DE MUNIZ, C.J.
These two cases are before this court on certified appeals from the Court of Appeals. ORS 19.405. Both cases involve the Public Employees Retirement Board's (PERB or the Board) revision or reduction of benefits with respect to so-called "Window Retirees."
Although the trial court did not consolidate these two cases, it determined that the cases raised interrelated issues concerning the effects of PERS legislation enacted in 2003 (the "2003 PERS reform legislation").
The Arken plaintiffs raised claims based on four theories, including breach of contract, promissory estoppel, wage claim, and declaratory and injunctive relief under the Administrative Procedures Act (APA). The trial court granted summary judgment in favor of the Arken defendants on all four claims.
The Robinson petitioners challenged the Board's January 27, 2006, order as an order in other than a contested case under ORS 183.484, alleging that the order violated Oregon Laws 2003, chapter 67, Section 14b(1) (discussed more fully below). The Robinson petitioners contended that Section 14b(1) provides the exclusive methods to recover erroneously paid retirement benefits to petitioners. They also alleged that the order violates ORS 238.715 because PERB failed to comply with the terms of that statute. The trial court granted summary judgment in favor of the Robinson petitioners on both of their claims for relief.
For the reasons set out below, we determine that the trial court correctly granted summary judgment to the Arken defendants on all four of the claims raised by the Arken
Before addressing the specific claims and arguments presented in these cases, we believe it is important to review the factual and legal circumstances that gave rise to the PERB order that is challenged in these proceedings. Oregon has provided its public employees with a retirement plan (PERS) as a contractual benefit of public employment since 1945. PERB administers PERS and acts as trustee for the Public Employment Retirement Fund (PERF or the fund). ORS 238.601; ORS 238.660(1). PERB sets employer contribution rates, adopts actuarial equivalency factors and assumed earnings rates, establishes reserve accounts, and allocates annual earnings to accounts and reserves. ORS 238.225; ORS 238.255; ORS 238.605; ORS 238.607; ORS 238.670; Strunk v. PERB, 338 Or. 145, 157, 108 P.3d 1058 (2005). The Oregon Investment Council (OIC) invests the assets of the fund. Each year, PERB allocates the annual investment earnings of the fund from the previous year to member, employer, and reserve accounts. Every PERS member has a PERS member account, which includes the member's contributions to PERS and earnings that PERB has credited to those contributions.
Public employees who joined PERS before January 1, 1996, are commonly denominated as Tier One members. Tier One members are entitled to a guaranteed minimum annual rate of return on their regular member accounts equal to the system's assumed earnings rate. ORS 238.255. The assumed rate is set by the Board based on advice from an actuary. ORS 238.605; ORS 238.670(2). The assumed earnings rate has been 8 percent for all time periods relevant to these cases. On retirement, PERS Tier One members receive a monthly service retirement allowance calculated according to one of three formulas: pension plus annuity (only available to members who contributed to PERS before August 21, 1981), full formula, or Money Match. ORS 238.300. At retirement, a PERS member is entitled to receive a service retirement allowance based on the formula that produces the highest pension amount.
For many retirees, including the retirees involved in this litigation, the Money Match formula results in the highest pension amount. Under the Money Match formula, a member's monthly service retirement allowance is calculated by determining the sum of the actuarial equivalent of the member's account balances at retirement (the annuity component) and then adding a sum in an equal amount that is charged to the employer, i.e., the "match" (the pension component).
Member accounts are credited annually as of December 31 of each calendar year. PERB reviews changes in the value of the fund and allocates earnings to various accounts within the fund on an "equal crediting" basis—i.e., earnings are allocated on the same percentage share to funds in each account. In years in which the earnings on the fund equal or exceed the assumed earnings rate, PERB is statutorily required to "set aside * * * such part of the income as [PERB] may deem advisable, not exceeding seven and one-half percent of the combined total of such income, which moneys so segregated shall remain in the fund and constitute therein a reserve account." ORS 238.670(1) (1999). During the time period relevant to this litigation, ORS 238.255 (1999) also charged PERB with maintaining a "gain-loss" reserve to provide assets to pay member benefits at the assumed earnings
On March 27, 2000, PERB issued an earnings allocation order crediting Tier One members' regular accounts with 20 percent earnings for the 1999 calendar year. In setting that earnings allocation order, PERB did not fund a contingency reserve and allocated only limited funds to the gain-loss reserve. The City of Eugene and several other public employers timely challenged PERB's 1999 earnings allocation order and also timely challenged their employer contribution rate orders for 1998 and 2000.
Before PERB issued a new earnings allocation crediting order for 1999, however, the Legislative Assembly amended the PERS statutes by enacting the 2003 PERS reform legislation. As this court noted in Strunk, the PERS reform legislation effectively codified the 11.33 percent figure as the correct 1999 crediting decision. 338 Or. at 216-17, 108 P.3d 1058. In Strunk v. PERB, this court also approved the finding of this court's appointed Special Master that the contingency reserve should be funded and that a reasonable funding level for the "gain-loss" reserve called for by ORS 238.255 (1999) was a level that would fund projected Tier One guaranteed earnings credits for a 30-month period, and this court expressly set out and agreed with the Special Master's determinations as follows:
Strunk, 338 Or. at 214-15, 108 P.3d 1058 (alterations in original; footnote omitted).
At the time that the legislature enacted the PERS reform legislation, the court challenges to PERB's 1999 earnings allocation crediting order in the City of Eugene litigation meant that the 1999 crediting decision was potentially subject to reversal. Id. at 217, 108 P.3d 1058. As part of the PERS reform legislation, the legislature enacted provisions addressed directly to the Window Retirees in Oregon Laws 2003, chapter 67, section 10, as amended by Oregon Laws 2003, chapter 625, section 13 (Section 10),
"* * * * *
As part of the PERS reform legislation, the legislature also enacted Oregon Laws 2003, chapter 67, section 14b, as amended by Oregon
These two statutory provisions constitute the focal points of the litigation in these cases; we discuss them in greater detail below.
After the legislature enacted the PERS reform legislation, PERB and the employers involved in the City of Eugene litigation entered into a settlement agreement that provided, in part:
"* * * * *
Following settlement of the City of Eugene litigation, PERB entered a revised earnings crediting order setting the 1999 earnings credit allocation for Tier One regular member accounts at 11.33 percent pending the outcome of the then still pending litigation challenges to the 2003 PERS reform legislation.
On March 8, 2005, this court issued its opinion in Strunk v. PERB upholding the constitutionality of much of the PERS reform legislation. In Strunk, this court did determine, however, that Tier One PERS members have a statutory contract right to annual COLAs on their regular member accounts. 338 Or. at 221-22, 108 P.3d 1058. This court, therefore, invalidated the COLA freeze mechanism that the legislature had included as a part of its attempt to recoup what it deemed to be overpayments to the affected members' regular accounts caused by the erroneous 20 percent earnings allocation determination that had originally been made by PERB for 1999. Id. at 225, 108 P.3d 1058.
On August 11, 2005, this court decided City of Eugene I, concluding that the 2003 PERS reform legislation had effectively codified
Finally, on January 27, 2006, PERB issued its "Order Adopting Repayment Methods," which is the order challenged in these consolidated cases. In that order, PERB established the methods that it intended to use to recover what PERB determined to be overpayments made to Window Retirees based on the erroneous 20 percent earnings allocation determination that was temporarily in effect when the Window Retirees retired. The PERB Order Adopting Repayment Methods provides, in pertinent part:
The challenged order also provides for various ways in which the amounts determined by PERB to be "overpayments" could be repaid, including repaying the "overpayments" in a lump sum or, if the retiree is receiving monthly benefits, repaying the "overpayments" by actuarial reduction of their monthly payment pursuant to ORS 238.715.
With that historical factual and legal background in mind, we turn to the issues and arguments involved in the claims asserted by the parties in these cases. We first address the issues presented in the Arken case.
