MARK WHITE 

Attorney General 

The Attorney General of Texas 

August 20, 1980 

Honorable Oscar H. Mauzy Opinion No. NW-22 1 

Chairman 

Senate Education Committee 

Capitol Building 

Austin, Texas 

Re: Whether section 3.02(a)(lE). 

Education Code, relating to the 

computation of retirement benefits, 

should be applied retroactively 

Dear Senator Mauzy: 

~You hsve raised three questions concerning section 3.02(a)(18) of the 

Education Code [formerly section 3.02(a)(21)] which, a,s amended in 1979, 

provides as follows: 

‘Best-five-years-average compensation’ means the 

average annual compensation received by the member 

as an employee &ring the 5 years of membership 

service (whether or not consecutive) in which the 

member earned the highest annual compensation. 

Compensation in excess of the limits established in 

the definition of ‘annual compensation’ shall be 

excluded in calculating the ‘beat-five-years-average 

compensation’ except that such average for a person 

retiring on or after the date that such limits are 

removed shall be based on actual compensation paid 

or payable for service as an employee. 

The term “annual compensation” is defined in section 3(a)(12) as: 

. . . the compensation that is paid or payable to an 

employee by his employers for service during a school 

year, except that compensation in excess of $25,000 

for school years after September 1, 1969, but before 

September 1, 1979, and compensation in excess of 

$8,400 for school years prior to September 1, 1969, 

shall not be included as annual compensation. 

You state that section 3.02(a)(lE) is being given “retroactive effect” by the 

Teacher Retirement System, the result being that individuals with annual 

salaries in excess of $25,000 who retire after August 27, 1979, the effective 

date of the amendment, will receive retirement benefits calculated on the 

basis of their full salary, even though at the time they performed their 

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Honorable Oscar H. Mauzy - Page Two (W-221) 

services the statute provioed that retirement would be calculated on a maximum of 

$25,000 annual salary and even though contributions to the retirement system on their 

behalf were limited to the first $25,000 annual earnings. You have asked the following 

questions: 

1. ls it proper for the Teacher Retirement System to apply 

the 1979 amendments retroactively to accomplish the result 

described above? 

2. ls the manner in which the amendment is being applied, 

as described above, in violation of article I, section 16 of the 

Constitution of the State of Texas as constituting retroactive 

legislation? 

3. ls the manner in which the amendment is being applied, 

as described above, in violation of article III, section 44 of the 

Constitution of the State of Texas inasmuch as it is a grant of 

extra compensation after the public service has already been 

performed? 

Your first and second questions are essentially the same and we will therefore 

consider them together. By virtue of amendments passed by the 66th legislature, 

section 3(a)@) now provides that the best-five-years-average compensation for a 

person who retires on or after the date that the limits set forth in section 3.02(a)(12) 

are removed shall be based on the actual compensation paid or payable to the 

employee for services rendered. Section 3.02(a)(12), as amended, provides that 

compensation in excess of $25,000 for school years after September 1,1969, but before 

September 1, 1979, and in excess of $8,400 for school years prior to September 1, 1969, 

shall not be included as annual compensation. The effect of these provisions is that 

persons retiring “on or after the date that such limits are removed,” i.e., September 1, 

1979, will have their best-five-years-average compensation calculated on the basis of 

actual compensation paid or payable to them rather than on the basis of their salary as 

limited by section 3.02(a)(12). 

In our view, this legislation is not “retroactive” in the sense that the term is used 

in article I, section 16 of the Texas Constitution, which provides that “No bill of 

attainder, ex post facto law, retroactive law, or any law impairing the obligation of 

contracts, shall be made.” Retroactive legislation is generally understood to mean 

legislation that affects acts or transactions that occurred before the legislation came 

into effect. See 53 Tex. Jur. 2d Statutes §28 (1964). The amendment to section 

3(a)(l8), however, affects only those individuals who retire on or after September 1, 

1979, which date is subsequent to the effective date of the amendment, and then only 

to the extent that their best-five-years-average compensation will be computed in a 

different manner. 

Even assuming that this legislation were retroactive, moreover, it would not be 

prohibited under article I, section 16 of the constitution. The constitutional prohibition 

against retroactive legislation has been construed to apply only to laws that divest 

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Honorable Oscar H. Mauzy - Page Three (m-221) 

individuals of vested rights acquired under existing laws, see, s, State Board of 

Registration for Professional Engineers v. Wichita Engineer= Co., 504 S.W. 2d 606 

(Tex. Civ. App. - Fort Worth 1973, writ rePd n.r.e.1; Texas Water Rights Commission v. 

