IN THE

SUPREME COURT OF THE STATE OF ARIZONA

THE HONORABLE PHILIP HALL ET AL.,

Plaintiffs/Appellees/Cross-Appellants,

v.

ELECTED OFFICIALS’ RETIREMENT PLAN ET AL.,

Defendants/Appellants/Cross-Appellees,

STATE OF ARIZONA,

Intervenor-Defendant/Appellant/Cross-Appellee.

No. CV-15-0180-T/AP

Filed November 10, 2016

Appeal from the Superior Court in Maricopa County

The Honorable Douglas L. Rayes, Judge (retired)

The Honorable Randall H. Warner, Judge

No. CV2011-021234

AFFIRMED IN PART AND REVERSED IN PART

COUNSEL:

Ron Kilgard (argued), Alison E. Chase, Keller Rohrback, L.L.P., Phoenix,

Attorneys for Philip Hall and Jon W. Thompson et al.

Bennett Evan Cooper, Steptoe & Johnson, LLP, Phoenix, Attorney for 

Elected Officials’ Retirement Plan and the Members of the Board of 

Trustees of the Public Safety Personnel Retirement System
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

2

Mark Brnovich, Arizona Attorney General, Charles A. Grube (argued), 

Senior Agency Counsel, Phoenix, Attorneys for State of Arizona

Colin F. Campbell, Osborn Maledon, PA, Phoenix; and Robert D. 

Klausner, Adam P. Levinson, Klausner Kaufman Jensen & Levinson, 

Plantation, FL, Attorneys for Amicus Curiae National Conference on 

Public Employee Retirement Systems

JUDGE HOWE* authored the opinion of the Court, in which JUDGE 

BUTLER* joined, JUDGE CATTANI* joined and specially concurred, and 

JUSTICE BOLICK and JUDGE TREBESCH* dissented in part and 

concurred in the judgment in part.

JUDGE HOWE, opinion of the Court:

¶1 In 2011, the Arizona Legislature enacted Senate Bill 1609, 

which made certain changes to the Elected Officials’ Retirement Plan. The 

Bill changed the formula for calculating future benefit increases for retired 

Plan members and increased the amount that employed Plan members 

must contribute toward their pensions. Retired members of the Plan 

challenged the provision changing the formula for calculating future 

benefit increases. They argued that the change violated the Pension 

Clause of the Arizona Constitution, article 29, section 1, which provides 

that “public system retirement benefits shall not be diminished or 

impaired.”1 We agreed, holding that this provision was unconstitutional 

 

* Chief Justice Scott Bales, Vice Chief Justice John Pelander, and Justices 

Robert M. Brutinel and Ann A. Scott Timmer recused themselves; 

pursuant to article 6, section 3 of the Arizona Constitution, the Honorable 

Randall M. Howe and the Honorable Kent E. Cattani, Judges of the Court 

of Appeals, Division One; the Honorable Michael J. Butler, Judge of the 

Pima County Superior Court; and the Honorable Patricia A. Trebesch, 

Judge of the Yavapai County Superior Court, were designated to sit in this 

matter.

1 This provision was subsequently amended by Laws 2016, S.C.R. 

1019, § 1, effective May 26, 2016. This amendment pertains only to the 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

3

as applied to the Plan’s retired members. See Fields v. Elected Officials’ Ret. 

Plan, 234 Ariz. 214, 320 P.3d 1160 (2014).

¶2 Employed members of the Plan also challenged the Bill. 

First, they argued that the unilateral changes to the benefit increases 

formula and to the amount they were required to contribute toward their 

pensions violated the Pension Clause for the reasons set forth in Fields. 

Second, relying on our long-standing decision in Yeazell v. Copins, 98 Ariz. 

109, 402 P.2d 541 (1965), they argued that because their pensions were part 

of their employment contracts that vested when they began employment, 

the Legislature could not unilaterally change the terms of their pensions to 

their detriment. The trial court granted the employed members summary 

judgment, invalidating the provisions at issue. The court denied the 

members’ request for attorneys’ fees and prejudgment interest, however. 

The court also denied the members’ request to have the judgment run 

against the State, which had intervened in the case. EORP and the State

appealed and the members cross-appealed.

¶3 Upon transfer from the court of appeals, we affirm the 

granting of summary judgment to the employed Plan members. As we 

held in Fields, the Bill’s change to the benefit increases formula violates the 

Pension Clause because it “diminishes and impairs” the employed 

members’ pension benefits. The Bill’s changes to the benefit increases 

formula and the contribution rate also violate our holding in Yeazell

because the Legislature cannot unilaterally change the terms of the 

members’ pension contracts once their rights to those terms have vested at 

the beginning of the members’ employment. Contrary to the trial court’s 

ruling, however, we find that the employed members are entitled to 

attorneys’ fees and prejudgment interest and that the judgment must run 

against the State as well as the Plan.

I. FACTS AND PROCEDURAL HISTORY

¶4 In 1985, the Legislature established the Plan to provide 

pension benefits for elected officials, including judges. A.R.S. §§ 38–

801(15), –802, –804. The Plan has four funding sources: employer 

 

Public Safety Personnel Retirement System established by Chapter 38, 

Article 4.1, and thus does not affect the resolution of this case.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

4

contributions, employee contributions, court filing fees, and investment 

proceeds. A.R.S. § 38–810. The employee contribution rate was set by 

statute initially at 6%, with the employer being responsible for 

contributing the remaining amount necessary to fund a defined benefit 

upon retirement. See A.R.S. § 38–810(A) (1985). In 1987, A.R.S. § 38–

810(A) was amended to increase the employees’ contribution to 7%. See 

1987 Ariz. Legis. Serv., ch. 146, § 4, codified at A.R.S. § 38–810(A) (1987).

¶5 During the 1990s, the Plan generated investment returns that 

far exceeded the actuarially assumed rate of return. See PSPRS Plan’s 

Funding Status Report with Options for Improving Funding and Reducing 

Required Contributions, at 2 (2010). During the same period, however, the 

Plan’s financial health was being “seriously compromised” because the 

Plan was gradually concentrating its investments in securities of high 

technology and telecommunications companies. Id. In March 2000, the 

prices of technology and telecommunications securities began to “decline 

rapidly.” Id. This made the Plan vulnerable to major financial shocks in

2000, 2008, and 2009. By fiscal year 2011, the Plan’s funding ratio—the 

actuarial value of the Plan’s assets divided by its actuarial accrued 

liabilities—was 62.1%, a drop from 121% in 1998 and 101.9% in 1985. 

Accordingly, the State’s contribution level necessarily increased, while the 

employee contribution rate remained constant, as set by statute.

¶6 In 2011, attempting to address continued rising costs, the 

Legislature enacted the Bill, making several unilateral changes to the Plan 

to be applied retroactively from June 30, 2011. See 2011 Ariz. Legis. Serv.,

ch. 357. One change the Bill made was to the statutory formula for 

calculating permanent benefit increases under A.R.S. § 38–818. The Bill 

amended A.R.S. § 38–818.01 to prohibit the transfer of any investment 

earnings that exceed the rate of return to the reserve fund and changed the 

formula used to calculate the permanent benefit increases, increasing the 

rate of return necessary to trigger a benefit increase. See A.R.S. 

§ 38–818.01(B).

¶7 We resolved whether the Bill’s change to the statutory 

formula for calculating permanent benefit increases was constitutional 

with respect to retired members in Fields, 234 Ariz. at 221 ¶ 34, 320 P.3d at 

1167. We held that the formula was a “benefit” for purposes of the 

Pension Clause and that the Bill’s change to the formula violated the 

clause because it diminished and impaired the retired members’ 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

5

retirement benefits. Id. at 220–21 ¶¶ 29, 34, 320 P.3d at 1166–67. Because 

the Bill retroactively prevented the transfer of funds to the Plan’s reserve, 

the Plan could not fund expected benefit increases, and retired members’ 

benefit increases consequently were reduced or eliminated in 2011, 2012,

and 2013. Id. at 221 ¶ 35, 320 P.3d at 1167. The Bill also made it less likely 

that retired members would receive future benefits increases because of 

the raised rate of return required to fund an increase. Id. at ¶ 36, 320 P.3d 

at 1167.

¶8 The Bill made another change that was not at issue in Fields, 

but is here. The Bill amended the employee contribution rate structure by 

increasing the rate to 10% for fiscal year 2011–2012 and to 11.5% for fiscal 

year 2012–2013. A.R.S. § 38–810(F)(1)–(3) (2011). It also set the rate for 

fiscal year 2013–2014 and each fiscal year thereafter to the lesser of 13% of 

the member’s gross salary or 33.3% of the sum of the member’s 

contribution rate from the preceding fiscal year and the normal cost plus 

the actuarially-determined amount required to amortize the employer’s 

unfunded accrued liability. A.R.S. § 38–810(F)(4) (2011).

¶9 In November 2011, Judges Philip Hall—who has since 

retired—and Jon W. Thompson, on behalf of themselves and as 

representatives of a class of employed Plan members and beneficiaries as 

of July 20, 2011, the Bill’s effective date (collectively, “Class Members”), 

sued the Plan and the Board of Trustees of the Public Safety Personnel 

Retirement System (collectively, “EORP”). The Class Members alleged 

that the Bill violated Yeazell, the Pension and Judicial Salary Clauses of the 

Arizona Constitution, and the Contract Clauses of the Arizona and United 

States Constitutions. The State intervened to defend the Bill. After the 

State intervened, the Class Members notified the trial court and the parties 

that they would seek relief, including attorneys’ fees, expenses, and 

taxable costs, not only from EORP but also from the State.

¶10 After intervening litigation, the parties each moved for 

summary judgment. The Class Members maintained—as relevant here—

that the Bill violated Yeazell by unilaterally modifying their interests in 

their pensions, which had vested at the outset of their employment with 

the State, and violated the Pension Clause by diminishing their entitled 

benefits. EORP and the State responded that the Class Members’ rights 

had not yet vested and therefore the Legislature could modify the pension 

plan as it saw fit. EORP and the State noted that in 2000, the Legislature 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

6

had enacted A.R.S. § 38–810.02 (“the vesting statute”), providing that 

EORP benefits vest at the time the employee applies for benefits or retires. 

EORP and the State argued that because the statute applies retroactively, 

it has become part of the Class Members’ employment contracts with the 

State, and accordingly, their rights do not vest until they retire.

¶11 The trial court granted the Class Members’ motion for 

summary judgment and denied EORP’s and the State’s cross-motions for 

summary judgment. The court held that the Pension Clause protected the 

benefit increases formula and the 7% prior contribution rate because they 

constituted “benefits” that were always part of the members’ contractual 

relationship with the State. The court rejected EORP’s argument that the 

vesting statute preempted the members’ contractual rights and their rights 

under the Pension Clause. The court concluded that the statute applies 

only to “ordinary” vesting, meaning that a member has no right to receive 

retirement benefits until the member fulfills specific conditions and 

retires. The court thus granted the Class Members the relief they sought.

