Court Opinion

ID: 9557555
Source: CourtListenerOpinion
Date Created: 2023-08-21 16:52:15.784454+00
Date Added: 2024-06-11T09:05:58.772111
License: Public Domain

GILLETTE, J.,
specially concurring in part and dissenting in part.
These consolidated cases arise out of various constitutional challenges that have been mounted against the substantive provisions of Ballot Measure 8, which the voters approved at the November 8, 1994, general election. That ballot measure added three new sections — 10,11, and 12 — to Article IX of the Oregon Constitution. Section 10 requires (1) that all public employees contribute 6 percent of their salary to their retirement pension system, (2) that the public employer not contribute to the same system in a way that would relieve the required employee contribution, and (3) that the public employer not otherwise offset the required employee contribution. Section 11 forbids any public employer from guaranteeing a rate of return or interest on a pension fund. Section 12 directs that, with respect to any public employee retiring on or after January 1, 1995, retirement benefits not be increased by any amount attributable to unused sick leave.
The issue brought to us in these combined cases is: Do any of the above provisions violate the Contracts Clause of the United States Constitution?1 The lead opinion concludes that all three substantive sections of the Ballot Measure offend the Contracts Clause. For the reasons that follow, I reject the analysis that is the basis of that conclusion, because I believe that the analysis ignores the rules that this court heretofore has set for itself in cases of this kind. As I also shall explain, however, I agree that sections 11 and 12 are invalid, based on well-settled rules concerning the impairment of contracts. I dissent from the lead opinion’s invalidation of section 10.
*405I begin with a general observation about the present Oregon statutory arrangement concerning public employees’ pensions. ORS chapter 273 contains a contract that provides, inter alia, that public employees will receive a pension for the work that they have performed. See, e.g., Hughes v. State of Oregon, 314 Or 1, 17-21, 838 P2d 1018 (1992) (so holding). But not every statutory provision in ORS chapter 237 is a part of that contract. Instead, whether a particular provision is part of that contract is a question of legislative intent. Id. I turn to a consideration of the provision involved in this case.
Under the PERS statutes, both public employers and employees have been required since 1953 to contribute to the pension fund.2 Former ORS 237.071.3 The lead opinion mentions the foregoing obligation, but fails to appreciate its significance. The statute now provides in part:
“Each employee who is an active member of the system shall contribute to the fund and there shall be withheld from salary of the employee six percent of that salary.”
(Emphasis added.) In 1979, the legislature added former ORS 237.075.4 That statute now provides in part:
“Notwithstanding any other provision of this chapter, and subject to the provisions of ORS 237.001 to 237.315, a public employer participating in the system may agree, by a written employment policy or agreement in effect on or after July 1, 1979, to ‘pick-up,’ assume or pay the full amount of contributions to the fund required of all or less than all *406active members of the system employed by the employer. If a public employer so agrees:
“(1) The rate of contribution of each active member of the system employed by the employer who is covered by such policy or agreement shall uniformly be six percent of salary regardless of the amount of monthly salary.”
(Emphasis added.) The meaning of former ORS 237.075 is central to this case.
As the statutory context demonstrates, the rule before 1979 was that a public employee was required to pay a 6 percent contribution to the retirement system. Then, in 1979, the legislature saw fit to relax the foregoing requirement by enacting former ORS 237.075. Under that statute, a public employer was authorized in its discretion in the course of the collective bargaining process, or otherwise, to agree to a pick-up of its employees’ contribution; it was not required to agree to such a pick-up.
Subsequently, many public employers entered into collective bargaining agreements to pay the pick-up in lieu of raising employees’ wages. Invariably, the pick-up was limited to the life of the collective bargaining agreements, but it has continued to be negotiated into successive two-year agreements. Non-union employees typically were extended the same pick-up arrangement through informal policy or practice.
The effect of the enactment of section 10 thus was to place in the Oregon Constitution a specific constitutional requirement that mirrored the pertinent part of former ORS 237.071, while prohibiting the practice that had been permitted since 1979 by former ORS 237.075. Plaintiffs’ theory is that, as a matter of traditional pension law, once the 6 percent pick-up was extended to employees, it became a permanently vested right of those employees that could not be taken away, even with respect to future employment and the benefits that were solely the reflection of such future employment, without providing offsetting benefits. Plaintiffs further argue that, although the provisions in various collective bargaining agreements by definition extended the right to the pick-up only over the two-year life of those underlying labor *407agreements, the periodic expiration of that right did not prevent it from being permanent. Therefore, plaintiffs argue, section 10 impermissibly impaired their PERS contract, by eliminating an existing contractual pension right to the 6 percent pick-up. In other words, plaintiffs seek to transform what is, at best, an express contractual right of limited duration into an implied absolute contractual right by virtue of traditional pension law. The lead opinion performs that transformation.
