Association of State Prosecutors v. Milwaukee County

• Decision Date: 13 March 1996
• Docket Number: No. 93-3329,93-3329
• Citation: 544 N.W.2d 888,199 Wis.2d 549
• Court: Wisconsin Supreme Court
• Parties: ASSOCIATION OF STATE PROSECUTORS, on behalf of its members and David A. Feiss, Petitioners-Respondents, v. MILWAUKEE COUNTY and the Milwaukee County Pension Board, Respondents-Appellants-Petitioners.

Page 888

544 N.W.2d 888

199 Wis.2d 549

ASSOCIATION OF STATE PROSECUTORS, on behalf of its members and David A. Feiss, Petitioners-Respondents, v. MILWAUKEE COUNTY and the Milwaukee County Pension Board,

Respondents-Appellants-Petitioners.

No. 93-3329.

Supreme Court of Wisconsin.

Argued Nov. 1, 1995.

Decided March 13, 1996.

For the respondents-appellants-petitioners there were briefs from Steven D. Huff, Anne Willis Reed, Bennett E. Choice, Dean E. Mabie, Thomas A. Cabush and Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C. and Timothy R. Schoewe, corporation counsel, all of Milwaukee, and oral argument by Anne Willis Reed.

For the petitioners-respondents there was a brief from Timothy E. Hawks, Jeffrey P. Sweetland and Shneidman, Myers, Dowling & Blumenfield, Milwaukee, and oral argument by Jeffrey P. Sweetland.

Amicus curiae brief was filed by Michael R. Burton and Burton & Davis, Milwaukee, for the Retired Employees of Milwaukee County.

Amicus curiae brief was filed by Alvin R. Ugent and Podell, Ugent & Cross, S.C., Milwaukee, for the District Council 48, AFSCME, AFL-CIO.

Amicus curiae brief was filed by Bruce Meredith, Chris Galinat, counsel, Madison, for the Wisconsin Education Association Council.

BABLITCH, Justice.

Milwaukee County and the Milwaukee County Pension Board (Milwaukee County) challenge the constitutionality of legislation concerning the Milwaukee County Employee Retirement System (County Plan) and the Wisconsin Retirement System (State Plan). The purpose of the legislation is to produce a uniform statewide pension plan for prosecutors and to provide prosecutors with prior service credits for their Milwaukee County employment. Under the legislation, Milwaukee County is required to transfer employer contributions made on behalf of Milwaukee County prosecutors from the County Plan to the State Plan. Milwaukee County argues that such a transfer unconstitutionally takes funds held in trust for the benefit of vested employees and retirees.

We hold that vested employees and retirees have protectable property interests in their retirement trust funds which the legislature cannot simply confiscate under the circumstances of this case. Although we recognize that legislative modifications may be necessary in limited situations, we conclude that the transfer of funds from the County Plan to the State Plan takes property without due process of law.

The relevant facts are undisputed. This action involves two different retirement systems, the County Plan and the State Plan. Prior to January 1, 1990, employees in district attorney offices throughout Wisconsin were employees of their respective counties. Thus, assistant district attorneys in the Milwaukee County District Attorney's Office were employees of Milwaukee County. The Milwaukee County Assistant District Attorneys (ADAs) were not eligible to participate in the State Plan, pursuant to Wis.Stat. § 40.21, since Milwaukee County never elected to participate in this plan. All other counties in Wisconsin participated in the State Plan. Under the County Plan, persons employed by Milwaukee County prior to January 1, 1982 could qualify for a deferred vested pension if they completed at least six years of county service. Persons employed on or after January 1, 1982, however, had to complete at least 10 years of service in order to qualify for a deferred vested benefit under the County Plan.

As of January 1, 1990, all district attorneys became state employees. All Milwaukee County ADAs were given the option to remain in the County Plan or to transfer to the State Plan. However, when the transfer of the Milwaukee County ADAs to the State Plan took effect, none of those who had been hired after January 1, 1982 had sufficient time in the County Plan to be vested since none of them yet had 10 years of service. While they could join the State Plan as state employees, their credited service in the State Plan could begin only on January 1, 1990. Thus, the non-vested Milwaukee County ADAs were subject to an anomaly since the State Plan did not give them credit for their time as county employees.

