PENSIONS ‑- RETIREMENT ‑- ADMISSION OF ELECTED OFFICIALS TO PUBLIC EMPLOYEES' RETIREMENT SYSTEM
A member of the council of a city which has been admitted into the public employees' retirement system may elect to join the system himself at any time during his term of office without violating Article XI, § 8 or Article XXX, § 1 (Amendment 54) of the state constitution; and the city which is involved may constitutionally make, on behalf of the council member becoming a member of the retirement system, the employer's contributions required by RCW 41.40.361.
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May 20, 1975
Honorable Gary M. Odegaard
State Senator, 20th District
Olympia, Washington 98504 Cite as: AGLO 1975 No. 51
By letters previously acknowledged you have described to us a factual situation in which a certain fourth class city in your legislative district became a participant in the public employees' retirement system in accordance with RCW 41.40.410 (optional entry of political subdivisions) some years ago. Now, one of the members of the city council, having previously elected not to become a member of the retirement system in accordance with the option afforded to elected officials by RCW 41.40.120(3), has changed his mind and desires at this time to become a member. He is, however, currently in the middle of his term of office on the city council. Therefore, the following two questions have arisen:
(1) May this city council member constitutionally become a member of the public employees' retirement system at the present time in view of Article XI, § 8 and Article XXX, § 1 (Amendment 54) of the state constitution?
(2) If question (1) is answered in the affirmative, may the city which is involved constitutionally make, on behalf of the council member thus becoming a member of the retirement system, the employer's contributions which are required by RCW 41.40.361?
We answer both of these questions in the affirmative for the reasons set forth in our analysis.
Chapter 41.40 RCW codifies the laws governing the public employees' retirement system (PERS). While all state agencies are mandatorily covered by this system as employers, cities, towns and other political subdivisions are generally not. Instead, except in the case of school districts, such municipalities have an option of joining or not joining in accordance with RCW 41.40.410 which provides, in material part, as follows:
[[Orig. Op. Page 2]] "The employees and appointive and elective officials of any political subdivision or association of political subdivisions of the state may become members of the retirement system by the approval of the local legislative authority: Provided, That on and after September 1, 1965, every school district of the state of Washington shall be an employer under this chapter and every employee of the school district who is eligible for membership under RCW 41.40.120 shall be a member of the retirement system and participate on the same basis as a person who first becomes a member through the admission of any employer into the retirement system on and after April 1, 1949. Each such political subdivision becoming an employer under the meaning of this chapter shall make contributions to the funds of the retirement system as provided in RCW 41.40.080, and 41.40.361 and 41.40.370 and its employees shall contribute to the employees' savings fund at the rate established under the provisions of RCW 41.40.330. . . ."
We will make further note of the last quoted sentence of this statute regarding employers' contributions in responding to your second question. Insofar as your initial question is concerned, however, the next section of the law which must be noted is so much of RCW 41.40.120 as provides that:
"Membership in the retirement system shall consist of all regularly compensated employees and appointive and elective officials of employers as defined in this chapter who have served at least six months without interruption or who are employed, appointed or elected on or after July 1, 1965, with the following exceptions:
". . .
"(3) Persons holding elective offices or persons appointed directly by the governor:Provided, That such persons shall have the option of applying for membership and to be accepted by the action of the retirement [[Orig. Op. Page 3]] board, such application for those taking elective office for the first time after May 21, 1971 shall be submitted within eight years of the beginning of their initial term of office: . . . And provided further, That any persons holding elective offices or persons appointed by the governor who are members in the retirement system and who have, prior to becoming such members, previously held an elective office, and did not at the start of such initial or successive terms of office exercise their option to become members, may apply for membership and be accepted by action of the retirement board,to be effective during such term or terms of office, and shall be allowed to recover or regain the service credit applicable to such term or terms of office upon payment of the employee contributions therefor by the employee and employer contributions therefor by the employer or employee . . ." (Emphasis supplied.)
Council members in a city such as you have described in your letter are elective officers. See, RCW 35.27.070. Thus, following the entry of their city into the retirement system under RCW 41.40.410,supra, they (along with any others elected or appointed to the city council at a later date) had a right themselves either to become members immediately or to stay out and then join the system at some later point in time. Furthermore, by reason of the portion of RCW 41.40.120 which we have underscored in quoting it above, any such later admission into membership may statutorily, ". . . be effective during such term . . . of office . . ." as a particular council member is serving at the time he applies for membership.
