Justus v. State
| Decision Date | 11 October 2012 |
| Docket Number | No. 11CA1507.,11CA1507. |
| Citation | 337 P.3d 1219 |
| Parties | Gary R. JUSTUS; Kathleen Hopkins; Eugene Halaas; and Robert P. Laird, Jr., Plaintiffs–Appellants, v. The STATE of Colorado; Governor John Hickenlooper, in his official capacity; Colorado Public Employees' Retirement Association; Carole Wright, in her official capacity; and Maryann Motza, in her official capacity, Defendants–Appellees. |
| Court | Colorado Court of Appeals |
OPINION TEXT STARTS HERE
Reversed and remanded. Richard Rosenblatt & Associates, LLC, Richard Rosenblatt, Greenwood Village, Colorado; Stember, Feinstein, Doyle & Payne, LLC, John Stember, William T. Payne, Stephen M. Pincus, Philadelphia, Pennsylvania, for Plaintiffs–Appellants.
John W. Suthers, Attorney General, Maurice G. Knaizer, First Assistant Attorney General, William V. Allen, Senior Assistant Attorney General, Megan Paris Rundlet, Assistant Attorney General, Denver, Colorado, for Defendants–Appellees The State of Colorado and Governor John Hickenlooper.
Reilly Pozner LLP, Daniel M. Reilly, Sean Connelly, Eric Fisher, Lindsay A. Unruh, Caleb Durling, Denver, Colorado, for Defendants–Appellees Colorado Public Employees' Retirement Association, Carole Wright, and Maryann Motza.
Opinion by Judge J. JONES.
¶ 1 Plaintiffs, Gary R. Justus, Kathleen Hopkins, Eugene Halaas, and Robert P. Laird, Jr., are recipients of retirement benefits through the Colorado Public Employees' Retirement Association (PERA). They challenge sections 19 and 20 of Senate Bill 10–001 (now codified at §§ 24–51–1001, 24–51–1002, C.R.S.2012), which reduced the amount they were entitled to receive as a cost-of-living adjustment (COLA) to their PERA benefits. Specifically, they claim that this reduction violates their rights under the Contract Clauses of the United States and Colorado Constitutions and the Takings Clause of the United States Constitution.
¶ 2 The district court granted summary judgment in favor of defendants, the State of Colorado, Governor John Hickenlooper, PERA, Carole Wright (Chair of the PERA Board of Trustees), and Maryann Motza (Vice–Chair of the PERA Board of Trustees). It ruled that plaintiffs have no contractual right to the COLA in effect when they retired, and that absent such a contractual right, plaintiffs' claims necessarily fail.
¶ 3 On appeal, plaintiffs contend that, under the holdings of Police Pension & Relief Bd. v. McPhail, 139 Colo. 330, 338 P.2d 694 (1959), and Police Pension & Relief Bd. v. Bills, 148 Colo. 383, 366 P.2d 581 (1961), they have a contractual right to the COLA in effect when they became eligible to retire or retired, which could not be reduced. We agree with plaintiffs, subject to certain limitations explained below. Specifically, we conclude that plaintiffs have a contractual right, but that the court must still determine whether any impairment of the right is substantial and, if so, whether the reduction was reasonable and necessary to serve a significant and legitimate public purpose. Therefore, we reverse the summary judgment and remand the case to the district court for further proceedings.
¶ 4 PERA provides retirement benefits to government employees. PERA has five divisions: state, school, local government, judicial, and Denver Public Schools (DPS). § 24–51–201(2), C.R.S.2012. It is funded by contributions from participating governmental employees and their employers. See § 24–51–401(1.7), C.R.S.2012. A retired PERA member is entitled to a monthly retirement benefit, the amount of which is determined by statute. § 24–51–603, C.R.S.2012.
¶ 5 Ms. Hopkins and Mr. Laird are former employees of the State of Colorado who retired in 2001 and 2010, respectively. Mr. Halaas (a former judge) is a former public official of the State of Colorado who retired in 1999. All three receive retirement benefits through PERA.