Wright, 464 S.W. 2d 642 (Tex. 19711, and section 3.02(a)(lE) does not divest anyone of 

any such vested right. See also Attorney General Opinion H-1121 (19781, H-634 (1975) 

(legislature may retroactively place obligations on the state and its agencies). 

You next ask whether the amendment violates article III, section 44 of the Texas 

Constitution on the ground that it constitutes a grant of additional compensation after 

the public service bs been performed. Article III, section 44 provides, in pertinent 

part: 

The Legislature shall provide by law for the compensation of 

all officers, servants, agents and ~public contractors, not 

provided for in this Constitution, but shall not grant extra 

compensation to any officer, agent, servant, or public contractors, after such public service shall have been performed or 

contract entered into, for the performance of same; . . . 

As the interpretive commentary and the leading cases construing this provision clearly 

indicate, the prohibition against granting additional compensation for services already 

rendered was intended to prevent payments in the nature of gratuities for services 

already performed. See, s, Byrd v. City of Dallas, 6 S.W. 2d 738 (Tex. Comm’n. 

App. 1928); City of Sfintonio v. Baird, 209 S.W. 2d 224 (Tex. Civ. App. - San Antonio 

1948, writ ref’d). 

Byrd v. City of Dallas, w, involved a challenge to statutes that authorized 

cities with a population exceeding 10,000 to pay pensions to policemen and firemen who 

served 20 years in either department, filed written statements indicating their desire 

to become beneficiaries, and contributed a portion of their salary to the fund. The 

Texas Supreme Court ruled that the statutes did not violate article III, section 44 of 

the Texas Constitutution. After noting that the purpose of article III, sections 44, 51, 

52 and 53 was “to prevent the application of public funds to private purposes; in other 

words, to prevent the gratuitous grant of such funds to any individual . . . 

whatsoever,” the court observed that: 

If the pension provided for in this act is a gratuity or 

donation to the beneficiary, it is clearly forbidden by the 

fundamental law. On the other hand, if it is a part of the 

compensation of such employee for services rendered to the 

city, or if it be for a public purpcee, then clearly it is a valid 

exercise of the legislative power. 6 S.W. 2d at 740. 

The pension plan adopted by the City of Dallas did not, in the Court’s view, violate this 

provision: 

The plan.. . contemplates. . . that as compensation the 

officers and employees named shall receive the salaries agreed 

upon to be paid periodically and shall be entitled to participate 

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Honorable Oscar H. Mauxy - Page Four (MW-221) 

in the fund provided for pensions according to the statutory 

plan. The law pertaining to such employment is necessarily a 

part of the contract of employment and is read into the 

contract as fully as though it had been actually incorporated 

therein. . . . When an. . . employee. . . evidences his assent to 

the pension scheme, he thereupon has a binding contract with 

his employer for the stipulated salary and likewise to be 

‘entitled to participate’ in the fund upon the terms prescribed. 

The right to participate in such fund is therefore not a gratuity 

or donation in any sense. It is as much a part of the agreed 

compensation as is the monthly stipend. 6 S.W. 2d at 740 - 741. 

IEmphasis added). 

The amendment to section 3.02(a) became effective August 27, 1979, and under 

its terms, only indiviaals who retire on or after September 1, 1979, sre affected. 

Necesssarily, anyone who will be affected would have been employed as of the 

effective date of the amendment, and would therefore still be performing services at 

that time. Accordingly, under the rationale of Byrd and subsequent cases, see City of 

San Antonio v. Baird, -, the benefits created by the amendment, which accrue only 

to indivi&als still employed and, therefore, still performing services on Algust 27, 

1979, do not amount to a gratuity or &nation or provide additional compensation after 

services have already been rendered. Consequently, the amendment &es not violate 

article III, section 44 of the Texas Constitution. 

SUMMARY 

Section 3.02(a)(18) of the Education Code does not violate 

article I, section 16 or article Ill, section 44 of the Texas 

Constitution. 

2zL* 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

Prepared by Jon Bible 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

C. Robert Heath, Chairman 

Jon Bible 

Susan Garrison 

Rick Gilpin 

Nancy Lynch 

P. 707