Court Opinion

ID: 9884854
Source: CourtListenerOpinion
Date Created: 2023-10-06 03:17:44.143884+00
Date Added: 2024-06-11T07:48:41.341451
License: Public Domain

REGAN, Acting P. J.
I dissent. I fully agree with the Governor that the statutory appropriations in Education Code sections 23401 and 23402 do not create a contract with the members of State Teachers’ Retirement System (STRS). These appropriations to the reserve fund were born of a crisis to meet the financing of local government and school districts, and not of an effort to contract with members, whereby the state would provide capitalization of the unfunded liability of the reserve fund in return for teachers’ continued employment. I find no adequate manifestation in sections 23401 and 23402 of a promise giving rise to a contractual obligation. Nor is there any manifestation of any “permanance of a continuing obligation” to fund the reserve fund solely by the included formulae.
Nor do I see any “unambiguous element of exchange of consideration by a private party for consideration offered by the state.” In fact, I fail to see *516how continuing employment by teachers in the plan somehow constitutes “acceptance” of an “offer” to finance the unfunded liability in outyear dollars. I cannot imagine any member contemplating quitting his or her job or participation in the plan for fear that in lieu appropriations may gut the chance for a fully funded account. Not only is there no “offer” here; there is no “acceptance.”
Under a “defined benefit plan” such as STRS, members are assured of receiving defined benefits upon retirement based on formulae that take into account years in service, salary level and similar criteria. Contributions to such a plan may have little relationship to the value of benefits earned by a specific employee.1 Contributions and appropriations may be on a “pay-as-you-go” basis, or reserves may be compiled actuarilly sufficient to generate adequate investment income to meet future obligations, and thus, make the plan “fully funded.”2
These appropriations are clearly intended to amortize the unfunded liability so as to enable sufficient investment capital to accrue to meet future obligations. No benefit or element of compensation is provided for in the statutes. The majority relies on County of San Luis Obispo v. Gage (1903) 139 Cal. 398 [73 P. 174], in implying a contract in the appropriations. Unlike Gage, however, the statutory appropriations in the instant case are not for the direct support or maintenance of anyone. Nor is there any “sub*517sequent performance” of any condition by anyone here, which in Gage, in combination with the legislation there, furnished “all the elements which are necessary to the formation and existence of an implied contract.” (Gage, supra, at p. 408.) Nor on any other authority are these appropriations unconditional or unilateral implied contracts.
I concurred in Valdes v. Cory (1983) 139 Cal.App.3d 773 [189 Cal.Rptr. 212], in finding a contractual obligation in contributory payments of the state to the Public Employees’ Retirement System (PERS). However, there are important factual differences between Valdes and the instant case.
In Valdes, I was impressed by the Public Employees’ Retirement Law provision that the monthly contributions to the retirement fund were “continuing obligations of the State.” (139 Cal.App.3d, at p. 787.) Furthermore, I saw a deeper and greater obligation in the state to make payments to a plan which originally involved the payment of retirement salaries to state employees, wherein the state, as employer, was making the employer contribution for the direct benefit of the employee. Further yet, the duties of actuarial investigation and reporting as well as the conduct of the state over 50 years manifested an intent “that periodic employer contributions will not be altered . . . .” (Ibid.) In the instant case, however, the statutory scheme does not contain the kind of express language which we had found in Valdes, and which in that case led to our conclusion that a contractual obligation was implied. There is nothing in this case which makes an in lieu appropriation offensive.3 Unlike “the continuing obligations of the State” in Valdes, the statutory appropriations in the instant case were part of a stop-gap measure necessitated by the property tax initiative known as “Prop. 13” to provide a upward-sliding scale of state funding to the reserve fund.
I have agreed in the past that employee pension beneficiaries have a vested interest in the integrity and security of the source of funding for the payment of benefits (Valdes v. Cory, supra, 139 Cal.App.3d at p. 785.) We stretched that interest into a contractual right in Valdes, travelling far from the contractual interest the employee had in his or her direct pension benefits.
However, in the instant case, I do not think we can stretch the interest in the input to this reserve fund so far. As we discussed in Valdes, the con*518tractual pension rights discussed in Betts v. Board of Administration (1978) 21 Cal.3d 859 [148 Cal.Rptr. 158, 582 P.2d 614], are the rights to “pension benefits,” as an element of compensation. (Id., at p. 863; italics added.) In Valdes, we concluded the vested rights of PERS members were impaired when the Legislature directed funds held in trust for the exclusive benefit of the members and beneficiaries of PERS be used to satisfy the state’s contractual obligations to make its monthly contribution to the retirement fund. (Valdes, supra, 139 Cal.App.3d, at p. 788-789.) We first concluded there was a contractual obligation by the state to “abide by its ‘continuing obligation’” (id., at p. 787), and then we found the legislative action in that case impaired the vested contractual rights of PERS members.
As I have stated, I do not find the same contractual interest in the input to the reserve fund as we found in Valdes. Secondly and consequently, I see no impairment of any vested rights to members of STRS. In the instant case, the annual in lieu appropriations do not suspend any employer contributions, nor do they change the source of contributions as was done in Valdes. The in lieu appropriations have no effect on the benefits, nor is the plan being changed to any member’s disadvantage. Thus, the in lieu appropriations offend neither Betts nor Valdes. In any case, as I see no contractual obligation in the law, the questions of impairment, alteration, and segmentation are irrelevant.
I am convinced this is a dangerous thing to do—to read contractual obligations into statutes which may remotely, rather than directly, affect beneficiaries. As we noted in Valdes, it is elementary the Legislature has power, absent constitutional restrictions, expressly to amend or repeal existing statutes. By extending the basis of constitutional infirmity into statutes such as this, we tie the hands of this and future Legislatures.
“It is the general rule that one legislative body cannot limit or restrict its own power or that of subsequent Legislatures and that the act of one Legislature does not bind its successors.” (In re Collie (1952) 38 Cal.2d 396, 398 [240 P.2d 275].) This is, of course, subject to constitutional limitations. (Methodist Hosp. of Sacramento v. Saylor (1971) 5 Cal.3d 685, 691 [97 Cal.Rptr. 1, 488 P.2d 161].) However, “all intendments favor the exercise of the Legislature’s plenary authority: ‘If there is any doubt as to the Legislature’s power to act in any given case, the doubt should be resolved in favor of the Legislature’s action. Such restrictions and limitations [imposed by the Constitution] are to be construed strictly, and not to be extended to include matters not covered by the language used.’ [Citations.]” (Ibid.)
In this case, I do not find an adequate manifestation of a promise giving rise to a contractual obligation. As I see no contract in the statutory appro*519priations, I do not find the annual in lieu appropriations constitutionally infirm.
I would deny the writ.
The petitions of real parties in interest and interveners for a hearing by the Supreme Court were denied August 20, 1984.

