City of Colorado Springs v. State

• Decision Date: 15 December 1980
• Docket Number: No. 79SA206,79SA206
• Parties: CITY OF COLORADO SPRINGS, a municipal corporation, and Board of Trustees of the Firemen's Pension Fund of The City of Colorado Springs, Plaintiffs-Appellants, v. The STATE of Colorado, Defendant-Appellee.
• Court: Colorado Supreme Court

Page 1122

626 P.2d 1122

CITY OF COLORADO SPRINGS, a municipal corporation, and Board

of Trustees of the Firemen's Pension Fund of The

City of Colorado Springs, Plaintiffs-Appellants, v. The STATE of Colorado, Defendant-Appellee.

No. 79SA206.

Supreme Court of Colorado, En Banc.

Dec. 15, 1980.

As Modified on Denial of Rehearing March 23, 1981.

Gordon D. Hinds, City Atty., Jackson L. Smith, and Robert M. Isaac, Deputy City Attys. Colorado Springs, for plaintiffs-appellants.

J. D. MacFarlane, Atty. Gen., Richard F. Hennessey, Deputy Atty. Gen., Mary J. Mullarkey, Sol. Gen., R. Michael Mullins, Asst. Atty. Gen., Denver, for defendant-appellee.

LOHR, Justice.

The City of Colorado Springs (city) and the Board of Trustees of the Firemen's Pension Fund of the City of Colorado Springs commenced this action against the State of Colorado seeking a declaratory judgment with respect to the obligations of the city and the state to contribute to the funding of the city's firemen's pension fund. The trial court granted summary judgment in favor of the state. We reverse that judgment. ¹

A brief review of the recent history of legislation relating to the funding of policemen's and firemen's pension funds is necessary for an understanding of the issues presented in this case. Prior to the enactment of the Policemen's and Firemen's Pension Reform Act (Pension Reform Act) in 1978, sections 31-30-801 to 807, C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.), funding of the city's firemen's pension fund was provided for in section 31-30-503, C.R.S. 1973 (1977 Repl.Vol. 12). Section 31-30-503 states in pertinent part:

"There shall be levied and set apart by the governing body of each city or city and county having a population of over one hundred thousand and a paid fire department, for the benefit of said fund, a tax for each year of ten cents on each one hundred dollars of valuation for assessment of taxable property in such city or city and county (i. e., a one mill tax). All collections made from said tax levies; ... and all such sums as the treasurer of said funds may receive from the state of Colorado as said city's or city and county's share of the state insurance tax as provided for in section 31-30-404 shall be paid into the fund."

That statute is part of C.R.S. 1963, 139-80-1 to 21, amended and now codified at sections 31-30-501 to 523 (1977 Repl.Vol. 12) (1980 Supp.) ("Firemen's Pension Act"), which provides for a state system of retirement and disability pensions for paid fire department personnel in cities having a population of more than one hundred thousand.

In 1970 Colorado Springs adopted an ordinance which established a firemen's pension plan for city firemen. The Colorado Springs pension plan did not include certain cost of living and wage increase adjustments to pension payments. The Firemen's Pension Act mandated such adjustments.

A declaratory judgment action was brought on behalf of certain classes of beneficiaries of the city's firemen's pension plan, seeking to have all provisions of the Colorado Springs ordinance in conflict with the Firemen's Pension Act declared invalid. Huff v. Mayor and City Council of Colorado Springs, 182 Colo. 108, 512 P.2d 632 (1973). The city argued that the Firemen's Pension Act was actuarially unsound and that C.R.S. 1963, 139-80-3, placed a confiscatory burden on the city and its taxpayers. (C.R.S. 1963, 139-80-3, is currently codified with minor amendments at section 31-30-503, C.R.S. 1973 (1977 Repl.Vol. 12), quoted in part above.) The city reasoned that the Firemen's Pension Act would eventually require the city to contribute more money than the prescribed one mill tax would generate.

This court found those provisions of the Colorado Springs ordinance which were in conflict with the Firemen's Pension Act to be invalid, but stated that the city need not fear an impending confiscatory burden because the Firemen's Pension Act limited the city's liability to one mill. Huff v. Mayor and City Council of Colorado Springs, supra. In acknowledging such a limitation on the city's liability, this court recognized that the Firemen's Pension Act may eventually require funds in addition to the one mill contribution in order to pay prescribed pension benefits, but did not reach the question of how the pension fund was to be maintained when additional contributions should be needed.