As a threshold matter, the Arken plaintiffs contend that this court in Strunk effectively determined both that the Window Retirees are entitled to receive retirement benefits based on the erroneous 20 percent earnings credit allocation initially made by PERB for calendar year 1999 and that the Window Retirees are also entitled to receive annual COLA increases on those benefits. The Arken plaintiffs base that claim on their reading of certain passages of this court's decision in Strunk. We disagree.
The Arken plaintiffs begin by noting that this court in Strunk stated that the "fixed service retirement allowance" called for by Section 10 of the 2003 PERS reform legislation "itself represents a determined allowance—that is, an allowance expressly determined by the legislature." Strunk, 338 Or. at 223, 108 P.3d 1058 (emphasis in original).
338 Or. at 223, 108 P.3d 1058. The Arken plaintiffs contend that this discussion constitutes a determination by this court that the PERS reform legislation constituted an explicit statutory promise to Window Retirees that they would receive the "fixed service retirement allowance" (based upon the initial PERB earnings crediting allocation of 20 percent for calendar year 1999) and receive COLA increases on that retirement allowance as well for as long as the Window Retirees received retirement benefits.
It is clear, however, that the Legislative Assembly did not make such a statutory promise. The 2003 PERS reform legislation provided that the original service retirement allowance for the Window Retirees should be recalculated in one of two ways: a "revised retirement service allowance" and a "fixed retirement service allowance." And, as this court expressly noted in Strunk, those two service retirement allowance calculations were intended by the legislature to be designed to recoup what the legislature "deemed to be overpayments to the affected members' regular accounts in 1999." Id. at 220, 108 P.3d 1058. The "fixed" allowance retained the 20 percent earnings credit for 1999, but eliminated COLAs until a member's retirement benefit based on the "fixed" allowance was surpassed by that based on the "revised" allowance. The "revised" allowance reduced the 1999 earnings credit to 11.33 percent, but continued to provide COLAs.
In Section 10, the legislature clearly and expressly tied the availability of the "fixed service retirement allowance" to the COLA freeze that it intended to use as an overpayment recoupment mechanism. Consequently, we conclude that the only reasonable interpretation of that part of the 2003 PERS reform legislation is that, in enacting Section 10, the legislature intended only that the Window Retirees receive retirement benefits based on the 20 percent earnings crediting decision for a "short" period of time—i.e., until the "revised service retirement allowance" (based upon the 11.33 percent earnings crediting allocation, with COLAs) caught up. Thus, in enacting the 2003 PERS reform legislation, the legislature did not promise the Window Retirees long-term retirement benefits based upon the 20 percent earnings crediting allocation and COLAs.
The Arken plaintiffs read this court's decision too broadly. This court's discussion of the "fixed service retirement allowance" in Strunk must be understood in the context of the precise issue that was before the court in Strunk.
In Strunk, this court addressed the "fixed service retirement allowance" only in the context of that allowance coupled with the suspensions of COLAs as the legislature's choice of a method of recouping overpayments. This court's discussion about the "fixed service retirement allowance" constituting an allowance that the legislature had determined the members were entitled to receive can only be read to reach as far as whether the "fixed service retirement allowance" was a determined allowance to which a COLA must attach under the terms of ORS 238.360. Whether the legislature intended to and did promise the Window Retirees longterm retirement benefits based upon the 20 percent earnings crediting allocation augmented by COLAs was not before this court in Strunk.
Indeed, this court expressly noted the limited reach of its holding in Strunk. For example, this court clarified:
338 Or. at 224 n. 58, 108 P.3d 1058. In addition, in concluding the discussion about the COLA suspension mechanism employed by the legislature, this court specifically noted that the effect of the court's decision "is that petitioners will be returned—at least for the time being—to the same position in which they would have been if the legislature had not enacted the COLA suspension." Id. at 225, 108 P.3d 1058 (emphasis added; footnote omitted). Those caveats negate any suggestion that this court's decision in Strunk can or should be interpreted to have the farreaching effect that the Arken plaintiffs advocate, and we decline to extend that decision beyond the specific issues addressed there. Thus, we find no merit in the first argument presented by the Arken plaintiffs.
The Arken plaintiffs further contend, however, that the remedy that this court established in Strunk effectively means that the statutory text of Section 10 leaves no room for PERB to apply ORS 238.715 to recover any purported overpayments to Window Retirees based upon the erroneous 20 percent earnings credit allocation for 1999. The Arken plaintiffs base their arguments on the text of Section 10, the remedy they understand this court provided in the Strunk case, and the legislative history that they provide concerning the 2003 PERS reform legislation.
The Arken plaintiffs note that this court in Strunk stated:
338 Or. at 225, 108 P.3d 1058. Based upon that statement, the Arken plaintiffs contend that the terms of Section 10 must be read to provide the Window Retirees with a statutory promise enacted by the legislature to provide retirement benefits based upon the original 20 percent earnings credit allocation for calendar year 1999 with COLAs attached. The Arken plaintiffs contend that the dispositional language in Strunk set out above had the legal effect of stripping out the last sentence of Section 10(3) and leaving the remainder of the legislatively enacted provisions in place for all purposes—including establishing an entitlement for Window Retirees to long-term retirement benefits calculated on a 20 percent earnings credit allocation for 1999 with COLAs attached.
That argument, however, ignores a number of important contextual matters. First, the argument takes the statement from Strunk quoted above out of context and views it in isolation, which leads to an overly broad understanding of the effect this court intended. As we previously noted, the very next sentence of this court's opinion in Strunk states that the effect of the court's action "is that petitioners will be returned— at least for the time being—to the same position in which they would have been if the legislature had not enacted the COLA suspension." Id. at 225, 108 P.3d 1058 (emphasis added). Those emphasized terms demonstrate that this court's decision in Strunk did not establish the entitlement for Window Retirees that the Arken plaintiffs urge.
That conclusion is further buttressed by the explicit caveat set out in Strunk noted above—viz., that the court's determination that the COLA suspension mechanism the legislature used to recover overpayments to the Window Retirees in Section 10 breached the PERS contract "implies nothing about PERB's—or for that matter, the legislature's—authority to recover amounts determined to have been paid from the fund in error." Id. at 224 n. 58, 108 P.3d 1058. The position urged by the Arken plaintiffs now is to give this court's decision in Strunk precisely the effect that this court stated it did
In interpreting the terms of a statute, the court will examine the text and context of the statute and consider the legislative history of the statute where that legislative history is useful in determining the meaning of the terms used. State v. Gaines, 346 Or. 160, 171-72, 206 P.3d 1042 (2009). However, it is also important to note that the goal is to discern what the legislature that enacted the statute in question had in mind at the time the legislature enacted the statute at issue. See, e.g., Holcomb v. Sunderland, 321 Or. 99, 105, 894 P.2d 457 (1995) ("The proper inquiry focuses on what the legislature intended at the time of enactment and discounts later events."). Furthermore, as we noted in Strunk, it is particularly important to ascertain the intent of the correct legislature when analyzing statutes to determine whether they constitute a statutory contract, because the fundamental purpose behind such contracts is to bind future legislative action. Strunk, 338 Or. at 189, 108 P.3d 1058.
Here, the terms of Section 10 manifest the 2003 legislature's intent to restrict the retirement benefits that the Window Retirees would otherwise receive based on PERB's erroneous 20 percent earnings credit allocation for calendar year 1999. That intent is clear in the legislature's express coupling of the "fixed service retirement allowance" established in Section 10(3) with the COLA suspension included in that same subsection. Thus, the express terms of Section 10(3) show that the legislature that enacted it intended it as a limitation on the retirement benefits that Window Retirees should receive. See Gaines, 346 Or. at 171, 206 P.3d 1042 (words used by legislature to give expression to its wishes are best evidence of legislative intent).