In other words, it will thus be seen that the actions contemplated by your first question are expressly authorized by statute at the present time. Your question, however, inquires as to whether those actions would be constitutional ". . . in view of Article XI, § 8 and Article XXX, § 1 (Amendment 54) of the state constitution" which read, respectively, as follows:
Article XI, § 8:
"The salary of any county, city, town, or municipal officers shall not be increased except as provided in section 1 of Article XXX or diminished after his election, or [[Orig. Op. Page 4]] during his term of office; nor shall the term of any such officer be extended beyond the period for which he is elected or appointed."
Article XXX, § 1 (Amendment 54):
"The compensation of all elective and appointive state, county, and municipal officers who do not fix their own compensation, including judges of courts of record and the justice courts may be increased during their terms of office to the end that such officers and judges shall each severally receive compensation for their services in accordance with the law in effect at the time the services are being rendered.
"The provisions of section 25 of Article II (Amendment 35), section 25 of Article III (Amendment 31), section 13 of Article IV, section 8 of Article XI, and section 1 of Article XXVIII (Amendment 20) insofar as they are inconsistent herewith are hereby repealed."
Apparently the reason for your concern with these constitutional provisions stems from such cases as Bakenhus v. Seattle, 48 Wn.2d 683, 296 P.2d 321 (1956), in which public employees' pensions in this state have been held not to be gratuities, but, instead, to be a form of ". . . deferred compensation for services rendered." Thus, the argument which is suggested is that because an elected official entering the retirement system during a given term of office could, conceivably, qualify for the receipt of some form of pension even before the expiration of that term1/ his entry at that [[Orig. Op. Page 5]] time could pose the possibility of a "mid-term increase in compensation" and thus be unconstitutional.
Our initial response to this argument is of necessity one based upon policy. Inasmuch as RCW 41.40.120(3), supra, which expressly authorizes the acts contemplated by your request, has already been enacted into law we must refrain from issuing any opinion which might have the effect of casting doubt as to its constitutionality. This office since its inception has continually followed a policy of presuming all duly enacted statutes to be consitutional until they are otherwise held invalid by a court of competent jurisdiction. Perhaps the most succinct explanation of this policy appears in AGO 1945-46 [[to John T. Welsh, Prosecuting Attorney, Pacific County on July 17, 1945]], page 269, as follows:
". . . The power to declare an act constitutional or unconstitutional is vested solely in the courts. Consequently, nothing can be gained by this office expressing an opinion as to the constitutionality of a statute. A pronouncement of unconstitutionality would merely cause confusion and disorder among the administrative officers whose duty it is to give effect to the presumption of constitutionality which attaches to all laws until declared otherwise by a court of competent jurisdiction."2/
In addition, however, it appears to us that the procedures authorized by RCW 41.40.120(3) with respect to the mid-term entry of elected officials into the retirement system are, in any event, constitutionally defensible. Although the constitution at one time contained a general and all-inclusive ban against mid-term pay increases for public officials, both state and local, serving fixed terms,3/ [[Orig. Op. Page 6]] this is no longer so. Instead, by reason of Article XXX, § 1 (Amendment 54), supra, the constitution now only prohibits those public officials having the power to fix their own compensation from exercising that power in such a manner as to provide for themselves, during their terms of office, increases in the level of that compensation. Accord, AGO 1974 No. 9 [[to Smith Troy, Prosecuting Attorney, Thurston County on April 10, 1974]], copy enclosed, in which we distinguished between legislatively granted salary increases for certain local officials and those granted by the local officials, themselves, saying:
". . . Neither the spirit nor the letter of the constitution is violated by the payment to a county commissioner of a mid-term salary increase provided for by the legislature ‑ as distinguished from one which is granted by the commissioners themselves. In the one case, the new salary is fixed by a state law enacted by the legislative authority of the state; in the other, it is fixed by a county ordinance or resolution requiring the approval of the commissioners themselves for passage. Therefore, it is our opinion that the members of a board of county commissioners or other county legislative authority may, during the remainder of the current terms they were serving when the salary increases provided for by the legislature in chapter 88,supra, became effective, receive those increased salaries."
In the instant case it is true that the city council members involved do have the authority not only to fix their own salaries (see, RCW 35.27.130) but, under RCW 41.40.410,supra, to provide for the entry of their city into the public employees' retirement system. However, the individual act of a given council member in joining that pension system under RCW 41.40.120(3), supra, does not constitute an exercise of either of those powers. Instead, the council member in question is simply exercising a statutory right granted to him or herby the legislature through its enactment of the statute.4/
[[Orig. Op. Page 7]] Likewise, this situation is distinguishable from the mid-term provision of health care benefits to county commissioners or city council members serving fixed terms ‑ a question to which we also addressed ourselves but answered in the negative in AGO 1974 No. 9,supra, and, earlier, in AGO 1969 No. 2 [[to Robert V. Graham, State Auditor on January 20, 1969]]. There the premium expenditures themselves are expressly declared by the applicable statute to be the "compensation" involved,5/ as opposed to the insurance benefits which may result to the covered official at some later [[Orig. Op. Page 8]] time either before or after the end of his or her current term of office. In the instant case, on the other hand, it is the later pension benefits which constitute the "deferred compensation" under the Bakenhus rule, supra, and not the employers' payments to the pension fund.