In January 1978 the Colorado Legislative Council Committee on Fire and Police Pensions (committee), after conducting a study of local policemen's and firemen's pension funds, reported to the General Assembly that policemen's and firemen's pension funds statewide had estimated unfunded accrued liabilities of approximately $500,000,000. ² The committee recommended that the legislature pass an act that would require full funding of policemen's and firemen's pension funds to cover both the unfunded accrued liabilities and the current annual service costs of pension benefits attributable to active members. Pursuant to that recommendation, in 1978 the legislature passed the Pension Reform Act which incorporated the committee's recommendation requiring full funding of policemen's and firemen's pension funds. ³

The Pension Reform Act requires annual contributions, beginning January 1, 1979, in amounts "equal to or greater than the sum of the actuarially determined amount required to amortize, over a period of not more than forty years from January 1, 1979, the unfunded accrued liabilities of such plan and the current service cost attributable to active members." Section 31-30-804(2), C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.). Section 31-30-804 makes certain provisions for lower contributions in early years to minimize undue initial hardship.

The Pension Reform Act does not specifically state who is to be liable for funding the pension funds. However, in 1979, the legislature stated that the pension funds were to become fully funded with local moneys. Sections 31-30-1001 and 1014, C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.). ⁴

In granting summary judgment for the state in the instant case, the trial court concluded that the Pension Reform Act places the burden of meeting actuarial deficits in the pension fund upon the city without mandatory state assistance. It also concluded that such legislative action does not violate Article XV, Section 12, of the Colorado Constitution, prohibiting certain retrospective legislation.

The substantive questions presented for review are (1) whether the legislature intended to hold the city solely liable for funding the unfunded accrued liabilities and for paying the annual current service costs of pension benefits attributable to active members; (2) whether the legislature constitutionally could require the city to be solely liable for funding the unfunded accrued liabilities; and (3) whether the legislature constitutionally could require the city to be solely liable for paying the prospective annual current service costs of pension benefits attributable to active members. First, we shall address question (1). Before addressing questions (2) and (3), we must consider whether the city has standing to raise those questions. ⁵

I.

The state argued and the trial court found that it was the intent of the legislature in the Pension Reform Act to hold the city fully liable for funding the unfunded accrued liabilities of the pension fund and for paying the annual current service costs of pension benefits attributable to active employees. ⁶ We agree.

Although the Pension Reform Act does not specifically state that the city will be solely liable for making the pension funds actuarially sound, ⁷ it is apparent that this was the legislative intent. The Pension Reform Act states that contributions to achieve actuarial soundness shall include "municipal and special district contributions, the established employee contribution, and any state contribution." (Emphasis added.) Section 31-30-804(1), C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.). Minimum and maximum contribution rates for employees are set forth in section 31-30-804(8)(a)(I), C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.), but section 31-30-804(8)(a)(II), C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.), provides that the governing body of a municipality may establish a rate of employee contribution lower than the minimum set forth in the statute if, among other things, the lower rate would meet the minimum funding requirements necessary to achieve actuarial soundness. Thus, the governing body of the municipality has control over the amount of the employee contribution up to the prescribed maximum. It is reasonable to conclude that the governing body of the municipality has been given this control because it alone is responsible for making the fund actuarially sound and is thus in the best position to determine what amount the employees must pay if actuarial soundness is to be achieved as required.

The only other specified source of contribution to the pension funds is the state. The state's contribution is specifically characterized as "any state contribution" (emphasis added). It is apparent from this language that no obligation was imposed on the state to contribute amounts necessary to achieve actuarial soundness. At the present time state contributions and the allocation and distribution of such contributions are prescribed by section 31-30-1014, C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.). This section is part of a statute which explicitly expresses the legislative intent to decrease state participation annually and to terminate such participation at the earliest possible date. Section 31-30-1001, C.R.S. 1973 (1977 Repl.Vol. 12) (1980 Supp.).

If the Pension Reform Act were construed not to require that the city be solely liable for making the pension fund actuarially sound, it would be impossible to determine what percentage must be paid by each contributor to achieve actuarial soundness. Furthermore, such a...