¶12 The parties then asked for a stay pending our decision in 

Fields, which the trial court granted. After considering the effect of Fields, 

the court denied the Class Members’ request for attorneys’ fees under 

A.R.S. § 12–341.01 because it concluded that the action arose out of 

constitutional and statutory—not contractual—obligations. The court also 

denied the Class Members’ request for prejudgment interest because it 

found that EORP was not unjustly enriched and should not be charged 

interest on money it legally could not pay. The court further denied the 

Class Members’ request that relief run against the State because it found 

that the State had intervened only to defend the Bill’s constitutionality and 

the Class Members’ notice seeking relief against EORP and the State was 

insufficient to assert claims against the State.

¶13 EORP and the State timely appealed the summary judgment 

in the Class Members’ favor, and the Class Members timely 

cross-appealed the judgment denying attorneys’ fees, prejudgment 

interest, and relief against the State. We granted the parties’ joint petition 

to transfer the case under Arizona Rule of Civil Appellate Procedure 19(a).

The funding of public pensions raises issues of statewide importance, and 

we have jurisdiction pursuant to article 6, section 5(3) of the Arizona 

Constitution.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

7

II. DISCUSSION

ISSUES ON APPEAL

¶14 EORP and the State argue that the trial court erred by 

finding that the Bill violates the Pension Clause and Yeazell.2 We review 

de novo the constitutionality of statutes and, if possible, construe them to 

uphold their constitutionality. State v. Glassel, 211 Ariz. 33, 51 ¶ 65, 116 

P.3d 1193, 1211 (2005). We presume that a statute is constitutional, and 

the “party asserting its unconstitutionality bears the burden of 

overcoming the presumption.”3 Eastin v. Broomfield, 116 Ariz. 576, 580, 570 

P.2d 744, 748 (1977). As discussed below, we hold that (1) the Bill’s 

change to the benefit increases formula provision violates the Pension 

Clause by diminishing and impairing a benefit to which the Class 

Members are entitled and (2) its changes to the benefit increases formula 

and the contribution rate provisions are unconstitutional under Yeazell

because it unilaterally modified the Class Members’ employment 

contracts with the State to the Class Members’ detriment.

A. The Pension Clause

¶15 EORP and the State first argue that the trial court erred 

because the benefit increases formula and the prior contribution rate are 

 

2 The Class Members argue that even if the Bill does not violate the 

Pension Clause and Yeazell, it is still unconstitutional under the Contract 

Clauses of the United States and Arizona Constitutions and the Judicial 

Salary Clause of the Arizona Constitution. See Ariz. Const. art. 6, § 33; 

Ariz. Const. art. 2, § 25; U.S. Const. art. 1, § 10. We need not reach these 

arguments, however, because the Pension Clause and Yeazell resolve the 

fundamental issues regarding the Class Members’ rights to the benefit 

increases formula and the prior contribution rate.

3 The Class Members argue that because Fields held that the Bill’s 

benefit increases formula provision was unconstitutional, the Bill is not 

entitled to such a presumption. But Fields decided only the Bill’s 

constitutionality with regard to retired judges and their entitlement to the 

benefit increases formula. 234 Ariz. at 220–21 ¶¶ 29, 34, 320 P.3d at 

1166–67. The issue here is its constitutionality with regard to employed

judges and their entitlement to the benefit increases formula and the prior 

contribution rate.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

8

not “benefits” and therefore not protected by the Pension Clause.

Regarding the benefit increases formula, this Court concluded in Fields

that permanent benefit increases and the benefit increases formula were 

“benefits” as used in the Pension Clause. See 234 Ariz. at 219, 220 ¶¶ 23, 

26, 320 P.3d at 1165, 1166. The reasoning in Fields applies with equal force 

to the Class Members because the Bill’s change to A.R.S. § 38–818’s 

formula diminishes and impairs the Class Members’ retirement benefits 

just as it does for retired members. See id. at 221–22 ¶¶ 34–36, 320 P.3d at 

1167–68. The Bill’s amendment regarding the benefit increases formula 

therefore violates article 29, section 1(C), of the Arizona Constitution. 

Regarding the prior contribution rate, however, because we hold that the 

prior contribution rate is protected under Yeazell, see infra § B, we need not 

decide whether it is also protected under the Pension Clause. See Three 

Affiliated Tribes of Fort Berthold Reservation v. Wold Eng’g, P.C., 467 U.S. 138, 

157 (1984) (“It is a fundamental rule of judicial restraint . . . that this Court 

will not reach constitutional questions in advance of the necessity of 

deciding them.”).

B. A Binding Contractual Relationship

1. Yeazell v. Copins

¶16 EORP and the State also argue that the trial court erred in 

applying Yeazell because “Yeazell enshrined the vesting statute as part of 

the [member’s employment] contract, authorizing the Legislature as a 

matter of the express contract to make reasonable prospective changes like 

adjusting the contribution rate.” Consequently, they argue, Yeazell does 

not “apply constitutional protections for pension rights” and also does not 

affect whether the Pension Clause protects the benefit increases formula 

and the prior contribution rate. The Class Members counter that the Bill

violates Yeazell because it seeks to unilaterally and retroactively modify 

their pension terms as provided in their employment contracts when they 

began services.

¶17 Yeazell established that the State’s promise to pay retirement 

benefits is part of its contract with the employee. See 98 Ariz. at 113–17, 

402 P.2d at 544–47. By accepting a job and continuing to work, the 

employee has accepted the State’s offer of retirement benefits, and the 

State may not impair or abrogate the terms of that contract without 

obtaining the employee’s consent. Id. Yeazell involved a Tucson police 

officer’s appeal of a local board’s decision setting his pension benefits 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

9

based on a 1952 amendment to the pension statute in effect at the time of 

his retirement, rather than on the statute in effect when he was hired in 

1937. Id. at 111, 402 P.2d at 542. Yeazell argued that the 1937 statute, 

requiring him to contribute 2% of his salary and granting him a monthly 

pension equal to one-half of his average monthly compensation for one 

year immediately before his retirement date, was the applicable law from 

which to determine his retirement benefits—not the 1952 statute. Id. His 

benefit under the 1937 statute would have been $7.21 more per month 

than his benefit under the 1952 statute. Id.

¶18 The issue in Yeazell was whether the Legislature could 

unilaterally change statutorily-created retirement benefits that were part 

of the terms of an employee’s employment contract when the employee 

began service. See id. at 111–12, 402 P.2d at 542–43. The majority rule in 

the United States at the time was that pensions—characterized as 

“gratuities” granted at the sovereign’s benevolent will—could be 

modified because the employees had no vested right to them. Id. at 112, 

402 P.2d at 543. Thus, pension plans could be amended or changed as a 

legislature saw fit. Id. Yeazell recognized, however, that treating 

retirement benefits as “gratuities” posed a problem in Arizona because of 

the state’s Gift Clause, id. at 112, 402 P.2d at 543, which, as relevant here, 

prohibits state entities from giving or lending its credit “in the aid of, or 

mak[ing] any donation or grant, by subsidy or otherwise” to any 

individual, Ariz. Const. art. 9, § 7.

¶19 Yeazell acknowledged that under the Gift Clause, “[t]he state 

may not give away public property or funds; it must receive a quid pro quo

which, simply stated, means that it can enter into contracts for goods, 

materials, property and services.” 98 Ariz. at 112, 402 P.2d at 543. Thus, 

to uphold Arizona retirement plans under the Arizona Constitution, this 

Court concluded that pensions were not gratuities, but were, in the nature 

of contracts, viewed as deferred compensation for services rendered. Id. at 

113–15, 402 P.2d at 543–45. We reasoned that a pension is a gratuity only 

when it is granted for services previously rendered, but when the services 

are rendered under a pension statute, “the pension provisions become a 

part of the contemplated compensation for those services, and so in a 

sense a part of the contract of employment itself.” Id. at 113, 402 P.2d at 

544; see also Proksa v. Ariz. State Sch. for the Deaf & the Blind, 205 Ariz. 627, 

631 ¶ 21, 74 P.3d 939, 943 (2003) (“Put differently, in the retirement 

benefits area, given the Gift Clause of our constitution, this court 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

10

effectively found an ‘adequate expression of an actual intent of the State to 

bind itself,’ because any finding to the contrary would render the statutes

unconstitutional.”) (citation omitted).

¶20 Based on Yeazell and its Gift Clause underpinnings, the law 

in Arizona has been clear since 1965 that public employees are 

contractually entitled to the retirement benefits specified in their initial 

employment contract. See, e.g., Proksa, 205 Ariz. at 630 ¶ 16, 74 P.3d at 942; 

Norton v. Ariz. Dep’t of Pub. Safety Local Ret. Bd., 150 Ariz. 303, 723 P.2d 652 

(1986); Thurston v. Judges’ Ret. Plan, 179 Ariz. 49, 876 P.2d 545 (1994). This 

protected relationship prevents the Legislature from changing the 

employee’s pension terms at will after the terms have vested, see Yeazell, 

98 Ariz. at 115–16, 402 P.2d at 545–46, and provides public employees 

reasonable expectations that their retirement benefits are protected by the 

law of contracts, see id. at 117, 402 P.2d at 546 (holding that a public 

employee “ha[s] the right to rely on the terms of the legislative enactment 

of the [pension plan] as it existed at the time he entered the service” and 

that “subsequent legislation may not be arbitrarily applied retroactively to 

impair the contract”). The parties may subsequently agree to modify the 

contract, of course, but the State may not unilaterally change the 

contractual terms unless the change benefits the employee. See Thurston, 

179 Ariz. at 51, 876 P.2d at 547 (recognizing that “when the amendment

[to retirement benefits] is beneficial to the employee or survivors, it 

automatically becomes part of the contract by reason of the presumption 

of acceptance”). Under that circumstance, the employee is deemed to have 

ratified the beneficial change, which becomes part of the employment 

contract. Id.

¶21 For Yeazell, we concluded that the Legislature had 

unilaterally amended the 1937 statute, which had become a part of his 

employment contract—a contract that included the 2% contribution rate 

and a pension calculation based on his last year’s earnings. Tucson 

therefore could not retroactively vary the pension terms without Yeazell’s

consent. Yeazell, 98 Ariz. at 116, 402 P.2d at 546. We explained that 

although an employee may not qualify to receive his pension benefits

until he has performed the necessary condition—completion of the 

requisite years of service—this did not mean that from the moment 

Yeazell entered service as a Tucson police officer, a firm and binding 

contract did not exist between him and the City of Tucson. Id. at 114, 402 

P.2d at 544.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

11

¶22 Although acknowledging that Yeazell established a 

contractual relationship between the State and public employees 

regarding the employees’ pensions, EORP and the State nonetheless assert 

that Yeazell provides only that “the employees’ contractual relationship 

vested at the time they began services [and] does not automatically mean 

that specific benefits vested at that time, without regard to the 

contemporaneous terms of the contract.” But the specific benefits—that is, 

the terms of the legislative enactment relating to the employees’ pensions

as they existed when the employees began their services—are exactly the 

type of benefits Yeazell protects:

The legislature amended the 1937 statute which was a part 

of appellant’s contract of employment with the City of 

Tucson. Tucson now attempts to apply the changes 

retroactively to vary the terms of its contract with appellant. 

We hold the changes, if applied to appellant without his 

assent, would constitute an alteration, a modification of his 

contract. This Tucson may not do.

