AFSCME COUNCILS 6, 14, 65 AND 96 v. Sundquist

• Decision Date: 22 November 1983
• Docket Number: C8-83-164,C3-83-167 and C5-83-168.,C1-83-166,No. C1-83-152,C1-83-152
• Citation: 338 NW 2d 560
• Parties: AFSCME COUNCILS 6, 14, 65 AND 96, AFL-CIO, Plaintiffs-Appellants, v. Barbara L. SUNDQUIST, Commissioner of Employee Relations; Allen Rudell, Commissioner of Finance; and the State of Minnesota, Defendants-Respondents, and The Minneapolis Police Relief Association; the Minneapolis Fire Department Relief Association; the Minnesota Federation of Teachers, AFL-CIO; the Minnesota Police and Peace Officers Association; the Minneapolis Employees Retirement Board; Minnesota Professional Firefighters Association, AFL-CIO; Duluth Police Pension Association; Duluth Police Union, AFL-CIO; Police Officers Federation of Minneapolis; Minnesota Firefighters Joint Pension Council; Minneapolis Retired Police Association; Rochester Police Relief Association; Minnesota Police Pension Council; Minnesota Education Association; Minnesota Teamsters Public and Law Enforcement Employees Union, Local No. 320; St. Paul Police and Firefighters Relief Associations, Minnesota Association of Professional Employees, Intervenors-Appellants, and International Union of Operating Engineers, Local 49, Amicus Curiae.
• Court: Minnesota Supreme Court

338 N.W.2d 560 (1983)

AFSCME COUNCILS 6, 14, 65 AND 96, AFL-CIO, Plaintiffs-Appellants, v. Barbara L. SUNDQUIST, Commissioner of Employee Relations; Allen Rudell, Commissioner of Finance; and the State of Minnesota, Defendants-Respondents, and The Minneapolis Police Relief Association; the Minneapolis Fire Department Relief Association; the Minnesota Federation of Teachers, AFL-CIO; the Minnesota Police and Peace Officers Association; the Minneapolis Employees Retirement Board; Minnesota Professional Firefighters Association, AFL-CIO; Duluth Police Pension Association; Duluth Police Union, AFL-CIO; Police Officers Federation of Minneapolis; Minnesota Firefighters Joint Pension Council; Minneapolis Retired Police Association; Rochester Police Relief Association; Minnesota Police Pension Council; Minnesota Education Association; Minnesota Teamsters Public and Law Enforcement Employees Union, Local No. 320; St. Paul Police and Firefighters Relief Associations, Minnesota Association of Professional Employees, Intervenors-Appellants, and International Union of Operating Engineers, Local 49, Amicus Curiae.

Nos. C1-83-152, C8-83-164, C1-83-166, C3-83-167 and C5-83-168.

Supreme Court of Minnesota.

September 16, 1983.

Rehearing Denied November 22, 1983.

Gregg Corwin, Russell J. LaCourse, St. Louis Park, for AFSCME.

Roger A. Peterson, Minneapolis, for Mpls. Police Relief Ass'n, et al.

Eric R. Miller and John Tunheim, St. Paul, for Minn. Educ. Ass'n.

Jeffrey W. Jacobs, Minneapolis, for Minn. Teamsters Public and Law Enforcement Employees Union.

Joseph T. O'Neill, O'Neill, Burke & O'Neill, St. Paul, for St. Paul Police Relief Ass'n.

Gregg Corwin, St. Louis Park, for Minn. Ass'n. of Professional Employees.

Hubert H. Humphrey, III, Atty. Gen., Richard Allyn, Chief Deputy Atty. Gen., Peter M. Ackerberg, Asst. Atty. Gen., St. Paul, for Sundquist, et al.

Bruce A. Finzen, St. Paul, for amicus Intern. Union of Operating Engineers.

Julia Penny Clark, Robert H. Chanin, Bredhoff & Kaiser, Washington D.C., for amicus Nat. Educ. Ass'n.

Heard, considered and decided by the court en banc.

AMDAHL, Chief Justice.

This litigation challenges the validity of legislation passed by the Minnesota Legislature on December 10, 1982, and signed into law by Governor Albert H. Quie on December 13, 1982. Act of December 10, 1982, 3rd Spec.Sess. ch. 1, 1982 Minn.Sess. Law Serv. 1819 (the "Act"). On that same day, various parties, representing public employees affected by the terms of the Act, petitioned this court for a writ of quo warranto in an effort to prevent the enforcement of the Act. Finding that this case did not present the type of controversy which fits within the nature of quo warranto, this court issued an order, on December 20, 1982, denying the petition and remanding the case to a special three-judge district court panel for an expedited hearing. The panel consisted of retired District Court Judges Archie L. Gingold, Gordon L. McRae and Bruce C. Stone.

