Public unions, others sue N.J. to overturn pension, health care law

TRENTON - New Jersey's largest public unions were among nearly 50 plaintiffs who sued the state on Wednesday in a bid to overturn a new law requiring workers to pay more for their pensions and health care.

Unions representing 800,000 current and retired teachers, state and local employees, and public safety workers said the law's suspension of automatic pension cost-of-living adjustments, among other provisions, violates the state and federal constitutions.

Cutting those adjustments for current retirees achieves more than half of the $120 billion in projected savings the law is anticipated to achieve in the next 30 years.

The suit - brought by the New Jersey Education Association, Communication Workers of America, and others - argues that the adjustments, known as COLAs, are deferred pay that is part of the pension contractually owed to employees.

Supporters of the law, which was signed by Gov. Christie on June 28, say changes were needed to prevent the system from going broke.

"Another lawsuit won't change the fact that the public employee pension system was on a collision course with collapse without the governor's and the legislature's bipartisan intervention," Michael Drewniak, a spokesman for Gov. Christie, said. "The union leadership is . . . oblivious to that. So, fine, file another lawsuit, keep your heads in the sand, and ignore the problem."

A main reason that New Jersey has about $54 billion in unfunded pension liabilities is that the state for years skipped contributions recommended by actuaries to ensure the funds had enough money to pay retirees.

A law enacted last year requires the state to pay one-seventh of the actuary-recommended amount starting in 2011 - about $500 million instead of $3 billion - and gradually increase payments to the full amount in seven years. The law passed in June added language allowing unions to take the state to court if it doesn't make those contributions.

What the unions are objecting to is a requirement, under the newest law, that they contribute more to their pensions while the state gets a break on what it must chip in. Contributions by employees in the Public Employee Retirement System, for example, were increased from 5.5 to 6.5 percent immediately and will rise to 7.5 percent in seven years.

The suit uses similar arguments of contractual violation when contesting an increase in health care premiums into retirement for current workers with fewer than 20 years of service.

Twenty-four individuals - current and retired government workers - also joined in the challenge, filed in U.S. District Court in Trenton.

The lawsuit does not come as a surprise. In the days leading up to the bill's passage, thousands of union workers rallied outside the Statehouse protesting what they viewed as a violation of their collective bargaining rights, and vowed to fight it.

Senate President Stephen Sweeney (D., Gloucester), an architect of the benefits overhaul, said he was confident a judge would find it constitutional.

The law allows newly formed committees, consisting of government and union representatives, to reinstate COLAs once the pension funds are financially healthy.

In July, judges in Colorado and Minnesota threw out challenges brought by public workers to cutbacks in cost of living adjustments in those states, concluding that COLAs were separate from base pension benefits.

Stephen Pincus, a Pittsburgh lawyer representing plaintiffs in both cases, said he had sought to prove that a worker vested in a retirement system is vested in both the base pension and the COLA.

"Everyone knows inflation can eat up your pension benefits and that the cost-of-living adjustment is a critical part of one's pension," he said.