BOARD OF TRUSTEES OF PUBLIC EMPLOYEES RETIREMENT SYSTEM OF NEW JERSEY v. STATE OF NEW JERSEY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

BOARD OF TRUSTEES OF PUBLIC

EMPLOYEES' RETIREMENT SYSTEM OF

NEW JERSEY; BOARD OF TRUSTEES OF

TEACHERS' PENSION AND ANNUITY

FUND OF NEW JERSEY; and BOARD OF

TRUSTEES OF POLICE AND FIREMEN'S

RETIREMENT SYSTEM OF NEW JERSEY,

Plaintiffs-Appellants,

v.

STATE OF NEW JERSEY; NEW JERSEY

DEPARTMENT OF TREASURY; CHRISTOPHER

JAMES CHRISTIE, GOVERNOR; and ROBERT A.

ROMANO, ACTING TREASURER, STATE OF

NEW JERSEY,

Defendants-Respondents.

December 12, 2016

Argued November 1, 2016 - Decided

Before Judges Reisner, Koblitz and Sumners.

On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2818-14.

Robert D. Klausner (Klausner Kaufman Jensen & Levinson) of the Florida bar, admitted pro hac vice, argued the cause for appellants (Bennet D. Zurofsky, and Mr. Klausner, attorneys; Mr. Zurofsky and Mr. Klausner, of counsel and on the briefs; Adam P. Levinson, on the briefs).

Jean P. Reilly, Assistant Attorney General, argued the cause for respondents (Christopher S. Porrino, Attorney General, attorney; Ms. Reilly, of counsel and on the brief; Gabriel I. Chacon, Deputy Attorney General, and Jonathan Peitz, Deputy Attorney General, on the brief).

PER CURIAM

In Burgos v. State, 222 N.J. 175 (2015), cert. denied, __ U.S. __, 136 S. Ct. 1156, 194 L. Ed. 2d 174 (2016), our Supreme Court recognized the severe funding shortages faced by the State's public employee pension systems, but held that the responsibility for addressing the shortfall rested with the Legislative and Executive branches. Id. at 184. Most significantly for the disposition of the current appeal, Burgos definitively held that Chapter 78, L. 2011, c. 78, does not, and constitutionally may not, create "an enforceable long-term financial contract." Ibid.; see N.J.S.A. 43:3C-9.5(c).

We . . . hold that the Legislature and Governor were without authority to enact an enforceable and legally binding long-term financial agreement through this statute. Chapter 78's contractual language creates, at best, the equivalent of appropriations-backed debt that is accompanied by a strong legislative expression of intent to provide future funding. The legislative use of contractual terms in Chapter 78, when referring to the required schedule of recurring payments of the State's annual required contribution to the State public pension systems, does not create an enforceable long-term financial contract that can co-exist with the limitations of the Debt Limitation Clause and the related Appropriations Clause of the State Constitution. So long as Chapter 78 exists in its present statutory form, each year's appropriations act will reflect the present legislative and executive judgment as to the budgetary priority of this pressing need for which those branches will be answerable to the public and to the financial marketplace. It is not the place of this Court to dictate that judgment, for the Constitution has left such budgetary and political questions to the other two branches.

[Burgos, supra, 222 N.J. at 184.]

Plaintiffs, the Boards of Trustees of the State's principal public employee retirement systems, filed a complaint in December 2014, primarily based on breach of contract, seeking to enforce Chapter 78. The Court decided Burgos on June 9, 2015.1 Despite the Court's clear holding, plaintiffs sought to amend their complaint to circumvent Burgos. For reasons stated in her oral opinion, Assignment Judge Mary C. Jacobson denied plaintiffs' motion to amend and granted defendants' motion to dismiss the complaint with prejudice, in an order dated October 8, 2015. Plaintiffs appeal from that order.

Based on our de novo review, we conclude that the complaint failed to state a claim and the proposed amendment would have been futile, thus warranting dismissal with prejudice. See Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006); Gonzalez v. State Apportionment Comm'n, 428 N.J. Super. 333, 349 (App. Div. 2012), certif. denied, 213 N.J. 45 (2013). We affirm for the reasons cogently stated in Judge Jacobson's October 8, 2015 oral opinion. Plaintiffs' arguments on this appeal largely repeat those presented to Judge Jacobson. Their contentions are without merit, and do not warrant additional discussion beyond the following brief comments. R. 2:11-3(e)(1)(E).

The majority of plaintiffs' arguments, concerning the contributions to the pension funds required by Chapter 78, suffer from the same central flaw - they assume the existence of a contract which Burgos clearly held does not legally exist. See Burgos, supra, 222 N.J. at 212. As the Court plainly stated: "There simply is no legally enforceable financial obligation imposed on the State by virtue of Chapter 78's enactment." Ibid.

Defendants' argument, that the State has "breached its contractual obligation to pay benefits," was also properly dismissed. Our Court has recognized that those benefits represent deferred compensation to retired employees for work already performed. Berg v. Christie, 225 N.J. 245, 253 (2016); Burgos, supra, 222 N.J. at 182. However, as Judge Jacobson correctly recognized, a claim based on an alleged failure to pay pension benefits is not ripe. The State is currently fulfilling its statutory obligation to pay pension benefits and has not indicated any intention to cease doing so. See N.J. Educ. Ass'n v. State, 412 N.J. Super. 192, 215 and n. 14 (App. Div.), certif. denied, 202 N.J. 347 (2010); see also Committee to Recall Robert Menendez v. Wells, 204 N.J. 79, 99 (2010).

Plaintiffs' argument concerning the Governor's refusal to expend funds appropriated in 2014 is moot. See Exec. Order No. 156, 46 N.J.R. 1375(a) (June 16, 2014); Burgos, supra, 222 N.J. at 187-88. By the terms of the FY2014 Appropriations Act, that pension-funding appropriation lapsed a month after the 2014 fiscal year ended. See L. 2013, c. 77. The courts cannot require the Legislature to re-appropriate those lapsed funds. Camden v. Byrne, 82 N.J. 133, 148 (1980); Camden v. Whitman, 325 N.J. Super. 236, 243 (App. Div. 1999).

We also agree with Judge Jacobson that the annual amount owed to the pension funds cannot be fractionalized - by viewing separately the amount owed to each fund in order to avoid the one-percent cap set by the Debt Limitation Clause. N.J. Const. art. VII, 2, 3. That would be clearly contrary to the Court's approach in Burgos. See Burgos, supra, 222 N.J. at 211 ("The amount of monies that Chapter 78 purports to contractually require the State annually to dedicate to pay down the unfunded liability of the various pension funds -- for example, the amount required in FY15 -- substantially exceeds the limits annually allowed under the Debt Limitation Clause.")

Finally, while we appreciate the tremendous importance of the fiscal issues underlying this appeal, their resolution must lie with the Legislative and Executive branches. See id. at 218.

Affirmed.

1 Plaintiffs had participated in Burgos as amici curiae.