Id. at 116, 402 P.2d at 546. Yeazell thus protects the specific terms of a 

public pension contract from unilateral retroactive alteration. Even the 

dissent in Yeazell recognized this as the Court’s holding. See id. at 118, 402 

P.2d at 547 (Udall, J., dissenting) (stating that the majority’s holding was 

based on the “erroneous premise that there was created upon 

employment an absolute binding ‘contract’ to a specific pension,” which 

meant that the majority was holding that “the legislature, by subsequent 

enactment, can modify the original pension terms only if the employee 

consents”).

¶23 The Bill’s changes to the Class Members’ pension contracts

are consequently invalid under Yeazell. When the Class Members were 

elected or appointed as judges, they entered a contractual relationship 

with the State regarding the public retirement system of which they 

became members. Their retirement benefits were a valuable part of the 

consideration the State offered upon which the Class Members relied 

when accepting employment. See Fields, 234 Ariz. at 220 ¶ 27, 320 P.3d at 

1166 (“As in Yeazell, Fields has a right in the existing formula by which his 

benefits are calculated as of the time he began employment and any 

beneficial modifications made during the course of his employment.”). 

Under their contracts, the Class Members received retirement benefits as 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

12

terms of their contracts for which they agreed to share the cost with their 

employers. Thus, an increase in the Class Members’ proportionate share 

of the contribution rate above 7% and the change in the statutory formula 

granting permanent benefit increases without the Class Members’ consent 

are breaches of that contract and infringe upon the Class Members’ 

contractual relationship with the State. See Thurston, 179 Ariz. at 52, 876 

P.2d at 548 (“Where the modification is detrimental to the employee, it 

may not be applied absent the employee’s express acceptance of the 

modification because it interferes with the employee’s contractual 

rights.”). By including in its scope Class Members who were Plan 

members at the time of enactment, the Bill retroactively, unilaterally, and 

substantially changed the contract terms that the parties previously 

agreed to. This violates Yeazell.

¶24 EORP and the dissent both argue that this is not the end of 

the analysis. They note that Yeazell commented that if a governmental 

entity shows that its pension plan is actuarially unsound, “the law 

governing mutual mistakes of fact” applies. See 98 Ariz. at 116, 402 P.2d at 

546. They interpret this comment to mean that if EORP and the State 

could show that the parties to the Plan made a mistake about the Plan’s 

financial viability, the Bill’s retroactive changes would be permissible 

modifications of the Plan under Yeazell. But EORP and the dissent overread Yeazell’s comment. Although this Court indeed said that the law of 

mistakes of fact applied to a pension plan if it was actuarially unsound, 

we expressly and carefully declined to address the consequences of such 

an application: “We do not, however, mean to imply what rights or 

remedies might be available to either party in a situation where it is 

established that a retirement plan is actuarially unsound. This is a matter 

beyond the issues of the present litigation.” Id. at 117, 402 P.2d at 546.

¶25 This Court’s reticence was appropriate. While the defense of 

mutual mistake of fact applies in any contract dispute, EORP and the State 

are unable to prove that defense as a matter of law. That defense requires 

that the party seeking to void a contract prove that (1) the parties made a 

mistake about a basic assumption on which they made the contract, (2) the 

mistake had a material effect on the exchange of performances, and (3) the 

party seeking avoidance does not bear the risk of the mistake. 

Restatement (Second) of Contracts § 152(1) (1981); see also Renner v. Kehl, 

150 Ariz. 94, 97, 722 P.2d 262, 265 (1986) (applying § 152 in resolving claim 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

13

of mutual mistake of fact). EORP and the State cannot prove two of these 

elements.

¶26 First, EORP and the State cannot show that the parties made 

a mistake about a basic assumption of the Plan. They claim (and the 

dissent accepts, see infra ¶¶ 73, 104) that the mistake was the parties’ 

shared assumption that the Plan was actuarially sound, meaning that the 

parties mistakenly believed that the Plan’s investment returns would be 

sufficient to maintain the Plan’s actuarial soundness without changing the 

benefit increases formula or the employee contribution rate. But 

disappointment about anticipated investment returns does not qualify as a 

mistake. See Restatement (Second) of Contracts § 152 cmt. b (noting that 

“market conditions and the financial situation of the parties are ordinarily 

not such assumptions” and “mistakes as to market conditions or financial 

ability do not justify avoidance under the rules governing mistake”).4

Moreover, the Plan’s actuarial soundness is within the Legislature’s 

control. The Legislature is responsible for setting the amounts of the 

employer contributions and court filing fees, see A.R.S. § 38–810(B)–(D), 

and the Legislature may not “reduce the amount of the contributions to 

the fund if thereby the soundness of the fund is jeopardized,” Yeazell, 98 

Ariz. at 116, 402 P.2d at 546. If the Plan is underfunded because of 

inadequate investment returns, the State may increase employer 

contributions and filing fees.

¶27 Second, even if unanticipated reductions in investment 

returns could qualify as a mistake, EORP and the State cannot show that 

the State did not bear the risk that this mistake might occur. The 

Legislature designed the Plan so that the State accepted the risk of variable 

investment returns. When investment returns are high, the State’s funding 

obligation through employer contributions is reduced or eliminated, as 

 

4 EORP also claims that changes to the Class Members’ pension 

contracts may be justified under the defense of “commercial 

impracticability.” As with the defense of mutual mistakes of fact, 

however, “mere market shifts or financial inability do not usually effect 

discharge under the rule” of commercial impracticability. Restatement 

(Second) of Contracts § 261 cmt. b; accord id. at § 152 cmt. b (recognizing 

that the same analysis applies for mutual mistakes of fact and commercial 

impracticability). Any defense of commercial impracticability thus fails.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

14

happened from 1998 to 2001. But when investment returns are low, the 

State’s funding obligation is necessarily increased. In either situation, 

however, the Class Members’ contribution rate remains fixed. Thus, the 

Class Members are not permitted to obtain any cost savings from higher 

investment returns, but they likewise are not required to pay more 

because of lower investment returns. The reward and risk of investment 

returns falls on the State. This is simply the nature of defined benefit 

plans. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439 (1999) (stating 

that in a defined benefit plan “the employer typically bears the entire 

investment risk” and “must cover any underfunding as the result of a 

shortfall that may occur from the plan’s investments”). Because the State

bears the risk of the claimed mistake, the State cannot rely on the defense 

of mutual mistake of fact to justify changes to the Plan.5

 

5 The dissent contends that in ruling that EORP and the State are 

unable to establish the defenses of mutual mistake of fact and commercial 

impracticability, we are usurping the trial court’s role by improperly 

determining as fact that poor investment returns were the cause of the 

Plan’s alleged actuarial unsoundness. See infra ¶¶ 104–106. The dissent 

maintains that EORP and the State “presented evidence of a variety of 

causes” and did not rely only on the Plan’s poor investment returns. Id.

This misunderstands the record and our ruling.

In the pleadings and arguments before the trial court, EORP and 

the State did not present a “variety of causes” for the Plan’s alleged 

actuarial unsoundness; they presented two: the Plan’s poor investment 

returns and the unsustainability of the former benefit increases formula. 

These are actually the same cause, however. The former benefit increases 

formula was based on the Plan’s investment returns, see Laws 1998, ch. 

264 § 1; Fields, 234 Ariz. at 216 ¶ 4, 320 P.3d at 1162, which is the very 

reason that EORP and the State allege it was unsustainable. Thus, the 

claimed mutual mistake of fact or commercial impracticability—whether 

made forthrightly on poor investment returns or obliquely on the 

unsustainability of the benefit increases formula—rests on investments 

returns. Because EORP and the State as a matter of law cannot rely on 

poor investment returns to support their defenses, see Restatement 

(Second) of Contracts § 152 cmt. b; id., § 261 cmt. b, our ruling is not 

improperly based on any factual determination, see Scottsdale Jaycees v. 

Super. Ct., 17 Ariz. App. 571, 574, 499 P.2d 185, 188 (1972) (holding that 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

15

¶28 The dissent also maintains that the Bill’s changes to the Plan 

may be upheld under the Contract Clauses of the United States and 

Arizona Constitutions. U.S. Const. art. 1, § 10; Ariz. Const. art. 2, § 25. See 

infra ¶ 107. As we have explained, however, the Bill’s unilateral and 

retroactive changes to the vested terms of the Plan violate Yeazell and the

Gift Clause. See supra ¶¶ 19–23. Consequently, analyzing whether the Bill 

would pass review under the Contract Clauses were it not for Yeazell and 

the Gift Clause is unnecessary and violates the principle of judicial 

restraint. See Superintendent, Mass. Corr. Inst. v. Hill, 472 U.S. 445, 453 

(1985) (stating that judicial restraint requires “avoid[ing] unnecessary 

resolution of constitutional issues”).

¶29 The dissent’s substantive concerns about our holding are, 

respectfully, not well taken. The dissent, however, raises one other 

concern that merits discussion. The dissent discusses at great length the 

perilous state of the Plan and this Court’s need to defer to the 

Legislature’s policy choices in making the Plan solvent, see infra ¶¶ 58, 64–

66, 108, effectively asking this Court to get out of the way and let the 

Legislature fix the problem. This argument has been raised in other cases 

involving judicial pension reform, when state legislatures have run afoul 

of state constitutional provisions that preclude retroactive changes to 

judicial pensions. See In re Pension Reform Litig., 32 N.E.3d 1, 19–26 (Ill. 

2015); De Pascale v. State, 47 A.3d 690, 693, 704–05 (N.J. 2012).

¶30 But this is not a matter of refusing to defer to the Legislature 

on an issue of public policy. It is a matter of requiring the Legislature to 

follow the Arizona Constitution in setting that policy. We recognize that 

the financial soundness of public pension systems is a matter of great 

public importance. We acknowledge that devising measures to guarantee 

the Plan’s financial stability is difficult and fraught with unpleasant policy 

choices. But whatever measures the Legislature enacts to address the 

problem still must comport with the Arizona Constitution. See In re 

Pension Reform Litig., 32 N.E.3d at 19 (stating that “[n]either the legislature 

nor any executive or judicial officer may disregard the provisions of the 

 

when the dispute is not with the facts but with “the legal conclusions to be 

drawn from” the facts, the legal conclusions “are properly resolved by the 

court sitting in its capacity as judge and not in its capacity as a trier of 

fact”). 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

16

constitution even in case of a great emergency”) (citation omitted); De 

Pascale, 47 A.3d at 704 (noting that a legislature has the right to implement 

its policy choices in dealing with critical issues but that those choices 

“must be made within a constitutional framework”). In examining the 

Bill’s constitutionality, we are not meddling in the Legislature’s policy 

choices. We are fulfilling our duty to ensure that the Arizona’s 

constitutional framework is respected and observed in making those 

choices. See Pool v. Superior Court, 139 Ariz. 98, 108, 677 P.2d 261, 271 

(1984) (noting that interpreting the state constitution is this Court’s 

responsibility). The provisions of the Bill at issue here are contrary to 

Arizona’s constitutional framework and consequently invalid.

2. The Vesting Statute

¶31 EORP and the State further assert that although Yeazell 

established a contractual relationship between the State and its employees 

regarding pensions, the vesting statute, enacted in 2000, is part of the 

employment contract for any employee hired after that date and allows 

the Legislature to modify the pension terms for members before they 

retire. The vesting statute provides:

A. Because the plan as enacted at a particular time is a 

unique amalgam of rights and obligations having a critical 

impact on the actuarial integrity of the plan, the legislature 

intends that the plan as enacted at a particular time be 

construed and applied as a coherent whole and without 

reference to any other provision of the plan in effect at a 

different time.

