Opinion ID: 1412004
Heading Depth: 2
Heading Rank: 3

Heading: Enforceable Sum Specific Debt

Text: Even a cursory review of the decisions of this Court in which the subject exception to article X, section 4 has been discussed and applied demonstrates that an obligation to fund is not the equivalent of a previous liability within the meaning of this state's debt clause. Significantly more than a moral obligation to pay is required to invoke the exception under discussion. In each case in which the previous liability exception has been examined and its application approved by this Court, there has been an existing sum specific indebtedness involved  an actual enforceable debt. In Dickinson v. Talbott, 114 W.Va. 1, 170 S.E. 425 (1933), we discussed how invocation of the previous liability exception to the debt clause is directly tied to the discharge of an indebtedness. Through that decision, this Court approved the issuance of state bonds for the purpose of discharging a specific indebtedness that resulted when the state, due to insufficient tax receipts and tax levying during the Depression, borrowed funds from various banks to meet the state's obligations and transferred funds from special funds not intended for general revenue purposes. Under the facts of Dickinson, two exceptions to the debt clause were determined to permit the bond issuance: the exceptions granted for casual deficits and redemption of a previous liability. See id. at 5-6, 170 S.E. at 427-28; W.Va. Const. art. X, § 4. In discussing the debt clause, we observed in Dickinson that The phraseology employed in the section under consideration [art. X, § 4] indicates that the framers of the Constitution anticipated that emergencies might arise in the state's finances when it would be necessary for indebtedness to be incurred by the state, and therefore provisions were made that such conditions might properly be met if and when they should arise.... ... We are of the opinion also that legislative justification of the five-million-dollar bond issue is based not only on the existence of casual deficits within the meaning of section 4, Article X of the Constitution, but as well on the existence of a previous liability of the State within the meaning of said section. The unanticipated decline in receipts of public revenue produced first the deficits in such revenue and then, to meet the same, indebtedness was incurred by the state as hereinabove stated. 114 W.Va. at 6, 170 S.E. at 428 (emphasis supplied). In upholding the bond issue in Dickinson, this Court made clear that application of the previous liability exception to the debt clause requires an existing indebtedness and an accompanying liability that results when that specific indebtedness is discharged or satisfied: When, by reason of casual deficits in its revenues, the state incurs liability in the discharge of indebtedness incident to such deficits, the same may be funded by state bonds for the issuance of which provision is made by legislative enactment, on the basis of the redemption of a previous liability of the State within the meaning of section 4, Article X, West Virginia Constitution. 114 W.Va. at 2, 170 S.E. at 426, syl. pt. 4. More recently, we were again asked to approve a bond issuance under the previous liability exception to the debt clause. In State ex rel. Department of Employment Security v. Manchin, 178 W.Va. 509, 361 S.E.2d 474 (1987), we upheld the sale of bonds pursuant to The Debt Fund Act [25]  legislation designed to repay the federal government for moneys borrowed to pay unemployment compensation premiums. [26] In syllabus point one of that decision, we recognized that  W.Va. Const., art. X, § 4, allows the legislature to issue bonds without a constitutional amendment `to redeem a previous liability of the State.' Just as in Dickinson, this Court found the previous liability exception applicable due to preexistent borrowing compelled by bleak economic conditions: [T]here is no question that the money borrowed from the federal government pursuant to our qualifying agreement with the Secretary of Labor ... is a valid, existing debt of the State.... Thus, having determined that there is a preexisting liability of the State that in one way or another must be repaid to the federal government, we find no impediment in W.Va. Const., art. X, § 4.... 178 W.Va. at 515, 361 S.E.2d at 480. In Gribben v. Kirk, 197 W.Va. 20, 475 S.E.2d 20 (1996), this Court rejected the Legislature's attempt to characterize a judgment against the state for unpaid overtime owed to police officers under certain wage payment statutes as a moral obligation[] of the state. Id. at 25, 475 S.E.2d at 25. Based on the fact that this judgment representing unpaid overtime and interest was a valid legal obligation[] of the State, this Court determined that the financial obligation was a previous liability of the State under section 4, article X which must be discharged in a manner consistent with our Constitution. 