Context and the legislative history of Section 10 support that determination as well. First, it is significant that Section 10(3) is embedded in a statute that is addressed, for the most part, to establishing the terms under which cost-of-living increases are to be provided for service retirement allowances for Window Retirees. Section 10(1) states:
And Section 10(5) limits application of the section to those Tier One members of PERS who have an effective date of retirement between April 1, 2000 and April 1, 2004—i.e., the Window Retirees. Reading Section 10 as a whole, the goal of those statutory provisions was to establish a means by which the cost-of-living adjustment would be used to reduce the overall payout of retirement benefits to Window Retirees from what they otherwise would receive by excluding those retirement benefits from the normal application of COLAs under ORS 238.360. Those contextual provisions demonstrate that the terms of Section 10(2) and Section 10(3) were intended to establish a means of limiting the retirement benefits of Window Retirees, either by reducing the earnings credit allocation for calendar year 1999 to 11.33 percent and allowing COLAs to continue to apply to the reduced benefit amounts under ORS 238.360 (Section 10(2)), or by suspending COLAs on retirement service allowances calculated on the 20 percent earnings credit allocation (Section 10(3)). Those contextual clues reinforce our determination that Section
Instead, Section 10 was intended to reduce retirement benefits that Window Retirees receive in order to "recoup" some of the retirement benefits that otherwise would be paid to them based on the 20 percent earnings credit allocation that the 2003 legislature had determined was excessive. As noted above, PERB's original 20 percent earnings credit allocation for calendar year 1999 was challenged by several public employers in the City of Eugene litigation. In that litigation, the trial court determined that PERB had abused its discretion by allocating excessive earnings to member accounts while not allocating any funds to the contingency reserve and not adequately funding the gain-loss reserve. In light of that trial court ruling, PERS recalculated the earnings credit for 1999 and concluded that, if the contingency reserve and gain-loss reserve had been properly funded, the proper 1999 earnings credit allocation would have been 11.33 percent. The 2003 Legislative Assembly enacted Section 10 in that context as part of the 2003 PERS reform legislation. And in the preamble to HB 2003 (which became Oregon Laws 2003, chapter 67), the Legislative Assembly expressly declared its view that "some retirees are receiving benefits that exceed the benefits provided by law," thus indicating that the goal of the legislation was to remedy the effects of prior actions by PERB. Indeed, in that preamble, the legislature explicitly referred to the City of Eugene litigation, stating that the legislation was intended to address the trial court's finding that PERB had abused its discretion "in failing to set aside adequate statutorily mandated reserves out of investment income while crediting imprudently large amounts of investment income to member accounts[.]"
In light of the text, context, and this legislative history, we conclude that the 2003 Legislative Assembly did not intend Section 10(3) to establish an entitlement for Window Retirees to receive retirement benefits based upon the 20 percent earnings credit allocation originally made by PERB for calendar year 1999. That conclusion is particularly significant in the circumstances presented here, because the terms of the statutory PERS contract are a matter of legislative intent and only statutory terms that "unambiguously evince[ ] an underlying promissory, contractual legislative intent" become a part of the statutory PERS contract. Hughes v. State of Oregon, 314 Or. 1, 26, 838 P.2d 1018 (1992). The terms of Section 10 do not evince any such promissory intent on the legislature's behalf.
Although the foregoing addresses the Arken plaintiffs primary arguments under their first claim for relief, they also posit that, in enacting the PERS reform legislation, the Legislative Assembly intended for that legislation to constitute the only available methods for PERB to recover any overpayments to the Window Retirees. We now turn to that argument.
The Arken plaintiffs note that the PERS reform legislation was built around general principles that had been enunciated by Governor Kulongoski in "The Governor's Standards for Public Pension Reform," which was provided to the House Committee on PERS on April 17, 2003. The Arken plaintiffs assert that those general principles govern how the PERS reform legislation should be interpreted and support their contention that the reform legislation did not leave open any option for PERB to recover any overpayments to the Window Retirees under ORS 238.715.
The Governor's Standards for Public Pension Reform articulated two principles of primary import on which the Arken plaintiffs rely. The Governor urged that PERS reform should protect retirees by not reducing the benefits of people who had already retired and retaining what had already accrued in member accounts. Although those goals may have been important parts of the discussion by interested parties involved in the push for the 2003 PERS reform legislation, such generalized concepts do not override the actual terms of the statutes enacted, the specific circumstances surrounding enactment of the statute, or the more significant statements of the Legislative
As the Arken defendants note, the express terms of the PERS reform legislation did not address the continuing vitality of ORS 238.715. The legislature certainly was aware of PERB's long-standing authority under ORS 238.715 to recover overpayments made to PERS members. The legislature did not, however, include in the 2003 PERS reform legislation any provisions that directly address or directly negate PERB's authority under that statute. This court has noted that repeal of a statutory provision by mere implication is disfavored, see, e.g., State v. Langdon, 330 Or. 72, 81, 999 P.2d 1127 (2000) (repeal of statute by implication not favored and must be established by plain, unavoidable, and irreconcilable repugnancy), and we discern no reason in this circumstance to depart from that general rule.
Furthermore, while it can be problematic to rely on a legislative omission, the enactment history of HB 2003 indicates that the legislature affirmatively chose to leave the authority provided by ORS 238.715 resident in PERB. As introduced in the 2003 legislative session, HB 2003 expressly provided that the COLA freeze approach was "in lieu of, and not in addition to, any action of the board taken pursuant to ORS 238.715." Those provisions were removed from the legislation during its consideration by the Legislative Assembly, however, and were not included in the enrolled version of HB 2003 that was enacted by the legislature. We agree with the Arken defendants that this enactment history adds additional support to the conclusion that the 2003 PERS reform legislation did not directly or indirectly eliminate the availability of the ORS 238.715 overpayment recovery authority.
Finally, this result is consistent with the overall goals of the 2003 PERS reform legislation. As noted above, the legislature articulated in the preamble to HB 2003 that the legislation was intended to remedy the effects of PERB's prior actions, including the erroneous crediting of large amounts of investment income to member accounts that had been identified in the City of Eugene litigation. In light of the foregoing, we conclude that the Legislative Assembly did not intend to eliminate sub silentio the authority of PERB to apply the overpayment recovery provisions of ORS 238.715 to the Window Retirees.
In sum, we conclude that the Arken plaintiffs' arguments that the 2003 PERS reform legislation constituted a statutory promise that the Window Retirees are entitled to receive retirement benefits based on the 20 percent earnings credit allocation for 1999, including COLAs, are not well taken. And we further conclude that the 2003 PERS reform legislation did not eliminate PERB's authority under ORS 238.715 to seek to recover overpayments to PERS members, including the Window Retirees. We therefore affirm the trial court's grant of summary judgment against the Arken plaintiffs on their breach of contract claim.
We next consider the Arken plaintiffs' argument that PERB should be precluded from applying ORS 238.715 to the Window Retirees based on the doctrine of promissory estoppel. The framework for plaintiffs' promissory estoppel argument is essentially that: (1) representations were made in notices to Window Retirees that future benefits would be based on the 20 percent earnings rate for 1999; (2) PERB reasonably expected Window Retirees to rely on these representations in making retirement decisions; and (3) Window Retirees did reasonably rely on these representations in making retirement decisions.
Although the Arken plaintiffs' claims follow the general contours of Oregon promissory estoppel law,
Id. at 683, 669 P.2d 1132. Although not every one of the circumstances noted in Wiggins will necessarily be required in every case to conclude that promissory estoppel may appropriately be applied to a governmental entity, a comparison of the circumstances, present here to the factors identified in Wiggins reveals numerous reasons why promissory estoppel is inapplicable here.
First, as we have stated earlier, whether a promise is a part of the PERS statutory contract depends on the precise terms of the statutory provisions enacted by the Legislative Assembly. The fact that the representations on which plaintiffs rely were made by PERB, and not the Legislative Assembly, is telling. Indeed, as this court previously noted in Strunk, the legislature has not clothed PERB with apparent authority to determine the parameters of the PERS statutory contract—rather, PERS is a statutory contract and there is "no Oregon statute indicating that the legislature intended to permit PERB or any other entity as a general matter to set or alter any terms of the PERS statutory contract." 338 Or. at 175, 108 P.3d 1058 (footnote omitted).