B. The plan was established in order to provide a 

uniform, consistent and equitable statewide program for 

those eligible elected officials as defined by the plan. A 

member of the plan does not have a vested right to benefits 

under the plan until the member files an application for 

benefits and is found eligible for those benefits. An eligible 

claimant’s right to benefits vests on the date of the member’s 

application for those benefits or the member’s last day of 

employment under the plan, whichever occurs first.

A.R.S. § 38–810.02. This Court has previously stated that rights legally 

vest “when the right to enjoyment, present or prospective, has become the 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

17

property of some particular person or persons as a present interest.” 

Hall v. A.N.R. Freight Sys., Inc., 149 Ariz. 130, 140, 717 P.2d 434, 444 (1986); 

Thurston, 179 Ariz. at 50–51, 876 P.2d at 546–47. “A vested property right 

is a right which is actually assertable as a legal cause of action or defense 

or is so substantially relied upon that retroactive divestiture would be 

manifestly unjust.” Aranda v. Indus. Comm’n of Ariz., 198 Ariz. 467, 471 

¶ 18, 11 P.3d 1006, 1010 (2000) (internal quotation marks and citation 

omitted). Thus, once substantive rights have vested, they cannot be 

impaired. Hall, 149 Ariz. at 140, 717 P.2d at 444. And rights that are 

legally vested differ from rights that are contingently vested, that is, ones 

that only “come into existence on an event or condition which may not 

happen or be performed until such other event may prevent their 

vesting.” Thurston, 179 Ariz. at 50, 876 P.2d at 546; see also Fund Manager, 

Pub. Safety Pers. Ret. Sys. v. Phx. Police Dep’t Pub. Safety Pers. Ret. Sys. Bd., 

151 Ariz. 487, 490, 728 P.2d 1237, 1240 (App. 1986) (listing employment 

rights that do not vest until the “condition” of service is satisfied, 

including accidental disability pension, unearned annual leave, vacation 

credits, and sick leave).

¶32 EORP and the State argue that the term “vesting” as used in 

the statute refers to legal vesting and operates to permit a unilateral 

change to an employment contract. But if we were to accept their 

position, the vesting statute would alter earlier established substantive 

rights to particular retirement benefits, violating Yeazell. Thus, the vesting 

statute is constitutional only if it refers to contingent vesting. See Jones v. 

Sterling, 210 Ariz. 308, 314–15 ¶ 27, 110 P.3d 1271, 1277–78 (2005) 

(providing that when we can avoid constitutional doubt by interpreting a 

statute in a manner that does no violence to its text, we will adopt that 

interpretation); Kotterman v. Killian, 193 Ariz. 273, 284 ¶ 31, 972 P.2d 606, 

617 (1999) (“[W]e resolve all uncertainties [regarding a statute] in favor of 

constitutionality.”). Our interpretation preserves the statute’s 

constitutionality because it does not affect the earlier established 

substantive right to particular retirement benefits. See In re Shane B., 198 

Ariz. 85, 87 ¶ 8, 7 P.3d 94, 96 (2000) (providing that an exception to the 

general prohibition on retroactive application of statutes is that “a statute 

does not have impermissible retroactive effect if it is merely procedural 

and does not affect an earlier established substantive right”).

¶33 Consequently, under Yeazell and the vesting statute, a public 

employee’s interest in a retirement benefit or pension becomes a right or 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

18

entitlement at the outset of employment, but the right to begin collecting 

pension benefits is contingent upon completing the requirements for 

retirement eligibility. See Fields, 234 Ariz. at 221 ¶ 31, 320 P.3d at 1167 

(providing that although the right to receive a pension “vest[s] upon 

acceptance of employment,” the pension is “subject to conditions 

precedent, such as completing the term of employment”); Krucker v. 

Goddard, 99 Ariz. 227, 230, 408 P.2d 20, 22 (1965) (providing that a plan 

member’s right to withdraw contributions vested because he “had 

fulfilled every condition precedent to having his contributions returned”); 

Cross v. Elected Officials Ret. Plan, 234 Ariz. 595, 600 ¶ 12, 325 P.3d 1001, 

1006 (App. 2014) (“When the Plan accepts a member’s application for 

retirement, pension rights ‘vest’ in that only then may the member begin 

to receive the benefits.”). Consequently, because the Class Members have 

a binding contract under Yeazell and because the employees and the State 

have not agreed to modify that contract, the vesting statute, by itself, does 

not permit the Legislature to unilaterally change the terms of that contract 

to the employees’ detriment. Accordingly, the Bill’s changes to the benefit 

increases formula and the contribution rate provisions violate Yeazell by 

unilaterally modifying the Class Members’ contracts with the State.

ISSUES ON CROSS-APPEAL

A. Attorneys’ Fees

¶34 On cross-appeal, the Class Members first argue that they are 

entitled to attorneys’ fees incurred before the trial court under A.R.S. 

§ 12–341.01 because the action arose out of contract. EORP counters that 

A.R.S. § 12–341.01 is inapplicable because the action arose from 

constitutional or statutory obligations, not contractual obligations, even 

though the members’ employment contracts were implicated. We review 

de novo the applicability of A.R.S. § 12–341.01. See Ahwatukee Custom 

Estates Mgmt. Ass’n, Inc. v. Bach, 193 Ariz. 401, 402 ¶ 5, 973 P.2d 106, 107 

(1999).

¶35 Section 12–341.01(A) provides that a court may award 

reasonable attorneys’ fees to the successful party in “any contested action 

arising out of a contract, express or implied.” When questions of contract 

are combined with other questions, judicial analysis whether the action is 

sufficiently contractual to invoke A.R.S. § 12–341.01(A) “has aptly focused 

on the substance of the action and the statutory policy to mitigate the 

burden of the expense of litigation to establish a just claim or defense.” 
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

19

A.H. By & Through White v. Ariz. Prop. & Cas. Ins. Guar. Fund, 190 Ariz. 526, 

529, 950 P.2d 1147, 1150 (1997) (internal quotation marks and citation 

omitted). The mere existence of a contract somewhere in the transaction is 

insufficient to support a fee award. Id. That is, “when the cause of action 

arises from statutory rather than contractual obligations, the peripheral 

involvement of a contract does not require the application of [A.R.S.] § 12–

341.01(A).” Id. (internal quotation marks and citation omitted).

¶36 Although this action might first appear to arise from 

constitutional or statutory interpretation, as EORP urges, a closer 

examination of the operation of those contractual provisions reveals 

otherwise. Sections 38–810 and 38–818 are part of the Plan’s statutory 

scheme to provide retirement benefits for elected officials. A.R.S. § 38–

802. The Plan’s fund is used “exclusively for payment of benefits to 

retired members or their beneficiaries” and “for payment of the 

administration, operation and investment expenses of the plan.” Id.

¶37 As recognized in Yeazell, because the Gift Clause forbids the 

Legislature from providing gratuities, the right to receive retirement 

benefits necessarily arose as a condition of the employee’s contract of 

employment. See 98 Ariz. at 114, 402 P.2d at 544. The Plan is therefore a 

creature of statute that assumes the contractual obligations between the 

State and public employees and exists to administer the 

statutorily-imposed duties of generating assets for benefit payments to 

retired members or their beneficiaries. Thus, the Plan’s relationship with 

the Class Members is governed by the members’ employment contracts

with the State. Section 12–341.01 is therefore applicable to disputes 

between the Plan and Class Members because the Plan’s obligation is 

determined by the underlying employment contracts. See Pendergast v. 

Ariz. State Ret. Sys., 234 Ariz. 535, 542 ¶ 23, 323 P.3d 1186, 1193 (App. 2014)

(providing that a public employee was entitled to attorneys’ fees on 

appeal when the Arizona State Retirement System appealed the trial 

court’s finding that application of a statute limiting the employee’s 

purchase of credited service violated the Pension Clause, because the

matter arose out of contract). Consequently, because this action arose out 

of the contractual relationship between the Class Members and the State, 

it arose out of contract and is properly within the scope of the attorneys’ 

fees statute.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

20

B. Prejudgment Interest

¶38 The Class Members next contend that they are entitled to 

prejudgment interest on the principal amounts due under the judgment. 

EORP counters that the Class Members are not entitled to such an award 

because EORP cannot be charged interest on money it was not legally 

obligated or able to pay and that the Plan statutes provide the sole remedy 

for the Class Members. We review de novo whether a party is entitled to 

prejudgment interest. Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493, 508, 

917 P.2d 222, 237 (1996).

¶39 Although the trial court found that awarding prejudgment 

interest in this case would not serve the purposes of prejudgment interest, 

“prejudgment interest on a liquidated claim is a matter of right” in a 

contract action. Metzler v. BCI Coca-Cola Bottling Co., 235 Ariz. 141, 144 

¶ 11, 329 P.3d 1043, 1046 (2014) (citation and quotation marks omitted). A 

claim is liquidated “if the evidence furnishes data which, if believed, 

makes it possible to compute the amount with exactness, without reliance 

upon opinion or discretion.” Schade v. Diethrich, 158 Ariz. 1, 14, 760 P.2d

1050, 1063 (1988) (citation omitted).

¶40 Here, the principal amounts due are liquidated because they

may be computed with exactness. One principal amount due is the excess 

payment contributions made by all Class Members. The other principal 

amount due is the delayed payments of permanent benefit increases 

under the former benefit increases formula to judges who have retired 

before this action has concluded. These amounts are readily determinable.

Consequently, because the principal amounts due can be computed with 

exactness, the Class Members are entitled to prejudgment interest on those 

amounts at the rate determined pursuant to A.R.S. § 44–1201(F) (setting 

the rate for prejudgment interest).

C. Relief Also Against the State

¶41 The Class Members argue finally that judgment should also 

run against the State because the State voluntarily intervened and actively 

litigated the case. The State counters that the Class Members will obtain 

all the relief to which they may be entitled from EORP and that it 

intervened for the limited purpose of defending the Bill’s constitutionality. 

We hold that under the facts here, relief should also run against the State.
HON. HALL ET AL V. EORP/STATE

Opinion of the Court

21

¶42 Arizona courts have previously held that intervenors may 

seek relief in civil rights actions, have judgments run against them, and be 

the prevailing party for purposes of the attorneys’ fees statute. See, e.g.,

Civil Rights Div. of Ariz. Dep’t of Law v. Super. Ct. In & For Pima Cty., 146 

Ariz. 419, 426-27, 706 P.2d 745, 752-53 (App. 1985) (providing that 

attorneys’ fees which the Legislature intended could be recovered in civil 

rights actions are a form of relief that may be sought only by individual 

plaintiffs or intervenors); Ariz. Ctr. for Law in Pub. Interest v. Hassell, 172 

Ariz. 356, 371–72, 837 P.2d 158, 173–74 (App. 1991) (allowing judgment to 

run against intervenor-defendants and awarding plaintiffs attorneys’ fees 

against defendants and intervenor-defendants under the private attorney 

general doctrine); McKesson Chem. Co., a div. of Foremost-McKesson, Inc. v. 

Van Waters & Rogers, 153 Ariz. 557, 739 P.2d 211 (App. 1987) (remanding 

for the trial court to determine whether intervenor-defendant was entitled 

to attorneys’ fees as prevailing party and awarding intervenor-defendant 

attorneys’ fees incurred on appeal).

