Opinion ID: 2318702
Heading Depth: 3
Heading Rank: 1

Heading: The State and the System's Ineradicable Interconnectedness

Text: To determin[e] whether a statutorily-established entity is an agency[,] instrumentality, or mere appendage, of the State for a particular purpose, like the calculation of damages, we have repeatedly recognized that there is no single test.... A.S. Abell Pub. Co. v. Mezzanote, 297 Md. 26, 35, 464 A.2d 1068, 1072 (1983). Instead, [a]ll aspects of the interrelationship between the State and the statutorily-established entity must be examined in order to determine its status. Id. (citations omitted); see e.g., A.S. Abell Pub. Co., 297 Md. at 39, 464 A.2d at 1074 (After examining all aspects of the interrelationship between the State and [the Maryland Insurance Guaranty Association (MIGA)], including the degree of control exercised by the State over MIGA's operation, we are persuaded that MIGA is an agency or instrumentality of the State [and, therefore,] within the scope of the Public Information Act.). [2] Through Title 21 of the State Personnel and Pensions Article, the Legislature created a State Retirement and Pension System to provide benefits ... for [State-employee] participants in the several systems. § 21-101(b). Although the Legislature created an uncompensated Board of Trustees to run much of the System, it retained significant managerial oversight and discretion. MARYLAND STATE RETIREMENT AND PENSION SYSTEM, COMPREHENSIVE ANNUAL FINANCIAL REPORT 24 (2010), http:// www.sra.state.md.us/Agency/Downloads/ CAFR/CAFR-2010.pdf (The System is fiscally dependent on the State by virtue of the legislative and executive controls exercised with respect to its operations, policies, and administrative budget.). Indeed, under the statute, the State is obliged to pay[] ... all allowances and other benefits; to creat[e] and maint[ain]... reserves in the accumulation fund[]; to credit[] ... regular interest to the annuity savings fund[] and to pay[all]... expenses for administration and operation of the several systems. § 21-302(a)(1)-(4) (emphasis added). To that end, the Governor and the Legislature require the Board to submit an annual budget report, § 21-109, which they consult discretionarily in their preparation of the State Budget. [3] Moreover, while the Board is empowered to hire an actuary, like Milliman, the General Assembly reserved the power to hire its own Legislative Auditor to conduct an annual or biennial fiscal and compliance audit of the [System's] accounts and transactions .... § 21-127. The State's paternal role with regard to the System does not end there. The General Assembly designated the State Treasurer, not the Board of Trustees, [a]s the custodian of ... the accumulation, annuity savings, and expense funds of the several systems ... and the assets of the Board of Trustees. Payments from these funds must follow regulations formulated by the Board, but approved ultimately by the State Treasurer. § 21-124(a)(2). The Legislature also entrusted the State Treasurer with the job of physically safeguarding] the System's assets. § 21-124(b). The State discloses these assets in its own financial statements. See COMPREHENSIVE ANNUAL FINANCIAL REPORT at 24. Such oversight and reservation of authority is understandable, given that the General Assemblyrather than the Board of Trustees, employees, or any other group(s)is responsible for the welfare of the System. The State pays into the System not only as an employer, but also as the only guarantor of risk and loss. Indeed, as a last resort, the statute requires the State to pay to the accumulation fund... at least an amount that when combined with the amount in the accumulation fund ... is sufficient to provide the allowances and other benefits payable out of the fund .... § 21-302(c). The System does not have a separate power to raise funds, outside of investing profitability the State's and employees' contributions. § 21-108(c). This scheme reveals that the System is merely an extension of the State (i.e., part of a single government), not simply because it was created by the Legislature, but because of the close, ongoing, and managerial presence of the State in the activities of the System. To refer to the System at large is to refer to the State, at least for the purpose of calculating damages. Los Angeles County Employees Retirement Association v. Towers, Perrin, Forster & Crosby, 2002 WL 32919576, at , 2002 U.S. Dist. LEXIS 27916, at  (C.D.Ca.2002) ([W]hile the separateness of [a retirement system] and [a c]ounty is recognized for a number of purposes, this separateness is not absolute and does not pervade every aspect of the relationship. For certain functions [including the calculation of damages], [the retirement system] and the [c]ounty should be considered the same entity.). [4]