Moreover, given our determination in Strunk that, in enacting Section 10, the Legislative Assembly "effectively codif[ied] the 11.33 percent figure as the correct 1999 crediting decision[,]" 338 Or. at 216, 108 P.3d 1058 (footnote omitted), the purported promise by PERB to calculate their retirement benefits on a 20 percent crediting allowance for 1999 is a promise that PERB could not lawfully make. In other words, we have already determined that there are statutory provisions that put such a promise beyond PERB's authority to make.
Finally, the Window Retirees had reason to know that PERB lacked the authority to make the alleged representations on which they rely. PERB's 1999 earnings crediting decision was timely challenged by the public employers involved in the City of Eugene litigation discussed earlier. As we stated in Strunk, "[a]s a result of the court challenges to PERB's 1999 crediting decision, that decision was potentially subject to reversal at the time that the legislature enacted Oregon Laws 2003, chapter 67, sections 9 and 10, as amended by Oregon Laws 2003, chapter 625, section 13." Strunk, 338 Or. at 216-17, 108 P.3d 1058. And, as the trial court noted, although the individual Window Retirees may not each have had personal knowledge about the vagaries of administrative and appellate court case law and procedure, they are charged with notice that the 1999 earnings crediting decision was subject to judicial review under ORS 183.484 and subject to potential reversal or change. As defendant PERB asserts, "Given that the 1999 earnings crediting decision was not yet final and was the subject of highly-publicized litigation, plaintiffs could not have reasonably relied on it." Similarly, this court has previously stated that the existence of a law in the public domain makes reliance on a contrary representation patently unreasonable, precluding estoppel. See Committee in Opposition
We thus conclude that the trial court correctly granted summary judgment against the Arken plaintiffs' second count of their contract claim for relief based on promissory estoppel.
In their second claim for relief, the Arken plaintiffs assert that retirement benefits come within the scope of "wages" under ORS 652.610 and that the Arken defendants violated the wage claim statutes by not timely paying Window Retirees the COLA increases on their retirement benefits that they contend were due based on this court's decision in Strunk. The Arken plaintiffs cite Kantor v. Boise Cascade Corp., 75 Or.App. 698, 708 P.2d 356 (1985), rev. den., 300 Or. 506, 713 P.2d 1058 (1986)—which in turn cites this court's decision in State ex rel. Nilsen v. Ore. Motor Ass'n, 248 Or. 133, 432 P.2d 512 (1967)—and Allen v. County of Jackson County, 340 Or. 146, 129 P.3d 694 (2006), for the proposition that the term "wages" has been broadly construed to include pension benefits. The Arken plaintiffs further contend that PERB acts as the agent for the Window Retirees' actual employers for purposes of pension benefits, and that the public employers are ultimately liable for the cost of providing the benefits and wages that they allege they are due, citing Stovall v. State of Oregon, 324 Or. 92, 922 P.2d 646 (1996).
The Arken defendants generally take issue with whether PERS pension payments come within the scope of the wage claim statutes, asserting that the issues involved here do not revolve around employer actions in withholding contributions to a pension plan or in refusing to pay a private pension amount, which were the circumstances involved in Kantor, State ex rel. Nilsen, and Allen. The public-employer Arken defendants further contend that, once employees retire, their former employers have no control over the issuance of retirement benefits checks, and when, as here, an employer has done nothing to cause an incorrect payment, the wage claim statutes should not be interpreted to apply to the employer. Defendant PERB, for its part, further contends that it is not an employer to whom the wage claim statutes apply.
It is unnecessary to address many of the issues raised by the parties under this claim because the major premise underlying the Arken plaintiffs' wage claim is incorrect. The Arken plaintiffs base their wage claim on their assertion that PERB did not timely pay them COLA increases on their retirement benefits, as they contend this court's decision in Strunk required.
From our review of the record—and none of the parties to this litigation contends otherwise—it appears that when individual Window Retirees have actually retired they would have begun receiving retirement benefits under the 2003 PERS reform legislation based either on their "revised service retirement allowance" or their "fixed service retirement allowance," whichever was the larger amount. See Section 10(4). If they received retirement benefits based on a "revised service retirement allowance," they would have begun receiving benefits based upon an earnings credit allocation of 11.33 percent for calendar year 1999, and they would also have received COLA increases on those benefits under Section 10(2). Consequently, no Window Retirees receiving retirement benefits based on a "revised service retirement allowance" would have been deprived of any COLA payments to which they were entitled, and they would have no basis to assert any wage claim based on an assertion that they had not received COLA payments. Indeed, we do not understand the Arken plaintiffs to assert that any Window Retiree who has received retirement benefits under the "revised service retirement allowance" provisions of Section 10 (if, in fact, there were any Window Retirees who have done so) has any basis for a wage claim.
Furthermore, Window Retirees who retired and began receiving retirement benefits under a "fixed service retirement allowance" under Section 10(3) would have begun receiving benefits based on the erroneous earnings credit allocation of 20 percent for calendar year 1999. They would have received retirement
That is what PERB determined in the order that is challenged in this case
Thus, PERB has recalculated retirement benefits for Window Retirees by revising the 1999 earnings credit allocation from 20 percent to 11.33 percent as required by the 2003 PERS reform legislation. PERB has also given those Window Retirees credit for COLA payments on the recalculated retirement benefits from the date that the Window Retirees retired through the recalculation date. PERB thus has paid the Window Retirees all the retirement benefits to which they are entitled under the PERS reform legislation and under this court's decisions in Strunk and City of Eugene. Consequently, we conclude there is no basis for any claim that Window Retirees were not timely paid all amounts they were due.
Although the Arken plaintiffs did aver in the trial court proceedings in this case that "PERS staff predicted that in some instances, the amount PERS owed certain retirees [for the not yet paid COLAs] would exceed the amounts owed by such retirees [for the overpayments]," they have made no
We do not view that as an admission by PERS that there necessarily were any PERS members who would be owed money by PERS after the recalculations were completed. And, based on the record developed in this case and shown to this court, we are unaware of any individuals for whom the COLA amounts they should receive based on the 11.33 percent earnings credit allocation for 1999 are larger than the overpayments they have already received from the benefits that they have been given based on the 20 percent earnings credit allocation that was originally in place. The record shows only that the Window Retirees ended up owing overpayment amounts to PERS after they were credited with the COLA payments that had been frozen.
The essence of a wage claim is an assertion that one has not received payment from one's employer of "wages due and owing." ORS 652.120(1); Allen, 340 Or. at 155, 129 P.3d 694. We are persuaded that, at the end of the recalculations conducted by PERS, the Window Retirees were provided with the correct benefit amounts taking into consideration the effects of both the earnings credit allocation reduction and the reinstatement of COLAs on the correctly calculated benefit amounts. Here, we need not decide whether Oregon's wage claim statutes apply to a claim that a PERS retiree is receiving less in retirement benefits than the amount to which the retiree is entitled because we determine that the Window Retirees timely received their retirement benefits in the correct amount.
The Arken plaintiffs also seek declaratory and injunctive relief under the APA. They contend that PERB's action under ORS 238.715 to recover alleged overpayments was improper, because PERB did not make individualized determinations that a member did, in fact, receive amounts in excess of the amounts to which the member was entitled, that PERB did not provide the required notice to members before reducing their benefits, and that PERB continued withholding of COLAs after Strunk was decided.
