New Jersey Gov. Chris Christie on Monday vetoed legislation that would have allowed the state Police and Firemen's Retirement System to break away from the New Jersey Department of the Treasury's administration and investment management.
“I refuse to hand PFRS a blank check while handing the taxpayers the deposit slip,” Mr. Christie said in his veto message. “I refuse to repeat the mistakes of prior governors and Legislatures who enacted pension legislation without ensuring appropriate safeguards for taxpayers not securing significant concessions from labor.”
Mr. Christie issued a conditional veto, which enables the governor to offer recommendations to change a bill. If the Legislature approves a revised bill, it will send it back to the governor for approval. The Legislature can also override the conditional veto.
However, the bill that would sever PFRS from the rest of the $71.6 billion New Jersey Pension Fund, Trenton, was approved by overwhelming — and veto-proof — majorities by the state Senate and General Assembly in March. The Senate vote was 37-0; the Assembly vote was 61-4 with 10 abstentions.
The Police and Firemen's Retirement System is the second-largest of the seven pension systems within the New Jersey Pension Fund. PFRS had $22.8 billion in assets at the end of the fiscal year on June 30.
The bill increases the size of the police and fire fund's board to trustees to 12 from 11 and gives it more power to administer the fund and make investments. The bill removes the fund's administration from the Treasury Department's Division of Pensions and Benefits, and it removes its investment practices from the Treasury Department's division of investment.
The bill's supporters argued that a separate PFRS can do a better job of administration and investing than being joined with six other public pension funds.
Critics said the legislation favors employee representatives over government members on the PFRS board of trustees and will reduce the economies of scale linked to the size of the New Jersey Pension Fund.
In his veto message, Mr. Christie said PFRS must play by the same rules as other pension funds. “Unfortunately, this bill goes too far and undoes significant portions of the bipartisan pension reform legislation I signed into law in 2011, unduly jeopardizing the financial health of PFRS,” he wrote.
For example, the bill would allow the independent PFRS to reinstate cost-of-living adjustments. COLA payments were suspended for New Jersey Pension Fund participants by a 2011 law, whose constitutionality was upheld by the state Supreme Court in 2016.
Mr. Christie cited the COLAs and several other powers of a new PFRS board that could “occur without a single vote of a management representative.” Membership of the new board of trustees must be “equally balanced” between management and labor, he added.
Any bill enabling independence would have to make sure PFRS abides by the 2011 law, he wrote. “I cannot condone backsliding on these reforms,” he wrote.
“I am willing to grant PFRS greater independence,” Mr. Christie wrote. “But, in return, I seek sufficient guardrails that adequately protect pensioners and taxpayers.”