FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

WILLIAM ROBERTSON; CYNTHIA 

CARLISLE; RUSSELL HATHHORN;

CHRISTOPHER MYERS; MICHAEL

SIMPSON; JANET BOWLER; LARRY

DEAN; JEAN DEJARNATT,

Plaintiffs-Appellants,

MARION COUNTY,

Intervenor-Appellee, No. 04-35898

v. D.C. No.

THEODORE KULONGOSKI; DAWN  CV-03-00999

MORGAN, Official capacity; JANICE MWM

DERINGER, Official capacity; MARK OPINION

GARDNER, Official capacity; JEANNE

GARST, Official capacity; GLENN

HARRISON, Official capacity; TODD

SCHWARTZ, Official capacity;

GEORGE RUSSELL, Official capacity;

PUBLIC EMPLOYEES RETIREMENT

BOARD,

Defendants-Appellees. 

Appeal from the United States District Court

for the District of Oregon

Michael W. Mosman, District Judge, Presiding

Argued and Submitted

September 15, 2006—Portland, Oregon

Filed October 24, 2006

17713
Before: Barry G. Silverman and Ronald M. Gould,

Circuit Judges, and John S. Rhoades,* District Judge.

Opinion by Judge Rhoades

*The Honorable John S. Rhoades, Sr., Senior United States District

Judge for the Southern District of California, sitting by designation. 

17714 ROBERTSON v. KULONGOSKI
COUNSEL

Gregory A. Hartman, Bennett, Hartman, Morris & Kaplan,

Portland, Oregon, for the plaintiffs-appellants. 

ROBERTSON v. KULONGOSKI 17715
Jeremy D. Sacks, Stoel Rives, Portland, Oregon, for the

defendants-appellees. 

OPINION

RHOADES, District Judge: 

Plaintiffs-Appellants (“the Employees”), current and retired

employees of the State of Oregon, challenge legislation1

passed by the Oregon legislature in 2003 that amended the

Oregon Public Employees Retirement System (“PERS”). The

Employees bring their claims under the Contract Clause of the

United States Constitution. The Employees appeal the district

court’s denial of their motion for summary judgment and

grant of summary judgment in favor of defendants-appellees

(collectively “the State”). Only the Employees’ First and

Sixth Claims remain at issue.2

I. The Oregon Public Employees Retirement System

“Oregon has provided its public employees with a retirement plan, as a contractual benefit of public employment,

since 1945.” Strunk v. Public Employees Retirement Board,

108 P.3d 1058, 1068 (Or. 2005). Prior to the 2003 legislation,

PERS members contributed six percent of their salaries to the

1

See House Bill 2003 (2003), Oregon Laws 2003, chapter 67. 

2As the Employees note in their Supplemental Opening Brief, their Second, Third, Fourth and Fifth Claims are moot in light of the Oregon

Supreme Court’s holding in Strunk v. Public Employees Retirement

Board, 108 P.3d 1058 (Or. 2005). Moreover, the Employees have specifically withdrawn their appeal of the district court’s decision regarding their

Third, Seventh, Eighth, Ninth and Tenth Claims. Although the Employees

contend that this appeal is now “limited to the diversion of employee contributions from employee regular accounts” — which could be construed

as a representation that only the First Claim remains at issue — because

the Employees’ Sixth Claim is not moot and the Employees do not specifically withdraw their appeal as to that claim, we consider it here. 

17716 ROBERTSON v. KULONGOSKI
PERS fund, see O.R.S. 238.200(1)(a) (2001), and the contributions to the fund were then directed to either a “regular”

account or a “variable” account. See O.R.S. 238.200(2)

(2001); O.R.S. 238.260(3) (2001); Strunk, 108 P.3d at 1079-

80, 1095-96. Earnings on contributions to the regular accounts

were credited to those accounts. See Strunk, 108 P.3d at 1071.

Since 1975, the PERS statutory scheme has “provided that the

earnings to be credited annually to Tier One members’ regular

accounts will be no less than the existing assumed earnings

rate.”3Id. at 1087; see also O.R.S. 238.255 (1995). 

As for the calculation of the members’ benefits at retirement, the Oregon Supreme Court has explained: 

There are three formulas available for calculating a

PERS member’s service retirement allowance, commonly known as the Pension Plus Annuity, the Full

Formula, and the Money Match. The Pension Plus

Annuity, which is available to only members who

contributed to PERS before August 21, 1981, consists of the sum of an annuity component and a pension component. The annuity component is

composed of the actuarial equivalent of the member’s account balances at retirement. The pension

component, funded by the employer, is equal to one

percent of the member’s final average salary (1.35

percent for legislators and police and fire employees)

for each service year. 