¶43 Therefore, relief can run against an intervenor-defendant. 

Here, the State elected to intervene as a defendant—referring to itself as 

“Intervenor Defendant” in several pleadings—and fully participated in 

this litigation, as well as in Fields. Although the Class Members did not 

amend their complaint to assert a claim against the State, they did notify 

the parties that they would seek relief against EORP and the State. “It 

would be hypertechnical and unjust to preclude [Class Members] from 

recovering [relief] that they have earned, merely for failure to amend their

complaint to expressly include [the State] within their demand for 

judgment.” Hassell, 172 Ariz. at 371–72, 837 P.2d at 173–74. Consequently, 

under the facts presented, relief should also run against the State.

III. CONCLUSION

¶44 For the foregoing reasons, we affirm the trial court’s 

judgment with respect to the unconstitutionality of the two provisions of

the Bill at issue, but reverse with respect to the court’s denial of attorneys’ 

fees, prejudgment interest, and relief against the State. On appeal, the 

Class Members request attorneys’ fees pursuant to A.R.S. § 12–341.01. In 

our discretion, we deny their request.
HON. HALL ET AL V. EORP/STATE

JUDGE CATTANI, Concurring

22

CATTANI, J., concurring. 

¶45 I concur in the court’s analysis, but I write separately to 

express my view that the superior court correctly ruled that Senate Bill 

1609’s change to the Class Members’ contribution rate violates the Pension 

Clause of the Arizona Constitution. From my perspective, changing the 

employees’ pension contribution rate specified by statute—and thereby 

decreasing the employer’s funding share—diminished the employee’s 

public retirement system benefit. And because the Pension Clause 

provides that “public retirement system benefits shall not be diminished 

or impaired,” Ariz. Const. art. 29, § 1(C), the Bill is unconstitutional 

regardless whether it would survive scrutiny under the Contract Clause, 

and the remand urged by the dissent is unnecessary.

¶46 The defined benefit pension system to which Class Members 

belong guarantees each Class Member fixed monthly benefit payments 

from the time of retirement for the remainder of the retiree’s life. The cost 

of funding the post-retirement benefit payments is shared by Class 

Members and the State, with Class Members paying a fixed percentage of 

their salary at the rate specified in A.R.S. § 38-810, and the State 

responsible for the balance necessary (beyond investment earnings) to 

ensure the actuarial soundness of the pension system.

¶47 EORP and the State, as well as the dissent, posit that the Bill 

did not diminish or impair Class Members’ pension benefits because the 

Bill did not change the guaranteed monthly payments to which Class 

Members are entitled upon retirement. But under that view, the 

Legislature could unilaterally increase the employees’ contribution rate to 

the point that Class Members shoulder the entire cost of funding the 

public pension system rather than sharing the cost between employee and 

employer. And it would be nonsensical to suggest that converting a 

public employee’s employer-provided retirement benefit into an entirely 

self-funded retirement plan would not diminish the employee’s “public 

retirement system benefits.”

¶48 The same logic applies to a partial reduction in the 

employer’s share of contributions to a retirement plan. Consider, for 

example, an employment agreement in which an employer agreed to 

share in the cost of a $1,000,000 retirement annuity (to be purchased on the 

date of retirement) that would pay the employee $5,000 per month for the 
HON. HALL ET AL V. EORP/STATE

JUDGE CATTANI, Concurring

23

rest of the employee’s life. If the employer agreed to pay 60 percent 

($600,000) of the cost to fund the annuity, with the employee responsible 

for the remaining 40 percent ($400,000), the value of the retirement benefit 

provided by the employer would be $600,000 as of the date of retirement. 

Under that scenario, increasing the employee’s share to 50 percent and 

reducing the employer’s contribution to 50 percent would mean that the 

value of the retirement benefit provided by the employer would only be 

$500,000, which would obviously be a reduction in that benefit.6

¶49 This example highlights that the benefit to an employee 

participating in a pension plan should not be measured—as the dissent 

suggests—as simply the sum of the retirement payments received during 

a retiree’s lifetime. Rather, the value of the benefit to the employee is the 

amount the employer contributes to guarantee the stream of postretirement payments. And when the employee’s contribution rate is a 

factor in determining the amount of the employer’s contribution, the 

employee’s contribution rate is a protected benefit under the Pension 

Clause.7 Cf. Fields v. Elected Officials’ Ret. Plan, 234 Ariz. 214, 219–20, ¶¶ 

24–29 (2014) (holding that the statutory formula for determining retiree 

benefit increases constitutes a pension benefit for purposes of the Pension 

Clause). Thus, a unilateral increase in the employee’s contribution rate 

violates the Pension Clause.

 

6 The dissent asserts that a guaranteed annuity as of the date of 

retirement is not an accurate way to portray Class Members’ retirement 

benefits because “in reality, under EORP, the payments are made and 

calculated during employment, based not only on that particular 

employee’s circumstances but the pension system as a whole.” But while 

calculating the funding needed for the public retirement system 

admittedly requires a more complex actuarial model than this illustration,

the shared funding obligations and fixed post-retirement payments of this 

guaranteed annuity example are in fact similar to the relevant provisions

of the Class Members’ defined benefit pension.

7 The retirement payment amount is similarly protected under the 

Pension Clause. Assuming (as § 38–810 specified) a fixed employee 

contribution rate, a reduction in the post-retirement payment obligation 

would reduce the employer’s funding share, thus diminishing the 

employee’s pension benefit in violation of the Pension Clause. 
HON. HALL ET AL V. EORP/STATE

JUDGE CATTANI, Concurring

24

¶50 The dissent relies on Taylor v. City of Gadsden, 767 F.3d 1124 

(11th Cir. 2014), and Borders v. City of Atlanta, 779 S.E.2d 279, 281 (Ga. 

2015), to suggest that courts in other jurisdictions have concluded that 

pension contribution rates are not a “benefit.” But the analysis in those 

cases is based on a critical distinction: in both Taylor and Borders, the terms 

of the pension plan from the outset expressly allowed modification. 

Taylor involved a pension system in which the employee handbook 

“explicitly stated that the ‘member contribution rate is determined by 

statute and subject to change by the Alabama Legislature.’” 767 F.3d at 

1129. The retirement plan at issue in Borders “unambiguously provide[d] 

for subsequent modification or amendment.” 779 S.E.2d at 282. The 

Pension Clause is only implicated when a promised benefit is “diminished 

or impaired,” and modifying the contribution rate in those circumstances 

did not take away a promised pension benefit precisely because the 

employment contract authorized the modification.

¶51 There is no such modification provision applicable to Class 

Members in this case. Section 38-810 specified a fixed 7% employee 

contribution rate, and no representations were ever made to Class 

Members that their contribution rate could vary in any way. Had Class 

Members been advised at the outset of their employment that their 

contribution rate was subject to change by the Legislature (effectively 

setting a variable formula for employee and employer contribution rates), 

Class Members—like the employees in Taylor and Borders—would not 

have a claim under the Pension Clause that a promised benefit was taken 

away.

¶52 And therein lies the problem underlying the position taken 

by EORP and the State, as well as the dissent, because the analysis turns 

on the question of what pension benefits employees were promised when 

they were hired. At its core, this case is based on the simple premise that

employees who accept employment are entitled to rely on promises made 

as part of their employment contract. And when those promises involve 

pension benefits for state employees, that guarantee carries constitutional 

weight. Here, because Class Members were promised a specified (fixed) 

pension contribution rate as part of their initial employment contract, the 

Bill’s changes to that rate diminished a promised benefit and thus 

contravened the Pension Clause.
HON. HALL ET AL V. EORP/STATE

JUDGE CATTANI, Concurring

25

¶53 The dissent asserts that the employee contribution rate was 

in fact variable, and that the Bill thus did not result in a Pension Clause 

violation. Although the constitutional provision regarding public 

retirement systems contemplates that total contributions will vary as 

necessary to ensure actuarial soundness, see Ariz. Const. art. 29, § 1(A), the 

provision says nothing about the employees’ and employer’s relative 

share of the total contribution amounts. And nothing in the language of § 

38-810 or the terms of employment under which Class Members were 

hired suggests a variable rate.8 Rather, § 38-810 (as it existed when each of 

the Class Members was hired) specified an employee contribution rate of 

7% of salary, and this became a provision of the employment contract on 

which each Class Member was entitled to rely.

¶54 The dissent notes that § 38-810 “has never contained 

language indicating an expectation or guarantee.” But the language of the 

statute creates precisely that expectation by imposing a fixed contribution 

rate for Class Members. And that language is in stark contrast to statutory 

language the Legislature has used in establishing other pension plans—

such as ASRS—that impose a variable employee contribution rate. See

A.R.S. § 38-736 (specifying that ASRS “member contributions are a 

percentage of a member’s compensation equal to the employer 

contribution”).9

 

8 The dissent asserts that the employee contribution rate specified by 

§ 38-810 “has varied over time,” and that the rate “has changed multiple 

times over the years.” In fact, the rate was changed only once: an increase 

from 6% to 7% in 1987, shortly after EORP was created. A single statutory 

modification almost three decades ago—and over a decade before 

adoption of the Pension Clause—does not establish that the rate is 

variable at the Legislature’s will, much less that such modification 

comports with the strictures of the Pension Clause. Nor does it foreclose 

the argument—not at issue here—that an employee hired with the 

promise of a 6% contribution rate would be entitled to that rate 

notwithstanding the statutory change.

9 This means that for ASRS members, who as the dissent 

acknowledges make up the overwhelming majority of state employees 

(approximately 535,000 of 582,000), the contribution rate is not fixed as a 

specified percentage of the employee’s salary, but—consistent with the 
HON. HALL ET AL V. EORP/STATE

JUDGE CATTANI, Concurring

26

¶55 The Legislature could have similarly designed EORP from 

the outset with a variable employee contribution rate. But it is not our 

role to rewrite the original statute or adopt language from other statutes. 

See Hughes v. Jorgenson, 203 Ariz. 71, 73, ¶ 11 (2002) (noting presumption 

that “the legislature has said what it means”); see also Comm. for Pres. of 

Established Neighborhoods v. Riffel, 213 Ariz. 247, 249–50, ¶ 8 (App. 2006) 

(noting that “when the legislature uses different language within a 

statutory scheme, it does so with the intent of ascribing different meanings 

and consequences to that language”).

¶56 Finally, the dissent misses the mark by suggesting that this 

case “freez[es] employee contribution rates in perpetuity.” Nothing in the 

court’s opinion prevents the State from prospectively specifying—as part 

of an initial employment contract—that a defined-benefit employee is 

subject to a variable contribution rate or, as the State has actually done for 

judges appointed after the effective date of the Bill, provide new 

employees with a defined contribution pension plan. Moreover, although 

the dissent references pension systems involving other types of state 

employees while highlighting the economic concerns underlying pension 

reform proposals, the court’s decision addresses only a small percentage 

of state employees (judges) who are part of an independent branch of 

government and whose positions carry added constitutional protections. 

