New Jersey judges say government retirees have a right to cost-of-living increases in pensions


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NEW BRUNSWICK, New Jersey — Unions are lauding a state appeals court ruling that retired public workers have a right to cost-of-living increases in their pensions.

A three-judge panel on Thursday left it to a lower-court judge to decide whether the state had proper justification for suspending those hikes as part of a 2011 pension system overhaul.

The suspension was part of a deal intended to stabilize the pension funds, which have an unfunded liability of about $40 billion. Workers also were required to pay more toward their retirement. The move came after an agreement in 2010 to ramp up payments over seven years to fully fund the pension funds.

Some retirees and unions sued, arguing that New Jersey law gives retirees a contractual right to the cost-of-living allowance, or COLA, increases.

New Jersey Education Association President Wendell Steinhauer called the ruling a "major win," even though it's unclear whether the payments will be reinstated as a result.

But the Republican Assembly budget officer, Declan O'Scanlon, said in a statement that the ruling may not help retirees in the long run.

"Reinstating COLA will have a devastating effect on the fund and put its survivability in question," he said. "Minor adjustments now in order to avoid eventual insolvency later are a small price that the members will regret not paying."

Pension funding for public workers has become a major political and legal issue in New Jersey because of the growing cost to make up for decades of underpayments.

Thursday's ruling follows one on Wednesday by a judge who said public workers have a contractual right to a fully funded pension system. The judge in that case ruled Republican Gov. Chris Christie can reduce the payment due this month because the state is in a legitimate financial bind.

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