TRENTON, N.J. - Trustees of New Jersey's largest public pension fund said they will sue the state for blocking their request for an outside lawyer to evaluate the effects of a law signed by Gov. Christine Todd Whitman that allowed the state to alter actuarial assumptions and cut contributions to state pension funds by more than $5 billion over five years.
Trustees of the $16 billion Teachers' and Pension Annuity Fund of New Jersey had asked the state attorney general's office for permission to hire an outside lawyer to help decide whether to support efforts by the New Jersey Education Association and another union to sue the state, charging the law passed last year is a breach of contract, violates their legal right to a fair hearing and is tantamount to illegally taking away benefits promised to state workers.
Deborah T. Poritz, the state attorney general, refused to sanction any money for trustees to hire outside counsel, said Harry Baldwin, chairman of the board. Trustees now hope to hire an outside lawyer soon to represent them against the state for free.
"The issue here is who controls the money of the trust's fund," he said. "The question is whether the trustees have the right to hire an outside counsel and to use the funds for purposes of reconciling actuarial reports, or getting technical advice independent of the state's actuary."
Ms. Poritz flatly denied the request, saying it would be "inappropriate" for the fund to file a friend-of-the-court brief supporting the lawsuit against the state. Ms. Poritz and Gov. Whitman, who spearheaded the budget move, are Republicans.
"We've asked for independent counsel. They've said no. And if we have to go to court, how do we do so without independent counsel?" Mr. Baldwin asked.
The dispute is the latest in a simmering controversy over the state law. On April 6, trustees issued a no confidence vote aimed at Buck Consultants Inc., the fund's actuary for more than 70 years. The vote was made in retaliation for testimony given last year by Buck officials before state legislators that said changes in the law would have no detrimental impact on the state pension funds. The board also decided to veto Buck's reappointment as actuary at the end of its current contract later this year.
Although New Jersey law does not permit public fund trustees to hire and fire actuaries, it does permit them to veto - for justifiable reasons - a pick by a state selection committee (Pensions & Investments, May 1).
Ms. Poritz's letter made it clear the veto of Buck's reappointment would not be accepted by state officials.
Because the board's veto of Buck apparently was motivated by NJEA influence, "these private motives would be improper and impermissible reasons to support a veto of Buck .*.*. under the board's veto authority pursuant to (the law)," she wrote.
"Our concern here lies in the apparent influence of the NJEA on the TPAF members as evidenced by the totality of the circumstances surrounding the board's recent actions," Ms. Poritz's letter states.
Three of the five trustees are members of the New Jersey Education Association, the teachers union. None holds union office, although two of them are committee members, Ms. Poritz's letter said.
In fact, more than 83% of participants in the teacher pension fund are members of the union, noted Peter Christensen, the union's in-house actuary.
"For the attorney general to go on as if these board members are committing some malfeasance is just nonsense," he said. "If you are acting on behalf of plan members, you're acting on behalf of people who also are members of NJEA."
Trustees of the $13 billion New Jersey Public Employees' Retirement System, also affected by changes in the law, are still waiting to hear from state officials on their request to hire an outside consultant to review the selection committee's choice of an actuary later this year, according to Wendy Jamieson, secretary.
Teachers' fund trustees also plan to ask state officials to account for money spent on an actuarial analysis by Buck and testimony the consulting firm prepared for state legislators before they passed the changes in the law last summer.
A review of Buck's actuarial data and assumptions by Actuarial Science Associates Inc., hired by the NJEA to perform that review, concluded Buck had provided insufficient data to determine if Buck's analysis of changes in the law was flawed.
At the May 31 meeting, trustees also reviewed Buck's response to their April 4 allegations that the firm had been biased in supporting Gov. Whitman's changes in the law as well as data Buck provided mid-May to support its conclusions.
The trustees plan to demand Buck provide that missing data.
Robert Baus, a consultant in Buck's Secaucus, N.J., office in charge of the account, said the consulting firm was paid on an hourly basis for reviewing proposed changes in the law and for testifying on the effect of those changes on the state's public pension funds. He said he did not have estimates on how much the firm received for its analysis and testimony or which state entity paid for it.
