Richard W. Berg v. Hon. Christopher J. Christie(074612)

SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)

Richard W. Berg v. Hon. Christopher J. Christie (A-71/72-14) (074612)

Argued March 14, 2016 – Decided June 9, 2016

LaVECCHIA, J., writing for a majority of the Court.

In this appeal, the Court considers whether the 2011 suspension of State pension cost-of-living adjustments
(COLAs), L. 2011, c. 78, contravened a term of the contract right granted under the earlier enacted “non-forfeitable
right” statute, L. 1997, c. 113 (presently codified as N.J.S.A. 43:3C-9.5).

The Pension Adjustment Act (PAA) started the modern legislative provision of COLAs for public sector
retirees. The PAA’s initial reach was limited, granting adjustments only to those who retired before 1952, among
other restrictions. COLAs were subject to annual appropriation by the Legislature and thus funded on a pay-as-you-
go basis. As the cost of living rose, retirees who retired after 1952 watched their fixed incomes drop in real terms.
The Legislature responded in the 1960s with a series of amendments to the COLA formula, culminating in 1969,
when the Legislature expanded COLAs to cover all eligible retirees, and linked the COLA formula to the consumer
price index (CPI). Over time, the Legislature took a series of steps to shift COLAs to a prefunded basis, recognizing
that the pay-as-you-go funding scheme was fiscally untenable.

In 1997, the Legislature enacted the non-forfeitable-right statute. L. 1997, c. 113, § 5 (Chapter 113). Then,
in 2011, as a part of comprehensive pension reform legislation, Chapter 78 suspended further COLAs, freezing the
cost-of-living adjustment at the 2011 level for current and future qualifying retirees. L. 2011, c. 78, § 25. The
suspension of State pension COLAs led to the complaint that commenced this action.

Retired government employees filed a complaint against various State defendants, alleging that plaintiffs
had contractual, statutory, and constitutional rights to COLAs and seeking numerous forms of relief. A group of
state and local employees and their labor unions (Intervenors) were granted leave to intervene and file a complant.
On the State’s motion, the trial court dismissed the two actions in their entirety. The court found Chapter 78 to be
constitutional without examining or resolving the non-forfeitable-right statute. The court viewed the Debt
Limitation Clause and the Appropriations Clause of the New Jersey Constitution as, in and of themselves, reserving
to the Legislature the ability to make changes to the pension statutes.

Plaintiffs and Intervenors filed separate notices of appeal, which the Appellate Division consolidated. In a
published opinion, the Appellate Division reversed the trial court’s dismissal of the complaints, concluding that
Chapter 113 created a protectable contract right that included COLAs. 436 N.J. Super. 220 (App. Div. 2014). The
panel remanded for a contract-impairment analysis, which the trial court had not reached. The panel rejected
plaintiffs’ other arguments and found that certain of their claims were properly dismissed.

Plaintiff Charles Ouslander, a retired prosecutor, filed a petition for certification, and the State filed a cross-
petition from the Appellate Division’s judgment. The Court granted both applications. 222 N.J. 311 (2015).

HELD: To construe a statute as creating a contractual right, the Legislature’s intent to limit the subsequent exercise
of legislative power must be clearly and unequivocally expressed concerning both the creation of a contract as well
as the terms of the contractual obligation. In this instance, proof of unequivocal intent to create a non-forfeitable
right to yet-unreceived COLAs is lacking. The Legislature retained its inherent sovereign right to act in its best
judgment of the public interest and to pass legislation suspending further COLAs.

1. The question before the Court is whether there is a contractual right to continued increased adjustment of public
pension benefits. To find a contract created by statute means that the Legislature binds itself to a policy choice and
surrenders the power of future elected representatives to cut back on that choice. Because the effect of finding a

1
statutory contract is so severe, only the clearest expression of statutory language and evidence of legislative intent
for such creation will do. In Spina v. Consolidated Police and Firemen’s Fund Commission, 41 N.J. 391 (1964), the
Court explained that a contractual restriction on future legislative action “should be so plainly expressed that one
cannot doubt the individual legislator understood and intended it.” That standard has remained the benchmark in
New Jersey for determining whether a contract has been created by statute. See Burgos v. State, 222 N.J. 175, 195
(2015), cert. denied, 136 S. Ct. 1156 (2016). State and federal courts across the country also have applied their
variants of the “clear indication” standard in cases like this one -- legislative suspension or reduction of COLAs. In
sum, courts historically have adhered to the clear indication standard, and it applies in this appeal. (pp. 18-25)

2. With the standard established, the Court turns to the statutes at issue in this appeal, beginning with a close
examination of the non-forfeitable-right statute, L. 1997, c. 113, § 5. Using the Public Employees’ Retirement
System as an example, the Court examines the statutes of the individual retirement systems or funds to understand
the benefits purportedly provided non-forfeitable protection. The relevant statutes define each system or fund as the
means for providing the retirement allowance and other benefits under the provisions of that system’s enabling act;
they do not include reference to benefits authorized to be paid via other statutes or acts. Because the individual
systems and funds define benefits as those made available only pursuant to their respective acts, the State urges the
Court to find that COLAs are not part of the protected non-forfeitable right. The State notes that COLAs are not
provided through the enabling acts or laws governing the specific retirement systems or funds, but rather are
authorized and are provided by way of separate legislation -- the Pension Adjustment Act, N.J.S.A. 43:3B-1 to -10.
Contrarily, plaintiffs argue that by using the term “benefits program” in the non-forfeitable-right statute, the
Legislature melded the base pension benefit to the COLA. Because the Legislature specifically excluded medical
benefits from the non-forfeitable right but did not exclude COLAs, plaintiffs think it unmistakable that COLAs fall
under the umbrella of the benefits program. (pp. 25-35)

3. This is not an ordinary statutory interpretation case. The Court’s task is not to determine which textually based
argument is more likely than not the actual intent of the Legislature. Rather, to find a statutory contract that would
have the effect of restricting subsequent legislative action on the subject, the Court must find unmistakable evidence
of legislative intent to create a non-forfeitable right to COLAs. Fairly viewed, the parties’ many arguments are
reasonable. However, based on the substantive provisions of the retirement systems’ or funds’ laws referenced in
the non-forfeitable-right statute, which detail the benefits receiving protection, and the absence of COLAs from
those provisions, plaintiffs’ arguments are insufficient. The plain language of the non-forfeitable-right statute does
not surely embrace COLAS, as it must to satisfy Spina. To succeed, plaintiffs needed to demonstrate that the
legislative intent to render future COLAs part of the non-forfeitable right conferred by Chapter 113 was
unmistakable. From a textual standpoint, that high standard simply is not met here. (pp. 36-37)

4. Plaintiffs argue that legislative history reveals the unmistakable legislative intent to include COLAs under the
protection of the non-forfeitable-right statute. But if there is ambiguity requiring resort to legislative history, one is
already outside the realm of unmistakable clarity needed to find a statutory contract right. In this setting, any
ambiguity spells failure for claims that the Legislature created a contractual right to COLAs. Even if the Court were
to look at legislative history, evidence of such unmistakable intent is wanting there. Plaintiffs also contend that the
history of COLAs supports the reasonable expectation that they were part and parcel of the singular pension benefit
provided on a monthly basis to retirees or their beneficiaries. However, the history of COLAs in New Jersey shows
that the Legislature granted COLAs as periodic exercises of legislative discretion separate and apart from the base
pension. Therefore, the additional extrinsic evidence offered by plaintiffs does not further the argument that the
Legislature acted with the required intent to include COLAs under the non-forfeitable-right statute. (pp. 38-46)

5. Finally, the Court rejects the alternative argument, raised by petitioner Ouslander, that equity prevents the State
from terminating COLAs for those employees who retired prior to the enactment of Chapter 78. Because the
language of the non-forfeitable-right statute does not guarantee COLAs, it necessarily follows that the retirees could
not reasonably rely on the statute’s terms for purposes of a claim in equity. Petitioner’s due process claims are
unavailing for similar reasons. Those claims depend on the existence of a vested right; the continued receipt of
COLAs cannot be categorized in that way based on the current text of the non-forfeitable-right statute. (pp. 46-49)

The judgment of the Appellate Division is REVERSED, and the trial court’s judgment dismissing the
complaints is REINSTATED.

2
JUSTICE ALBIN, DISSENTING, expresses the view that the pension statutes at issue are clear and
unambiguous, and guarantee COLAs for retired public employees. Justice Albin believes that, because the cost-of-
living adjustment was contained in laws “governing the retirement system or fund” and not subject to any exclusion
in the non-forfeitable-right statute, plaintiffs are entitled to COLAs as a part of their full pension benefits.

CHIEF JUSTICE RABNER; JUSTICES PATTERSON, FERNANDEZ-VINA, and SOLOMON;
and JUDGE CUFF (temporarily assigned), join in JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN filed
a separate, dissenting opinion.

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SUPREME COURT OF NEW JERSEY
A-71/72 September Term 2014
074612

RICHARD W. BERG, ROBERT J.
BRASS, THOMAS CANNAVO,
MELAINE B. CAMPBELL, LARRY
ROBERT ETZWEILER, KATHY
FLICKER, ARNOLD GOLDEN,
CHARLES GRINELL, TONI A.
HENDRICKSEN, HAROLD
KASSELMAN, SUSAN LOTHIAN,
STEPHEN H. MONSON, MARTIN C.
MOONEY, SR., BRIAN
MULHOLLAND, ANNE C. PASKOW,
SHARYN PEIFFER, SAMUEL REAL,
JR., GREGORY J. SAKOWICZ,
SUSAN W. SCIACCA, WILLIAM H.
SCHMIDT, FRED SCHWANWEDE,
JOHN J. SMITH, DEBRA STONE,
SHERI TANNE, AND JACK L.
WEINBERG,

Plaintiffs-Respondents,

and

CHARLES OUSLANDER,

Plaintiff-Appellant
and Cross-Respondent,

and

NEW JERSEY EDUCATION
ASSOCIATION, NEW JERSEY STATE
POLICEMEN’S BENEVOLENT
ASSOCIATION, INC.,
COMMUNICATIONS WORKERS OF
AMERICA, AFL-CIO, NEW JERSEY
FRATERNAL ORDER OF POLICE,
NEW JERSEY STATE

1
FIREFIGHTERS’ MUTUAL
BENEVOLENT ASSOCIATION,
PROFESSIONAL FIREFIGHTERS
ASSOCIATION OF NEW JERSEY,
AMERICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL
EMPLOYEES, COUNCIL 1, AFL-
CIO, AMERICAN FEDERATION OF
STATE, COUNTY AND MUNICIPAL
EMPLOYEES, COUNCIL 73, AFL-
CIO, AMERICAN FEDERATION OF
TEACHERS NEW JERSEY STATE
FEDERATION, AFL-CIO,
INTERNATIONAL FEDERATION OF
PROFESSIONAL AND TECHNICAL
ENGINEERS, AFL-CIO & CLC,
LOCAL 194, INTERNATIONAL
FEDERATION OF PROFESSIONAL
AND TECHNICAL ENGINEERS, AFL-
CIO, LOCAL 195, INTERNATIONAL
FEDERATION OF PROFESSIONAL
AND TECHNICAL ENGINEERS, AFL-
CIO & CLC, LOCAL 200,
PROBATION ASSOCIATION OF NEW
JERSEY, NEWARK FIREFIGHTERS
UNION, MORRIS COUNCIL NOS. 6
AND 6A, NJCSA IFPTE, AFL-CIO,
JERSEY CITY POLICE OFFICERS
BENEVOLENT ASSOCIATION,
CAMDEN COUNTY COUNCIL #10,
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS LOCAL 97,
BELLEVILLE PBA LOCAL 28, NEW
JERSEY ASSOCIATION OF SCHOOL
ADMINISTRATORS, NEW JERSEY
PRINCIPALS AND SUPERVISORS
ASSOCIATION, NEW JERSEY
ASSOCIATION OF SCHOOL
BUSINESS OFFICIALS, NEW
JERSEY RETIREES’ EDUCATION
ASSOCIATION, TRANSPORT
WORKERS UNION LOCAL 225, NEW
JERSEY SUPERIOR OFFICERS LAW
ENFORCEMENT ASSOCIATION,