Also, in that other situation regarding medical insurance, the action which we said would be unconstitutional was that of the legislative authority in extending coverage to its own members (or increasing their previous coverage) on a mid-term basis ‑ and not (as is the case by analogy here) the election by an individual county commissioner or city council member to avail himself or herself of a plan earlier adopted by the legislative authority.
In summary, we therefore answer your first question by concluding (1) that a city council member in a fourth class city which is participating in the public employees' retirement system under RCW 41.40.410 may become a member of the system in accordance with RCW 41.40.120(3) at any time during a given term of office; and (2) that such a procedure does not violate the provisions of Article XI, § 8 or Article XXX, § 1 (Amendment 54) of the constitution.
Having thus answered your first question we turn to your second. Assuming the foregoing answer, you have then asked:
". . . may the city which is involved constitutionally make, on behalf of the council member thus becoming a member of the retirement system, the employer's contributions which are required by RCW 41.40.361?"
As noted earlier, RCW 41.40.410 includes the following directive relating to employers' contributions:
"Each such political subdivision becoming an employer under the meaning of this chapter shall make contributions to the funds of the retirement system as provided in RCW 41.40.080, 41.40.361 and 41.40.370 and its employees shall contribute to the employees' savings fund at the rate established under the provisions of RCW 41.40.330. . . ."
[[Orig. Op. Page 9]] Of the sections of chapter 41.40 RCW thus referred to, however, we need only concern ourselves here with RCW 41.40.361. The otherstatutes cited with respect to employers' contributions, RCW 41.40.080 and RCW 41.40.370, are basically procedural rather than substantive.
RCW 41.40.361 has two separate facets to it. First, this statute requires all employers (state agencies and political subdivisions) to make monthly payments to the retirement fund based upon a percentage of the monthly compensation payable to each employee who is then an active member of the retirement system. See, AGLO 1975 No. 50 [[to Frank J. Warnke, State Representative on May 12, 1975, an Informal Opinion AIR-75550]], copy enclosed. Secondly, in the case of employers admitted into the system after April 1, 1949 (including political subdivisions admitted under RCW 41.40.410), subsection (5) of RCW 41.40.361 provides as follows:
"Any employer admitted to the retirement system after April 1, 1949, shall make an additional contribution until such time as the sum of such additional contributions equals the amount of contributions which such employer and employee would have been required to contribute between April 1, 1949, and the date of such employer's admission to the retirement system: Provided, That either the employee or employer may make the contributions the employee would have made during the same period of time:Provided further, That all additional contributions hereunder and under the provisions of RCW 41.40.160(2) must be completed within fifteen years from the date of the employer's admission. Employee contributions for these periods must be made before the member will receive credit for those periods of service, pursuant to such regulations as the retirement board may adopt."
The issue raised by your second question is whether either of these two requirements of this statute can constitutionally be adhered to by the city involved in the situation covered by question (1), above.
Insofar as current and future employers' contributions are concerned, we would regard our affirmative answer to your first question as also being determinative of the constitutionality of such payments as are required by RCW 41.40.361 to cover creditable current and future service by a city council member becoming a member of PERS under the circumstances therein considered. The contributions thus to be made are not, themselves, a form of "compensation" [[Orig. Op. Page 10]] (as opposed to any resulting pension payments to the member); moreover, even if they were, their payment by the city would not be the result of action by the council but only that of the individual council member in electing to avail himself of a statutory right established by the legislature.
The constitutional issue raised by the so-called "arrearage" contributions required by RCW 41.40.361(5), supra, is also readily answerable, in our opinion. The problem, however, in this case is not limited to those instances involving elected officials of political subdivisions who are serving fixed terms. The statute requires a political subdivision coming into the retirement system to make arrearage contributions on behalf of all of its officers and employees thereby becoming members of the system to cover their periods of creditable service ". . . between April 1, 1949, and the date of such employer's admission into the retirement system. . .," and the issue is whether this requirement violates a different section of the constitution than the two which we have heretofore been considering; namely, so much of Article II, § 25 as states that:
"The legislature shall never grant any extra compensation to any public officer, agent, employee, servant, or contractor, after the services shall have been rendered, or the contract entered into, . . ."