The Arken plaintiffs' first claim for declaratory relief essentially contends that PERB could not continue to withhold COLA payments from Window Retirees on benefit payments for calendar years 2003, 2004, and 2005, after this court's decision in Strunk without first determining in an individual case whether the COLA payments owed to the individual member exceeded the reduction in that member's benefit caused by the reduction in the earnings credit allocation to 11.33 percent. The Arken plaintiffs assert that, for those members who were ultimately determined to be owed money by PERS because the COLA payments they should have received were greater than the benefit reductions caused by the 2003 PERS reform legislation, the continued withholding of the COLA payments was "contrary to ORS Chapter 238, outside the range of discretion delegated to PERB, and contrary to the fiduciary
We conclude that PERB acted reasonably and within its statutory authority in determining that the best course of action was to simultaneously calculate the reduction in benefits caused by the reduction in the 1999 earnings credit allocation and the effect of reinstituting the COLA payments, and then to determine whether individual members owed money to PERS due to an overpayment or were owed money by PERS because the COLA payment amounts were greater than the earnings credit reduction.
Defendant PERB notes that this court issued its decision in Strunk on March 8, 2005, and PERB contends that it acted with diligence to reverse the COLA freeze promptly following Strunk. PERB relates that, at its subsequent Board meetings in March, April, September, and October of 2005, the Board developed rule modifications and staffing needs and undertook a comprehensive review of the various implementation methods that could be used to implement this court's decision in Strunk and the other changes called for under the 2003 PERS reform legislation and the settlement of the City of Eugene litigation. PERB is charged with serving as a fiduciary for the fund under ORS 238.601, and the methodology PERB chose avoided the need to go through two (or more) costly and time-consuming recalculation efforts while still ensuring that the individual members received all the benefits to which they are entitled. Under those circumstances, PERB did not abuse its discretion in developing the methodology it used to implement the various changes it was required to make, including "delaying" implementation of this court's Strunk decision so that it occurred simultaneously with the other necessary changes.
The Arken plaintiffs' second claim for declaratory relief is premised on their assertion that, under ORS 238.715(4), PERB was required to give members notice of the overpayment "[b]efore reducing a benefit to recover an overpayment or erroneous payment." The Arken plaintiffs present that argument as if the continued withholding of COLA payments by PERB is the functional equivalent of seeking to recover an overpayment. That argument is inapposite on the facts here. In continuing to withhold COLA payments until the comprehensive recalculation of benefits could be completed, PERB did not affirmatively reduce member benefits. Rather, PERB maintained the status quo. And, in those instances in which PERB determined that overpayments would be recovered from Window Retiree accounts, PERB provided the affected members with the requisite notice and an opportunity for a contested case proceeding to challenge the amounts that PERB had determined were owed. In fact, PERB issued a letter that accompanied the Order Adopting Repayment Methods (the order challenged in this case). In that letter, PERB notified the Window Retirees, including the plaintiffs in this case that:
Plaintiffs' argument that PERB did not provide the required notice is misplaced.
Finally, the Arken plaintiffs' claim for injunctive relief is similarly without merit. As presented, the claim for injunctive relief is an alternative ground for relief based on the arguments presented under the other claims for relief. We have already determined those claims to be unavailing.
The Robinson petitioners (the Window Retirees) also challenge the PERB order issued on January 27, 2006, but from a different starting point. As noted above, the challenged PERB order required Window Retirees to repay overpayments they received based on the original 20 percent earnings allocation credited for 1999. The PERB order relied on PERB's authority pursuant to ORS 238.715 to recover overpayments directly from the Window Retirees. The Robinson petitioners sought both a declaration that the PERB order is unenforceable and an injunction prohibiting PERB from collecting any of the alleged overpayments except as permitted by Section 14b of the 2003 PERS Reform legislation (Oregon Laws 2003, chapter 67, section 14b, as amended by Oregon Laws 2003, chapter 625, section 31).
In asserting their claims, the Robinson petitioners necessarily acknowledge, or at least assume for the purposes of their argument, that the amounts at issue (the amounts the Window Retirees have received based on the erroneous 20 percent earnings allocation, above and beyond what they would have received based on the revised 11.33 percent earnings allocation), constitute benefits erroneously paid to retired members as a result of erroneous benefit calculation methods identified in the City of Eugene litigation. That is so because Section 14b applies only to recovery of the "cost of benefits erroneously paid."
Section 14b sets out two mechanisms for recovering those costs. First, under Section 14b(1)(a), PERB "may withhold cost of living increases under ORS 238.360 from a retired member whose benefit is greater than the correctly calculated benefit of the member until such time as the member's benefit is equal to the correctly calculated benefit." Second, under Section 14b(1)(b), PERB "may treat all or part of the present value of the benefits erroneously paid * * * as an administrative expense of [PERS], to be paid exclusively from future income of the [PERF], and to be amortized over an actuarially reasonable period not to exceed 15 years."
The trial court agreed with the Robinson petitioners that Section 14b applies to the benefits that the Window Retirees have already received based on the 20 percent earnings allocation determination. The trial court concluded that PERB had erred in relying on ORS 238.715 to recover overpayments, reasoning that Section 14b was intended to and did set out the universe of available remedies for recovery of excess benefits paid to Window Retirees based on the 20 percent earnings allocation determination. In addition, the trial court determined that this court's decision in Strunk, which voided the prohibition on COLAs under Section 10 of the 2003 PERS reform legislation, necessarily signaled that the mechanism of withholding COLAs set out in Section 14b(1)(a) is similarly void. The trial court, therefore, determined that the only available mechanism for PERB to recover the costs of benefits erroneously paid to the Window Retirees was to treat those costs as PERS administrative expenses to be paid from future income of the PERF as provided in Section 14b(1)(b).
The net effect of treating the benefits erroneously paid to the Window Retirees as administrative expenses is that the costs of those benefits will be borne by all Tier One and Tier Two members of PERS with existing accounts as the administrative expenses are paid from future income of the PERF. That result was described in an exhibit that was presented to the PERB at its September 23, 2005, meeting, and made a part of the trial court record in this case:
(Footnote omitted.)
On appeal, the Robinson respondents (local government respondents and respondent PERB) contend that the trial court made numerous errors in concluding that Section 14b required the benefits erroneously paid to the Window Retirees to be charged as PERS administrative expenses. We turn first to the arguments raised by the Robinson local government respondents and PERB contending that Section 14b does not apply to the overpayments made to the Window Retirees.
The Robinson local government respondents and PERB contend that Section 14b does not apply because the overpayments are not the result of an "erroneous benefit calculation" identified in the City of Eugene litigation. Judge Lipscomb, the trial court judge in City of Eugene, certainly identified PERB's 20 percent earnings credit allocation as a significant issue involved in that litigation, and, in fact, all parties agree that one of the major determinations made by Judge Lipscomb in City of Eugene was that PERB erred in making the 20 percent allocation determination. Judge Lipscomb found that PERB abused its discretion and erred as a matter of law in not adequately funding the contingency reserve and the gain-loss reserve in 1999, and Judge Lipscomb instructed PERB to issue a new, corrected earnings allocation determination for calendar year 1999.
The more narrow issue presented by the Robinson respondents, however, is whether that earnings credit allocation determination comes within the parameters of the terms "one or more of the erroneous benefit calculation methods" identified in the City of Eugene litigation within the meaning of Section 14b. The Robinson respondents argue that there is a distinct difference between the 20 percent earnings credit allocation error and errors such as using outdated actuarial factors and requiring employers to match earnings from the Variable Annuity Program in the money match calculation, which they agree are "erroneous benefit calculations" for purposes of Section 14b.
The Robinson respondents argue that the plain meaning of the terms of Section 14b distinguish between benefit calculation errors and overpayments resulting from the erroneous 1999 earnings credit determination. They rely in part on provisions in the preamble of HB 2003, which describe the City of Eugene litigation as having involved three different determinations by the trial court. The Robinson respondents note that the preamble describes the City of Eugene litigation as having found that PERB
(Emphasis added.) The Robinson respondents contend that, because the first two categories use the term "calculate," those are the only categories contained within the terms "erroneous benefit calculation methods" as used in Section 14b.
