(Bloomberg) — Governor Chris Christie won a decisive victory over New Jersey unions when the state's highest court ruled he isn't required to fill a $1.57 billion pension budget gap, defusing an issue that hung over his potential presidential campaign.
While the ruling averts an immediate cash crunch, the pension hole continues to restrain spending on schools, tax relief and municipal aid. Christie has vowed not to raise taxes even as he acknowledges there's no alternate plan for closing a deficit that may top $2.7 billion through June.
The New Jersey Supreme Court ruled it's up to the state legislature to resolve the funding issue.
"That the state must get its financial house in order is plain," the court said Tuesday in a 5-2 decision. "The need is compelling in respect of the state's ability to honor its compensation commitment to retired employees. But the court cannot resolve that need in place of the political branches."
Christie, a Republican, said last year that an unanticipated drop in revenue forced him to trim pension payments to balance the budget, as required by law. The move came after Christie and the Democratic-led legislature approved a bill in 2011 that increased the state's annual payments into the pension fund in exchange for higher employee contributions.
Christie made the first two payments, deferred $887 million last year when revenue sagged, and withheld payment on the remainder for the year ending June 30.
Unions sue
Unions for teachers, firefighters and other public employees sued seeking full payment into a pension system underfunded by $83 billion. State court Judge Mary Jacobson sided with the governor in June 2014.
