Etherton v. Wyatt, 1--672A10

Citation293 N.E.2d 43, 155 Ind.App. 440
Case DateMarch 07, 1973
CourtCourt of Appeals of Indiana

Page 43

293 N.E.2d 43
155 Ind.App. 440
Trudy Slaby ETHERTON, Auditor of State of Indiana, et al.,
Defendants-Appellants,
v.
Robert W. WYATT et al., Plaintiffs-Appellees.
No. 1--672A10.
Court of Appeals of Indiana, First District.
March 7, 1973.

[155 Ind.App. 442]

Page 45

Theodore L. Sendak, Atty. Gen., Wendell C. Hamacher, Chief Counsel-Staff, Edward W. Johnson, Asst. Atty. Gen., Darrel K. Diamond, Deputy Atty. Gen., for defendants-appellants.

Jonathan L. Birge, Bingham, Summers, Welsh & Spilman, Indianapolis, Peter L. Obremskey, Parr, Richey, Obremskey, Pedersen & Morton, Lebanon, for plaintiffs-appellees.

ROBERTSON, Presiding Judge.

The State is appealing the granting of an injunction mandating the transfer of certain monies from the State's General Fund to the Indiana State Teachers' Retirement Fund.

The plaintiff-appellees Wyatt and Reece filed suit for the [155 Ind.App. 443] injunction on June 27, 1969, in Marion Superior Court, Room 6. Thereafter the complaint was amended to include McHargue as a party plaintiff.

The State moved for a change of venue with the resulting transfer to the Boone Circuit Court in early April, 1970. A second amended complaint was filed with the three plaintiffs being joined in their capacity as Trustees of the Teachers' Retirement Fund. The cause was subsequently tried before the court. The judgment of the court ordered the transfer of $26,478,000 from the unappropriated General Fund surplus to the Indiana State Teachers' Retirement Fund. The Special Findings of Fact and Conclusions of Law were:

'1. The individual plaintiffs are members of the Indiana State Teachers' Retirement Fund.

2. The control and management of the Indiana State Teachers' Retirement Fund is vested in the plaintiff Board of Trustees pursuant to the Acts of 1915, ch. 182, S.3, as amended, as found in Burns Ind.Ann.Stat. $28--4803 (1970 Replacement) (IC 1971, 21--6--1--3).

3. That Mary Aikens and Jack L. New are the duly elected and acting Audtor and Treasurer respectively of the State of Indiana, and are the successors in office of the original defendants named in their official capacity, and the defendant Thomas Taylor is the duly appointed and acting Director of the Budget Agency of the State of Indiana.

4. The Indiana State Teachers' Retirement Fund is financed by contributions by teachers and by the State of Indiana.

5. That the teachers of the State of Indiana voted in 1955 to come under the provisions of Chapter 329, Acts of 1955, and Section 23 of that Act (the same being Burns Ind.Ann.Stat. 60--1934 (IC 1971, 5--10--3--25)) requires in part the State to appropriate enough funds each year to the pension account and fund of the Teachers' Retirement Fund to prevent an increase in

Page 46

the unfunded liability of the pension account.

6. In 1967, pursuant to Chapter 298, Section 2 of the Acts of 1967, the Indiana General Assembly appropriated the sum of $35,500,000 as the State's contribution to the pension fund of the Indiana State Teachers' Retirement Fund for the fiscal year beginning July 1, 1967, and ending June 30, [155 Ind.App. 444] 1968, and also appropriated the sum of $35,500,000 as the State's contribution to the pension fund of the Indiana State Teachers' Retirement Fund for the fiscal year beginning July 1, 1968, and ending June 30, 1969, both to be paid from the State's General Fund.

7. In fiscal 1967--68 the State Budget Agency allotted only $24,522,000 from said appropriation to the pension fund of the Indiana State Teachers' Retirement Fund, and thereby reduced the appropriation for that year by $10,978,000.

8. In fiscal 1968--69 the State Budget Agency allowed only $20,000,000 from said appropriation to the pension fund of the Indiana State Teachers' Retirement Fund, and thereby reduced the appropriation for that year by $15,500,000.

9. The 1967--69 biennium was the first time that the State Budget Agency had not allotted the full amount of the legislative appropriation to the pension fund of the Indiana State Teachers' Retirement Fund.