2
ATLANTIC CITY WHITE COLLAR
PROFESSIONAL ASSOCIATION,
INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WORKERS LOCAL 210,
ATLANTIC CITY SUPERIOR
OFFICERS ASSOCIATION, PETER
BURKHALTER, DEE TRUCHON,
GEORGE O’BRIEN, THOMAS
TEVLIN, ROBERT BROWER,
ROSEMARIE JANKOWSKI, IRIS J.
ELLIOTT, KENNETH D. KING,
FRANK ELMER HICKS, WILLIAM A.
PARKER, BRAD FAIRCHILD,
DWIGHT COVALESKIE, ANTHONY F.
WIENERS, GARY SOUSS, WILLIAM
LAVIN, CHARLES WEST, MARIAN
LEZGUS, MELANIE HAFDELIN,
STEVEN ENGRAVALLE, CINDY
BARR-RAGUE, DOMINICK MARINO,
JOHN J. GEROW, JANET S.
ZYNROZ, ALFRED CRESCI, RAE C.
ROEDER, MARYANN PIUNNO SMITH,
MARYANN MESICS, DENNIS
REITER, ANTHONY MISKOWSKI,
VINCENT KAIGHN, WILLIAM S.
BAUER, JR., MICHAEL
CALABRESE, and DEBORAH
JACOBS,

Plaintiffs/Intervenors-
Respondents,

HON. CHRISTOPHER J. CHRISTIE,
HON. KIM GUADAGNO, SECRETARY
OF STATE OF THE STATE OF NEW
JERSEY, DIRECTOR, DIVISION OF
PENSIONS, BOARD OF TRUSTEES,
PUBLIC EMPLOYEES’ RETIREMENT
SYSTEM, TREASURER, STATE OF
NEW JERSEY AND STATE OF NEW
JERSEY,

3
Defendants-Respondents
and Cross-Appellants.

MICHAEL DELUCIA, PATRICIA
DELUCIA, ROBERT C. BROWN, AND
ANNE K. BROWN,

Plaintiffs,

STATE OF NEW JERSEY
DEPARTMENT OF THE TREASURY,
DIVISION OF PENSIONS AND
BENEFITS,

Defendants.

Argued March 14, 2016 – Decided June 9, 2016

On certification to the Superior Court,
Appellate Division, whose opinion is
reported at 436 N.J. Super. 220 (App. Div.
2014).

Jean P. Reilly, Assistant Attorney General,
argued the cause for respondents and cross-
appellants (Robert Lougy, Acting Attorney
General of New Jersey, attorney; Mr. Lougy,
Ms. Reilly, and Kevin R. Jespersen,
Assistant Attorney General, of counsel; Ms.
Reilly, John P. Bender, Assistant Attorney
General, Amy Chung, David M. Reap, and
Matthew T. Kelly, Deputy Attorneys General,
on the briefs).

Charles M. Ouslander argued the cause for
appellant and cross-respondent pro se.

Daniel Louis Grossman argued the cause
for respondents Richard W. Berg, Robert
J. Brass, Thomas Cannavo, Melaine B.

4
Campbell, Larry Robert Etzweiler, Kathy
Flicker, Arnold Golden, Charles Grinell,
Toni A. Hendricksen, Harold Kasselman,
Susan Lothian, Stephen H. Monson, Martin
C. Mooney, Sr., Brian Mulholland, Anne C.
Paskow, Sharyn Peiffer, Samuel Real, Jr.,
Gregory J. Sakowicz, Susan W. Sciacca,
William H. Schmidt, Fred Schwanwede, John
J. Smith, Debra Stone, Sheri Tanne, and
Jack L. Weinberg.

Ira W. Mintz argued the cause for
respondents (Weissman & Mintz, attorneys
for Communications Workers of America,
AFL-CIO, American Federation of State,
County and Municipal Employees, Council
73, AFL-CIO, International Federation of
Professional and Technical Engineers,
AFL-CIO & CLC, Local 194, International
Federation of Professional and Technical
Engineers, AFL-CIO & CLC, Local 200,
Peter Burkhalter, Dee Truchon, Rae C.
Roeder, Maryann Piunno Smith, Maryann
Mesics, Dennis Reiter, Anthony
Miskowski, Vincent Kaighn, William S.
Bauer, Jr., Michael Calabrese, and
Deborah Jacobs; Zazzali, Fagella, Nowak,
Kleinbaum & Friedman, attorneys for New
Jersey Education Association, New Jersey
Retirees’ Education Association, New
Jersey State Policemen’s Benevolent
Association, Inc., American Federation
of State, County and Municipal
Employees, Council 1, AFL-CIO,
Belleville PBA Local 28, George O’Brien,
Rosemarie Jankowski, Iris J. Elliot,
William A. Parker, Anthony F. Wieners,
Gary Souss, Marian Lezgus, and Melanie
Hafdelin; Markowitz and Richman,
attorneys for New Jersey Fraternal Order
of Police; Craig S. Gumpel, attorney for
New Jersey State Firefighters’ Mutual
Benevolent Association of New Jersey,
Newark Firefighters Union, Morris

5
Council Nos. 6 and 6A, NJCSA, IFPTE,
AFL-CIO, Thomas Tevlin, Robert Brower,
William Lavin, and Charles West; Mets
Schiro & McGovern, attorneys for
Professional Firefighters Association of
New Jersey, American Federation of
Teachers New Jersey Federation, AFL-CIO,
International Brotherhood of Teamsters
Local 97, Dominick Marino, and John J.
Gerow, Oxfeld Cohen, attorneys for
International Federation of
Professional and Technical Engineers,
AFL-CIO & CLC, Local 195; Spear
Wilderman, attorneys for Camden County
Council #10; Robert M. Schwartz,
attorney for New Jersey Principals and
Supervisors Association, Janet S.
Zynroz, and Alfred Cresci; O’Brien,
Belland & Bushinsky, attorneys for
Transport Workers Union Local 225, New
Jersey Superior Officers Law Enforcement
Association, Atlantic City White Collar
Professional Association, International
Brotherhood of Electrical Workers Local
210, and Atlantic City Superior Officers
Association; Maria M. Lepore, attorney
for New Jersey Association of School
Administrators, Kenneth D. King, and
Steven Engravalle; Sciarrillo, Cornell,
Merlino, McKeever & Osborne, attorneys
for New Jersey Association of School
Business Officials, Frank Elmer Hicks,
and Cindy Barr-Rague; Daniel J. Zirrith,
attorney for Probation Association of
New Jersey and Dwight Covaleskie; Detzky
and Hunter, attorneys for Jersey City
Police Officers Benevolent Association;
Mr. Mintz, Kenneth I. Nowak, Edward M.
Suarez, Jr., and Flavio L. Komuves, on
the joint briefs).

Anthony M. Rainone submitted a brief on
behalf of amicus curiae Former New
Jersey State Troopers Association, Inc.

6
(Brach Eichler, attorneys; Mr. Rainone
and Lucas A. Markowitz, on the brief).

JUSTICE LaVECCHIA delivered the opinion of the Court.

Part of comprehensive pension reform legislation, Chapter

78 of the Laws of 2011 suspended State pension cost-of-living

adjustments (COLAs). L. 2011, c. 78. In this appeal, we

consider whether that suspension contravened a term of the

contract right granted under the earlier enacted “non-

forfeitable right” statute. See L. 1997, c. 113 (presently

codified as N.J.S.A. 43:3C-9.5).

Qualifying members of the State’s public pension systems or

funds were granted “a non-forfeitable right to receive benefits

as provided under the laws governing the retirement system or

fund.” N.J.S.A. 43:3C-9.5(b). By codifying that “non-

forfeitable right to receive benefits,” the Legislature provided

that the “benefits program, for any employee for whom the right

has attached, cannot be reduced.” N.J.S.A. 43:3C-9.5(a). That

legislative enactment underscored the view that a public

employee’s pension -- a benefit accrued through many years of

faithful public service -- represented earned compensation, not

a gratuity that would be revoked or reduced without cause. See

N.J. Educ. Ass’n v. State, 412 N.J. Super. 192, 216 (App. Div.),

certif. denied, 202 N.J. 347 (2010); see also Uricoli v. Bd. of

Trs., Police & Firemen’s Ret. Sys., 91 N.J. 62, 73 (1982)

7
(recognizing that “[p]ublic pensions provide public employees

with employment stability and financial security”).

Whether COLAs are part of the “benefits program” protected

by N.J.S.A. 43:3C-9.5 depends on whether the Legislature, in

enacting N.J.S.A. 43:3C-9.5(a) and (b), intended to create a

contractual right to COLAs. To construe a statute as creating a

contractual right, the Legislature’s intent to limit the

subsequent exercise of legislative power must be clearly and

unequivocally expressed concerning both the creation of a

contract as well as the terms of the contractual obligation.

In this instance, proof of unequivocal intent to create a

non-forfeitable right to yet-unreceived COLAs is lacking.

Although both plaintiff retirees and the State advance plausible

arguments on that question, the lack of such unmistakable

legislative intent dooms plaintiffs’ position. We conclude that

the Legislature retained its inherent sovereign right to act in

its best judgment of the public interest and to pass legislation

suspending further COLAs. Having determined that there is no

contract violation, and because the additional arguments

advanced by plaintiffs are not meritorious, we must respect the

legislative choice and reverse the Appellate Division’s

judgment.

8
Because “[t]he legal issues must be viewed realistically

against the story of these pension plans,” Berg v. Christie, 436

N.J. Super. 220, 229 (App. Div. 2014) (quoting Spina v. Consol.

Police & Firemen’s Pension Fund Comm’n, 41 N.J. 391, 393

(1964)), the Appellate Division’s opinion set forth a necessary

and comprehensive account of the structure of the pension funds,

the Pension Adjustment Act, and the non-forfeitable-right

statute, see id. at 230-43. We need not repeat that thorough

compilation here. For purposes of commencing our review, we

summarize the legislative activity that led up to the issue at

the heart of this appeal: whether the non-forfeitable right to

receive benefits covers COLAs.

The Pension Adjustment Act (PAA), L. 1958, c. 143, started

the modern legislative provision of COLAs for public sector

retirees. The Legislature took that action to meet the

financial need of retirees because, by the late 1950s, many

former public employees -- “retired on pensions based on the

salary levels of many years ago” -- faced financial hardship as

they watched the purchasing power of their pensions diminish

over the years. Sponsor’s Statement to Assembly No. 367 (1958).

But the PAA’s initial reach was limited, granting adjustments

only to those who retired before 1952 and only to the first $480

of a retiree’s pension. L. 1958, c. 143, §§ 2, 3. COLAs were

9
subject to annual appropriation by the Legislature and thus

funded on a pay-as-you-go basis. L. 1958, c. 143, §5.

As the cost of living continued to rise, and retirees who

retired after 1952 watched their fixed incomes drop in real

terms, the Legislature again responded to economic conditions.

See L. 1961, c. 144; L. 1964, c. 198; see also Sponsor’s

Statement to Assembly No. 559 (1961). More retirees were

brought into the fold, and the amount of the pension benefit

subject to COLAs increased, when the COLA formula was amended in

1961 and again in 1964. See L. 1961, c. 144, §§ 1, 2; L. 1964,

c. 198, § 1.

A major change came in 1969, when COLAs were expanded to

cover all eligible retirees. See L. 1969, c. 169, §§ 1, 2.

Moreover, the Legislature linked the COLA formula to the

consumer price index (CPI). L. 1969, c. 169, §§ 1, 5.

With all retirees receiving COLAs, and with COLAs tied to

the consumer price index, the annual appropriation needed to

cover that cost gradually increased in turn. In a series of

legislative steps, COLAs for the pension funds shifted to a

prefunded basis. See L. 1987, c. 385, § 2 (Teachers’ Pension

and Annuity Fund (TPAF)); L. 1989, c. 204, § 7 (Police and

Firemen’s Retirement System (PFRS)); L. 1990, c. 6, § 2 (Public

Employees’ Retirement System (PERS)); L. 1992, c. 41, § 10

(Judicial Retirement System (JRS)); L. 1992, c. 41, § 30 (State

10
Police Retirement System (SPRS)). The Legislature took those

steps in recognition that the pay-as-you-go funding scheme was

proving fiscally untenable. See Sponsor’s Statement to S. No.