See Ariz. Const. art. 6, § 33 (providing that the Legislature cannot remove 

judges from office or reduce their salary). And although the State cannot 

fire judges or reduce their salaries, nothing prevents the State from 

negotiating a change to the contribution rate for judges and incentivizing 

such a change by, for example, conditioning future raises on an agreement 

to accept a higher contribution rate. Accordingly, the court’s decision 

does not “lock in” an unworkable contribution rate in perpetuity, and 

instead simply requires that changes to promised pension benefits be 

carried out in a manner that comports with constitutional principles.

 

statutory terms of the employment contract—can increase or decrease 

(just as the State’s rate can correspondingly go up or down) depending on 

the amount needed to fund the overall ASRS pension fund.
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

27

BOLICK, J., joined by TREBESCH, J., dissenting in part and concurring in 

the judgment in part. 

¶57 The majority today holds unconstitutional statutory changes 

to the permanent benefit increase (“PBI”) formula and contribution rates 

as applied to active members of EORP. We respectfully dissent from the 

holding that changes to contribution rates are unconstitutional and 

otherwise concur in the result.

¶58 This case involves an anomaly that is largely this Court’s 

invention. Most Arizona state employees are at-will employees. EORP’s 

active members are either elected officials or judges who serve for fixed 

terms. No formal contract exists between the state and those employees. 

However, in a work of legal fiction to which the likes of John Grisham 

could only aspire, this Court fifty-one years ago implied such a contract 

for purposes of pension benefits, whose terms are largely set upon the 

employment date and whose benefits extend far beyond retirement until 

the employees’ beneficiaries pass on. See Yeazell, 98 Ariz. at 117, 402 P.2d 

at 546. The voters subsequently incorporated much of that legal 

relationship into our Constitution. Ariz. Const. art. 29, § 1. We are 

impelled by that law to agree with the majority that the change in the PBI 

formula is impermissible. But by freezing employee contribution rates in 

perpetuity, the majority goes far beyond anything contemplated by our 

jurisprudence or the Constitution, thereby jeopardizing the Plan’s 

financial integrity, imposing an enormous uncontemplated burden on 

taxpayers, and preventing the state from reasonably requiring employees 

to shoulder part of the increased burden of paying for their own 

retirement benefits.

I.

A. Factual Background

¶59 Arizona has four statewide retirement plans for public 

employees: the Arizona State Retirement System (“ASRS”), EORP, the 

Public Safety Personnel Retirement System (“PSPRS”), and the 

Corrections Officers Retirement Plan (“CORP”). See Hayleigh S. 

Crawford, Going For Broke: Arizona’s Legal Protection of Public Pension 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

28

Benefits, 46 Ariz. St. L.J. 635, 655 (2014). EORP is by far the smallest.10 All 

are “defined benefit” systems, which means they are “funded by 

employer and employee contributions and guarantee[] the employee a 

certain benefit upon retirement.” Id. at 639-40.

¶60 In 1985, the Legislature enacted EORP, which provided to 

elected officials, including judges, a pension in the amount of three and 

one-third percent of salary for each year worked, up to eighty percent of 

average yearly salary after twenty years of employment, which was 

increased to four percent in 1988. See 1985 Ariz. Sess. Laws, ch. 309, § 4 

(1st Reg. Sess.) (codified at A.R.S. § 38-808(B)(1) (1985)). That promised 

benefit, which essentially places elected officials and judges on par with 

first responders, has never been changed. 

¶61 The EORP Plan has four funding sources: employer 

contributions, employee contributions, court filing fees, and investment 

proceeds. The employee contribution rate is set by statute and has 

changed over time. In 1985, it was set at six percent of the employee’s 

gross salary. See id. (codified at A.R.S. § 38-810(A) (1985)). In 1987, it was 

increased to seven percent. See 1987 Ariz. Sess. Laws, ch. 146, § 4 (1st Reg. 

Sess.) (codified at A.R.S. § 38-810(A) (1987)).

¶62 By contrast, employer contributions are determined by 

actuarial calculations of the amount needed to fund the plan in light of 

projected payouts and investment income, in order to cover both normal

service costs and the amortized amount of the unfunded actuarial accrued 

liability over a period not to exceed thirty years. In recent years, the 

employer contribution rate has increased dramatically, from a low of 6.97 

percent of each employee’s salary in 2002 to 29.79 percent in 2011, the year 

in which the reform at issue was adopted. According to EORP, the rate 

has continued to increase every year since then, to 39.62 percent in the 

fiscal year ending in 2014. In other words, the employer’s contribution 

rate has increased 568 percent in twelve years.

¶63 Also at issue in this case are “permanent increases in base 

 

10 ASRS covers about 535,000 members, EORP has approximately

2,000, and PSPRS and CORP together have about 45,000. Id.
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

29

benefits” for retired employees. In 1990, the state enacted the first 

statutory PBI formula, providing retirement payment increases based on 

the Plan’s investment earnings. 1990 Ariz. Sess. Laws, ch. 236, § 4 (2d Reg. 

Sess.) (codified at A.R.S. §§ 38-818(B), (E), (F) (1990)). If investments 

returned more than nine percent, half of the return would be used to fund 

increases up to four percent, with any remainder placed into a reserve for 

future benefits increases. Id. After that statute expired in 1994, the 

Legislature enacted a new PBI formula the following year. Increases were 

based on the Plan’s investment returns, capped at the lesser of three 

percent or half of the percentage change in the consumer price index. 

1996 Ariz. Sess. Laws, ch. 198, § 1 (2d Reg. Sess.) (codified at A.R.S. § 38-

818(F) (1996)). In 1998, the Legislature raised the maximum possible 

increase to four percent and eliminated any reference to the inflation rate. 

1998 Ariz. Sess. Laws, ch. 264, § 1 (2d Reg. Sess.) (codified at A.R.S. § 38-

818(F) (1998)). That statutory formula remained in place until S.B. 1609. 

According to EORP, since the 1998 change, EORP retirees received a four 

percent annual benefit increase each year until the end of fiscal year 2010.

¶64 The statute at issue in this case is part of a nationwide effort 

to reform public pensions. As a result of recession and insufficient 

contributions, as of 2010, public pensions for state employees nationally 

were underfunded by an estimated one trillion dollars. Pew Center on the 

States, The Trillion Dollar Gap: Underfunded State Retirement Systems and the 

Roads to Reform at 1-3 (2010). Between 2008 and 2013, every state passed 

some type of pension reform legislation. See National Conference of State 

Legislatures, Pensions and Retirement State Legislation, available at

http://www.ncsl.org/research/fiscal-policy/pension-legislationdatabase.aspx (last visited Mar. 7, 2016).

¶65 Arizona’s public pensions were not immune to these 

financial challenges. In 2010, Arizona taxpayers were paying at least $1.39 

billion annually to fund the state pension systems, a 448 percent increase 

from ten years previously and more than the estimated cost for higher 

education, corrections, or healthcare for indigent people. Crawford at 637. 

Serious reversals in investment returns in 2000, 2008, and 2009, combined 

with significant actuarial errors pertaining to the PBI mechanism, 

contributed to what EORP characterizes as “dramatic decreases” in the 

Plan’s funding ratio—a benchmark of financial soundness calculated by 

dividing the plan’s assets by its liabilities. The funding ratio decreased 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

30

from 141.7 percent in 2001 to 58.4 percent in 2012, a decline EORP 

considers “alarming.” See generally Fields, 234 Ariz. at 217 ¶ 8, 320 P.3d at 

1163 (recounting declining funding ratio). Based on record evidence, 

EORP suggests that an “80% funding ratio is a generally accepted 

indicator of a healthy pension plan.” Additionally, EORP’s PBI reserve for 

future benefit increases declined from more than $40 million in 2000 to 

zero in 2011. In sum, EORP was severely under-funded, rendering 

precarious its ability to pay future pension obligations.

¶66 In an effort to place EORP, CORP, and PSPRS on a more 

sound financial footing, the Legislature passed S.B. 1609 in 2011. As 

relevant here, the statute increased the employee contribution rate from 

seven percent to ten percent for fiscal year 2011-12, to 11.5 percent in 2012-

13, and a maximum of thirteen percent thereafter. A.R.S. § 38-810(F)(1)-(4) 

(2011), renumbered as A.R.S. § 38-810(G)(1)-(4) (2013). The Legislature also 

included a “maintenance of effort” clause, which provides that employee 

contributions above seven percent of salary shall not be used to reduce the 

employer’s contribution. A.R.S. § 38-810(G) (2011), renumbered as A.R.S. 

§ 38-810(H) (2013).

¶67 Senate Bill 1609 also made changes to the PBI formula in 

EORP, PSPRS, and CORP. First, it ended future inflows into the PBI 

reserve fund. A.R.S. § 38-818.01(E). Second, it increased the investment 

return rate upon which future PBIs would be calculated. A.R.S. § 38-

818.01(D). Finally, it maintained a four percent maximum for future 

benefit increases, it pegged such increases to the Plan’s funding ratio, with 

larger benefit increases as the actuarial soundness of the Plan improved. 

A.R.S. § 38-818.01(C). These changes—the increased employee 

contribution rate and the changes in the PBI formula—are at issue here.

¶68 In 2013, EORP was closed to new members so that elected 

officials and judges taking office thereafter are no longer eligible. 2013 

Ariz. Sess. Laws, ch. 216, § 9 (1st Reg. Sess.). Instead, they participate in a 

“defined contribution” program.11

 

11 A defined contribution plan does not provide a guaranteed benefit

amount at retirement. Rather, employers and employees contribute to a 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

31

B. Applicable law

¶69 The Contract Clause of our Declaration of Rights, comprised 

by Arizona Constitution article 2, section 25, provides that “no . . . law 

impairing the obligation of a contract[] shall ever be enacted.” 

Historically, Arizona courts have applied the United States Supreme 

Court’s test for determining violations of the Contract Clause of the 

Federal Constitution. In order to violate the Contract Clause, a law must 

substantially impair a contractual relationship. The state may justify the 

impairment by demonstrating a significant, legitimate public purpose, 

and that the impairment is reasonable and appropriate. See, e.g., Fund 

Manager, Pub. Safety Pers. Ret. Sys. v. City of Phoenix Police Dep’t Pub. Safety 

Pers. Ret. Sys. Bd., 151 Ariz. 487, 491, 728 P.2d 1237, 1241 (App. 1986) 

(citing Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400,

411-12 (1983)).

¶70 This Court first held that public pension benefits are 

contractual rights in Yeazell. 98 Ariz. at 114-15, 402 P.2d at 544-45. 

Because the Arizona Constitution prohibits gifts of public funds to 

individuals,12 the Court reasoned that “state pensions cannot be sustained 

as constitutional unless anchored to a firmer basis than that of a gift.” Id.

at 112, 402 P.2d at 543. On that basis, the Court determined that public 

pensions are contractual in nature, and that “[c]ontroversies as to those 

rights should be settled consistent with the law applicable to contracts.” 

Id. at 113-14, 402 P.2d at 544. 

¶71 More specifically, the Court held that “the laws of the state 

are a part of every contract.” Id. at 113, 402 P.2d at 544. Because 

retirement benefits are “a valuable part of the consideration for the 

entrance into and continuation in public employment,” the “right to a 

 

plan in which benefits are based on contributions plus or minus 

investment returns. 