In order to place the non-vested Milwaukee County ADAs on an equal footing with all other assistant district attorneys, the legislature enacted § 333c of [199 Wis.2d 554] 1989 Wis.Act 336 creating Wis.Stat. § 978.12(5)(c)5. ¹ Pursuant to § 978.12(5)(c)5, a participating non-vested Milwaukee County ADA could elect to transfer employer contributions made on his or her behalf, along with the interest accrued, from the County Plan to the State Plan. The companion statute, Wis.Stat. § 40.02(17)(g), ² provided that the non-vested Milwaukee County ADAs would receive service credit for county employment in an amount dependent upon the dollar amount transferred determined by an actuary.

By July 1991, approximately 42 Milwaukee County ADAs, who were non-vested in the County Plan, elected to have Milwaukee County contributions made on their behalf transferred to the State Plan. In response, Milwaukee County refused to transfer any funds contending that the contributions to the County Plan were not allocated to individuals.

The County Plan is a defined benefit plan in which its members are assured they will receive a specific retirement benefit calculated as a percentage of their final average salary multiplied by their years of county service. Actuaries make projections such as plan participation, future employee salary increases, the ages at which participants are expected to retire and economic assumptions. Actuaries then examine the covered employees to ascertain the cost of the plan. They examine age, employment and salary history for all individual participants. The individual participant data is the basis for determining the employer's annual contribution. After the actuarial findings, contributions are made by the employer to cover the plan's anticipated present and future liabilities. Also, under the County Plan, pursuant to Milwaukee County general ordinances, §§ 201.24 through 5.1, different percentage multipliers are used for calculating the benefits to be paid to the different groups of county employees. The Milwaukee County Pension Board administers the County Plan and submits the pertinent data, including the actual contribution required, to the County's board of supervisors each year.

The State Plan is a hybrid plan with characteristics of both a defined contribution plan and defined benefit plan. Defined contribution plans do not provide specific dollar benefits at retirement. The benefits payable to the employees are funded by both the employer and employee. The State Plan places its contributions into an employer accumulation reserve, pursuant to Wis.Stat. § 40.04(5). Contributions placed in the accumulation reserve are applied solely to the payment of fixed monthly annuities based on percentages of the final average earnings, multiplied by years of service pursuant to Wis.Stat. § 40.23(2)(b) and (2m)(e).

Milwaukee County refused to make the transfer from the County Plan to the State Plan on the ground that such a transfer would have misappropriated funds held in trust exclusively for the benefit of vested employees and retirees. The Association of State Prosecutors and David A. Feiss (The * 891 Association) sought a writ of mandamus to require Milwaukee County and its pension board to transfer money equal to "all employer contributions made on behalf of" all non-vested Milwaukee County ADAs from the County Plan to the State Plan. The circuit court granted mandamus and ordered Milwaukee County to calculate and transfer the contributions made on behalf of the 42 ADAs.

Milwaukee County appealed. The court of appeals affirmed the circuit court in all respects. It concluded that the County Plan participants did not have a property interest in contributions to the County Plan's trust fund. Therefore, the court of appeals held that the legislatively-mandated transfer of funds from the County Plan to the State Plan was not a "taking" of their property without due process. We granted Milwaukee County's petition for review to determine whether the transfer of pension funds from the County Plan to the State Plan is a taking of property without due process of law.

Milwaukee County argues that vested Milwaukee employees and retirees have a legitimate protectable property interest in the County Plan's trust fund. It contends that because the funds are held in trust, both vested participants and retirees have property interests not only in their own benefits, but also in the trust funds themselves. Therefore, Wis.Stat. § 978.12(5)(c)5 unconstitutionally takes property because the statute appropriates private funds held in trust for current vested members of the County Plan without due process of law.

The Association argues that the vested beneficiaries of the County Plan do not have property rights in the specific funds designated for transfer by Wis.Stat. § 978.12(5)(c)5. Since Milwaukee County need only transfer those funds relating to the 42 non-vested ADAs, the beneficiaries' property interests will not be injured.

We address the single issue of whether Wis.Stat. § 978.12(5)(c) 5 violates federal constitutional prohibitions against the taking of property without due process. This determination involves a question of law that we review de novo. In Interest of J.A.L., 162 Wis.2d 940, 962, 471 N.W.2d 493 (1991). A statute is presumed to be constitutional. State v. Hart, 89 Wis.2d 58, 64, 277 N.W.2d 843 (1979). When attacking the constitutionality of a statute, the contesting party must prove the unconstitutionality of the statute beyond a reasonable doubt. In Matter of E.B., 111 Wis.2d 175, 180, 330 N.W.2d 584 (1983).

This issue involves two questions. The first question we address is whether a property interest exists for purposes of the due process clause. The Fourteenth Amendment of the United States Constitution prevents the state from...