This provision, although expressed solely as a limitation upon the legislature, has also been applied to local governmental units in numerous decisions by our state supreme court. See, AGO 63-64 No. 97 [[to Cliff Yelle, State Auditor on April 8, 1964]]and cases cited therein; also, AGO 1974 No. 19 [[to Gary Grant, State Senator on September 18, 1974]]. It is not, however, violated by the making of arrearage contributions under RCW 41.40.361(5),supra, for the following two reasons:
(1) For the same reason that an employer's contributions do not constitute the "compensation" to which Article XXX, § 1 (Amendment 54), involving mid-term increases is addressed, they likewise would not themselves be a form of "extra compensation" under Article II, § 25; and
(2) In any event the pension benefits which these contributions are to fund, although measured in part by periods of previous service, are only payable for service rendered after an individual's admission into membership in the retirement system.
[[Orig. Op. Page 11]] As was explained by the court in Aldrich v. State Employees' Retirement System, 49 Wn.2d 831, 833, 834, 307 P.2d 270 (1957), upholding the constitutionality under Article II, § 25 of prior service credit (i.e., service credit under RCW 41.40.010(10) for service rendered prior to the date6/ upon which the retirement system first became operative):
"Prior service credit for services antedating the effective date of the state employees' retirement act cannot, standing alone, support a pension under the rule of theBakenhus case. There must be, in addition thereto, some service rendered after the effective date of the act, so that the act will constitute a part of the contract governing the subsequent employment. Then the pensions provided for under the act constitute deferred compensation for the subsequent service and are not gratuities predicated merely upon the prior service."
Likewise in the case of such previous service credit as is to be funded by employers' contributions under RCW 41.40.361(15), supra, ‑ credit for service to the employer after April 1, 1949, and the date of its entry into the retirement system ‑ no such serviceby itself can or will support a retirement allowance. Therefore, the retirement allowance when ultimately received by an employee entering the system under RCW 41.40.410, supra, will not be in the form of an unconstitutional payment of extra compensation in violation of Article II, § 25 of the constitution. Instead, it will simply be a form of deferred compensation for services rendered after the date of entry into the system ‑ measured, in part, by a formula which allows credit, as well, for previous service.
Accordingly, we also answer your second question in the affirmative.
We trust that the foregoing will be of some assistance to you.
Very truly yours,
PHILIP H. AUSTIN
Deputy Attorney General
*** FOOTNOTES ***
1/Under RCW 41.40.200 a member may qualify for a duty disability retirement allowance at any time after becoming a member. In addition, although at least five years of covered service are required for either a nonduty (RCW 41.40.230) or a service (RCW 41.40.180) retirement allowance ‑ a period by itself extending beyond a city council member's ordinary four year term of office ‑ in a given case the individual involved could have had some earlier covered service in another capacity and, hence, become eligible for retirement during the same term as he was serving when he joined the system.
2/This policy of presuming the constitutionality of all duly enacted legislation is, of course, to be contrasted with our role, during a legislative session, of providing advice to members of the legislature with regard to the constitutionality of proposed legislation.
3/See, Article II, § 25, Article III, § 25, Article IV, § 13, the original text of Article IX, § 8, supra, and Article XXVIII, § 1 (Amendment 20).
4/Accord, a legal opinion previously prepared for the mayor of the city involved by the Chehalis, Washington law firm of Baker and Lund, a copy of which you have provided to us. On the first page of that opinion, dated February 7, 1975, the following similar analysis is set forth:
"RCW 41.40.120, Section 3, provides that all persons holding elective offices, or persons appointed directly by the Governor, shall have the option for applying for membership and to be accepted by the action of the Washington State Retirement Board so long as such application is made within eight years of the beginning of the initial term dated from the 21st of May, 1971. The legislature, by this provision, has created a vested right of entrance into the State Retirement System which can be exercised at any time within the eight year time period after the 21st of May, 1971. This is an emolument which is provided by the Washington State Legislature through its creation and amendment of the Washington State Pension and Retirement System. Individuals who sit as elected officers or persons appointed directly by the Governor have the option to exercise the choice of joining the retirement system or not joining the retirement system. This is an individual action and not a council action, and therefore, when the individual elected official opts to participate in the system or not to participate in the system, this is not an official action taken by the members of the municipal legislature to increase their compensation within their term."
5/See, RCW 41.04.190 which, referring to the group health insurance policies authorized by RCW 41.04.180, provides that:
"The cost of any such group policy or plan to any such public agency or body shall be deemed additional compensation to the employees or elected county officials covered thereby for services rendered, and any officer authorized to disburse such funds may pay in whole or in part to any such insurance carrier or health care service contractor the amount of the premiums due pursuant to any such contract."
6/October 1, 1947.