The Full Formula also includes an annuity component composed of the actuarial equivalent of the

member’s account balances at retirement and a pension component; however, the pension component is

3PERS classifies Oregon employees into two “tiers.” “Tier One” members are those whose membership in PERS began before January 1, 1996.

See Strunk, 108 P.3d at 1069. All plaintiffs in this action are Tier One

members or retired Tier One members. 

ROBERTSON v. KULONGOSKI 17717
calculated differently than under the Pension Plus

Annuity. The Full Formula first calculates a member’s service retirement allowance by multiplying

the member’s final average salary by a factor set at

1.67 percent (two percent for legislators, police officers, and firefighters) and then multiplying the

resulting figure by the member’s years of membership. That service retirement allowance then is

funded using the actuarial equivalent of the member’s account balances at retirement (the annuity

component) and employer contributions required to

make up the difference (the pension component). 

Under the Money Match, a member’s service retirement allowance is calculated by determining the sum

of the actuarial equivalent of the member’s account

balances at retirement (the annuity component) and

then adding a sum in an equal amount that is charged

to the employer, i.e., the “match” (the pension component). The resulting service retirement allowance

therefore amounts to twice the actuarial equivalent

of the member’s account balances at retirement. 

Strunk, 108 P.3d at 1069-70. Upon retiring, “a PERS member

receives a service retirement allowance based on the formula

that produces the highest pension amount among the foregoing three alternative formulas.” Id. at 1070; see also O.R.S.

238.300 (2001). Prior to 2003, a retired member’s service

retirement allowance was increased annually through a costof-living adjustment (“COLA”) regardless of the formula

used to determine the allowance. Strunk, 108 P.3d at 1070. 

Under the challenged 2003 legislation, Tier One members

no longer have the option of contributing to the regular or

variable accounts. Rather, all member contributions made

after January 1, 2004, are now placed in a new Individual

Account Program (“IAP”) account. See id. at 1071-72. Importantly, unlike the balances in the regular accounts, “[t]he bal17718 ROBERTSON v. KULONGOSKI
ances held in members’ IAP accounts will not be annually

credited at not less than the assumed earnings rate and, at

retirement, will not be subject to employer matching under the

Money Match or be enhanced by annual COLAs.” Id. at 1072.

The statutory provisions regarding how benefits are calculated under the Pension Plus Annuity, the Full Formula and

the Money Match were not altered by the 2003 legislation.

However, the effect of the 2003 legislation is that Money

Match will not be the predominant formula for calculating

PERS retirement allowances, which it has been in recent

years. Id. at 1070 n.18. The Money Match in recent years has

provided generous retirement allowances. For example, in

2000, “the average PERS retired member with 30 years of

creditable service retired at the age of 53 with a service retirement allowance equal to 106 percent of the member’s final

average salary.” Id. at 1070. 

II. Analysis

In broad terms, the Employees contend that they have a

contractual right to participate in the PERS pension plan as it

existed prior to the challenged 2003 legislation and that the

2003 legislation violates the federal Contract Clause by

impairing the State’s obligations to them under the pre-2003

PERS statutory scheme. Specifically, the Employees’ First

Claim challenges the fact that the 2003 legislation eliminates

the Employees’ right to contribute six percent of their salaries

to a regular account, see O.R.S. 238.200(4), redirects the

Employees’ contributions to an IAP account, see O.R.S.

238A.305(1) (2003); O.R.S. 238A.330 (2003), and effectively

eliminates the Money Match as the primary formula for calculating member service retirement allowances. The Employees’ Sixth Claim challenges the fact that the 2003 legislation

eliminates their right to contribute to a variable account. 

[1] The federal Contract Clause provides: “No State shall

. . . pass any . . . Law impairing the Obligation of Contracts.”