665 (1990) (recognizing that state employer’s liability for

COLAs was “growing rapidly” and that “[i]f steps are not taken

soon to recognize and provide reserve funding for this

liability, a severe fiscal crisis could develop in the future”).

COLAs are presently paid by the five major retirement systems,

“funded as employer obligations in a similar manner to that

provided for the funding of employer obligations for the

retirement benefits provided by the retirement system.” See,

e.g., L. 1990, c. 6, § 2 (PERS). Two funds -- the Prison

Officers’ Pension Fund and the Consolidated Police and Firemen’s

Pension Fund -- remain funded on a pay-as-you-go basis. See

N.J.S.A. 43:3B-4a (exempting TPAF from pay-as-you-go funding

method); N.J.S.A. 43:3B-4.2 (exempting PFRS); N.J.S.A. 43:3B-4.3

(exempting PERS); N.J.S.A. 43:3B-4.4 (exempting JRS); N.J.S.A.

43:3B-4.5 (exempting SPRS).

In 1997, the Legislature enacted the non-forfeitable-right

statute. L. 1997, c. 113, § 5 (Chapter 113). Then, in 2011,

Chapter 78 suspended further COLAs, freezing the cost-of-living

adjustment at the 2011 level for current and future qualifying

retirees. L. 2011, c. 78, § 25. That brings us to the

complaint that commenced this action.

11
II.

Richard Berg and twenty-five other retired government

employees1 filed a complaint against the Governor, the Secretary

of State, the Director of the Division of Pensions, the PERS

Board of Trustees, the State Treasurer, and the State

(collectively the State). The complaint alleged that plaintiffs

had contractual, statutory, and constitutional rights to COLAs

and sought numerous forms of relief, including “a mandatory

injunction ordering defendants to pay plaintiffs the COLAs that

were abrogated by” Chapter 78 and “monetary damages equal to the

COLAs that were abrogated by” Chapter 78. Plaintiffs’ complaint

alleged that Chapter 78’s freeze of COLAs constituted a breach

of contract and violated the Contract and Due Process Clauses of

the Federal and State Constitutions.

The State filed a motion to dismiss for failure to state a

claim, and plaintiffs filed a motion for summary judgment.

Prior to the resolution of those motions, a group of state and

local employees, both active and retired, and labor unions that

represent them (Intervenors) filed a motion to intervene, which

the trial court granted. Intervenors thereafter filed a

complaint, adding claimed violations of the Contract Clause and

Due Process as well as equitable estoppel.

1 Per joint stipulation, it is undisputed that all of these
plaintiffs retired prior to 2011.
12
The trial court converted the State’s motion to dismiss

into a motion for summary judgment and granted the State’s

motion, dismissing the two actions in their entirety. The court

found Chapter 78 to be constitutional without examining or

resolving the non-forfeitable-right statute. The court viewed

the Debt Limitation Clause and the Appropriations Clause of the

New Jersey Constitution as, in and of themselves, reserving to

the Legislature the ability to make changes to the pension

statutes. See N.J. Const., art. VIII, § II, ¶ 3; N.J. Const.,

art. VIII, § II, ¶ 2.

Plaintiffs and Intervenors filed separate notices of

appeal, which the Appellate Division consolidated.2 In a

published opinion, the Appellate Division reversed the trial

court’s dismissal of the complaints. Berg, supra, 436 N.J.

Super. at 229. At bottom, the panel concluded that Chapter 113

created a protectable contract right that included COLAs. Id.

at 259.

In reaching its conclusion, the panel noted initially that

there was a tension between, on the one hand, the principle of

statutory construction that pension statutes are remedial

legislation and, on the other, well-recognized case law

2 Retired prosecutor Charles Ouslander filed a notice that he was
proceeding pro se. Where necessary, his arguments are
separately identified.

13
expressing judicial hesitancy to find a contract created by a

statute. Id. at 250. However, the panel concluded that the

non-forfeitable-right statute created a protectable contractual

right that included COLAs. Id. at 259. The panel examined (1)

the text of Chapter 113, which expressly excluded medical

benefits from the definition of the non-forfeitable right but

did not mention COLAs in that express exception, id. at 249; (2)

two forms of legislative history, (a) a transcript from a

legislative hearing that preceded enactment of Chapter 113, and

(b) a Sponsor’s Statement that tracked the bill’s language

specifically excluding medical benefits, id. at 251-253; and (3)

a compiled history of New Jersey’s COLA statutes, which the

panel regarded as having the effect of rendering COLAs an

integral part of the pension benefit, id. at 255-56.

Having determined that the non-forfeitable-right statute

created a contractual right to receive pension benefits that

included COLAs, the panel viewed as no impediment the Debt

Limitation or Appropriations Clauses of the New Jersey

Constitution. Id. at 246. The panel stated that the funds

initially necessary to address plaintiffs’ claims could come

from monies presently held by the respective systems and funds

and would not require payment through a State appropriation.

Ibid. The panel added that those constitutional provisions

would require analysis when a court-ordered State appropriation

14
would be triggered. Ibid. In the end, having found the

existence of a contract right, the panel reversed the trial

court’s dismissal of the action and remanded for a contract-

impairment analysis, which the trial court had not reached. Id.

at 263.

Although it had no impact on the State Contract Clause

analysis, the panel found that plaintiffs’ Federal Contract

Clause claims were properly dismissed. Id. at 247-48.

Plaintiffs’ other claims were rejected, as those claims

“recycl[ed] arguments that were litigated and decided adversely

to the intervenor-plaintiffs in . . . prior state and federal

lawsuits.” Id. at 247.

Ouslander filed a petition for certification, contending

that, contrary to the holding of the Appellate Division, the

suspension of COLAs implicates the Due Process Clause and

invokes the doctrine of equitable estoppel. He also argues that

the Appellate Division improperly dismissed his Federal Contract

Clause claim on sovereign immunity grounds, because the State

(1) is not protected from constitutional claims, and (2)

alternatively, waived its immunity. The State filed a cross-

petition from the Appellate Division’s judgment. We granted

both applications. 222 N.J. 311 (2015). The parties’ arguments

are refined versions of their presentations to the Appellate

Division; we address them in the course of this opinion.

15
III.

The Contract Clause states, “[n]o State shall . . . pass

any . . . Law impairing the Obligation of Contracts.” U.S.

Const. art. I, § 10, cl. 1. New Jersey’s Constitution includes

a similar guarantee that “[t]he Legislature shall not pass any .

. . law impairing the obligation of contracts, or depriving a

party of any remedy for enforcing a contract which existed when

the contract was made.” N.J. Const. art. IV, § 7, ¶ 3; see also

Burgos v. State, 222 N.J. 175, 193 (2015), cert. denied, __ U.S.

__, 136 S. Ct. 1156, 194 L. Ed. 2d 174 (2016); Fid. Union Tr.

Co. v. N.J. Highway Auth., 85 N.J. 277, 299 (1981) (noting that

United States and New Jersey Constitutions provide “parallel

guarantees”).

Contract impairment claims brought under either

constitutional provision entail an analysis that first examines

whether a change in state law results in the substantial

impairment of a contractual relationship and, if so, then

reviews whether the impairment nevertheless is “reasonable and

necessary to serve an important public purpose.” U.S. Tr. Co.

of N.Y. v. New Jersey, 431 U.S. 1, 25, 97 S. Ct. 1505, 1519, 52

L. Ed. 2d 92, 112 (1977); see also Farmers Mut. Fire Ins. Co. of

Salem v. N.J. Prop.-Liab. Ins. Guar. Ass’n, 215 N.J. 522, 546-47

(2013) (expressing same). The first step in that analysis

involves three inquiries: (1) whether a contractual right

16
exists in the first instance; (2) whether a change in the law

impairs that right; and (3) whether the defined impairment is

substantial. See Gen. Motors Corp. v. Romein, 503 U.S. 181,

186, 112 S. Ct. 1105, 1109, 117 L. Ed. 2d 328, 337 (1992).

In this appeal, there is disagreement on the very standard

to be applied to whether a contract was formed that triggered a

contractual right to ongoing COLAs. We begin with that

fundamental difference because it profoundly affects other

issues and arguments advanced by the litigants.

Plaintiff retirees argue that the standard for reviewing

pension legislation applies to this matter, the standard that is

reserved for remedial legislation generally. New Jersey courts

have considered pension statutes to be remedial in character and

thus deserving of a liberal construction and administration “in

favor of the persons intended to be benefited thereby.” Klumb

v. Bd. of Educ. of Manalapan-Englishtown Reg’l High Sch. Dist.,

Monmouth Cty., 199 N.J. 14, 34 (2009) (quoting Geller v. N.J.

Dep’t of Treasury, Div. of Pensions & Annuity Fund, 53 N.J. 591,

597-98 (1969)).

On the other hand, relying on the general presumption

against finding a contract that is created by a statute, see

National R.R. Passenger Corp. v. Atchison, T. & S.F. Ry. Co.,

470 U.S. 451, 465-66, 105 S. Ct. 1441, 1451-52, 84 L. Ed. 2d

432, 446 (1985), the State argues for a standard that requires

17
the Legislature to express unequivocal intent to contract.

According to the State, that rigorous standard must be applied

to find (1) the existence of a contract, and (2) the terms, or

contours, of that contract as well. In our view, the State’s

position is unassailable.

The cases relied on by plaintiffs involved individual

coverage issues under a public pension scheme. Those cases

considered whether a public employee is entitled to receipt of a

particular form of coverage under an existing statutory benefits

program. There we employ a liberal bent in favor of coverage.

But those cases are not of-a-kind to the question that is before

the Court.

The question before us is whether there is a contractual

right to continued increased adjustment of public pension

benefits. The ramifications of a contract of that sort are

harsh: To find a contract created by statute means that the

Legislature binds itself to a policy choice and surrenders the

power of future elected representatives to cut back on that

choice. See Pittman v. Chicago Bd. of Educ., 64 F.3d 1098, 1104

(7th Cir. 1995) (recognizing that “treat[ing] statutes as

contracts would enormously curtail the operation of democratic

government” and “creat[e] rights that could never be

retracted”). In response, there is a rule -- in this state and

elsewhere -- that holds that because the effect of finding a

18
statutory contract is so severe, only the clearest expression of

statutory language and evidence of legislative intent for such

creation will do.

That rigorous standard found expression by this Court in

Spina v. Consolidated Police and Firemen’s Fund Commission, 41

N.J. 391, 404-05 (1964), where the Court held that there must be

an expression of unequivocal intent by the Legislature in order

to conclude that the legislative branch was giving up its

constitutional right and duty to enact laws by creating a

statute by legislative vote. In Spina, the Court was confronted

with an ailing local public pension fund and a legislative

response thereto that increased both the length-of-service

requirement and the minimum retirement age. Id. at 393. The

question for this Court became “whether the Legislature is free

to rewrite the formula for the good of all who have

contributed.” Id. at 402.

The Court acknowledged that the Legislature could, if it

wished, impose contractual obligations on itself. Id. at 405.

But to do so, the Court required a high bar for the creation of

contracts by statute because contractual language in a statute

cuts off the legislative prerogative to revisit its policy

choices. Id. at 404-05. Writing for the Court, Chief Justice

Weintraub explained that a contractual restriction on future

legislative action “should be so plainly expressed that one

19
cannot doubt the individual legislator understood and intended

it.” Id. at 405 (emphasis added). That standard has remained

the benchmark in this state for determining whether a contract

has been created by statute. See N.J. Educ. Ass’n, supra, 412

N.J. Super. at 206-07 (“[A] statute will not be presumed to

create private, vested contractual rights, unless the intent to

do so is clearly stated. This is because the effect of such

authorization is to surrender the fundamental legislative

prerogative of statutory revision and amendment and to restrict

the legislative authority of succeeding legislatures.” (internal

citations omitted)).