There can be no question as to the governing law in this case. Oregon follows the contract theory of pension benefits, i.e., it treats pensions as a deferred portion of the contracted-for compensation earned by public employees. See, e.g., Hughes, 314 at 17-21 (summarizing law and citing cases). Thus, the problem here is not whether there is a contract—there is one: the PERS system. Apparently, that is enough for the majority.
But our methodology until today was far more demanding. The appropriate inquiry, under our precedents, should proceed in three steps: (1) Was the statute in question a part of the contract? (2) If so, what was the specific nature of the promise made by that statute? (3) Whatever the promise contained in the statute, what was its duration? In order to prevail here, the plaintiffs must demonstrate (1) that the statute in question, ORS 237.075, was a part of the PERS contract; (2) that the statute promised that the six percent pick-up that it discusses would be a part of an employee’s pension program under PERS, once that employee’s employer agreed to the pick-up; and (3) that that promise was in perpetuity, i.e., was not subject to modification at a later time.
The lead opinion concludes that the contract does contain a promise, one that is broad enough to meet plaintiffs’ desires. But that opinion does so only by ignoring the cardinal principle that this court long ago created to assure that legislative enactments would be deemed to be contracts only in those circumstances in which the legislature intended them to be such. This court most recently reiterated that principle in Hughes:5
*408“[I]n determining whether a contract exists, because this case involves state legislation alleged to be a contract, a contract will not be inferred from that legislation unless it unambiguously expresses an intention to create a contract. Eckles v. State of Oregon, [306 Or 380, 390-91, 760 P2d 846 (1988), appeal dismissed 490 US 1032 (1989)]; Campbell v. Aldrich, [159 Or 208, 213-14, 79 P2d 257, appeal dismissed 305 US 559 (1938)].”
314 Or at 17. (Emphasis added.) And, even if a contract is proved — as it has been in this case — it is necessary to inquire further to determine whether a particular statute was a part of that contract. 314 Or at 21, 23. Finally, the precise nature and extent of the particular statutory promise must be identified. See 314 Or at 27-29 (illustrating process).
The “intention” that the Hughes, Eckles, and Campbell decisions all require is a legislative intention, expressed in the particular statutory provision that a party asserts is a part of the contract that the party has with the government. See Hughes, 314 Or at 22-27 (demonstrating the method by which the court looks to determine whether a specific statute was intended by the legislature to be a promise). Under familiar principles of statutory construction, the intention of the legislature in enacting a statute is to be determined, first, by examining the wording of the statute, together with the statutory context in which the statute appears. PGE v. Bureau of Labor & Industries, 317 Or 606, 610-11, 859 P2d 1143 (1993). Thus, if the legislature is to be said to have intended that the 6 percent pick-up authorized in former ORS 237.075 be a promise in perpetuity to public employees, that intention must be found in that statute. The lead opinion never even acknowledges the foregoing methodology, much less attempts to follow it.6
*409I shall assume, for the purposes of this opinion, that plaintiffs can overcome the first hurdle, i.e., can show that ORS 237.075 is a part of the PERS contract. But, as I shall show, plaintiffs cannot get past the second hurdle, i.e., they cannot demonstrate that the promise made by ORS 237.075 is as extensive as it needs to be in order for them to prevail.
I already have reviewed the relevant statutory text and context above and need not set that review out again at length here. A fair summary is that there is a general statutory rule that a public employee must contribute 6 percent of the employee’s salary toward the employee’s pension, former ORS 237.071, but that an employer may make an exception to the general rule if it wishes by agreeing, either formally (in a collective bargaining agreement) or informally (with respect to unrepresented employees), that it will “pick up” the employee’s 6 percent obligation. Former ORS 237.075. Where, in the wording of that latter statute, is there any room for a plausible interpretation that transforms the aforementioned statutory permission into a promise to pick up all public employees’ 6-percent contribution? Nowhere. And, because there is no such plausible construction of statutory text and context, the statute simply may not be read to do what the plaintiffs (and the lead opinion) wish to have it do. PGE, 317 Or at 610-11 (citing to ORS 174.010 for the rule of statutory construction that a court is “not to insert what has been omitted”).
The lead opinion devotes an enormous amount of its energy to proving, through an exhaustive review of our precedents, that it is possible for the legislature to promise benefits to public employees that continue to be available into the future. However, nobody here questions the power of the legislature to make a promise to public employees in perpetuity; this court specifically recognized in Hughes that such a promise would be possible. 314 Or at 28. But establishing that the legislature has the power to do a thing does not, ipso facto, mean that the thing has been done.
