As reported by njspotlight.com, despite his threat to take “extreme measures” to control rising pension costs, Governor Chris Christie does not have the power to declare a fiscal “state of emergency” to make unilateral changes to the pension system, nor does New Jersey have the ability, like Detroit, to declare bankruptcy to get out from under its pension obligations, according to state and national authorities.
Christie warned during his annual State of the State address in January that the $600 million annual increase in state pension payments required through Fiscal Year 2018 as part of a seven-year ramp up to the actuarially required funding level was crowding out spending on education, transportation, and other policy priorities. The Governor grudgingly budgeted the $2.25 billion pension payment required for next year only after Senate President Stephen Sweeney threatened to shut down state government if he failed to do so.
Following his budget message last month, Christie warned that he had “significant powers” to rework the pension system on his own. The not-so-veiled threat was aimed at the Democratic Legislature, suggesting that if it did not pass measures to further cut pension costs, presumably by requiring further concessions from the public employee unions, Christie would act on his own.
But a review by the nonpartisan Office of Legislative Services concluded that the Governor’s powers under the Disaster Control Act do not give him the authority to carry out his threat because no imminent fiscal emergency exists, according to a Senate Democratic memo and an OLS analysis obtained by NJ Spotlight. Further, Christie and other governors do not have the power to declare bankruptcy to get out from under contractual obligations for pensions and retiree health benefits, as Wall Street financiers have been privately urging for years, because states, as constitutional sovereigns with taxing authority, are not covered by bankruptcy laws, the National Governors Association and the National Conference of State Legislatures have concluded.
Christie’s threat aroused loud protests from the state’s unions and sent legislators scurrying to the law books. ‘With the governor threatening to unilaterally make changes to the pension system but not explaining how or what he intends to do, the Office of Legislative Services engaged in extensive discussions and review of state laws to determine any possible way the governor could act by Executive Order,” according to a Senate Democratic memo issued by Sweeney and Executive Director Kevin Drennan on March 13 that was obtained by NJ Spotlight, along with an accompanying OLS report.
“OLS’s conclusion is that he does not have any power to unilaterally make any changes because the state’s pension laws are all set by statute, including the reforms that continue to restore financial stability to the pension system,” the memo continued. “The governor can’t try to claim that the pension system’s finances are in such dire straits to constitute an emergency because OLS believes that the pension system is not in any state of emergency,” the memo said.