10. At the end of fiscal 1967--68, on June 30, 1968, the General Fund of the Treasury of the State of Indiana had an unappropriated surplus of approximately $37,455,000.

11. At the end of fiscal 1968--69, on June 30, 1969, the General Fund of the Treasury of State of Indiana had an unappropriated surplus of approximately $30,321,000.

12. In fiscal 1967--68 actual revenues were approximately 2.3 percent lower than revenues estimated for that year by the State Budget Agency at the time of the 1967 legislature, but the pension fund appropriation for the Indiana State Teachers' Retirement Fund was reduced by the State Budget Agency for that year by approximately 31 percent.

13. In fiscal 1968--69 actual revenues were approximately 3.3 percent lower than revenues had been estimated for that year by the State Budget Agency at the time of the 1967 legislature, but the pension fund appropriation for the Indiana State Teachers' Retirement Fund was reduced by the State Budget Agency for that year by approximately 43 percent.

14. The State Budget Agency had knowledge prior to the end of fiscal 1967--68 that there would be a sufficient unappropriated surplus in the General Fund of the Treasury of Indiana at the end of that fiscal year to pay the entire amount of the $35,500,000 appropriation to the Indiana State Teachers' Retirement Fund, as evidenced by the [155 Ind.App. 445] memorandum from John Hatchett to Governor Branigin. (Plaintiffs' Exhibit No. 9).

15. The State Budget Agency, in reducing the appropriations of the Indiana State Teachers' Retirement Fund, did not consider the effect such reductions would have on the unfunded accrued liability or the vested contractual obligations of the State of Indiana.

16. The appropriations for the main operating budgets of four state universities (Indiana, Purdue, Indiana State and Ball State) were not reduced at all by the State Budget Agency during fiscal 1967--68 and 1968--69.

17. The State Budget Agency had no written guidelines with regard to the administration of the allotment system during the 1967--69 biennium.

18. A recent audit (March, 1971) of the financial condition of the Indiana State Teachers' Retirement Fund by the State Board of Accounts indicated that as of June 30, 1970, that approximately $2,700,000 of the employee contributions

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had been used to meet the State's obligations to the pension fund. (Plaintiffs' Exhibit No. 10).

19. The unfunded accrued liability for retired members of the Indiana State Teachers Retirement Fund rose during the 1967--69 biennium by approximately $26,000,000.'

The Court finds the conclusions of law to be the following:

'1. The Acts of 1955, Chap. 329, Section 23(b), being Burns Ind.Ann.Stat. 60--1934(b) reading in pertinent part as follows:

'60--1934. Appropriations by the state.--The amount to be appropriated by the state for any biennium for the purposes of Article III (Sec. 60--1923--60--1940 (IC 1971, 5--10--3--13 to 5--10--3--31)) of this act shall be the sum of the following:

(b) At least the amount required to prevent an increase in the amount of the unfunded accrued liability of the state as defined in Section 22(b)(iii) (Sec. 60--1933(b)(iii) (IC 1971, 5--10--3--24(b)(iii)) during said period.'

was at all times material herein in full force and effect.

2. The State Budget Agency's reduction of the appropriation to the pension fund of the Indiana State Teachers' Retirement Fund during the 1967--69 biennium was contrary to Burns Ind.Ann.Stat. 60--1934(b) in that such reduction permitted an increase in the amount of the unfunded accrued[155 Ind.App. 446] liability of the state to the pension fund of the Indiana State Teachers' Retirement Fund.

3. The State Budget Agency's reduction of the appropriation to the pension fund of the Indiana State Teachers' Retirement Fund during the 1967--69 biennium was arbitrary and capricious and constituted arbitrary and capricious state action in violation of the Fourteenth Amendment to the Constitution of the United States.

4. The State Budget Agency's reduction of the appropriation to the pension fund of the Indiana State Teachers' Retirement Fund during the 1967--69 biennium impaired the obligation of contractual rights of retired members of the Indiana State Teachers' Retirement Fund in violation of article I, Section 24 of the Constitution of the State of Indiana.'

By way of its overruled motion to correct errors, the State on appeal, is claiming error as to the jurisdiction of the Boone Circuit Court, and as to the correctness of each of the court's four conclusions of law.

The State asserts that the Boone Circuit Court lacked jurisdiction over...

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