*410The lead opinion gets as far as it does only by pretending that the PERS statutory scheme is monolithic, with each provision of it being a part of a single promise. However, our earlier precedents demand (and Hughes illustrates) that each statutory provision must be examined on its own terms to determine legislative intent and that this is true particularly of later-enacted statutory provisions like former ORS 237.075. Hughes, 314 Or at 22-29.
Why the lead opinion has strayed so far from the appropriate methodology in this case is hard to fathom, although it does offer some hints. It states, for instance 323 Or at 373:
“The enactment of [former] ORS 237.075 followed lengthy negotiations between the state and employee unions, during which employees agreed to forego a requested pay raise in exchange for a right to bargain with public employers for a six percent ‘pick-up.’ The enactment allowed the state to give employees what amounted to a six percent pay increase without increasing the state’s payments to Social Security. The agreement also had significant tax benefits for the employees.
“If the state stops paying the six percent pick-up and that cost is shifted to plaintiffs, the state will reduce its PERS costs by six percent of salary. Because plaintiffs will have to pay PERS six percent of their salary, they will experience slightly more than a six percent reduction in their salaries, because pick-up amounts are not considered as income and are not taxed when contributed, whereas employees pay their contributions from their taxable income.”
(Footnote omitted.)
So what? Those statements in the lead opinion are not a part of any relevant analysis. If anything, they are expressions of concern over the consequences of the policy choice made by the people in adopting Ballot Measure 8. It may well be true, as the lead opinion’s musings imply, that Measure 8 represents public policy that is wrong-headed, short-sighted, and mean-spirited. But if any or all of those characteristics qualify legislation for invalidation by this court, our work has changed utterly from that which the *411Oregon Constitution and the laws made pursuant to it allocate to us.
The lead opinion further weighs in with a justification for its actions that is a flat misstatement: “That consequence [of allowing Section 10 to stand] would permit the state to retain the benefit of plaintiffs’ labor, but relieve the state of the burden of paying plaintiffs what it promised for that labor.” 323 Or 374. That argument is specious. The state never has claimed that any of the substantive sections of Ballot Measure 8 should be applied retroactively, thereby depriving any public employee of any benefit that the employee already has worked for. With respect to any pension fund contributions made on their behalf up to the effective date of Ballot Measure 8, plaintiffs have lost nothing. That money is not withdrawn; it continues to draw interest and will be available, when they retire, as benefits. They have lost the 6 percent pick-up prospectively — but they never were promised anything to the contrary.
In summary, I find the lead opinion’s approach to and resolution of the challenge to section 10 to be at odds with the most fundamental principles that this court heretofore has applied to impairment-of-contract claims involving state statutes. Instead of observing the procedures that this court has established in such cases, the lead opinion speaks as if it has set itself up to judge the social utility and acceptability of a measure that the people have chosen to adopt. That is an inappropriate use of the judicial power.7 I would hold that section 10 does not violate the Contracts Clause.
The lead opinion also strikes down section 11, the guaranteed rate of return section, and section 12, the sick leave provision. As to each, the lead opinion utilizes an analysis similar to that used to invalidate section 10. As I have explained, I disagree with the lead opinion’s entire approach to the problem. However, my disagreement does not extend *412to the lead opinion’s holding as to either section. The lead opinion reads both sections as applying retrospectively, i.e., as affecting rights for which public employees already have performed the requisite labor. I agree that those sections fairly may be read that way and, as so read, are impermissible impairments of contract. See, e.g., Hughes, 314 Or at 31 (retrospective abrogation of tax exemption for pensions was impairment of PERS contract); Harryman v. Roseburg Fire District, 244 Or 631, 634-35, 420 P2d 51 (1966) (invalidating retrospective application of a decision by a fire district that terminated an accrued sick leave rule). I therefore concur specially as to those two sections.8
If we were charged in this case with writing on a clean slate concerning the subject matter addressed by section 10,1 might well set policy in line with that which results from the lead opinion. But the policy choice in this area is entrusted to another branch of government — the people, exercising their legislative power under Article IV, section 1, of the Oregon Constitution. The lead opinion oversteps the proper scope of our authority to overrule that policy choice. In so doing, the lead opinion suffers, not from any want of good will or of diligence, but from a temporary loss of perspective, apparently due to the subject matter — pensions—that we are addressing. I cannot join it.
Carson, C. J., and Graber, J., join in this specially concurring and dissenting opinion.