Just last term, looking to whether the Legislature created

a contractual right under a different provision of Chapter 78,

we asked whether the Legislature spoke “with sufficient clarity

to evince intent to create a contract right.” Burgos, supra,

222 N.J. at 194. We pointed to Spina and to the United States

Supreme Court’s cautionary direction to courts in Federal

Contract Clause matters “not to presume that a statute creates

private contract rights unless ‘some clear indication’

establishes the intent to do so.” Id. at 195 (quoting Nat’l

R.R. Passenger Corp., supra, 470 U.S. at 465-66, 105 S. Ct. at

1451, 84 L. Ed. 2d at 446).

Spina and Burgos did not break new ground but rather drew

on a long-held presumption against contracts by statute. See

20
Wis. & Mich. Ry. Co. v. Powers, 191 U.S. 379, 386-87, 24 S. Ct.

107, 108, 48 L. Ed. 229, 231 (1903) (“[I]t is clear that we

should require an adequate expression of an actual intent on the

part of the state to set change of position against promise

before we hold that it has parted with a great attribute of

sovereignty beyond the right of change.”); see also Keefe v.

Clark, 322 U.S. 393, 397-98, 64 S. Ct. 1072, 1074, 88 L. Ed.

1346, 1349 (1944); Dodge v. Bd. of Educ., 302 U.S. 74, 79, 58 S.

Ct. 98, 100, 82 L. Ed. 57, 62 (1937); Stanislaus Cty. v. San

Joaquin & King’s River Canal & Irrigation Co., 192 U.S. 201,

208, 24 S. Ct. 241, 244, 48 L. Ed. 406, 410-11 (1904); E.

Saginaw Salt Mfg. Co. v. E. Saginaw, 80 U.S. 373, 378-79, 20 L.

Ed. 611, 614 (1872); Proprietors of Charles River Bridge v.

Proprietors of Warren Bridge, 36 U.S. 420, 551, 9 L. Ed. 773,

825-26 (1837); Shiner v. Jacobs, 17 N.W. 613, 613 (Iowa 1883);

People ex rel. Cunningham v. Roper, 35 N.Y. 629, 633 (1866);

Jack M. Beermann, The Public Pension Crisis, 70 Wash. & Lee L.

Rev. 3, 49 (2013) (“When determining whether a protected

contractual relationship exists, courts are very sensitive to

states’ interest in remaining flexible and retaining their full

regulatory authority. This judicial instinct in the United

States dates back at least to the famous Charles River Bridge

case [36 U.S. 420, 9 L. Ed. 773 (1837)] . . . .”).

21
A searching inquiry is also applied in disputes involving

the terms of a public contract by statute. Courts must “proceed

cautiously both in identifying a contract within the language of

a regulatory statute and in defining the contours of any

contractual obligation.” Nat’l R.R. Passenger Corp., supra, 470

U.S. at 466, 105 S. Ct. at 1452, 84 L. Ed. 2d at 446 (emphasis

added); see also Robertson v. Kulongoski, 466 F.3d 1114, 1117

(9th Cir. 2006) (recognizing that “[t]he first sub-inquiry is

not whether any contractual relationship whatsoever exists

between the parties, but whether there was a contractual

agreement regarding the specific . . . terms allegedly at issue”

(alteration in original) (internal quotation marks omitted)),

cert. denied, 550 U.S. 935, 127 S. Ct. 2262, 167 L. Ed. 2d 1092

(2007).

Faced with a legislative decision to reduce COLAs for

public employee pensions, the United States Court of Appeals for

the First Circuit recently applied its variant of the “clear

indication” standard in a setting close to the one presented

here. Me. Ass’n of Retirees v. Bd. of Trs. of Me. Pub. Emps.

Ret. Sys., 758 F.3d 23 (1st Cir. 2014). The threshold for

recognizing the creation of legislative contracts, the First

Circuit explained, “has been referred to as the ‘unmistakability

doctrine.’” Id. at 29 (quoting Parker v. Wakelin, 123 F.3d 1, 5

(1st Cir. 1997), cert. denied, 523 U.S. 1106, 118 S. Ct. 1675,

22
140 L. Ed. 2d 813 (1998)). The First Circuit noted that the

unmistakability doctrine serves the twin goals of limiting the

ability of contractual rights to curb the State’s legislative

power and avoiding “difficult constitutional questions” about

the ability of one legislature to tie the hands of future

legislatures. Ibid. (quoting United States v. Winstar Corp.,

518 U.S. 839, 875, 116 S. Ct. 2432, 2455, 135 L. Ed. 2d 964, 991

(1996) (plurality opinion)).

Taking its cue from National Railroad, the First Circuit

applied the unmistakability doctrine to both the existence and

terms of a statutory contract. Id. at 30. Accordingly, the

panel assumed that Maine’s pension statutes created at least

some type of contractual obligation and “focus[ed] instead on

whether COLAs [were] included in that obligation.” Ibid.

Because it was not “unmistakably clear” that COLAs fell under

“the umbrella of benefits,” and therefore beyond the reach of

legislative amendment, the First Circuit concluded that the

retirees’ Contract Clause argument failed. Id. at 31.

Courts across the country have applied the unmistakability

standard, or a similarly worded test for such clarity of

expression, in cases like this one -- legislative suspension or

reduction of COLAs. See, e.g., Am. Fed’n of Teachers -- N.H. v.

State, 111 A.3d 63, 69 (N.H. 2015) (“Recognizing that the

principal function of a legislature is not to make contracts,

23
but to make laws that establish the policy of the state, we

recently adopted the unmistakability doctrine.” (internal

quotation marks omitted)); Justus v. State, 336 P.3d 202, 208-09

(Colo. 2014) (“[I]t is presumed that the legislature did not

intend to bind itself contractually and that the legislation was

not intended to create a contractual right unless there is a

clear indication of the legislature’s intent to be bound.”).

In sum, the clearly indicated standard serves an important

public policy purpose. Statutes are the expression of

legislative policy and may accordingly be changed at the

Legislature’s will. Spina, supra, 41 N.J. at 400. But that is

not so if a contract is found. Then, legislation “creat[es]

rights that [can] never be retracted or even modified.”

Pittman, supra, 64 F.3d at 1104. Because the Legislature cedes

significant sovereign power by the creation of a legislative

contract, the clear indication, or unmistakability, standard is

designed to prevent that power from being yielded too easily.

See, e.g., Parella v. Ret. Bd. of the R.I. Emps.’ Ret. Sys., 173

F.3d 46, 60 (1st Cir. 1999) (recognizing that because public

contractual obligation prevents subsequent legislatures from

altering that obligation “for merely rational reasons,” “there

is, for the purposes of the Contract Clause, a higher burden to

establish that a contractual obligation has been created”);

Studier v. Mich. Pub. Sch. Emps. Ret. Bd., 698 N.W.2d 350, 366

24
(Mich. 2005) (“It seems obvious that to read what is a contract

too broadly swallows the right of the people to change the

course of their governance.”). New Jersey courts have adhered

to that standard in the past and we hold that it applies here.

See Spina, supra, 41 N.J. at 405; see also Burgos, supra, 222

N.J. at 194-95; N.J. Educ. Ass’n, supra, 412 N.J. Super. at 206-

07.

With the clearly indicated standard in mind, we turn to the

statutes at issue in this appeal.

IV.

Plaintiffs claim that by contractually guaranteeing the

“benefits program,” the Legislature created in the non-

forfeitable-right statute a right that is broad in scope. From

that inclusive, broadly worded right, plaintiffs highlight the

express legislative exclusion of medical benefits. Because the

Legislature specifically excluded medical benefits from the non-

forfeitable right, yet did not expressly exclude COLAs,

plaintiffs think it unmistakable that COLAs fall under the

umbrella of the benefits program. The State responds that

plaintiffs improperly focus on what the Legislature expressly

excluded from the benefits program instead of what the

Legislature expressly included.

25
We therefore begin with a close examination of the non-

forfeitable-right statute. Adopted in 1997 as an added section

to an Administration-drafted bill,3 section 5 of Chapter 113

provides in pertinent part:

5. a. For purposes of this section, a
“non-forfeitable right to receive benefits”
means that the benefits program, for any
employee for whom the right has attached,
cannot be reduced. The provisions of this
section shall not apply to post-retirement
medical benefits which are provided pursuant
to law.

b. Vested members of the Teachers’
Pension and Annuity Fund, the Judicial
Retirement System, the Prison Officers’
Pension Fund, the Public Employees’ Retirement
System, the Consolidated Police and Firemen’s
Pension Fund, the Police and Firemen’s
Retirement System, and the State Police
Retirement System, upon the attainment of five
years of service credit in the retirement
system or fund or on the date of enactment of
this bill, whichever is later, shall have a

3 The bill originally addressed statutory terms that the State
agreed to enact as part of its settlement with the IRS that
concerned an unrelated issue and ensured that the State plans
operated in conformance with the Internal Revenue Code (IRC).
See L. 1997, c. 113, §§ 1 – 4 (codified as N.J.S.A. 43:3C-9.1 –
9.4). Significantly, the Legislature foreclosed the prior
practice of allowing movement of State contributed funds into
and out of the State’s pension systems or funds prior to the
close of the fiscal year, when remittance was due of all final
amounts of required State contributions to the various systems
and funds. See N.J.S.A. 43:3C-9.1. With that amendment, once
State-contributed funds were moved into the individual systems
or funds, the monies then became corpus of the retirement system
or fund and could not be removed, even if the amount was in
excess of the required State contribution. Ibid. The monies
became designated for the exclusive benefit of the members or
their beneficiaries. Ibid.
26
non-forfeitable right to receive benefits as
provided under the laws governing the
retirement system or fund upon the attainment
of five years of service credit in the
retirement system or fund or on the effective
date of this act, whichever is later.

. . . .

e. Except as expressly provided herein
and only to the extent so expressly provided,
nothing in this act shall be deemed to (1)
limit the right of the State to alter, modify
or amend such retirement systems and funds, or
(2) create in any member a right in the corpus
or management of a retirement system or
pension fund.

[L. 1997, c. 113, § 5 (codified as N.J.S.A.
43:3C-9.5).]

Subsection (a) of N.J.S.A. 43:3C-9.5 defines the “non-

forfeitable right to receive benefits” as inapplicable to

medical benefits. The definition otherwise protects the

“benefits program” from reduction but does not expressly exclude

anything else. Plaintiff retirees point to that definitional

language as evidence of a clear legislative intent that COLAs

were not meant to be excluded from the protected right.

The State’s response focuses on subsection (b)’s reference

to “benefits as provided under the laws governing the retirement

system or fund.” Because, in the State’s view, COLAs are

substantively housed in the Pension Adjustment Act, N.J.S.A.

43:3B-1 to -10, they are not provided by the “laws governing the

retirement system or fund” and thus are not part of the non-

27
forfeitable right. And the State emphasizes that the

Legislature has otherwise distinguished the pension benefit from

the cost-of-living adjustment.

In our examination of those textual arguments, we note that

subsection (b) is the operative subsection to the non-

forfeitable-right statute. Beyond declaring the non-forfeitable

right’s existence, it contains a description of what comprises

the non-forfeitable right that vested members of the public

pension systems receive. Specifically, subsection (b)’s first

clause refers to the individual pension systems and funds by

name and declares, as non-forfeitable, vested members’ “right to

receive benefits as provided under the laws governing the

retirement system or fund.” Because the non-forfeitable right

protects “benefits as provided under the laws governing the

retirement system or fund,” identified individually by name, we

therefore examine the statutes of the individual retirement

systems or funds to understand the benefits purportedly provided

non-forfeitable protection. The non-forfeitable-right statute

provides no further guidance on the subject.