ROBERTSON v. KULONGOSKI 17719
United States Const. art. I, § 10, cl. 1. To determine whether

a legislative enactment violates the Contract Clause, the panel

must engage in a three-part analysis. Rui One Corp. v. City of

Berkeley, 371 F.3d 1137, 1147 (9th Cir. 2004). The first part

of the analysis, which is at issue here, is “ ‘whether the state

law has, in fact, operated as a substantial impairment of a contractual relationship.’ ” Id. (quoting Allied Structural Steel

Co. v. Spannaus, 438 U.S. 234, 244 (1978)). In making this

determination, the court must consider “whether there is a

contractual relationship, whether a change in law impairs that

contractual relationship, and whether the impairment is substantial.’ ” Gen. Motors Corp. v. Romein, 503 U.S. 181, 186

(1992). Importantly, “[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.’ ” Rui One

Corp., 371 F.3d at 1147 (quoting Romein, 503 U.S. at 187)

(emphasis added); see also State of Indiana ex rel. Anderson

v. Brand, 303 U.S. 95, 100 (1938). 

[2] In determining the contours of the statutorily-created

PERS contract, we apply federal law, see State of Nev.

Employees Ass’n, Inc. v. Keating, 903 F.2d 1223, 1227 (9th

Cir. 1990); Brand, 303 U.S. at 100, which requires us to find

a “clear indication” of the Oregon legislature’s intent that the

State be contractually bound by the provisions of PERS that

the Employees urge us to find are contractual promises.

National R.R. Passenger Corp. v. Atchison Topeka and Santa

Fe Ry. Co., 470 U.S. 451, 465-466 (1985) (emphasis added).

As explained in National Railroad Passenger Corp.: 

For many decades, this Court has maintained that

absent 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.” Dodge v. Board of Education, 302 U.S. 74,

17720 ROBERTSON v. KULONGOSKI
79, 58 S.Ct. 98, 100, 82 L.Ed. 57 (1937). See also

Rector of Christ Church v. County of Philadelphia,

24 How. 300, 302, 16 L.Ed. 602 (1861) (“Such an

interpretation is not to be favored”). This wellestablished presumption is grounded in the elementary proposition that the principal function of a legislature is not to make contracts, but to make laws that

establish the policy of the state. Indiana ex rel.

Anderson v. Brand, 303 U.S. 95, 104-105, 58 S.Ct.

443, 447-448, 82 L.Ed. 685 (1938). Policies, unlike

contracts, are inherently subject to revision and

repeal, and to construe laws as contracts when the

obligation is not clearly and unequivocally expressed

would be to limit drastically the essential powers of

a legislative body . . . . Thus, the party asserting the

creation of a contract must overcome this wellfounded presumption, Dodge, supra, 302 U.S., at 79,

58 S.Ct., at 100, and we proceed cautiously both in

identifying a contract within the language of a regulatory statute and in defining the contours of any

contractual obligation. 

Id. at 465-466. (emphasis added).4

[3] Finally, although we apply federal law in ascertaining

the State legislature’s intent to bind the state contractually, we

must accord “respectful consideration and great weight to the

views of the State’s highest court . . . .” Romein, 503 U.S. at

187 (quoting Brand, 303 U.S. at 100); see also Phelps v. Bd.

of Educ. of Town of West New York, 300 U.S. 319, 322

4The Employees attempt to draw a distinction between the standard for

ascertaining the legislature’s intent to be bound by a contract in general

and the standard for ascertaining its intent regarding the terms of the contract. The Employees contend that once it is determined that the legislature

intended to create an enforceable contract we need not apply a heightened

standard in determining the terms of that contract. However, we have not

been cited any authority that so holds, and this contention cannot be reconciled with the passage we cite from National Railroad Passenger Corp. 

ROBERTSON v. KULONGOSKI 17721
(1937); Dodge v. Bd. of Educ. of City of Chicago, 302 U.S.

74, 79 (1937). 

[4] Clearly, under Oregon law, “PERS is a contract

between the state and its employees.” Oregon State Police

Officers’ Ass’n v. State, 918 P.2d 765, 779 (Or. 1996). However, whether the parties had a contract is not at issue here.

Rather, like the Oregon Supreme Court in Strunk,

5

 we are called upon to determine the contours of the Employees’ PERS

contract. Having considered Strunk’s detailed analysis of this

issue, which includes a thorough examination of the text and

context of all relevant statutory provisions along with an

examination of the history of PERS,6 we agree with the Oregon Supreme Court that the Oregon legislature did not promise the Employees a perpetual or “immutable” right to

contribute to the regular and variable accounts. Strunk, 108

P.3d at 1087. Moreover, the Employees’ arguments to the

contrary notwithstanding, we also agree with Strunk that the

legislature “did not promise that PERS would be maintained

so that the Money Match remains the primary calculator of

member service retirement allowances . . . .” Id. at 1085; see

also id. at 1087. We further agree that the Oregon legislature’s promise to the Employees was simply that they “would

receive service retirement allowances calculated under whichever formula yields the highest pension amount for that mem5

In Strunk, PERS members who are not parties to the present lawsuit

brought federal and state Contract Clause challenges to the identical 2003

legislative provisions that are at issue here. 