 Article I, section 10, of the United States Constitution provides:
“No state shall * * * pass any * * * Law impairing the Obligation of Contracts!.]”

 PERS is the relevant pension system for the majority of plaintiffs in the present litigation. However, one group of plaintiffs is not part of PERS but, instead, belongs to the Portland Fire and Police Disability and Retirement Plan (FPD&R). Because this dissenting opinion is aimed primarily at what I believe to be lapses in the lead opinion’s analysis, and because that opinion never discusses the unique application of section 10 to the FPD&R, I do not discuss the FPD&R further in this opinion.

 In 1979, former ORS 237.071 provided for several contribution rates, ranging from four to seven percent of salary. In 1981, the statute was amended to provide a blanket six percent rate for all employees, except for those who became members of the system before August 22, 1981, and were entitled to a lower contribution rate at that time. Former ORS 237.071 was renumbered ORS 238.200 in 1995. No substantive change was made at that time.

 In 1993, the statute was amended to replace “employee member” with “active member.” ORS 237.075 was renumbered ORS 238.205 in 1995. No substantive change was made to its provisions.

 Of course, Hughes is distinguishable factually. But that case plowed no new ground. It was a simple compilation of rules derived from our earlier precedents. *408Thus, my frequent citations to it are a shorthand to all of our precedents on this topic, of which Hughes is the compendium.

 The lead opinion’s failure to appreciate the reason for this elementary tenet is manifested, inter alia, by its reliance on numerous cases from other jurisdictions that conclude that an increase in required employee contributions to a pension plan impaired a contractual obligation. Invariably in those cases, the state legislature created by statute a certain contribution requirement and then subsequently by statute increased that amount. Here, the statutorily required rate of contribution (six percent, as set in former ORS 237.071) has not been altered. The six percent pick-up promise was negotiated between employers and employees; it never wa's created by statute. Even assuming, as the lead opinion apparently does, that *409the pick-up promise in the collective bargaining agreement became part of the statutory promise, the express two-year durational limitation of those agreements necessarily kept the promise from becoming permanent.

 The inappropriate role assumed by the lead opinion is highlighted by that opinion’s assertion that “notions of fundamental fairness that transcend the [Contract Clause] itself’ dictate the conclusion that the lead opinion reaches. 323 Or at 375. That novel approach never has been a part of this court’s (or any court’s) jurisprudence. Our role is to apply the Contract Clause, not to “transcend” it in some quixotic effort to arrive at what some members of the court deem to be “fundamentally fair.”

 As I read it, the lead opinion would not allow prospective application of sections 11 and 12, either, at least with respect to public employees who already were on the job when Ballot Measure 8 went into effect. In my view, that is error, for the same reasons that the ruling on section 10 is (in my view) error. But that error does not affect the disposition of this case as to sections 11 and 12.