12 The Gift Clause, in article 9, section 7 of the Arizona Constitution 

provides, “Neither the state, nor any . . . subdivision of the state shall 

ever . . . make any donation or grant, by subsidy or otherwise, to any 

individual, association, or corporation . . . .”
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

32

pension becomes vested upon acceptance of employment.” Id. at 115, 402 

P.2d at 545. A “contract cannot be unilaterally modified nor can one party 

to a contract alter its terms without the assent of the other party.” Id. 

Applying those principles, the Court held that a legislative amendment 

“may not be arbitrarily applied retroactively to impair the contract” as it 

existed at the time the employment relationship was established. Id. at 

117, 402 P.2d at 546.

¶72 The Court in Yeazell and subsequent cases essentially created 

a one-way ratchet. Baseline benefits are set on the employment date. 

They can be increased but never decreased without members’ consent. 

Such un-bargained for, open-ended benefits are hardly compelled by the 

Gift Clause, though they might well be forbidden by it. Cf. Turken v. 

Gordon, 223 Ariz. 342, 351 ¶ 43, 224 P.3d 158, 167 (2010) (payments of 

public funds must be supported by consideration that is not 

disproportionate to the value received). In dissent, Justice Udall declared 

that the majority opinion “had no support in reason or logic nor the case 

law . . . and will create problems far beyond the immediate controversy.” 

Yeazell, 98 Ariz. at 124, 402 P.2d at 551 (Udall, J., dissenting). Justice Udall 

was prescient. 

¶73 However, the Yeazell decision embraced a vitally important 

limiting principle to ensure that the supposed pension contract would not 

necessarily be a financial suicide pact for the taxpayers. “We do 

not . . . mean to imply what rights or remedies might be available to either 

party in a situation where it is established that a retirement plan is 

actuarially unsound,” the Court declared. Id. at 117, 402 P.2d at 546. In 

such circumstances, the Court stated, ordinary contract principles such as 

mutual mistake of fact could be applied to modify or rescind a contract in 

appropriate circumstances. Id. at 116, 402 P.2d at 546. Specifically, if both 

parties “labored under the mistaken assumption that there was a fund 

sufficient to afford . . . beneficiaries of the fund the amount provided” by 

the original plan, the state could modify the contract if it carried its 

burden of proving the mutual mistake. Id. Although the State presented 

abundant evidence that EORP was structurally unsound prior to S.B. 1609, 

the trial court never addressed the question of mutual mistake, instead 

disposing of the case entirely under the Pension Clause of our 

Constitution.
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

33

¶74 In 1998, upon legislative referral, Arizona voters enacted 

Proposition 100, which added article 29, section 1 to the Arizona 

Constitution. Most relevant to the issues presented here is section C, 

which provides, “Membership in a public retirement system is a 

contractual relationship that is subject to article II, section 25 [the Contract 

Clause], and public retirement system benefits shall not be diminished or 

impaired.”13

¶75 In Fields, this Court struck down under the Pension Clause 

S.B. 1609’s change in the permanent benefit increase formula as to retired

EORP members. 234 Ariz. at 221 ¶ 34, 320 P.3d at 1167. The Court 

concluded that the statutorily prescribed permanent benefit increase 

formula is a Plan “benefit,” and that S.B. 1609’s formula modification 

violated article 29, section 1 because it “diminishes and impairs the retired 

members’ benefits.” Id. at 216 ¶ 1, 220-22 ¶¶ 30-36, 320 P.3d at 1162, 1166-

68.

¶76 In this action, on cross-motions for summary judgment, the 

trial court concluded that the changes to the permanent benefit increase 

formula and contribution rates for active Plan members violated the 

Pension Clause. Because it so ruled, it did not reach any of the other 

constitutional issues. Although we agree with the majority’s outcome on 

the PBI formula issue, we believe that the contribution rate is not a 

pension “benefit,” and that the trial court improperly granted summary 

judgment to the plaintiffs without considering defendants’ defenses under 

Yeazell or the Contract Clause.

II.

A. The Pension Clause

¶77 Although the majority reaches the Pension Clause issue only 

with regard to the PBI formula and not to contribution rates, we consider 

 

13 This provision is now codified in sections C and D of article 29, 

section 1 of the Arizona Constitution. See Laws 2016, S.C.R. 1019, § 1, 

Prop. 124, approved election May 17, 2016, eff. May 26, 2016.
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

34

it in both contexts because it was the sole basis for the trial court’s 

contribution rates ruling as embraced by the concurring opinion.

¶78 “In interpreting a constitutional amendment, our primary 

purpose is to ‘effectuate the intent . . . of the electorate that adopted it.’” 

Id. at 219 ¶ 19, 320 P.3d at 1165 (quoting Jett v. City of Tucson, 180 Ariz. 115, 

119, 882 P.2d 426, 430 (1994)). In doing so, we give words “the meaning 

most common to the ordinary individual.” Downs v. Sulphur Springs 

Valley Elec. Coop., 80 Ariz. 286, 293, 297 P.2d 339 (1956); accord Fields, 234 

Ariz. at 219 ¶ 19, 320 P.3d at 1165.

¶79 In addition to the text’s plain language, the ballot pamphlet 

can aid in determining the electorate’s intent. See Calik v. Kongable, 195 

Ariz. 496, 498 ¶ 10, 990 P.2d 1055, 1057 (1999). The ballot measure’s 

proponents (no opponents submitted statements) all address one 

overriding purpose: to prevent the legislature from raiding pension 

funds, which had occurred in other states. See Ariz. Sec’y of State, 1998 

Publicity Pamphlet 6-12 (1998), available at 

http://apps.azsos.gov/election/1998/Info/PubPamphlet/Prop100.html.

¶80 That objective reflects in the first two of article 29, section 1’s 

three substantive provisions. Subsection A declares, “Public retirement 

systems shall be funded with contributions and investment earnings using 

actuarial methods and assumptions that are consistent with generally 

accepted actuarial standards.” Subsection B provides, “The assets of 

public retirement systems, including investment earnings and 

contributions, are separate and independent trust funds and shall be 

invested, administered and distributed as determined by law solely in the 

interests of the members and beneficiaries of the public retirement 

systems.”

¶81 On its face, subsection C, at issue here, makes two changes 

from prior law regarding pension contracts.14 First, it establishes that 

 

14 We presume that the legislature (in this instance, the measure’s 

drafters and the electorate) knows the prior law, and if it changes that law, 

that it intends that those changes have real and substantial effect. See, e.g.,
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

35

“[m]embership in a public retirement system is a contractual relationship 

that is subject to article II, § 25,” the Contract Clause. This language marks 

a significant departure from Yeazell and its progeny because instead of 

applying ordinary contract principles to pension contract terms, it 

establishes that the relationship is subject to Contract Clause rules, which 

generally provide greater leeway to contract modifications by 

government. See, e.g., Fund Manager, Pub. Safety Pers. Ret. Sys., 151 Ariz. at 

491, 728 P.2d at 1241. As a result, this change is extremely consequential 

for the present case.

¶82 Second, subsection C states that “public retirement system 

benefits shall not be diminished or impaired.” This too marks a departure 

from prior law, more favorable to Plan members and beneficiaries in this 

instance because it suggests that benefits cannot be diminished or 

impaired period, even in light of contract defenses that might previously 

have been raised under Yeazell.

¶83 It therefore makes an enormous difference whether a 

particular pension contract provision is a “benefit.” If so, it is legally 

sacrosanct; if not, it is subject to the Contract Clause’s modification rules. 

The Court recognized this crucial distinction in Fields, declaring that the 

“Contract Clause applies to the general contract provisions of a public 

retirement plan, while the Pension Clause applies only to public 

retirement benefits.” 234 Ariz. at 218 ¶ 17, 320 P.3d at 1164. In this case, 

the majority correctly applies the changes wrought by the Pension Clause 

to invalidate changes to the PBI formula, but improperly ignores them in 

order to strike down the change in contribution rates.

B. Permanent benefit increases

¶84 This Court decided in Fields that the PBI formula for retired 

Plan members is a benefit. Because S.B. 1609 diminished or impaired that 

benefit, it violated the Pension Clause. 234 Ariz. at 220 ¶¶ 26-27, 320 P.3d 

at 1166.

 

Stone v. I.N.S., 514 U.S. 386, 397 (1995); Brousseau v. Fitzgerald, 138 Ariz. 

453, 455, 675 P.2d 713, 715 (1984).
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

36

¶85 The State and EORP argue that the vesting statute, A.R.S. 

§ 38-810.02, changed the pension contract for employees hired after its 

2000 effective date. Specifically, they urge that for such employees, 

benefits do not vest until retirement, hence the state may determine 

benefit increases upon retirement.

¶86 As a general proposition, we agree with defendants that the 

state is free to change pension terms or benefits or eliminate them 

altogether for new employees, as the state did by changing to a definedcontribution system for judges and elected officials in 2013. But their 

interpretation of the vesting statute collides with the contractual nature of 

public pensions, under Yeazell and as embraced and modified by article 

29, section 1. Prior to the vesting statute in 2000, all seem to agree that 

Plan members had a contractual expectation of a particular formula for 

permanent benefit increases. The State and EORP posit that after the 

vesting statute, that contractual expectation was replaced by a contingent 

expectation; that is, the state may determine benefit increases upon 

retirement.

¶87 Such a contingent, open-ended possibility fails for two 

reasons. First, it does not provide a sufficiently definite term to satisfy the 

requirement of contractual consideration. See, e.g., Savoca Masonry Co. v. 

Homes & Son Constr. Co., 112 Ariz. 392, 394, 542 P.2d 817, 819 (1975) 

(requiring sufficient specification of terms for mutual assent). Second, it 

raises the Gift Clause concerns that animated the Yeazell decision because 

the state is deciding the amount of compensation after work is performed, 

thus giving rise to the prospect of a gift rather than proportionate, 

bargained-for consideration. 98 Ariz. at 112-13, 402 P.2d at 543-44. 

¶88 Accordingly, we conclude that the vesting statute did not 

alter the contractual expectations of EORP Plan members, and thus the 

Court’s conclusion in Fields that the PBI formula is protected by the 

Pension Clause also controls here. Because S.B. 1609’s modification to the 

PBI formula impaired or diminished that benefit for active Plan members, 

it violates the Pension Clause. 

C. Contribution Rates

¶89 By contrast, contribution rates are not benefits and thus do 

not fall within the Pension Clause’s strictures. 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

37

¶90 By their nature, pension plans fall into one of two categories: 

defined benefits or defined contributions. In the former, benefits are fixed 

but the contributions may vary; in the latter, contributions are fixed but 

the payouts may vary. See, e.g., Crawford at 639-42. 

¶91 Article 29, section 1(B) uses the term “contributions” and 

makes clear they are Plan “assets,” providing that they are to be held in 

trust for the Plan’s beneficiaries. Section 1(A) provides that public 

pension systems “shall be funded with contributions and investment 

earnings using actuarial methods and assumptions that are consistent 

with generally accepted actuarial standards.” That language indicates 

contributions are not fixed, but rather may vary over time to ensure the 

Plan’s financial integrity. Indeed, at oral argument, plaintiffs’ counsel 

could point to nothing in the ballot materials that would have placed 

voters on notice that the state could not adjust employee contribution 

rates to ensure the Plan’s financial viability.

