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

Heading: Public Debt versus Prior Liability

Text: The events that precipitated the Dadisman I decision were the underfunding of the Public Employees Retirement System (PERS) over a period of four years combined with the legislative transfer of funds originally appropriated for PERS to the general revenue fund. See 181 W.Va. at 785-86, 384 S.E.2d at 822-23. In Dadisman I, a retired public employee sought a writ of mandamus to ensure the proper funding of PERS and to obtain directives requiring the expedient imposition of fiscally sound management practices. In discussing the underfunding of PERS in Dadisman I, this Court declared that [t]he amount of employer contributions earned by State employees which have been wrongfully withheld or diverted over the past four years is a public debt, which must be repaid. Id. at 792, 384 S.E.2d at 829 (emphasis supplied). Recognizing the folly of borrowing from the PERS trust for the purposes of political expediency, we rejected that practice as placing an assured and unwise heavy tax burden on posterity. Ibid. In moulding relief for the misappropriations at issue in Dadisman I, we directed that an independent actuary be hired to determine whether such funding decisions had rendered [PERS] actuarially unsound. Ibid. And, in the event that the retirement fund at issue was declared to be actuarially unsound, we required that an appropriation plan be developed to return PERS to actuarial soundness. In response to this Court's directives in Dadisman I, the Legislature authorized an audit of PERS to determine whether the plan was actuarially unsound. The audit revealed that PERS was not rendered actuarially unsound by the underfunding in view of an amortization plan that involved replacement of wrongfully withheld or diverted appropriations from PERS over a sixteen-year period. State ex rel. Dadisman v. Caperton ( Dadisman II), 186 W.Va. 627, 413 S.E.2d 684 (1991). Consequently, we recognized that PERS was not in need of further appropriations at this time to return the fund to soundness. After reemphasizing the Legislature's obligation to timely and complete[ly] fund [ ] and proper[ly] appl[y]... all employer contributions to the employer accumulation fund of the PERS, without diversion to unauthorized purposes we found the issue of adequate funding essentially mooted by the actuarial sound condition of the fund. [21] 186 W.Va. at 632, 413 S.E.2d at 689. We reached a similar result in the well-reasoned decision of West Virginia Education Association v. Consolidated Public Retirement Board, 194 W.Va. 501, 460 S.E.2d 747 (1995), in which we addressed the issue of inadequate funding of the Teachers Retirement System. Due to the passage of legislation aimed at correcting the unfunded liability over a period of forty years that included annual determinations of actuarial soundness, we found the funding issue mooted by the legislation. [22] Id. at 511, 460 S.E.2d at 757. Significantly downplaying the historical underpinnings to the characterization of misappropriated funds as a public debt in Dadisman I, Appellees argue that this Court's recognition of a duty to repay those funds to PERS combined with the legislation at issue is sufficient to invoke the debt clause exception that permits extension of this state's credit for a previous liability of the state. W.Va. Const. art. X, § 4. Further analysis of the law as it pertains to pension rights and payment obligations, however, demonstrates why this Court's acknowledgment of a public debt with regard to misappropriations that affected PERS  a retirement system that is not even at issue in this case  does not cause the UAAL identified with respect to the three retirement systems at issue here to rise to the constitutionally significant level of a previous liability of the state for purposes of involving this state's credit in the manner contemplated by the Act. Id. The recognition by this Court in Dadisman I and II and in Consolidated Public Retirement Board that the respective retirement funds must be funded pursuant to statutory requirements which extend over a period of years does not entitle the Legislature to invoke the previous liability exception to the clear constitutional prohibition against incurring debt on the state's behalf. While the term previous liability is certainly subject to differing views, [23] we are certain that the mere designation of the state's obligation to continue to fund PERS, the teachers retirement funds, and by logical implication all other retirement systems that are statutorily established, does not fall within the ambit of what the constitutional drafters intended as a permissible basis for extending the state's credit. As Appellants aptly note, if recognition of an obligation to fully or adequately fund was the threshold test for invoking the previous liability exception, there are virtually no state funding obligations for which the reasoning upon which Appellees rely would not justify the use of an investment scheme such as that contemplated by the Act. [24]