Although there is the linguistic distinction that the Robinson respondents note, their argument places an unwarranted emphasis on the term "calculate" as it is used in the preamble. First, the preamble itself describes three errors by PERB, not two, that led to payment of benefits to Window Retirees in excess of those authorized by law, including the error committed by PERB in failing to set aside adequate reserves while crediting imprudently large amounts of investment income to member accounts. Second, as the Robinson petitioners note, Section 14b provides that the section applies if PERB "is required to correct one or more of the erroneous benefit calculation methods identified in City of Eugene, et al." (Emphasis added.) The use of the terms "one or more" in referring to the errors identified in the City of Eugene litigation is telling when juxtaposed with the legislature's use of the terms "one or both" later in that same statutory section to identify the two cost recovery mechanisms provided in Section 14b(1)(a) and (b). Furthermore, neither the trial court judge involved in the City of Eugene case nor the legislature used the term "calculate" as precisely as the Robinson respondents assert. For example, in its Opinion and Order issued October 7, 2002, the trial court stated in its conclusion: "Upon remand, the Board must issue new employer rate orders for 1998 and 2000, and a new earnings allocation order for the 1999 investment year. These new orders will inevitably have a significant effect not only on the accounts of the petitioning employers, but also on each account in the system, including the accounts of individual members." We discern from that statement that the trial court understood the interrelated nature of the errors the court had found.
The earnings credit allocation is one of the basic building blocks for the calculation of PERS retirement benefits for those PERS members who have a regular member account in PERS. As this court stated in Strunk, "Every PERS member has a regular `account' in PERS. The member's regular account consists of the member's contributions to the system and earnings that PERB has credited to those contributions." Id. at 158, 108 P.3d 1058. This court also observed that,
Id. at 161, 108 P.3d 1058. We agree with the Robinson petitioners that the earnings credit allocation determination is an integral part of the calculation of retirement benefits for all Tier One PERS members who retire under the Money Match method for determining a member's service retirement allowance, including
As a conceptual matter, there is no real distinction between the types of errors the trial court found in the City of Eugene litigation. As the Robinson petitioners observe:
The Robinson respondents concede that the outdated actuarial factor error and the error in requiring employers to match the variable account balance come within the scope of erroneous benefit calculation methods. We conclude, based on statutory text and context, that the earnings credit allocation error also qualifies as a benefit calculation methodological error.
The parties, citing this court's decision in Gaines, 346 Or. 160, 206 P.3d 1042, all also point to pieces of the extensive legislative history surrounding enactment of the PERS reform legislation that they contend support their respective views about the purported scope and meaning of Section 14b. Ultimately, however, the voluminous legislative history provides little clarity about the legislature's intent in enacting Section 14b.
First, as the trial court noted below, the Governor, who advocated for the 2003 PERS reform legislation, and the Legislative Assembly, which enacted the legislation, both were faced with difficult circumstances and an uncertain legal landscape. As the trial court stated,
Much of the legislative history presents generalities about the overall intent of the PERS reform legislative package, which are of little help in discerning the precise parameters of Section 14b.
Second, the proposed 2003 PERS reform legislation changed frequently during the legislative process, and much of the legislative history presented addresses versions of bills that the legislature ultimately did not enact. Those references to the legislative history, too, are not helpful in determining the scope and meaning of Section 14b as it was ultimately enacted.
Third, and finally, the legislative history that is directly relevant to Section 14b is confusing and conflicting, and in any event, not enlightening. For example, the Robinson respondents (PERB and local government employers) cite statements made by Senator Tony Corcoran, one of the carriers of HB 2003, who described the bill as having three major components, including correcting for the over-crediting of Tier One member accounts and correcting the errors identified in the City of Eugene litigation. They also cite statements by Deputy Legislative Counsel David Heynderickx, who noted that "Section 14b directs the board on how to recover the cost of erroneously paid benefits and tells them to do it in one or two ways or a combination * * * and that's of course in addition to the one that's already in the bill for the 1999 crediting." From these statements, the Robinson respondents contend that the Legislative Assembly clearly intended Section 10 (discussed earlier in addressing the claims raised by the Arken plaintiffs) to be the only provision of the 2003 PERS reform legislation addressed to the 1999 earnings allocation crediting determination and that Section 14b clearly did not address at all the effects of the 1999 earnings allocation crediting determination, but rather addressed
For their part, the Robinson petitioners (the Window Retirees) refer us to comments presented to the Legislative Assembly by William F. Gary, counsel for Robinson local government respondents, who was also an active participant in the legislative hearings on the 2003 PERS reform legislation. Gary stated,
The Robinson petitioners assert that Gary did not limit his comments to the actuarial and variable account errors and that his comments must be read to include the 1999 earnings allocation crediting determination as well. Here, too, we do not find Gary's comments conclusive, and petitioners' reliance on them is not availing.
Inasmuch as we determine that the legislative history is inconclusive, we give it little weight and conclude that it does not alter our determination that the earnings credit allocation error comes within the scope of the erroneous benefit calculation methods identified in the City of Eugene litigation.
PERB presents an additional argument that it contends shows that Section 14b of HB 2003 was not intended to reach any of the effects of the 1999 earnings allocation crediting determination. PERB asserts that "If Section 14b is interpreted as applying to the correction of the 1999 earnings overcrediting, it is redundant with Section 10, which provides a clear remedy for this issue." PERB contends that interpreting Section 14b to apply to the earnings credit allocation error violates both the cardinal rule of statutory construction to give significance and effect to every part of a statute and the well-established principle to avoid interpretations of statutes that render portions of them redundant. See, e.g., Union Pac. R.R. Co. v. Bean, 167 Or. 535, 549, 119 P.2d 575 (1941) (stating "`cardinal rule' of statutory construction that significance and effect shall, if possible, be accorded to every section, clause, word or part" of an act); State v. Young, 196 Or.App. 708, 713, 103 P.3d 1180 (2004), rev. den., 338 Or. 583, 114 P.3d 504 (2005) ("Well-worn principles of statutory construction counsel us to avoid, if possible, interpretations, that render portions of a statute redundant.").
The Robinson petitioners counter that those two statutory provisions are addressed to different concerns—they note that Section 10 is addressed to determining the proper level of future benefits (i.e., by making changes in how future benefits will be calculated) and Section 14b is addressed by its terms to recovering the costs of benefits already paid erroneously. As the Robinson petitioners state:
We agree that the provisions of Section 10 and Section 14b are not redundant. Rather, they address different aspects of the effects of the 1999 earnings allocation crediting determination—one looking forward and intended to establish the correct retirement service allowances for all Tier One members of PERS (Section 10) and one looking backward and intended to establish methods for recovering the costs of erroneously paid benefits already made to the Window Retirees (Section 14b). Furthermore, Section 14b
In sum, we conclude that Section 14b was intended by the legislature to provide for recovery of the costs of benefits erroneously paid to retired members as a result of erroneous benefit calculation methods identified in the City of Eugene litigation. We further conclude that the erroneous earnings credit allocation determination made by PERB in 1999 constitutes one of those erroneous benefit calculation methods. We therefore turn to analyzing the effects of Section 14b.
As an initial matter, we note that the Legislative Assembly used mandatory wording in Section 14b. Section 14b(1) states:
(Emphasis added.) The legislature's choice of words is the best evidence of legislative intent. Gaines, 346 Or. at 171, 206 P.3d 1042. Consequently, as a preliminary matter, we conclude the terms of Section 14b set out a statutory requirement that PERB "shall" use one or both of the methods set out in that section to recover benefits erroneously paid to the Window Retirees—and that those recovery methods are the only methods the legislature intended to authorize PERB to use.
Despite the legislature's clearly expressed policy, both PERB and the local government employers contend that the terms of Section 14b should not be interpreted to provide the exclusive methods for recovering benefits erroneously paid to the Window Retirees. We address their arguments serially.