On close review, it appears that the non-forfeitable-right

statute’s reference to benefits provided “under the laws

governing the retirement system or fund” is a reference to

corresponding terminology in the respective individual public

pension statutory schemes. The public pension retirement

28
schemes define each individual “system” or “fund” using common

phraseology. That language in each of the systems or funds

consistently describes payment of retirement allowances and

other benefits under the provisions of that system’s enabling

act or law. We use the Public Employees’ Retirement System of

New Jersey as an example, although the phrasing is similar if

not identical in all corresponding provisions in the other

systems or funds:

“Public Employees’ Retirement System of New
Jersey,” hereinafter referred to as the
“retirement system” or “system,” is the
corporate name of the arrangement for the
payment of retirement allowances and other
benefits under the provisions of this act
including the several funds placed under said
system.

[N.J.S.A. 43:15A-6(m) (emphasis added).]4

The emphasized language thus defines the system itself (or fund

where that term is employed as the system’s name) as the means

for providing the retirement allowance and other benefits

provided to a beneficiary under the provisions of that system’s

4 See also N.J.S.A. 18A:66-2(q) (defining similarly “Teachers’
Pension and Annuity Fund”); N.J.S.A. 43:16A-1(1) and N.J.S.A.
43:16A-2 (same for “Police and Firemen’s Retirement System”);
N.J.S.A. 53:5A-3(s) (same for “State Police Retirement System of
New Jersey”); N.J.S.A. 43:6A-3(q) (same for “Judicial Retirement
System of New Jersey”).

29
enabling act. It does not include reference to benefits

authorized to be paid to a beneficiary via other statutes or

acts.

In similar fashion, the respective pension schemes use

common definitions of key words, which repeatedly emphasize that

the benefits conferred under the particular system or fund are

those provided for under that fund’s or system’s enabling act or

law. Continuing to use PERS as an example, we note that the

Legislature carefully constructed the conferred benefit and

related terms by reference to those provided through the

particular statutory act for the pension system. “Beneficiary”

means “any person receiving a retirement allowance or other

benefit as provided in this act.” N.J.S.A. 43:15A-6(d)

(emphasis added). See also N.J.S.A. 43:15A-6(k) (defining

“pension” as “payments for life derived from appropriations made

by the employer as provided in this act” (emphasis added));

N.J.S.A. 43:15A-6(b) (defining “annuity” as “payments for life

derived from the accumulated deductions of a member as provided

in this act” (emphasis added)). Importantly, “retirement

allowance” also is defined to mean simply “the pension plus the

annuity,” N.J.S.A. 43:15A-6(o), thus restricting it to those

benefits listed above, all of which are delimited to the

formulaic terms and conditions set forth fully in the enabling

act of the specific retirement system or fund.

30
Considering that the individual systems and funds define

benefits as those made available to beneficiaries only pursuant

to the provisions of their respective acts, the State urges this

Court to find that COLAs are not part of the protected non-

forfeitable right. The State relies in good measure on the fact

that COLAs are not provided to retired members of those systems

or funds through the enabling act or law governing the specific

retirement system or fund. Rather, COLAs are authorized and are

provided to retirees by way of separate legislation -- the

Pension Adjustment Act.

N.J.S.A. 43:3B-2 of the PAA expressly provides for

adjustment of the monthly amount of “retirement allowance or

pension originally granted to any retirant” (emphasis added), or

corresponding “pension or survivorship benefit originally

granted to any beneficiary” of a deceased member. The statutory

authorization for “adjustment” to the retirement allowance or

pension brings the reader back to the touchstone definitions of

those and related terms in the individual retirement schemes,

all of which define their statutory program of benefits based on

the act or law that enables that retirement system or fund.

The sole reference to COLAs in each retirement system’s or

fund’s enabling acts is narrow: COLAs are made a liability of

the fund or system. See, e.g., N.J.S.A. 43:15A-24.1. The

language providing for that liability is the same in each of the

31
pension systems or funds in issue that contain even this lone

mention of a COLA in their codified scheme;5 therefore, we quote

from the example cited:

Pension adjustment benefits; payment;
funding; liability

Pension adjustment benefits for members and
beneficiaries of the Public Employees’
Retirement System provided by the “Pension
Adjustment Act,” P.L.1958, c. 143 (C.43:3B-1
et seq.), shall be paid by the retirement
system and shall be funded as employer
obligations by the same method provided by law
for the funding of employer obligations for
the basic retirement benefits provided by the
retirement system.

[N.J.S.A. 43:15A-24.1 (emphasis added).]

The above text distinguishes between pension retirement

benefits and pension adjustment benefits within the same

sentence. Coupled with the separate provision of COLAs in the

PAA, that suggests that the Legislature considered the pension

benefit and the cost-of-living adjustment distinct. Without the

substantive COLA provisions incorporated into the “laws

governing the retirement system or fund,” there is insufficient

evidence to show that making COLAs a liability of the system or

5 See N.J.S.A. 18A:66-18.1 (TPAF); N.J.S.A. 43:6A-33.1 (JRS);

N.J.S.A. 53:5A-34.2 (SPRS); N.J.S.A. 43:16A-15.6 (PFRS).

32
fund made them a part of the benefits program. How a liability

is paid does not necessarily alter the nature of the benefit.6

Despite argument to the contrary, and the view expressed in the

dissent, it is the PAA that confers COLAs. The statutes

governing the retirement systems or funds may reference COLAs

and provide the mechanics for their funding, but they do not

confer them. Only the PAA does that.

Read together, the language of Chapter 113 and the

substantive provisions of the individual retirement systems or

funds reasonably support the State’s position. The non-

forfeitable-right statute’s protection of benefits “provided

under the laws governing the retirement system or fund” refers

to the operative enabling provisions of those systems and funds,

which, as set forth earlier, do not provide authorization for

COLAs.

The State also provides a rationale for the Legislature’s

express exclusion of medical benefits. The State maintains that

6 Just as N.J.S.A. 43:15A-24.1 did not effectuate a change in the
nature of the pension adjustment benefit by making it a
liability of the fund, paid for as a prefunded employer
obligation, the statute’s earlier inclusion of medical benefits
did not alter their nature. The prefunding of medical benefits
for PERS and TPAF ended in 2007. See L. 2007, c. 103, §§ 43,
44. The prefunded nature of both COLAs and medical benefits at
the time of the enactment of the non-forfeitable-right statute
in 1997 does not signal clear evidence that either was
substantively incorporated and provided to retirees and pension
members under either PERS’s or TPAF’s statutory schemes.
33
the exclusion was based on the need to ensure that medical

benefits be subordinate to retirement benefits in order for the

State’s retirement plans to remain “qualified” plans under the

Internal Revenue Code. See 26 U.S.C.A. § 401(h)(1). Medical

benefits are subordinate to retirement benefits if, in any given

year, the contributions for medical benefits, combined with

contributions for life insurance, do not exceed twenty-five

percent of the aggregate contributions for retirement benefits.

See 26 C.F.R. 1.401-14(c)(1)(i). In New Jersey, medical

benefits were made subject to negotiation one year prior to

passage of the non-forfeitable-right statute. See L. 1996, c.

8, § 6. Thus, according to the State, there existed a realistic

potential for inflation of medical benefit costs. If benefits

increased in a particular year and could not thereafter be

reduced because they were deemed to be non-forfeitable, and the

cost of medical benefit payments exceeded the twenty-five

percent threshold, a State retirement plan affected in that way

would not remain a qualified plan under the IRC. Although that

scenario had not yet occurred in New Jersey, the consequences of

a plan being held unqualified were so significant that the

Legislature’s action eliminated any doubt on the subject,

according to the State.

That plausible explanation dispels the notion that the

express exclusion of medical benefits can evince only a clear

34
intent on the part of the Legislature to include all else,

including COLAs, in the non-forfeitable right. At the very

least, the State maintains that the reasonableness of the

argument undercuts confidence in any “clearly indicated intent”

that requires us to interpret the exclusion as a green light to

include COLAs as a protected term of the contract right

conferred by the non-forfeitable-right statute through its

reference to “benefits program.”

Plaintiffs argue that by using the term “benefits program”

the Legislature melded the base pension benefit to the COLA. In

response, the State relies on statutory language that, it says,

does not make the two parts one under the law. The State

maintains that, in New Jersey, the COLA never becomes part of

the base pension and is not compounded annually. Rather, as

explained by the State, tracking the PAA’s language, N.J.S.A.

43:3B-2 provides that the monthly retirement allowance

“originally granted” to a retiree shall be adjusted in

accordance with the provisions of the PAA. In greater detail,

the State provides an example to illustrate the PAA’s operation.

Utilizing the formula in the PAA, as it operated prior to

Chapter 78’s enactment, a person’s base retirement allowance

would be entitled to an adjustment equal to sixty percent of the

difference between the Consumer Price Index in the year of

retirement and the then-current year. The following year, the

35
retirement allowance would be reset to the original amount and

the person would again be entitled to an adjustment equaling

sixty percent of the difference between the CPI in the year of

retirement and the then-current year.

This is not an ordinary statutory interpretation case, so

our task here is not to determine which textually based argument

is more likely than not the actual intent of the Legislature.

To find a statutory contract that would have the effect of

restricting subsequent legislative action on the subject, we

must find unmistakable evidence of legislative intent to create

a non-forfeitable right to COLAs. Fairly viewed, the parties’

many arguments are reasonable. Plaintiffs forcefully argue that

although medical benefits were expressly excluded from the non-

forfeitable right, COLAs were not. The State offers equally

persuasive reasons to conclude that the Legislature did not

intend to include COLAs as part of the non-forfeitable right:

COLAs (substantively provided for in the PAA) are not found in

“the laws governing the retirement system or fund” and the

Legislature had an independent reason for excluding medical

benefits.

Based on our review of the substantive provisions of the

retirement systems’ or funds’ laws referenced in the non-

forfeitable-right statute, which detail the benefits receiving

protection, and the absence of COLAs from those provisions, we

36
find plaintiff retirees’ arguments insufficient. The plain

language of the non-forfeitable-right statute does not surely

embrace COLAS, as it must to satisfy Spina. Although the

dissent states that it tracks Spina, by slighting the State’s

plausible arguments, its analysis strays from that case and

substitutes equitable concerns for the required standard.

Notwithstanding the dissent’s view, a crisp guarantee of

continued COLAs cannot be found in the text of the non-

forfeitable-right statute.

To succeed, the plaintiffs needed to demonstrate that the

legislative intent to render future COLAs part of the non-

forfeitable right conferred by Chapter 113 was unmistakable.

From a textual standpoint, that high standard simply is not met

here.7

7 Post-argument, plaintiffs brought to our attention a recent
decision of the Illinois Supreme Court, finding that a
legislative reduction in COLAs violated the Pension Protection
Clause in the Illinois Constitution. Jones v. Mun. Emps.
Annuity & Ben. Fund of Chi., __ N.E.3d __ (Ill. 2016). We find
that case unpersuasive for the same reason we find the substance
of the analyses of many of the out-of-state cases cited by the
State of little help: the COLA question was considered against
a wholly different statutory (or in the case of the Illinois
decision, constitutional) backdrop. To the extent that we rely
on out-of-state cases, our reliance has been limited to general
principles applicable regardless of the precise statutory
language. The language of our statutes controls the outcome
here.
37
Plaintiffs next argue that legislative history further

reveals the unmistakable legislative intent to include COLAs

under the protection of the non-forfeitable-right statute.

Plaintiffs also look to the history and nature of COLAs, arguing

that they support their claim that the base pension benefit and

COLAs are one and the same.

Ordinarily, we do not turn to extrinsic aids such as

legislative history unless there is some ambiguity on the face

of the statute itself. See DiProspero v. Penn, 183 N.J. 477,

492-93 (2005). But if there is ambiguity requiring resort to

legislative history, one is already outside the realm of

unmistakable clarity needed to find a statutory contract right.

Although it is not beyond the pale for courts to consider

legislative history advanced by litigants looking to “overcome

the hurdle of the unmistakability doctrine,” see R.I. Bhd. of

Corr. Officers v. Rhode Island, 357 F.3d 42, 46 n.3 (1st Cir.

2004), we find reliance on that type of extrinsic evidence

necessarily weak. In this setting, any ambiguity spells failure

for claims that the Legislature created a contractual right to

COLAs. The intent to contract must be unmistakable.