¶92 Thus, unlike the PBI formula to which an employee is 

contractually “entitled” according to statutory provisions in effect on the 

hiring date, Fields, 234 Ariz. at 219 ¶ 23, 320 P.3d at 1165, public employees 

are not entitled to a fixed contribution rate. Indeed, if they were, the 

failure to raise sufficient funds through employee contributions could 

jeopardize the Plan’s financial viability required under article 29, sections 

1(A)-(B), thus justifying the state’s change to those rates. By contrast, if 

the entire burden of providing adequate pension contributions is placed 

upon the state, it would create an uncertain, open-ended, and limitless 

obligation that could run afoul of the Gift Clause. See Turken, 223 Ariz. at 

351 ¶ 43, 224 P.3d at 167.

¶93 The employee contribution rate statute, A.R.S. § 38-810, has 

never contained language indicating an expectation or guarantee. In fact, 

the employee contribution rate has varied over time, including an increase 

from six to seven percent in 1987, shortly after EORP was created. See

1987 Ariz. Sess. Laws., ch. 146, § 4 (1st Reg. Sess.) (codified at A.R.S. § 38-

810(A) (1987)). Arizona tax statutes also treat pension contributions and 

benefits differently, with the former generally shielded and the latter 

generally exposed to taxation. See A.R.S. §§ 38-810, -810.01, -811, 43-1022. 

Arizona contribution rate statutes thus do not exhibit the indicia of 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

38

contractual entitlement that the Court found with regard to the PBI 

formula in Fields. 234 Ariz. at 219 ¶¶ 23-24, 320 P.3d at 1165.

¶94 Other courts that have considered the precise issue of 

whether pension contribution rates are a benefit have held they are not. In 

Taylor v. City of Gadsden, 767 F.3d 1124 (11th Cir. 2014), plaintiffs argued, 

as here, that they had a protected contractual pension right to a particular 

contribution rate. Holding the change did not violate the state or federal 

Contracts Clauses, the court explained, “Here, the City did not alter 

plaintiffs’ pension benefits; instead, it altered their pension obligations.” 

Id. at 1135.

¶95 The Georgia Supreme Court likewise recently considered a 

challenge to sizable increases in employee contribution rates. The court 

observed that the “pension contribution increases were not retroactive 

and did not change a member’s benefit formula, calculation of pension 

benefit, or actual benefit amount payable at the time of retirement.” 

Borders v. City of Atlanta, 779 S.E.2d 279, 281 (Ga. 2015). The court upheld 

the contribution rate change because it “did not alter Plaintiffs’ pension 

benefits, but rather modified their pension obligations, and in no manner 

divested Plaintiffs of their earned pension benefits, so as to implicate 

constitutional concerns.” Id. at 287; see also In re Enrolled Sen. Bill 1269, 209 

N.W.2d 200, 203 (Mich. 1973), followed in AFT Michigan v. Michigan, 846 

N.W.2d 583, 593-94 (Mich. App. 2014).

¶96 Furthermore, if contribution rates were benefits, we have 

difficulty perceiving which aspects of the pension contract would be 

subject to the Contract Clause rather than to the absolute prohibition 

against benefit impairment in article 29, section 1(C). Rather, as the Court 

stated in Fields, that special protection is reserved for benefits, which 

contribution rates are not. Indeed, we are loath to attribute to voters the 

intent to have taxpayers alone shoulder all unanticipated financial 

burdens of guaranteed pension payouts, absent clear evidence they were 

placed on notice that they were doing so when they adopted article 29, 

section 1.

¶97 The majority does not address this issue, finding instead that 

the changes to the contribution rate violate Yeazell. But the concurring 

opinion by Judge Cattani would affirm the trial court’s holding that 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

39

employee contribution rates are benefits and thus unchangeable under the 

Pension Clause. 

¶98 Judge Cattani compares the defined-benefit contribution to 

an annuity. Respectfully, it is not. The common definition of annuity is 

“[a] fixed sum of money payable periodically.” Black’s Law Dictionary 

105 (9th ed. 2009). The defined-benefit pension, by contrast, involves fixed 

benefits but requires variable payments. Judge Cattani seems to recognize 

that distinction by observing that if this were an annuity, the amount of 

payments, or cost, would “be determined upon the employee’s 

retirement.” But in reality, under EORP, the payments are made and 

calculated during employment, based not only on that particular 

employee’s circumstances but the pension system as a whole; indeed, 

deferring until retirement the amount of an employee’s compensation 

would present Gift Clause problems because it would be indeterminate 

and open-ended. Perhaps the legislature could improve the current 

system by purchasing annuities for its employees, but that is not the 

system before us.

¶99 Judge Cattani also observes that the system has no 

“modification provision” to alert employees that contribution rates might 

go up. Were this a real rather than fictional contract, perhaps it would 

contain such a provision. As with many benefits, such as health 

insurance, parking, or public transit passes, employee costs can vary. The 

benefit is the outcome, not how much it costs the employer or employee. 

That is the nature of a defined-benefit as opposed to a definedcontribution retirement plan. Moreover, as noted, the statutes governing 

employee contributions have never created an expectation or entitlement, 

and the rate has changed multiple times over the years. A post hoc 

transformation of a defined-benefit pension plan into an annuity whose 

cost is determined upon retirement does not alter the legal reality that 

employee contribution rates are not benefits.

¶100 For the foregoing reasons, the trial court erred in holding 

that S.B. 1609’s employee contribution rate increase violates the Pension 

Clause, the sole basis for its ruling on contribution rates.

D. The Contract Clause and Yeazell
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

40

¶101 The majority bases its decision striking down the 

contribution rate changes on its view that Yeazell allows no changes 

whatsoever to a pension plan that are to the members’ disadvantage, 

absent the members’ consent. As we noted earlier, that conclusion 

misreads Yeazell, which expressly recognizes contract defenses such as 

mutual mistake regarding the Plan’s actuarial soundness. 98 Ariz. at 116, 

402 P.2d at 546. It also ignores the constitutional changes that significantly 

alter our jurisprudential landscape.

¶102 The majority says we “over-read” Yeazell because although it 

recognizes the mutual mistake defense, the Court stated it did “not, 

however, mean to imply what rights or remedies might be available to 

either party in a situation where it is established that a retirement plan is 

actuarially unsound. This is a matter beyond the issues of the present 

litigation.” See ¶ 24 (citing Yeazell, 98 Ariz. at 117, 402 P.2d at 546). But 

that is precisely the issue in this litigation; and whatever “rights or 

remedies might be available,” it is judicial abdication to preemptively 

foreclose them.

¶103 Because this case was decided on cross-motions for 

summary judgment, the trial court made no factual findings on contract 

defenses. As this Court is not affirming the trial court’s ruling that the 

change in employee contribution rates violates the Pension Clause, and as 

the parties below fiercely contested the factual issues pertaining to 

contract defenses, affirming the summary judgment is manifestly 

inappropriate. See Ariz. R. Civ. P. 56(a); see also Peterson v. Valley Nat. Bank 

of Phoenix, 90 Ariz. 361, 362, 368 P.2d 317, 318 (1962) (stating summary 

judgment inappropriate where there are material contested issues of fact 

or where there is the slightest doubt as to the facts). 

¶104 Rather than remand the issue for factual determination, the 

majority dons trial court robes to determine that EORP and the State are 

“unable to prove that defense.” Selectively reviewing the record, the 

majority finds that the Plan’s financial worries are attributable solely to 

EORP’s investment choices, and states that “disappointment about 

anticipated investment returns does not qualify as a [mutual] mistake.” 

See ¶ 26. Not only that, but “the Plan’s actuarial soundness is within the 

Legislature’s control,” because it can always increase taxes and court fees, 

apparently ad infinitum. Id. In reality, EORP presented evidence of a 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

41

variety of causes, and did not learn until a 2010 audit that the Plan was 

severely unfunded. Until then, all parties labored under the assumption 

that the Plan was actuarially sound—an assumption that proved to be 

mistaken. By finding otherwise, the majority short-circuits the mistake of 

fact analysis that Yeazell expressly recognizes.

¶105 The majority errs even more fundamentally by beginning 

and ending its analysis with Yeazell. Article 29, section 1 now governs the 

contractual relationship regarding public employee pensions. Section 1(C) 

very plainly states that although benefits are sacrosanct, other parts of the 

pension contract are governed by the Contract Clause. We said as much 

in Fields, 234 Ariz. at 218 ¶ 17, 320 P.3d at 1164 (“The Contract Clause 

applies to the general contract provisions of a public retirement plan, 

while the Pension Clause applies only to public retirement benefits.”). As 

noted previously, we cannot assume that the amendment’s drafters were 

ignorant of past governing law and the significant change effected by the 

ballot language. Our job is to enforce that language, not ignore it.

¶106 But ignore it the majority does, justifying itself with the 

proposition, remarkable on multiple levels, that “analyzing whether the 

Bill would pass review under the Contract Clauses were it not for Yeazell

and the Gift Clause is unnecessary and violates the principle of judicial 

restraint.” See ¶ 28. Article 29, section 1 governs public pensions. It does 

so in all, not just some, of its particulars. Declining to apply all of its 

provisions is not judicial restraint but pick-and-choose jurisprudence.

¶107 As we decided in Fields, public pension contract terms that 

are not benefits are subject to the Contract Clause. Neither this Court nor 

the trial court made the requisite determination that the contribution rate 

changes violate the Contract Clause; thus, remand is imperative. See State 

v. Brita, 158 Ariz. 121, 124, 761 P.2d 1025, 1028 (1988) (“It is highly 

undesirable to attempt to resolve issues for the first time on appeal, 

particularly when the record below was made with no thought in mind of 

the legal issue to be decided.”). But even so, based on available facts and 

contrary to the majority’s conclusion, the record is quite clear that the 

changes constitute “a significant and legitimate public purpose,” and that 

the impairment is reasonable and appropriate. Fund Manager, Pub. Safety 

Pers. Ret. Sys., 151 Ariz. at 491, 728 P.2d at 1241. Averting a pension crisis 

and protecting the Plan’s actuarial soundness are not only significant and 
HON. HALL ET AL V. EORP/STATE

JUSTICE BOLICK, joined by JUDGE TREBESCH, Dissenting in Part and 

Concurring in the Judgment in Part

42

legitimate, they are the very essence of the constitutional guarantees the 

voters approved. The Plan members’ contribution rate increases are 

dwarfed by the increased taxpayer contributions. Senate Bill 1609 takes 

pains to not displace the state’s obligations or to raid pension funds. 

Based on the record, we would uphold the contribution rate changes 

under the Contract Clause (and therefore under article 29, section 1(C)). 

At the very least, we would remand to the trial court to determine this 

question in the first instance.

III.

¶108 If ever there were a case in which we should seriously

indulge the presumption of statutory constitutionality, this is it. The 

majority winks at that rule, then utterly fails to apply it. It repeatedly 

invokes the mantle of judicial restraint while casually invalidating a 

statute designed to preserve the financial stability of a public employee 

pension plan, a purpose so important that the voters made it part of our 

state’s organic law. 

¶109 The majority opinion portends a huge financial windfall for 

the class members, a burden the taxpayers will shoulder. Under such 

circumstances, we should act with great restraint, lest the rule of law be 

undermined by a public perception that this decision is of the judges, by 

the judges, and for the judges. On this important issue, the majority 

exhibits no such restraint, and we therefore respectfully dissent.