In conjunction with the filing of their amended complaint on December 23, 1982, appellants brought a motion for a temporary injunction seeking to immediately restrain that part of the Act increasing government employees' existing contributions to the pension funds by 2%.¹ On December 30, 1982, the trial court denied appellants' motion for a temporary injunction and set the case for trial on January 6, 1983. Thereafter, on January 24, 1983, the trial court issued its findings of fact, conclusions of law and order for judgment dismissing plaintiffs' complaint. On that same day, a notice of appeal from the order and judgment of the trial court was filed with this court.

The Act was written and passed upon rather short notice in response to an imminent, and very serious, fiscal crisis facing the government of the State of Minnesota. Governor Quie called the Third Special Session of the 72nd Legislature in early December 1982 to address an anticipated short fall in state revenue of approximately $312,000,000.² This substantial anticipated deficit was the latest of six distinct financial crises which have been faced by Minnesota government since July of 1980.³

Three major factors operated to further accentuate the severity of the crisis and the need for a swift legislative response. First, the crisis was compounded by the fact that local government aids and homestead credits in excess of $1,000,000,000 were due to be paid by the state to Minnesota cities and counties in mid-December 1982. A second factor emphasizing the immediacy of the need for remedial attention was the state's obligations for $930,000,000 in short term certificates of indebtedness. These certificates were recently issued by the state to alleviate a severe cash flow problem, and contained convenants which gave unqualified priority to an impoundment schedule, commencing February 1, 1983, established to assure the satisfaction of the indebtedness upon maturity in June 1983. An additional pressure for an expeditious legislative response to this crisis was exacted by a statutory provision requiring the Commissioner of Finance to "unallot," or withhold the payment of, appropriated funds when projected revenues are insufficient to meet the state's expenses. Minn.Stat. § 16A.15, subd. 1(b) (1982). Unallotment would result in drastic cuts in funding to public agencies which, because 75-80% of the funds allotted to public agencies are appropriated for personnel costs, would fall most heavily on public employees. When viewed in this fiscal context, and against the backdrop of the measures already taken in response to previous revenue shortfalls, it is evident that this revenue shortfall did indeed present a crisis.

Although the Act effects a number of tax increases, spending cuts and spending shifts, the only portion of the Act challenged in this action are the provisions impacting upon the terms of public employees' employment, primarily the provision regarding public employees' pension contributions.⁴ In relevant part, the Act requires that, beginning with the first full pay period after December 28, 1982, various state, county and municipal employees are required to pay an additional 2% of their salaries into their respective pension funds. This increase in employee contributions is limited in duration to the last pay period before January 1, 1984; then the preexisting formula returns. The Act also requires that, beginning with the first full pay period after December 28, 1982, and continuing until the last full pay period before July 1, 1983, employer contributions to the pension funds equal to 4 percent of salary are to be either diverted from the pension funds and credited to the general fund, or deferred altogether and not paid to the funds. It is projected that these reductions in employer contributions will save the state approximately $63,000,000. In addition, the Act provides that, until June 30, 1983, state employees who choose to go on unpaid leaves of absence may continue to accrue most fringe benefits as if they had been working during their leave periods. The Act also contains provisions which raise issues of federal taxation, the most important of which is a provision to reduce the federal adjusted gross income of public employees by the amount of their employee contributions.⁵

The issues presented by this appeal can be grouped into four broad categories: (1) contract clause issues; (2) equal protection and uniformity clause issues; (3) due process issues; and (4) unfair labor practice issues.

1. CONTRACT CLAUSE ISSUES

Appellants argue that the Act unconstitutionally impairs contractual obligations between public employers and employees regarding the level of public employee pension contributions.⁶ This court recently addressed the issue of the nature of a public employee's interest in a public pension or retirement plan and the degree to which that interest is afforded constitutional protection. In Christensen v. Minneapolis Municipal Employees Retirement Board, 331 N.W.2d 740 (Minn.1983), we abandoned the gratuity approach in analyzing such issues in favor of an expanded contract approach. Recognizing that a conventional contract approach, with its strict rules of mutuality, can seldom operate to provide protection for specific, legitimate interests of public employees in this context, the Christensen case augmented the contract approach to include the closely related doctrine of promissory estoppel. Id. at 747. Under Christensen, public employees can challenge changes affecting their interests in a public pension plan under the contract clause by establishing their right to the maintenance of the preexisting terms or conditions as a matter of either express contract, implied-in-fact contract, or promissory estoppel.⁷

In the case at bar, appellants advance each of these theories in arguing that the Act unconstitutionally impairs contractual obligations between public employers and employees regarding the level of public employee pension contributions. We conclude that no contract or contract term, express or implied, existed between public employers and employees which guaranteed fixed levels of employee retirement contributions to the pension funds. We further hold that the record does not support appellants' claim to a fixed level of employee pension contributions based on a theory of promissory estoppel. Because we therefore affirm the trial court's findings that appellants have failed to establish a right, based either on conventional contract or promissory estoppel theories, to a fixed level of employee pension contributions, we need not address the issue of whether the Act operates to unconstitutionally impair such a right.

It cannot be disputed that the record contains no evidence of an express contract designating rates at which public employees must contribute to their pension funds. In the absence of an express contract, appellants argue that the legislature's promise to supply...