Even if we were to look at legislative history, evidence of

such unmistakable intent is wanting there. First, plaintiffs

rely on the committee statement accompanying the non-

forfeitable-right statute. They emphasize that nothing in that

38
statement suggested that COLAs were excluded from the non-

forfeitable right. See Senate Budget and Appropriations

Committee, Statement to S. No. 1119 (1997). That argument fails

for the same reason plaintiffs’ textual argument fails. It adds

nothing beyond the text of the statute, and it focuses on what

is unmistakably excluded from the non-forfeitable right instead

of what is unmistakably included.

Even weaker is plaintiffs’ reliance on a transcript of a

legislative hearing conducted by the Senate State Management,

Investment and Financial Institutions Committee on the State’s

pension system, a committee that never passed on the bill that

was ultimately introduced and enacted as Chapter 113. See

Public Hearing Before Senate State Management, Investment and

Financial Institutions Committee (May 20, 1996). Only two

Senators were present at the hearing, and one departed midway

through the hearing. Id. at 49. Much of the hearing focused on

the actuarial soundness of the pension funds. But the

discussion later moved to the question of whether public

employees should have a contractual right to their pension

benefits. Id. at 53.

Plaintiffs focus on the remaining Senator’s remarks. After

urging by a union representative that a bill to conform the

pension funds to IRS requirements contain additional contractual

language, the Senator responded that he “[felt] strongly that

39
the same protections and rights that are accorded, say, under an

ERISA [Employee Retirement Income Security Act] standard to

people in the private sector, should be accorded to people in

the public sector.” Id. at 69. He continued, explaining that,

in his view, once public employees “have their pensions

established as at a point in time with regard to vesting it,

that you cannot go back retroactively and change what has been

earned, what has been accrued, what has been vested in.” Ibid.

Believing that ERISA provides that protection, the Senator added

that “[s]urely, at a minimum, that is what we should provide

here, too.” Ibid.

That type of legislative history is not reliable. The

hearing was a forum for airing views by the relevant

stakeholders, including representatives from the State and

various labor unions, on the current soundness of the pension

funds and how to best ensure their long-term viability. After

the discussion turned to what would eventually be conceptualized

as the non-forfeitable-right statute, the sole remaining Senator

offered a preliminary take on the subject, but “the statements

of individual legislators are not generally considered to be a

reliable guide to legislative intent.” State v. Yothers, 282

N.J. Super. 86, 104 (App. Div. 1995) (Skillman, J.A.D.,

dissenting). We can reliably cast the Senator’s statements as

his personal thoughts on the topic, thoughts that he

40
acknowledged were preliminary. No more, no less. We cannot

accept that to be a definitive and unmistakable pronouncement of

legislative intent.

Second, plaintiffs contend that the history of COLAs

supports the reasonable expectation that they were part and

parcel of the singular pension benefit provided on a monthly

basis to retirees or their beneficiaries. However, the history

of COLAs in New Jersey points to the opposite conclusion: that

the Legislature granted COLAs as periodic exercises of

legislative discretion separate and apart from the base pension,

responding to evolving economic, social, and political dynamics.

Cf. Justus, supra, 336 P.3d at 209 (“By its very nature a

statutory cost of living adjustment is a periodic exercise of

legislative discretion that takes account of changing economic

conditions in the state and/or nation.”).

In New Jersey, COLAs were not always automatic. They were

instead provided from time to time when the Legislature was

persuaded that an adjustment calculated on fiscal realities

would be the appropriate public policy of the State. The

frequent legislative tinkering with the COLA formula over the

years only underscores that reality. See, e.g., L. 1958, c.

143, § 3 (granting first COLAs to retirees who retired before

1952); L. 1961, c. 144, § 2 (granting COLAs to retirees who

retired between 1952 and 1954); L. 1969, c. 169, §§ 1, 2, 5

41
(expanding COLAs to all eligible retired public employees and

providing adjustments based on CPI); L. 1977, c. 306, § 4

(increasing percentage of adjustment from one-half to three-

fifths of percentage change in CPI); L. 1981, c. 128, § 1

(increasing percentage of adjustment from three-fifths to two-

thirds of percentage change in CPI); L. 1981, c. 128, § 2(a)

(returning adjustment to three-fifths of change in CPI);

N.J.S.A. 43:3B-7(a) (“The percentage of adjustment shall be

[three-fifths] of the percentum of change.”); see also Justus,

supra, 336 P.3d at 212 (“Modifications over the past half

century reflect the legislature’s unbridled management of the

COLA . . . .”).

Plaintiffs’ argument taken to its logical end is that, even

before the non-forfeitable-right statute was passed, all

pensioners -- vested and retired members -- had a reliable

expectation that future adjustments under the present CPI

formula in the COLA statute could not be prospectively suspended

or adjusted. So viewed, once the Legislature granted the first

COLAs, COLAs became a perpetual right. But that cannot be, for

that is precisely what the presumption against a contract right

is designed to prevent -- the hamstringing of the Legislature’s

right to enact new or changed laws to address present needs.

See Wash. Educ. Ass’n v. Dep’t of Ret. Sys., 332 P.3d 439, 446

(Wash. 2014) (“Surely the legislature can make the addition of

42
[a COLA] subject to its right to amend or repeal the program in

the future. To say otherwise would strongly disincentivize the

legislature from providing additional benefits beyond a basic

pension.”); see also Pittman, supra, 64 F.3d at 1104 (“A statute

is not a commitment by the legislature never to repeal the

statute.”). Indeed, in subsection (e) of the non-forfeitable-

right statute, the Legislature specifically reiterated that any

benefit not guaranteed by the statute is subject to change by

the Legislature. N.J.S.A. 43:3C-9.5(e).

Moreover, the State points to additional statutory support

to view COLAs and retirement benefits as not melded together by

statute or practice. COLAs are tied to the CPI, making a year-

to-year increase uncertain and even allowing for a negative

adjustment. See N.J.S.A. 43:3B-7(a); see also Bartlett v.

Cameron, 316 P.3d 889, 895 (N.M. 2013) (“Future economic growth

is neither consistent nor dependable, and any adjustment

predicated on economic growth is at best indefinite,

antithetical to a vested property right.”).

But a negative adjustment cannot take the total amount a

retiree receives below the initial base benefit. See N.J.S.A.

43:3B-7(a) (allowing for negative adjustment but providing that

“[i]n no instance shall the amount of the retirement allowance

or pension originally granted and payable to any retirant be

reduced as a result of [an] adjustment”). That legislative

43
distinction between the COLA and the initial pension amount --

the benefits floor, below which the amount received cannot drop

-- supports the State’s argument that the two are not one and

the same. See Me. Ass’n of Retirees, supra, 758 F.3d at 31

(accepting as “possible” argument that “in setting the

retirement-date pension amount as the floor below which a

negative CPI could not reduce the allowance, the Legislature

arguably treated the base pension amount as the benefit,

protected against deflationary reduction, and COLA increases as

potentially temporary adjustments to that benefit” (internal

citation omitted)). As the State points out, Chapter 78 did not

purport to take away any adjustment already made; it simply

stopped further adjustment until certain conditions were met.

After Chapter 78, no retiree saw his monthly pension benefit

drop.

To adopt the retirees’ argument about prior practice

providing the basis for an implicit contract right to ongoing

COLAs reads into Chapter 113 -- which is silent on COLAs -- a

perpetual escalator clause entirely out of State control, driven

only by the pertinent CPI. The Legislature’s right to set the

policy of this State as it sees fit cannot permit such a result

unless a law clearly and unmistakably takes that power away from

future legislatures.

44
We conclude that the additional extrinsic evidence does not

further the retirees’ argument that the Legislature acted with

the required intent. The text of the non-forfeitable-right

statute is not sufficiently clear to have unmistakably conferred

a statutory contract right to continued COLAs. Nor is its

surrounding history. The Appellate Division’s careful analysis

went awry in reversing that presumption. Moreover, Chapter 78

enjoys a presumption of constitutionality. And the

Legislature’s view that its prior action in Chapter 113 did not

prevent future suspensions of COLAs is relevant in our

consideration. See Varsolona v. Breen Capital Servs. Corp., 180

N.J. 605, 623 (2004) (“[S]ubsequent legislation may be used by a

court as an extrinsic aid when seeking to discern earlier

legislative intent.”). Clearly, the Legislature did not think

itself bound to never suspend the PAA right to continued

increases in pension adjustments based on cost-of-living

indices. To find a contrary intent requires a much greater

demonstration than the plaintiffs have available to them.

All of the aforesaid arguments considered, we conclude that

the statutory and contract claims advanced by plaintiffs must

fail. For the Legislature to have given up so much control over

a future Legislature’s ability to react to the present needs of

the State, the expression of a statutory contract and the

individual terms of such a contract must be unmistakably clear.

45
That clarity is absent here in respect of the continued right to

receive additional COLAs after their suspension in 2011.8

Finally, and alternatively, petitioner Ouslander contends

that equity prevents the State from terminating COLAs for those

employees who retired prior to the enactment of Chapter 78.

More specifically, petitioner claims he is entitled to a remedy

for the State’s actions under the principles of procedural and

substantive due process and equitable estoppel. Because the

language of the non-forfeitable-right statute does not guarantee

COLAs, it necessarily follows that the retirees could not

reasonably rely on the statute’s terms for purposes of a claim

in equity.

To support an estoppel theory, a litigant must prove that

the opposing party “engaged in conduct, either intentionally or

under circumstances that induced reliance[.]” Knorr v. Smeal,

178 N.J. 169, 178 (2003). This involves “a knowing and

intentional misrepresentation” by the party against whom

estoppel would apply. O’Malley v. Dep’t of Energy, 109 N.J.

309, 317 (1987). The non-forfeitable-right statute’s disputed

8 Because we find no statutory contract right, there is no need
to examine further petitioner Ouslander’s challenge to the
Appellate Division’s rejection of his arguments on sovereign
immunity and its application to a claimed violation of the
Federal Contract Clause. We will not address an issue that is
unnecessary to our disposition.
46
language does not unambiguously include COLAs within its

guarantee, so the text itself does not suggest an intentional

representation by the Legislature of the certain payment of

perpetual adjustments. Even the State’s course of conduct -- in

this case the continual payment of COLAs for decades -- must be

tempered by the limited reach of the language of the non-

forfeitable-right statute and the Legislature’s prerogative to

change the laws. The retirees could not reasonably expect

perpetual COLAs when the non-forfeitable-right statute

specifically notes that any benefit not guaranteed by the

statute, a category that we hold includes COLAs, is subject to

change by the Legislature. N.J.S.A. 43:3C-9.5(e). To hold

otherwise would suggest that the pensioners had a right to

receive continued pension payments before the statute was

enacted, which is contrary to the history of COLA legislation

and the ability of the Legislature to amend, repeal, and modify

legislation.

Petitioner’s due process claims are unavailing for similar

reasons. Those claims depend on the existence of a vested

right, Twiss v. State, 124 N.J. 461, 467 (1991); the continued

receipt of COLAs cannot be categorized in that way based on the

current text of the non-forfeitable-right statute. This is

especially true because the heightened standard of National

Railroad, supra, applies equally to an analysis of vested rights

47
created by statute. See 470 U.S. at 465-66, 105 S. Ct. at 1451,

84 L. Ed. 2d at 446 (“[A]bsent some clear indication that the

legislature intends to bind itself contractually, the

presumption is that a law is not intended to create private

contractual or vested rights but merely declares a policy to be

pursued until the legislature shall ordain otherwise.” (emphasis

added) (internal quotation marks omitted)).

Ultimately, petitioner’s alternative claims are belied by

the same evidence that guided our Contract Clause analysis. The

text of the non-forfeitable-right statute does not reveal an

unequivocal intent of the Legislature to include COLAs within

its contractual guarantees. The absence of unequivocal

legislative intent forecloses petitioner’s equitable claims.

