Republican Gov. Chris Christie and the state's Democrat-controlled Legislature must find $1.57 billion to put into pension funds for retired public workers, a judge ruled Monday in a decision that comes as a major blow to the governor as he prepares to run for president.
Unions for public workers sued Christie after he announced last year he would not make the full pension payments he had agreed to in a 2011 overhaul that was one of his main accomplishments.
Superior Court Judge Mary Jacobson's ruling could force big changes in the state budget late in the fiscal year.
"In short, the court cannot allow the State to 'simply walk away from its financial obligations,' especially when those obligations were the State's own creation," she wrote in the ruling, released a day before Christie is scheduled to make his budget proposal for the fiscal year starting July 1.
The state government will appeal, the governor's office said in a combative statement.
"Once again, liberal judicial activism rears its head with the court trying to replace its own judgment for the judgment of the people who were elected to make these decisions. This budget was passed by the Legislature and signed by the governor with a pension payment," Christie spokesman Michael Drewniak said in a statement. "The governor will continue to work on a practical solution to New Jersey's pension and health benefits problems while he appeals this decision to a higher court where we are confident the judgment of New Jersey's elected officials will be vindicated."
Representatives of government employees, meanwhile, declared victory.
"It's a win for all of the participants in the fund and the retirees," said Kenneth Nowak, a lawyer who argued the case on behalf of the New Jersey Education Association, the state's largest teachers' union.
Christie, who is laying the groundwork for a presidential run but has not announced a candidacy, said reducing payments last year and this year was the only reasonable way for the state to balance its budgets after tax revenue fell short of expectations last year.
The legal dispute centered on whether the state was contractually bound by the governor's 2011 promise to make up for missed or reduced pension payments over a seven-year period.
The 2011 pension deal was one of Christie's major accomplishments as governor and served as evidence that he could work with Democrats to deal with one of New Jersey's persistent financial issues. But it has become a thorn in his side.
Last year, even before the scramble to balance the budget, Christie decried the cost to taxpayers as too high. When revenue came in under projections, he funded most of the gap by cutting contributions. He said he's still making good on the state's current obligation while suspending efforts to catch up from past underpayments.
Last year, he reduced the contribution from a planned $1.7 billion to $700 million. This year, he wants to contribute $681 million rather than the planned $2.25 billion.
At a court hearing over the cuts in January, the state attorney general's office, representing the Christie administration, was in the unusual position of arguing that a law signed by Christie to make the deal more ironclad violated the state's constitution. It argued that a law should not require spending of future legislatures.
Unions say the law is constitutional and it's only fair: Public workers had their contributions increased and saw their retirement ages raised, while retirees had their cost-of-living increases suspended.
Since early last year, Christie has been saying that the rising cost of pensions is unsustainable. It's expected to cost the state $5 billion a year eventually.
But it was not until tax receipts last year came in short that he announced he would not make the whole makeup payment in 2014 or 2015.
The judge ruled last year that making the full payments is an obligation, but she found that the state should be allowed to cut back for 2014 because it was an emergency. Making the full payment last year could have meant drastic cuts to other government services.