PERB and the local governments both argue that, in context, the word "shall" in Section 14b should be interpreted as "may" and that Section 14b should, therefore, be seen to supplement rather than supplant PERB's authority to use ORS 238.715 to recover benefit overpayments. They note that the legislature in its early deliberations on HB 2003 considered including an explicit statement that the Section 14b remedies were "in lieu of, and not in addition to, any action of the board taken pursuant to ORS 238.715." They assert that the Legislative Assembly's deletion of that provision from the enacted version of the bill shows that the legislature intended for PERB to retain authority under ORS 238.715 to recover any overpayments made to retired members. We are not persuaded. The legislature's omission of those terms is not sufficient to overcome the clear meaning of the mandatory terms that the legislature enacted. See ORS 174.010 ("In the construction of a statute, the office of the judge is simply to ascertain and declare what is, in terms or in substance, contained therein, not to insert what has been omitted, or to omit what has been inserted[.]").
The Robinson local government employers further contend that Section 14b by its terms is addressed only to recovering the costs of benefits erroneously paid to retirees. They then go on to contend that recovering the costs of such benefits does not equate to actually recouping the amount of benefits erroneously paid. The Robinson local government employers observe that the two methods of cost recovery set out in Section 14b do not actually recover any overpayments that have already been made. Rather, as they correctly note, the COLA freeze in Section 14b(1)(a) gradually eliminates the overpayments prospectively, but does not recover
Although those assertions about the actual effects of the cost recovery methods set out in Section 14b are accurate, we cannot ignore the fact that Section 14b states that "the board shall recover the cost of benefits erroneously paid" by one or both of the methods set out in subsections (1)(a) and (1)(b). We understand from the express terms used by the legislature that it intended Section 14b to set out how PERB would recover the costs of benefits erroneously paid to retired members based on errors identified in the City of Eugene litigation. The fact that the cost recovery methods that are established in Section 14b will not actually effectuate the intended cost recovery, as noted above, does not allow us to ignore the express statutory terms the legislature enacted. See ORS 174.010 (stating goal of statutory construction is "to ascertain and declare what is, in terms or in substance, contained therein, not to insert what has been omitted, or to omit what has been inserted"); State v. Vasquez-Rubio, 323 Or. 275, 283, 917 P.2d 494 (1996) (court will not redraft statute to avoid even purportedly absurd result).
Finally, the local government employers also contend that the trigger for the application of Section 14b—viz., that PERB be required to correct one or more of the erroneous benefit calculation methods identified in City of Eugene—has never come to pass. In support of that proposition, the local government employers assert that the only way the trigger could be tripped was by a final court judgment imposing that requirement. The local government employers note that the City of Eugene litigation was resolved by settlement, rather than by final judgment, and that this court ultimately determined that the settlement mooted the litigation and vacated the trial court judgment that had been in place. They argue, therefore, that PERB has not been required to correct the errors.
Under the terms of the Settlement Agreement that PERB entered into to resolve the City of Eugene litigation, PERB is bound to implement many of the terms of the judgment entered by the trial court. As noted, the Settlement Agreement itself states:
This court's decision in Strunk, which declared the COLA freeze provision of Section 10 to be invalid, provided the basis for paragraph 1.3 of the Settlement Agreement to be triggered. We conclude that PERB was required to correct one or more of the erroneous benefit calculation methods identified in City of Eugene and that the cost recovery provisions of Section 14b were triggered.
As noted, the trial court determined that the only available remedy was to treat these costs as an administrative expense.
Fundamentally, the PERF is a trust fund to be used for the exclusive benefit of members and their beneficiaries. ORS 238.660(1) and (2) state, in part:
The express declaration of the PERF as a trust fund dates back at least to 1953 (see Or. Laws 1953, ch. 200, § 10) and it has been carried forward continuously to the present. ORS 238.660 declares PERF to be a trust fund, declares PERB to be a trustee of that fund with fiduciary obligations, and requires that fund assets may not be diverted from the exclusive benefit of members. How fund assets are to be used, how the amount of member benefits are to be determined, and how a member will benefit from the growth in value of the contributions that accumulate in that member's account are fundamental components of the PERS system. Consequently, we determine that the trust fund obligations imposed by ORS 238.660 are a part of the statutory PERS contract.
We note, that although a PERS member may not be entitled to any particular rate of growth in the member's account, beyond the assumed interest rate, the distribution of PERF earnings among the various accounts is a "zero-sum" matter: If overpayments beyond
We find support for this conclusion in long-standing, general trust principles. Generally, trusts are to be administered in accordance with the trust instrument, and trusts created by statute, like PERS, "are administered as express trusts, the terms of which are either set forth in the statute or are supplied by the default rules of general trust law." Restatement (Third) of Trusts § 4 comment g (2003). The Restatement (Third) makes clear that a trustee has a duty of impartiality and, "with respect to the various beneficiaries of the trust," must administer the trust "impartially and with due regard for the diverse beneficial interests created by the terms of the trust."
Restatement (Third) § 79(1)(a).
The Restatement (Second) of Trusts (1959) more specifically states:
Restatement (Second) § 254. In addition, a comment to that general statement further explains:
Restatement (Second) § 254 comment e. ORS 238.660 incorporates those general trust principles into the operations of the PERS, by prohibiting the diversion of trust fund assets to favor one set of beneficiaries of the trust over another.
We think it significant, too, that the diversion of assets from Tier One and Tier Two members to the Window Retirees, which was attempted by the 2003 PERS reform legislation, relates to overpayments to Window Retirees on their contributions and earnings of the PERF in 1999 and relates to benefits that will be available to all Tier One and Tier Two PERS members based upon work already performed by those members. As this court stated in Hughes,
314 Or. at 20, 838 P.2d 1018 (citation omitted). In Hughes, this court held that a 1991 statutory amendment, which would have subjected PERS members' retirement benefits to state and local taxation, breached the statutory PERS contract insofar as it applied to PERS retirement benefits accrued or accruing for work performed before the effective date of that 1991 legislation. Id. at 36, 838 P.2d 1018.
We conclude that categorically treating the erroneous overpayments to all Window Retirees as an administrative expense violates well-established trust fund principles that are embedded in ORS 238.660 because that treatment favors the Window Retirees over other beneficiaries of PERS. Because those trust fund principles are part of the PERS statutory contract, that in turn violates the statutory contract rights of all Tier One and Tier Two members of PERS with existing member accounts. Therefore, we determine that the administrative expense mechanism for cost recovery set out in Section 14b(1)(b) cannot be applied by PERB to all of the costs associated with the overpayments made to the Window Retirees.
The COLA freeze mechanism in Section 14b(1)(a) is set out as an alternative means to recover the costs of the erroneous overpayments made to the Window Retirees. As a threshold matter, we note that the Robinson respondents (local government employers and PERB) contend that the arguments presented by the local government employers to support the COLA freeze set out in Section 14b were not preserved below. We conclude, however, that we need not decide that issue. We have determined, as set out above, that the legislature intended Section 14b to establish two exclusive methods of cost recovery for erroneous overpayments to the Window Retirees—viz., the COLA freeze in Section 14b(1)(a) and the administrative expense treatment in Section 14b(1)(b). Consequently, in addressing whether PERB's decision to use the cost recovery mechanism provided in ORS 238.715 is lawful, we must first determine whether the COLA freeze mechanism set out in Section 14b(1)(a) is a viable method of cost recovery. That is so because, if that COLA freeze mechanism is available, then by its terms, Section 14b requires PERB to use it as the method for cost recovery of overpayments to the Window Retirees. We turn, therefore, to the parties' arguments regarding the legality of Section 14b's COLA freeze.
As a starting point, this court addressed the COLA freeze of Section 10 in Strunk. In Strunk, this court invalidated that COLA freeze because it violated the statutory contract rights of PERS members. The Robinson local government respondents contend, however, that the terms of the COLA freeze in Section 14b are different enough from the terms of the COLA freeze set out in Section 10 that a different result should obtain. They note that Section 10 called for the establishment of a "fixed service retirement allowance" and then froze COLAs on that fixed service retirement allowance. They contend that Strunk determined that the fixed service retirement allowance was itself a legislatively "determined allowance" of what a retiree was entitled to receive. The same analysis does not apply here, they reason, because the Section 14b COLA freeze would apply only to retired members who are receiving benefits greater than their correctly calculated benefits.