 In a “defined benefit plan,” the employer undertakes to provide a specified level of retirement income, as opposed to a “defined contribution plan,” where the employer makes specified contributions to an individually allocated investment account. In a “defined benefit plan,” employer contributions are determined on the basis of a specific actuarial funding method which seeks to smooth contribution requirements as a percentage of payroll over a long period, reflecting overall funding requirements, and they are not allocated to individual accounts. However, in the instant case, state appropriations are not based on a percentage of payroll. Such appropriations simply capitalize the fund to allow investment financing to meet
For background, see testimony of and appendix topic paper by Robert D. Krinsky, “Defined Benefit/Defined Contribution: A Comparison,” in U.S. Senate subcommittee report Forums on Federal Pensions (Subcom. on Civil Service, Post Office and General Services of Com. on Gov. Affairs), pages 59-60, 152-158.

 In most public “defined benefit” retirement plans, there is no legal requirement to be fully funded, whereas there is generally a 40-year amortized funding mandated for private plans subject to the federal Employee Retirement Income Security Act of 1974 (ERISA). In any case, the retirement fund here is solvent. As of September 30, 1983, the STRS investment portfolio had $10.5 billion, based on an October 1/September 30 year-to-year survey, as reported in “Annual Survey of 1000 Largest Pension Funds” in Pension and Investment Age, January 23, 1984 issue. The September 1982 STRS Funding Study by Weston Hulse, Controller’s Exhibit 1, noted that in 1981/1982 total income from contributions and investment return was almost $2 billion, “while benefit payments, refunds, and administrative costs totalled only $800 million, leaving 1.2 billion to add to investments.” (Funding Study, supra, at p. 12.) Although the unfunded obligation increases regularly, the investment portfolio is increasing by over $1 billion dollars a year.

 In Valdes, the challenged provisions of chapter 115 of Statutes of 1982, reduced or suspended employer contributions (§ 14, subd. (b)), state-employer contributions (§ 58), and school district-employer contributions (§ 59). In section 58, the PERS Board was mandated to transfer monies from its reserve against deficiencies into the unallocated portion of the PERS retirement fund in order to permit the reversion to the unappropriated surplus of the general fund monies already appropriated in the 1981-1982 budget to the PERS retirement fund.