6Rather than reiterate the Strunk court’s analysis, we direct the reader

to Strunk, 108 P.3d at 1080-87, 1095-98. We do note, however, that, the

Employees’ contention to the contrary notwithstanding, the Strunk court

did, as it should, consider the provision regarding contributions to the regular accounts in the context of the PERS contract as a whole. See id. at

1087 (explaining that “the text of O.R.S. 238.200(1)(a) (2001) and its statutory context do not establish clearly and unambiguously that the legislature intended to promise members that they could contribute six percent

of their salaries to their regular accounts throughout their PERS membership”) (emphasis added). 

17722 ROBERTSON v. KULONGOSKI
ber . . . .” Id. at 1085. Finally, we conclude, as did Strunk, that

“[t]he legislature did not alter or eliminate that promise when

it enacted the 2003 PERS legislation.” Id. at 1087. 

In reaching this conclusion, we reject the Employees’ contention that Strunk’s analysis is not helpful here because it

applied an incorrect standard in determining the legislature’s

intent. The standard it used — whether there was clear and

unambiguous evidence of the legislature’s intent — is consistent with the applicable standard under federal law. See

National R.R. Passenger Corp., 470 U.S. at 465-66. We also

reject the Employees’ argument that United States v. Winstar,

518 U.S. 839 (1996), provides the standard for determining

the contours of a statutorily-created contract because, unlike

National Railroad Passenger Corp., Winstar did not involve

the interpretation of such a contract. 

The Employees’ contention that Keating, not Strunk,

should be the starting point for our analysis is also unavailing.7

Not only does this argument overlook the fact that federal

courts accord deference to a state court’s determination as to

the existence and terms of a contract created by state statute,

see Brand, 303 U.S. at 100; Phelps, 300 U.S. at 322, but

Keating does not provide a framework for determining the

terms of a statutorily-created contract. 

In Keating, employees of the State of Nevada and their

employee association challenged the Nevada legislature’s termination of their right to withdraw their pension contributions

7

Interestingly, although the Employees now contend that federal law

drives the analysis regarding the scope of their statutorily-created contract,

prior to Strunk the Employees relied heavily on Oregon cases such as Taylor v. Multnomah County Deputy Sheriff’s Retirement Board, 510 P.2d

339 (Or. 1973), Hughes v. State of Oregon, 838 P.2d 1018 (Or. 1992), and

Oregon State Police Officers’ Ass’n v. State, 918 P.2d 765 (Or. 1996) in

support of their claims. We conclude that nothing in these cases suggests

a flaw in Strunk’s analysis of the specific PERS terms at issue here, which

we find to be the correct analysis. 

ROBERTSON v. KULONGOSKI 17723
without penalty. The State of Nevada did not dispute that a

contractual relationship existed between the parties, see 903

F.2d at 1226, and notably absent in Keating is an analysis as

to whether there was a contractual agreement regarding the

specific term at issue in that case. Because the seminal issue

here is not whether the parties had an agreement but, rather,

the terms of that agreement, and because Keating is silent as

to how this issue should be approached, the Employees’ reliance on Keating is unavailing here. 

Finally, we note that the Employees’ remaining arguments

are unavailing because they are predicated upon the presumption that the perpetual right to contribute to the regular and

variable accounts and the right to have their member service

retirement allowances calculated under the Money Match are

statutorily-created PERS contractual rights. Because we have

found they are not, it is irrelevant whether the Oregon legislature could have unilaterally abrogated such contractual rights

were they to exist. 

III. Conclusion

[5] Having considered the Oregon Supreme Court’s

detailed analysis of the terms of the Employees’ statutorilycreated PERS contract, we conclude, as did the Oregon

Supreme Court in Strunk, that the Employees’ PERS contract

does not contain the promises urged by the Employees.

Accordingly, the 2003 legislation does not impair a term of

the Employees’ PERS contract and, therefore, does not violate

the federal Contract Clause. Accordingly, the district court is

AFFIRMED. 

17724 ROBERTSON v. KULONGOSKI