The Robinson petitioners counter by arguing that the local government employers misunderstand or misstate the full reach of the COLA freeze provision in Section 14b. They contend that when the full implications of Section 14b's COLA freeze mechanism are considered, there is no material difference between the two COLA freezes. As support,
Section 14b(1)(a) provides:
We understand the terms of this statute, as the Robinson petitioners assert, to allow PERB to withhold COLAs on the member's benefit amount with no difference drawn between that part of the member's benefit that is correctly calculated and that part of the benefit that constitutes an overpayment. As the Robinson petitioners state, "Though some undefined part of the benefit named in section 14b may be overpayment, the statute freezes COLAs on the retiree's whole benefit, the great majority of which is not based on overcredited earnings." Although we do not agree that the statute itself mandates that COLAs be frozen on the entire benefit amount, the statute does authorize PERB to freeze COLAs on the entire benefit amount. To that extent, there is no material difference between the COLA freeze mechanism set out in Section 14b and the COLA freeze mechanism set out in Section 10 that this court invalidated in Strunk.
Consequently, we conclude that the COLA freeze mechanism set out in Section 14b is invalid for the same reasons that we struck the COLA freeze provision contained in Section 10 in Strunk. That conclusion then leads to the question: what is the appropriate remedy? Although Section 14b(1)(a) might be susceptible to a narrowing interpretation (e.g., one that would preserve the COLA freeze for only those portions of Window Retiree benefits that constitute overpayments), we conclude that such an interpretation is not plausible in this instance.
First, such an interpretation would mean that the Window Retirees would indefinitely receive benefits in an amount that exceeds the benefits to which they are entitled, because they would continue to receive their correctly calculated benefits with COLAs and they would also receive the additional overpayment amount (albeit without any COLA increase) in addition to their correct benefit amount. That would not accord with the legislature's intent in enacting Section 14b—the legislature intended the provision to constitute a means to "recover the cost of benefits erroneously paid to retired members." Furthermore, rewriting the statutory provision to provide for overpayments to Window Retirees to continue into the indefinite future raises trust fund administration issues similar to those we discussed related to the treatment of overpayments as administrative expenses. Therefore, the correct remedy is to strike the COLA freeze mechanism set out in Section 14b in its entirety.
Although we have determined that both of the means enacted by the legislature in Section 14b to recover the costs of benefits erroneously paid to the Window Retirees are invalid, that does not necessarily mean that PERB is without any authority to recover those costs. As we stated in Strunk in invalidating the COLA freeze mechanism contained in Section 10, "[o]ur conclusion that [the] particular legislative action amounted to a breach of the PERS contract, however, implies nothing about PERB's—or, for that matter, the legislature's—authority to recover payments determined to have been paid from the fund in error." 338 Or. at 224 n. 58, 108 P.3d 1058. Here, too, our determination that the cost recovery methods set out in Section 14b are invalid does not necessarily mean that PERB is powerless to recoup the costs of benefits erroneously paid to the Window Retirees.
Indeed, in its brief in this court, PERB directly asserts that ORS 238.715 authorizes the board to recoup the overpayments to the Window Retirees at issue in this proceeding. For their part, the Robinson petitioners assert that this court should not reach this issue because, in their view, this
The Robinson petitioners note that they did not move for summary judgment on their ORS 238.715 claim below, and, because the trial court ruled in their favor on their Section 14b claim, they assert that it was not necessary for the trial court to reach the ORS 238.715 claim. The Robinson petitioners acknowledge, however, that the trial court granted summary judgment to them on both of their claims for relief—including their ORS 238.715 claim. They contend, nevertheless, that the ORS 238.715 issue should be remanded to the trial court for further briefing because it was not necessary for the trial court to reach the issue and because the trial court did not set forth its analysis of the ORS 238.715 issue in its decision.
As we have noted, respondent PERB has directly raised the argument that ORS 238.715 provides PERB with explicit statutory authority to recoup the overpayments made to the Window Retirees. Inasmuch as the trial court reached the issue (albeit in a truncated manner) and respondent PERB has directly raised the issue in its briefing in this court, we think the issue is properly before us for resolution.
As we previously observed, ORS 238.715 has remained in place throughout all the events discussed above. The legislature did not repeal or amend that statute in its effort to reform the PERS statutes in 2003.
ORS 238.715 provides, in part:
Not only does ORS 238.715 provide explicit authority to the board to recover overpayments, ORS 238.715(2) states that persons
We conclude that the overpayment recovery authority granted to PERB in ORS 238.715 remains available for PERB to use to recover the overpayments made to the Window Retirees for three reasons. First, our conclusion is consistent with the legislatively stated intent in Section 14b to provide a means for PERB to recover the costs of overpayments made to the Window Retirees. Second, our conclusion comports with the legislative charge to the courts in ORS 174.010 to give effect to statutory provisions enacted by the Legislative Assembly by giving effect, in these circumstances, to the provisions of ORS 238.715. Third, our conclusion is also consistent with the trust fund principles set out in ORS 238.660 that prohibit PERB from categorically favoring some beneficiaries of PERS over other beneficiaries of PERS and that are part of the statutory PERS contract.
Our review of the challenged PERB order shows that it complies with the provisions of ORS 238.715. PERB's Order Adopting Repayment Methods first notes that, in light of this court's decisions in Strunk and City of Eugene, and the settlement agreement the board entered to resolve the City of Eugene litigation, the board had determined that the earnings on Tier One regular member accounts for 1999 should be reallocated at an earnings rate of 11.33 percent. The order further notes that this recalculation will affect Tier One members who retired on or after April 1, 2000, and before April 1, 2004—i.e., the Window Retirees—among others. The order then states:
The terms of the challenged order are within the authorizing provisions of ORS 238.715, and we conclude that the Robinson petitioners' assertion to the contrary is without merit.
The judgment of the circuit court in Arken, et al. v. City of Portland, et al., Case No. 0601-00536, is affirmed. The judgment of the circuit court in Robinson, et al. v. Public Employees Retirement Board, Case No. 0605-04584, is reversed, and the case is remanded to the circuit court for further proceedings.
________________________________________________________________________________________________________ Account balance at retirement (with 20 percent earnings crediting in 1999) $132,211.00 ________________________________________________________________________________________________________ Recalculated account balance at retirement (11.33 percent earnings crediting in 1999) $122,700.00 ________________________________________________________________________________________________________ Monthly benefit at retirement (your retirement date was April 1, 2000) $ 2,200.00 ________________________________________________________________________________________________________ Recalculated monthly benefit at retirement (11.33 percent earnings crediting in 1999) $ 2,042.00 ________________________________________________________________________________________________________ Current monthly benefit, including any cost-of living adjustments (COLAs) made since your $ 2,335.00 retirement date ________________________________________________________________________________________________________ Recalculated monthly benefit (starting September 1, 2006). This includes annual COLAs $ 2,346.00 made and COLAs restored by the Strunk case through August 1, 2006 ________________________________________________________________________________________________________
The Benefit Adjustment letter then explained that for this "John Doe" window retiree the amount of overpaid benefits would have been $9,313.00, for which there were two options provided for repayment. This "John Doe" window retiree would then have the option to repay the $9,313.00 in a lump sum, which would result in his monthly benefit amount being adjusted to $2,346.00 beginning September 1, 2006. Alternatively, this "John Doe" window retiree would have the option to repay the overpayment by having his monthly benefit adjusted using the Actuarial Reduction Method which would result in a reduction of the current monthly benefit amount to $2,317.00 (a reduction of $29.00 per month). Under either option, an annual COLA would then be applied to the benefit payment each August 1.
From our review of the record in these proceedings, the consequences projected for this "John Doe" window retiree are consistent with the amounts that were ultimately determined by PERB for individual Window Retirees.
303 Or. at 180-81.
