Christopher Burgos v. State of New Jersey (075736)
118 A.3d 270
| N.J. | 2015Background
- New Jersey enacted Chapter 78 (2011) amending N.J.S.A. 43:3C-9.5(c) to state that public-employee members “shall have a contractual right to the annual required contribution (ARC)” and that failure to pay is an "impairment" enforceable in Superior Court.
- Chapter 1 (2010) phased in the State’s ARC over seven years (1/7 increments), so FY15 required a 4/7 payment (~$2.25B under Chapter 1; full ARC was larger).
- Governor reduced FY14 pension payments by executive order and, for FY15, line-item vetoed $1.57B from the Appropriations Act after the Legislature included the full 4/7 ARC funded partly by proposed tax bills the Governor later vetoed.
- Unions and individual public employees sued, asserting statutory, state- and federal-Contracts Clause claims and seeking injunctive/mandamus relief; the trial court found Chapter 78 created an enforceable contract and granted summary judgment for plaintiffs on impairment claims.
- The New Jersey Supreme Court granted direct certification and reversed: it held Chapter 78 did not create a legally enforceable, constitutionally protected contract obligating multi-year appropriations because the State Constitution’s Debt Limitation and Appropriations Clauses prohibit creating such binding, year-to-year financial obligations without voter approval.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chapter 78 created a legally enforceable contract right to annual ARC payments | Chapter 78’s repeated use of “contractual right” and jurisdiction/waiver provisions manifest clear legislative intent to create an enforceable contract | Even if wording is clear, State constitutional limits (Debt Limitation & Appropriations Clauses) prevent creation of a binding, multi-year appropriation obligation | No; Legislature lacked authority under State Constitution to create an enforceable, multi-year appropriation obligation—statute creates only an obligation subject to annual appropriation |
| Whether failure to appropriate the FY15 ARC was an unconstitutional impairment of contract under Federal/State Contracts Clauses | The State’s large FY15 underpayment substantially impaired contractual expectations and is subject to contract-impairment analysis | If no enforceable contract exists, Contracts Clause analysis is inapplicable; if it did, the reduction was reasonable/necessary for legitimate public purpose | Not reached on merits: impairment analysis not applied because no enforceable contract existed under state constitutional constraints |
| Whether Chapter 78 violates the Debt Limitation Clause when it purports to compel recurring large appropriations | Plaintiffs: Debt Clause guards against binding debt/borrowing, not ordinary operating expenses or subject-to-appropriation payment schedules | State: Chapter 78 would impose multi-year, substantial obligations that effectively bind future budgets and exceed the Clause’s limits without voter approval | Chapter 78 could not create a legally enforceable obligation of the size and multi-year character asserted absent voter authorization; Debt Limitation Clause bars such binding commitments |
| Whether courts may order or review appropriations to enforce such a contract (separation-of-powers/Appropriations Clause) | Plaintiffs: courts can vindicate contract rights without dictating line-item appropriations | State: Judicial enforcement would intrude on the Legislature/Governor’s exclusive budget power; appropriations must be made in annual general appropriation law | Judicial enforcement of annual appropriations would violate Appropriations Clause and separation-of-powers; obligations not incorporated into the annual appropriation are subject to appropriation and not judicially enforceable |
Key Cases Cited
- Spina v. Consol. Police & Firemen’s Pension Fund Comm’n, 41 N.J. 391 (1964) (statute may create a binding public contract only if legislative intent is plainly expressed)
- Lonegan v. State (Lonegan II), 176 N.J. 2 (2003) (Debt Limitation Clause applies only to legally enforceable debts; appropriations-backed obligations avoid clause if not legally binding)
- City of Camden v. Byrne, 82 N.J. 133 (1980) (Appropriations Clause bars expenditure of State funds through separate statutes; dedications outside the general appropriation law are not judicially enforceable appropriations)
- Enourato v. N.J. Bldg. Auth., 90 N.J. 396 (1982) (lease-and-appropriation arrangements survive Debt Clause only because payments remain subject to annual appropriation and State not legally bound)
- U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1 (1977) (federal Contracts Clause test: impairment may be constitutional if reasonable and necessary to an important public purpose; state-law existence of contract is threshold question)
- Indiana ex rel. Anderson v. Brand, 303 U.S. 95 (1938) (federal review must consider whether a state has authority under its own law to create the contractual obligation)