amendment would overrule that holding and ensures that the commitment and requirement for annual funding to eventually reach full funding for the pension systems are protected by the New Jersey Constitution,” Prieto said.
Under the measure, quarterly state payments into the pension system would be required.
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.
“This would accelerate the return on investment of the pension systems,” Prieto said. “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.”
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.