197 W.Va. at 25, 475 S.E.2d at 25. There is no dispute that the three funds at issue are currently in actuarially sound condition. While Appellees want us to view the Legislature's obligation to inject increasingly large appropriations into the funds at issue because of the UAAL as the type of enforceable debt that translates into a previous liability within the meaning of the debt clause exception, we are not persuaded by this argument. To be required to make appropriations is one thing; to have a valid and enforceable debt against the state is an entirely different matter. In marked contrast to those three decisions in which this Court has approved extension of this state's credit under the previous liability exception, there has been no default in the payment of pensions which would in turn give rise to the creation of an enforceable sum specific indebtedness. The existence of a recognized moral obligation to pay pension benefits  one that is currently being met  does not equate to a previous liability of the state within the constitutional meaning of that exception to the debt clause. Provided the Legislature is currently appropriating sufficient funds and continues to responsibly make additional appropriations necessitated by past imprudent financial decisions, there is no present indebtedness resulting from the discharge of a specific liability. Moreover, the statutorily required and prudently performed annual calculations of the UAAL relative to the pension systems at issue do not in any manner reflect or represent amounts that are currently owed to anyone. As such, these calculated projections, which can be altered at any time based on different assumptions and market results, similarly cannot come within the constitutional meaning of a previous liability of the state. Notwithstanding the Legislature's ostensibly foresightful attempt at reducing anticipated future appropriations required to maintain the fiscal soundness of the funds at issue, [27] the necessary financial prerequisite for extending the state's credit is not demonstrated by the record before us. Because of the current actuarially sound status of the three retirement funds at issue and because there is no present indebtedness resulting from the actual discharge of debt attributable to such funds, there is no previous liability within the meaning of section four of article ten of the state constitution that would permit issuance of the general revenue bonds contemplated by the Act. Absent the applicability of this constitutional exception to incurring debt on the state's behalf or any other exception, the bond sale and investment plan at issue may only be implemented with the consent of the people expressed by the adoption of a constitutional amendment. [28] Accordingly, we hold that the Pension Liability Redemption Act is unconstitutional in that implementation of its provisions would result in violation of the debt clause set forth in section four, article ten of the West Virginia Constitution. As this Court wisely enunciated in Dickinson, [t]he state's constitutional requirements are for the preservation of the state and the maintenance of its integrity and for the protection of the people. 114 W.Va. at 5, 170 S.E. at 427. Though the specific historical concerns which prompted the inclusion of the debt clause may no longer exist, [29] the objectives for which the debt clause was initially enacted  to curtail the accumulation of mountainous financial obligations that would severely saddle future generations of this state  remain as valid as when the constitution was first adopted. Despite the passage of time, the pitfalls and dangers attendant upon unrestrained expenditures of public funds to be derived from revenues in the future of which our constitutional forebears were justifiably determined to prevent are just as deserving of vigilant watchdogging today as in 1872. State ex rel. State Road Comm'n v. O'Brien, 140 W.Va. 114, 128, 82 S.E.2d 903, 910 (1954) (Lovins, J., dissenting). See generally R. Briffault, Foreword: The Disfavored Constitution: State Fiscal Limits and State Constitutional Law, 34 Rutgers L.J. 907, 909, 952 (2003) (noting existence of enormous gap between the written provisions of state constitutions and actual practice; recognizing judicial complicity in evasion of constitutional restrictions on debt limitation, and observing that voter approval requirements are an important theme in contemporary tax and expenditure limitations). [30] Having determined that the Pension Liability Redemption Act is unconstitutional, the decision of the Circuit Court of Kanawha County is hereby reversed. Reversed.