Regardless of the merits of petitioner’s claims, the

creation of legislation is an essential function of the

Legislature, so that sovereign immunity bars the equitable

estoppel claim. See O’Malley, supra, 109 N.J. at 316 (noting

application of equitable estoppel against governmental entity is

particularly rare when it would interfere “with essential

governmental functions” (quoting Vogt v. Borough of Belmar, 14

N.J. 195, 205 (1954)); 28 Am. Jur. 2d Estoppel & Waiver § 128

(2011) (“It has been held that estoppel may not be applied

against the government acting in its sovereign capacity.”).

Equitable estoppel may be invoked against a governmental entity

48
only “to prevent manifest injustice.” O’Malley, supra, 109 N.J.

at 316. Here, as in all cases, equity follows the law. Because

we have determined that the non-forfeitable-right statute does

not guarantee COLAs, we decline to provide a remedy in equity

that is not available under the law.

VI.

The judgment of the Appellate Division is reversed, and the

trial court’s judgment dismissing the complaints is reinstated.

CHIEF JUSTICE RABNER; JUSTICES PATTERSON, FERNANDEZ-VINA,

and SOLOMON; and JUDGE CUFF (temporarily assigned), join in

JUSTICE LaVECCHIA’s opinion. JUSTICE ALBIN filed a separate,

dissenting opinion.

49
SUPREME COURT OF NEW JERSEY
A-71/72 September Term 2014
074612

Plaintiffs-Respondents,

and

CHARLES OUSLANDER,

Plaintiff-Appellant
and Cross-Respondent,

and

NEW JERSEY EDUCATION
ASSOCIATION, NEW JERSEY STATE
POLICEMEN’S BENEVOLENT
ASSOCIATION, INC.,
COMMUNICATIONS WORKERS OF
AMERICA, AFL-CIO, NEW JERSEY
FRATERNAL ORDER OF POLICE,
NEW JERSEY STATE

Plaintiffs/Intervenors-
Respondents,

3
Defendants-Respondents
and Cross-Appellants.

MICHAEL DELUCIA, PATRICIA
DELUCIA, ROBERT C. BROWN, AND
ANNE K. BROWN,

Plaintiffs,

STATE OF NEW JERSEY
DEPARTMENT OF THE TREASURY,
DIVISION OF PENSIONS AND
BENEFITS,

Defendants.

JUSTICE ALBIN, dissenting.

Sometimes a plainly written statute is just a plainly

written statute. I do not agree with the majority that the

pension statutes at issue, which guarantee retired public

employees a cost-of-living adjustment (COLA), lack clarity or

are susceptible to two interpretations.

In 1997, the Legislature made a contractual promise to

public employees when it passed the Non-Forfeitable Right

Statute, N.J.S.A. 43:3C-9.5. L. 1997, c. 113, § 5. Public

employees whose pension rights had vested were assured that they

had a “non-forfeitable right to receive benefits as provided

under the laws governing the retirement system or fund,”

N.J.S.A. 43:3C-9.5(b), and that their “benefits program” could

4
not be reduced, N.J.S.A. 43:3C-9.5(a). (Emphasis added). At

the time of the passage of the Non-Forfeitable Right Statute,

the “laws governing the retirement system or fund,” N.J.S.A.

43:3C-9.5(b), specifically provided for cost-of-living

adjustments for retired public employees. The statutory scheme

of each currently open retirement system or fund not only

directly incorporates the Pension Adjustment Act (PAA), N.J.S.A.

43:3B-1 to -10, but also states that pension adjustment benefits

(cost-of-living adjustments) “shall be paid by the retirement

system” to vested public employees.9 The pension fund and system

statutes clearly and distinctly designate COLAs as pension

benefits.

The pension benefits program mentioned in the Non-

Forfeitable Right Statute has three components: base benefits,

1 The pension systems and funds are the Teachers’ Pension and
Annuity Fund, N.J.S.A. 18A:66-1 to -93, the Police and Firemen’s
Retirement System, N.J.S.A. 43:16A-1 to -68, the Public
Employees’ Retirement System, N.J.S.A. 43:15A-1 to -161, the
Judicial Retirement System, N.J.S.A. 43:6A-1 to -47, and the
State Police Retirement System, N.J.S.A. 53:5A-1 to -47. The
two remaining funds mentioned in the Non-Forfeitable Right
Statute, the Consolidated Police and Firemen’s Pension Fund,
N.J.S.A. 43:16-1 to -21, and the Prison Officers’ Pension Fund,
N.J.S.A. 43:7-7 to -27, have been closed to new members since
1944 and 1960, respectively. See N.J.S.A. 43:7-8 (“No person
employed on or after January 1, 1960 shall be eligible for
membership in the Prison Officers’ Pension Fund.”); N.J.S.A.
43:16-17 (defining “member” as “a person who on July 1, 1944,
was a member of a municipal police department . . . fire
department or county police department” for Consolidated Police
and Firemen’s Pension Fund).
5
medical benefits, and COLAs. That statute excludes medical

benefits, but not COLAs. Had the Legislature intended to

exclude COLAs, it knew how to do so. Because the cost-of-living

adjustment was contained in laws “governing the retirement

system or fund” and not subject to any exclusion in the Non-

Forfeitable Right Statute, the public employee retirees who have

brought suit are entitled to the pension benefits promised to

them. This ineluctable conclusion follows from the clear and

unambiguous language of the relevant statutes. The wording and

interconnection of those statutes do not suggest any other

plausible interpretation.

The PAA and each retirement system and fund guaranteed

public employees that, if they retired, their pension benefits

would be sustained by a periodic cost-of-living adjustment. In

making the critical decision of whether and when to retire,

public employees relied on the legislative promise that COLAs

would protect their pensions from the ravages of inflation.

Many public employees may not have retired or may have deferred

their retirement had COLAs not been guaranteed as part of their

pension benefits program. Although the Legislature had the

right to suspend COLAs for those public employees whose pension

benefits had not vested and who had yet to retire, it did not

have the right to do so for those public employees who retired

expecting that the State would keep its word. The Legislature

6
did here precisely what the United States and New Jersey

Constitutions prohibit: it passed a law impairing the

obligation of its own contract. See U.S. Const. art. I, § 10,

cl. 1.; N.J. Const. art. IV, § 7, ¶ 3.

I concur with the judgment of the Appellate Division, Berg

v. Christie, 436 N.J. Super. 220 (App. Div. 2014), which the

majority has overturned. The retired public employees in this

case are entitled to their full pension benefits earned over the

course of their careers. I therefore respectfully dissent.

The first paragraph of the Non-Forfeitable Right Statute,

N.J.S.A. 43:3C-9.5(a), provides:

For purposes of this section, a “non-
forfeitable right to receive benefits” means
that the benefits program, for any employee
for whom the right has attached, cannot be
reduced. The provisions of this section shall
not apply to post-retirement medical benefits
which are provided pursuant to law.

The second paragraph, N.J.S.A. 43:3C-9.5(b), states:

Vested members of the Teachers’ Pension and
Annuity Fund, the Judicial Retirement System,
the Prison Officers’ Pension Fund, the Public
Employees’ Retirement System, the
Consolidated Police and Firemen’s Pension
Fund, the Police and Firemen’s Retirement
System, and the State Police Retirement
System, upon the attainment of five years of
service credit in the retirement system or
fund or on the date of enactment of this bill,
whichever is later, shall have a non-
forfeitable right to receive benefits as
provided under the laws governing the

7
retirement system or fund upon the attainment
of five years of service credit[.]

The majority reads the language of the second paragraph --

“the laws governing the retirement system or fund,” N.J.S.A.

43:3C-9.5(b) -- as referring only to the base pensions conferred

by each pension fund or system. (Emphasis added). With that

constricted view, the majority concludes that the legislative

contract formed in the Non-Forfeitable Right Statute extends no

further. That approach, however, requires that we put on

blinders to the provisions of the statutes in each retirement

system and fund that confer a cost-of-living adjustment to

retired public employees.

At the time of passage of the Non-Forfeitable Right

Statute, the laws governing each retirement system and fund

included specific provisions for the payment of COLAs to vested

and retired public employees. See N.J.S.A. 18A:66-18.1

(“Pension adjustment benefits for members and beneficiaries of

the Teachers’ Pension and Annuity Fund as provided by the [PAA]

shall be paid by the retirement system[.]” (citation omitted));

N.J.S.A. 43:6A-33.1 (“Pension adjustment benefits for members

and beneficiaries of the Judicial Retirement System provided by

the [PAA] shall be paid by the retirement system[.]” (citation

omitted)); N.J.S.A. 43:15A-24.1 (“Pension adjustment benefits

for members and beneficiaries of the Public Employees’

8
Retirement System provided by the [PAA] shall be paid by the

retirement system[.]” (citation omitted)); N.J.S.A. 43:16A-15.6

(“Pension adjustment benefits for members and beneficiaries of

the Police and Firemen’s Retirement System of New Jersey as

provided by [the PAA] shall be paid by the retirement system[.]”

(citation omitted)); N.J.S.A. 53:5A-34.2 (“Pension adjustment

benefits for members and beneficiaries of the State Police

Retirement System provided by the [PAA] shall be paid by the

retirement system[.]” (citation omitted)).10

The clear and unmistakable language of every statute above

provides for COLAs in a retirement system or fund in which

public employees are beneficiaries. Each of those statutes

directly incorporates the Pension Adjustment Act. The Non-

Forfeitable Right Statute and retirement system and fund

statutes when read together meet the high standard for a

legislative contract. See Spina v. Consol. Police & Firemen’s

Pension Fund Comm’n, 41 N.J. 391, 405 (1964) (stating that

“legislative contract” should be “so plainly expressed that one

2 Each of those statutory provisions also provides that COLAs
shall be funded as employer obligations. See, e.g., N.J.S.A.
18A:66-18.1 (“Pension adjustment benefits for members and
beneficiaries of the Teachers’ Pension and Annuity Fund as
provided by the [PAA] . . . shall be paid by the retirement
system and shall be funded as employer obligations by the same
method provided by law for the funding of employer obligations
for the basic retirement benefits provided by the retirement
system.” (citation omitted)).
9
cannot doubt the individual legislator understood and intended

it”).

The Legislature was familiar with the COLA retirement

benefit conferred by those statutes at the time of the enactment

of the Non-Forfeitable Right Statute. Mahwah Twp. v. Bergen

Cty. Bd. of Taxation, 98 N.J. 268, 279 (“The Legislature is

presumed to have been aware of existing legislation[.]”), cert.

denied, 471 U.S. 1136, 105 S. Ct. 2677, 86 L. Ed. 2d 696 (1985).

Those statutory provisions clearly show that COLAs were an

integral part of the benefits program provided to retired public

employees under various pension systems.

The majority’s approach, moreover, does not conform to the

logic of N.J.S.A. 43:3C-9.5. If section b’s reference to “laws

governing the retirement system or fund” encompassed nothing

more than a public employee’s right to the base pension pay,

then the Legislature would have had no need to exclude “post-

retirement medical benefits” provided by law from N.J.S.A.

43:3C-9.5’s benefits program. The majority’s interpretation

renders the exclusion superfluous. Yet, our canons of statutory

construction mandate that we give effect to all the words of a

legislative enactment. McCann v. Clerk of Jersey City, 167 N.J.

311, 321 (2001) (quoting Gabin v. Skyline Cabana Club, 54 N.J.

550, 555 (1969)).

In that light, the post-retirement medical benefits

10
exclusion is not mere surplusage. The Legislature clearly and

distinctly expressed that the employees’ benefits program

included more than base pension benefits by pointedly excluding

medical benefits. In other words, if the benefits program

mentioned in N.J.S.A. 43:3C-9.5(b) was limited to base pension

benefits, the Legislature would not have crafted the medical

benefits exclusion in N.J.S.A. 43:3C-9.5(a). See Prado v.

State, 186 N.J. 413, 426-27 (2006) (“[W]here a general provision

in a statute has certain limited exceptions, all doubts should

be resolved in favor of the general provision rather than the

exceptions[.]”) (quoting 2A Norman J. Singer, Sutherland

Statutory Construction § 47.11 (5th ed. 1992)).

