June 9 (Reuters) - New Jersey's Supreme Court will release its decision on Tuesday on whether Governor Chris Christie, a likely 2016 presidential candidate, violated public pensioners' contract rights when he slashed $1.6 billion from the state's contribution to the retirement system for this year.
The stakes are high for Christie, a Republican, who has trailed in polls behind rivals such as Wisconsin Governor Scott Walker, a fellow Republican.
Christie is viewed unfavorably even in his own state according to one poll.
Christie is battling to improve his record on the economy, where he has come under fire for his handling of the state's sluggish recovery, as well as a scandal around the 2013 George Washington Bridge closure, which saw a former ally plead guilty to federal charges.
A win for the governor in court could provide him with a substantial lift to his standing while a loss would provide ammunition to his detractors who argue that Christie's often heavy-handed tactics have not yielded a long-awaited recovery in the state's fiscal and economic fortunes.
The state's pension system has about $83 billion of unfunded liabilities and was funded at only about 44 percent in fiscal 2014.
"I don't see a good outcome under any scenario here, just because the deficits are so overwhelming," said Richard Dreyfuss, senior fellow at the Manhattan Institute.
Christie made the pension cuts last year because of a large, unexpected revenue shortfall. The cuts prompted lawsuits by public sector unions and retirees, who won in lower court when a state judge decided that Christie's landmark 2011 pension reforms created a contractual right obliging the state to pay its fair share into the retirement system.
Even if the court does order Christie to restore the funding, the state has said it does not have the money to make the full payment.
The pension ruling is important for New Jersey and the state's economic health, Democratic Senate President Stephen Sweeney said in a statement.
Sweeney said lawmakers expect to pass a 2016 budget before the end of this fiscal year on June 30, one that fully funds the required pension payment.
They would do it through a tax hike on the state's high-income earners, a so-called millionaire's tax that Christie has repeatedly vetoed in the past.
The court clerk's office said that the opinion would be released at 10 a.m. EDT (1400 GMT).
(Reporting by Megan Davies and Hilary Russ in New York; Editing by Lisa Shumaker)
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