(June 23, 2011) — A lawsuit filed by Local 1033 of the Communications Workers of America (CWA) — a New Jersey labor union — claims Governor Chris Christie and his predecessors failed to make payments to the state’s pension funds.
The union filed the suit in US District Court in New Jersey, alleging that the failure by Christie and his predecessors to make sufficient payments to the funds violated a constitutional prohibition against the “impairment of contracts,” Reuters reported. Since 1998, the state has made three partial payments to the pension, skipping the remaining ones, a CWA spokesman told Reuters.
“This is not about the benefits paid to retirees,” Rae Roeder, president of Local 1033, told the news agency. “This is about gross mismanagement by the state and its attempt to shift blame to the victims.”
Under Christie’s agreement to cut pensions and benefits for current public employees, workers would need to pay more of their salaries into the pension system. They would also need to give up annual cost-of-living increases while also paying a percentage of their health care premiums in a tiered system based on their salary. The proposed deal also comes nine months after Christie announced his proposals for cuts to help balance the state’s pension system.
According to Moody’s Investors’ Service, New Jersey’s $30.7 billion unfunded pension liability makes it the seventh-worst funded system in the country.
Explaining the low funding environment among pensions in the United States, State of Wisconsin Investment Board spokesperson Vicki Hearing told aiCIO: “There are several reasons why funds in the US have such low funding levels — one reason is that a lot of funds were in trouble because they didn’t keep up with contributions, so states have promised benefits, but are not funding them. The Wisconsin Retirement System funding level is strong and historically has been strong. We’ve met 100% of our contributions because it’s mandatory in the state. There’s never been a holiday here, while other states have had holidays for contributions,” she said, noting that the lack of mandatory contributions among pensions has created major attention in recent years.
On the investment side of the pension equation, however, New Jersey’s pension fund is attempting to make up some of the shortfall through an increasing allocation towards allegedly riskier investments. In March, in an effort to boost funding levels, the New Jersey State Investment Council approved new investment guidelines, which would allow a higher alternatives allocation totaling 35% of assets from the current cap of 25%. The State Investment Council revealed that domestic equities returned 32.3% from June 30 to February 28, making it the best-performing asset class. Meanwhile, about $35 billion, or 48%, of the fund’s assets were in public equity with $10.8 billion, or 15%, in alternative investments, which include private equity, real estate, and hedge funds.
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