Accordingly, the exclusion of only post-retirement medical

benefits from the Non-Forfeitable Right Statute clearly evinced

the Legislature’s intent to confer on retiring public employees

the remaining contractually promised post-retirement benefits --

the base pension and COLA.

II.

The cost-of-living adjustment has been a post-retirement

benefit for certain public employees since the passage of the

Pension Adjustment Act in 1958. See L. 1958, c. 143. In the

years that followed, the Legislature amended the PAA a number of

times, ingraining the COLA as a basic component of a pensioner’s

retirement benefits. See, e.g., L. 1977, c. 306, § 6

11
(increasing adjustment from one-half of percentage of change in

Consumer Price Index to three-fifths of percentage of change);

L. 1969, c. 169, § 1 (providing that adjustments would be based

on Consumer Price Index); L. 1964, c. 198, § 1 (applying COLA to

first $900 of retirement benefit). To place COLAs on a secure

financial footing, the Legislature required that employers pre-

fund COLAs, thus replicating the funding structure for base

pensions. See, e.g., L. 1990, c. 6 (Public Employees’

Retirement System); L. 1989, c. 204 (Police and Firemen’s

Retirement System); L. 1987, c. 385 (Teachers’ Pension and

Annuity Fund).

When the Legislature enacted the Non-Forfeitable Right

Statute, N.J.S.A. 43:3C-9.5, in 1997, which guaranteed that

vested public employees had a non-forfeitable right to post-

retirement benefits (other than medical benefits) “under the

laws governing the retirement system or fund,” public employees

reasonably believed that COLAs were an essential part of their

pension. That reasonable belief sprang from clear and

unmistakable statutory language. Public employees relied on

that language in deciding whether and when to retire.11 Without

3 The New Jersey Division of Pensions and Benefits published a
fact sheet explaining to members of the pension funds and
systems how to calculate COLAs and who to contact to verify
their current allowance and deduction information. N.J. Div. of
Pensions & Benefits, Fact Sheet #18: Cost-of-Living Adjustments
(Nov. 2005),
12
the guarantee of a cost-of-living adjustment, many public

employees may have determined that they would be unable to

financially support their families and may have postponed their

retirements.

In 2010, the Legislature limited the right to non-

forfeitable post-retirement benefits to those public employees

whose pension rights had become vested before May 21 of that

year. See L. 2010, c. 1. In 2011, the Legislature suspended

automatic COLAs for current and future retirees beginning June

28, 2011. L. 2011, c. 78, § 25 (codified as amended at N.J.S.A.

43:3B-2(a)).

No one doubts that the Legislature is empowered, and has

the duty, to make the State’s pension system fiscally sound.

But the United States and New Jersey Constitutions bar the

Legislature from unilaterally abrogating a contract it made with

its retired public employees. The various pension systems and

funds must honor the contractual right of those employees to

future cost-of-living adjustments under the Non-Forfeitable

Right Statute. The Federal and State Contracts Clauses prohibit

the state from impairing a contractual obligation. U.S. Const.

art. I, § 10, cl. 1. (“No State shall . . . pass any . . . Law

impairing the Obligation of Contracts[.]”); N.J. Const. art. IV,

http://www.njleg.state.nj.us/propertytaxsession/opi/fact18.pdf.
13
§ 7, ¶ 3 (“The Legislature shall not pass any . . . law

impairing the obligation of contracts, or depriving a party of

any remedy for enforcing a contract which existed when the

contract was made.”).12 Those clauses are limitations on

legislative power. New Jersey has waived its right to assert

sovereign immunity through the New Jersey Contractual Liability

Act. See Alden v. Maine, 527 U.S. 706, 755, 119 S. Ct. 2240,

2267, 144 L. Ed. 2d 636, 679 (1999) (“sovereign immunity bars

suit only in the absence of consent,” and therefore state may

waive its immunity under the Eleventh Amendment); Allen v.

Fauver, 167 N.J. 69, 75 (2001) (explaining that sovereign

immunity will not bar suit if there is “express legislative

consent to suit”). The Act provides:

The State of New Jersey hereby waives its
sovereign immunity from liability arising out
of an express contract or a contract implied
in fact and consents to have the same
determined in accordance with the rules of law

4 It bears noting that in 2006, the Office of Legislative
Services issued an opinion letter concluding that legislation
that would detrimentally alter the retirement benefits of
qualified retirees “would be unconstitutional as violative of
the federal and State constitutional proscription against
impairment of the obligation of contracts.” N.J. State Leg.,
Office of Legis. Servs., Opinion Letter on Reduction of
Retirement Benefits for Public Employees (Aug. 21, 2006),
http://www.njleg.state.nj.us/propertytaxsession/opi/jcpe_resourc
es_08232006.pdf. That letter also stated that the financial
instability of the system “was foreseeable at the inception of
the contractual relationship and the State, nevertheless,
committed itself and did not reserve the right to unilaterally
adopt substantial modifications of the pension program.” Ibid.

14
applicable to individuals and corporations;
provided, however, that there shall be no
recovery against the State for punitive or
consequential damages arising out of contract
nor shall there be any recovery against the
State for claims based upon implied warranties
or upon contracts implied in law.

[N.J.S.A. 59:13-3.]

Accordingly, the Legislature, pursuant to the Contractual

Liability Act, has waived immunity from suit for its violation

of its express contractual obligations to the retired public

employees in this case.13

Whatever reforms the Legislature enacts to ensure the

financial stability of the pension system must conform to the

Constitution. The promises made to public employees through the

Non-Forfeitable Right Statute meet the definition of a

legislative contract. That is so because the commitment made in

that statute is so plainly expressed that there can be no doubt

about the Legislature’s intent. See Spina, supra, 41 N.J. at

405.

III.

Unlike the majority, I conclude that public employee

plaintiffs in this case have an enforceable contractual right to

5 Employees and employers prefunded the COLA. See, e.g.,
N.J.S.A. 43:3B-4.3; N.J.S.A. 43:15A-24; N.J.S.A. 43:15A-24.1.
The payment of monies owed to retired public employees does not
require a legislative appropriation because those monies are in
a preexisting fund.
15
their COLAs. I therefore respectfully dissent.

16
SUPREME COURT OF NEW JERSEY

NO. A-71/72 SEPTEMBER TERM 2014
ON CERTIFICATION FROM Appellate Division, Superior Court

RICHARD W. BERG, ROBERT J. BRASS,
THOMAS CANNAVO, MELAINE B.
CAMPBELL, LARRY ROBERT ETZWEILER,
KATHY FLICKER, ARNOLD GOLDEN,
CHARLES GRINELL, TONI A. HENDRICKSEN,
HAROLD KASSELMAN, SUSAN LOTHIAN,
STEPHEN H. MONSON, MARTIN C. MOONEY,
SR., BRIAN MULHOLLAND, ANNE C.
PASKOW, SHARYN PEIFFER, SAMUEL REAL,
JR., GREGORY J. SAKOWICZ, SUSAN W.
SCIACCA, WILLIAM H. SCHMIDT, FRED
SCHWANWEDE, JOHN J. SMITH, DEBRA
STONE, SHERI TANNE, AND JACK L.
WEINBERG,

Plaintiffs-Respondents,

and

CHARLES OUSLANDER,

Plaintiff-Appellant
and Cross-Respondent,

and

NEW JERSEY EDUCATION ASSOCIATION,
NEW JERSEY STATE POLICEMEN’S
BENEVOLENT ASSOCIATION, INC.,
COMMUNICATIONS WORKERS OF
AMERICA, AFL-CIO, NEW JERSEY
FRATERNAL ORDER OF POLICE, NEW
JERSEY STATE FIREFIGHTERS’ MUTUAL
BENEVOLENT ASSOCIATION,
PROFESSIONAL FIREFIGHTERS
ASSOCIATION OF NEW JERSEY, AMERICAN
FEDERATION OF STATE, COUNTY AND
MUNICIPAL EMPLOYEES, COUNCIL 1, AFL-

CIO, AMERICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL EMPLOYEES,
COUNCIL 73, AFL-CIO, AMERICAN
FEDERATION OF TEACHERS NEW JERSEY
STATE FEDERATION, AFL-CIO,
INTERNATIONAL FEDERATION OF
PROFESSIONAL AND TECHNICAL
ENGINEERS, AFL-CIO & CLC, LOCAL 194,
INTERNATIONAL FEDERATION OF
PROFESSIONAL AND TECHNICAL
ENGINEERS, AFL-CIO, LOCAL 195,
INTERNATIONAL FEDERATION OF
PROFESSIONAL AND TECHNICAL
ENGINEERS, AFL-CIO & CLC, LOCAL 200,
PROBATION ASSOCIATION OF NEW
JERSEY, NEWARK FIREFIGHTERS UNION,
MORRIS COUNCIL NOS. 6 AND 6A, NJCSA
IFPTE, AFL-CIO, JERSEY CITY POLICE
OFFICERS BENEVOLENT ASSOCIATION,
CAMDEN COUNTY COUNCIL #10,
INTERNATIONAL BROTHERHOOD OF
TEAMSTERS LOCAL 97, BELLEVILLE PBA
LOCAL 28, NEW JERSEY ASSOCIATION OF
SCHOOL ADMINISTRATORS, NEW JERSEY
PRINCIPALS AND SUPERVISORS
ASSOCIATION, NEW JERSEY ASSOCIATION
OF SCHOOL BUSINESS OFFICIALS, NEW
JERSEY RETIREES’ EDUCATION
ASSOCIATION, TRANSPORT WORKERS
UNION LOCAL 225, NEW JERSEY SUPERIOR
OFFICERS LAW ENFORCEMENT
ASSOCIATION, ATLANTIC CITY WHITE
COLLAR PROFESSIONAL ASSOCIATION,
INTERNATIONAL BROTHERHOOD OF
ELECTRICAL WORKERS LOCAL 210,
ATLANTIC CITY SUPERIOR OFFICERS
ASSOCIATION, PETER BURKHALTER, DEE
TRUCHON, GEORGE O’BRIEN, THOMAS
TEVLIN, ROBERT BROWER, ROSEMARIE
JANKOWSKI, IRIS J. ELLIOTT, KENNETH D.
KING, FRANK ELMER HICKS, WILLIAM A.
PARKER, BRAD FAIRCHILD, DWIGHT
COVALESKIE, ANTHONY F. WIENERS, GARY
SOUSS, WILLIAM LAVIN, CHARLES WEST,
MARIAN LEZGUS, MELANIE HAFDELIN,
STEVEN ENGRAVALLE, CINDY BARR-
RAGUE, DOMINICK MARINO, JOHN J.
GEROW, JANET S. ZYNROZ, ALFRED
CRESCI, RAE C. ROEDER, MARYANN
PIUNNO SMITH, MARYANN MESICS, DENNIS
REITER, ANTHONY MISKOWSKI, VINCENT
KAIGHN, WILLIAM S. BAUER, JR., MICHAEL
CALABRESE, and DEBORAH JACOBS,

Plaintiffs/Intervenors-
Respondents,

v.
HON. CHRISTOPHER J. CHRISTIE, HON. KIM
GUADAGNO, SECRETARY OF STATE OF
THE STATE OF NEW JERSEY, DIRECTOR,
DIVISION OF PENSIONS, BOARD OF
TRUSTEES, PUBLIC EMPLOYEES’
RETIREMENT SYSTEM, TREASURER, STATE
OF NEW JERSEY AND STATE OF NEW
JERSEY,

Defendants-Respondents
and Cross-Appellants.

MICHAEL DELUCIA, PATRICIA DELUCIA,
ROBERT C. BROWN, AND ANNE K. BROWN,

Plaintiffs,

STATE OF NEW JERSEY DEPARTMENT OF
THE TREASURY, DIVISION OF PENSIONS
AND BENEFITS,

Defendants.

DECIDED June 9, 2016
Chief Justice Rabner PRESIDING
OPINION BY Justice LaVecchia
CONCURRING/DISSENTING OPINION BY
DISSENTING OPINION BY Justice Albin

REVERSE AND
CHECKLIST DISSENT
REINSTATE
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA X
JUSTICE SOLOMON X
JUDGE CUFF (t/a) X
TOTALS 6 1