¶ 6 Mr. Justus is a former employee of DPS who retired in 2003. Before 2010, he received his pension through the Denver Public Schools Retirement System (DPSRS). In 2010, the General Assembly merged DPSRS into PERA. See generally Ch. 288, sec. 1–56, §§ 24–51–101 to –1715, 2009 Colo. Sess. Laws 1331–69. He now receives his retirement benefits through PERA.
¶ 7 Because some history of PERA and the changes to the COLA under PERA and DPSRS is relevant to resolving the issue raised by plaintiffs on appeal, we detail the relevant history below.
¶ 8 The General Assembly created a pension system for state employee retirees in 1931. See Ch. 157, §§ 111–1–1 et seq., 1931 Colo. Sess. Laws 742–52. At the same time, the General Assembly provided expressly that the retirement board created to administer the system could not reduce the benefits (termed “annuities”) paid to retirees. Ch. 157, § 111–1–22, 1931 Colo. Sess. Laws 752. But the General Assembly did not include any provision for a COLA.
¶ 9 In 1935, the General Assembly authorized the retirement board to increase member contributions to the pension fund or to decrease pension benefits payable to retirees, Ch. 203, sec. 7, § 111–1–22, 1935 Colo. Sess. Laws 1055.
¶ 10 In 1969, the General Assembly repealed the provision authorizing the board to decrease pension payments. Ch. 252, sec. 7, § 111–1–22, 1969 Colo. Sess. Laws 888. And it enacted two provisions authorizing two types of COLAs for PERA members.1 One provision included a table specifying the percentage increase then-current PERA retirees were entitled to receive in their monthly retirement benefits based on the year each had retired (the base COLA). The earlier the member had retired, the greater the increase to the member's initial benefit. Ch. 256, sec. 1, § 111–1–35, 1969 Colo. Sess. Laws 904; Ch. 260, sec. 1, § 111–2–23, 1969 Colo. Sess. Laws 917.2 The other provision increased retired members' benefits each year, on a noncompounded basis, by the lesser of one and one-half percent or the increase in the consumer price index (CPI) in the past year, as determined by a fractional formula (the supplemental COLA). Ch. 111, § 111–1–35(2)(b), (3)(c), (5)(b), (6)(c), 1969 Colo. Sess. Laws 897; Ch. 257, sec. 8, § 111–2–23, 1969 Colo. Sess. Laws 909–10.3
¶ 11 In 1973, the General Assembly changed the supplemental COLA to the lesser of three percent or the CPI increase. Ch. 320, sec. 8, § 111–2–27(2)(b), (5)(b), 1973 Colo. Sess. Laws 1117; see also Ch. 194, sec. 8, §§ 24–51–1002 to –1003, 1987 Colo. Sess. Laws 1071. It also authorized a supplemental COLA for judicial division members that was the lesser of one and one-half percent or the CPI increase. Ch. 323, sec. 6, § 111–6–14, 1973 Colo. Sess. Laws 1130.
¶ 12 Between 1975 and 1987, the General Assembly increased the base COLA percentages on several occasions. E.g., Ch. 194, sec. 8, §§ 24–51–1005 to –1006, 1987 Colo. Sess. Laws 1072–73 (); Ch. 185, sec. 1, § 24–51–136(1), 1986 Colo. Sess. Laws 955–56; Ch. 195, sec. 1, § 24–51–136(1), 1984 Colo. Sess. Laws 715–16; Ch. 102, sec. 1, § 24–51–136(1), 1982 Colo. Sess. Laws 390–91; Ch. 118, sec. 3, § 24–51–136(1)–(2), 1980 Colo. Sess. Laws 604–05; Ch. 335, sec. 1, § 24–51–224, 1977 Colo. Sess. Laws 1234–35; Ch. 222, sec. 1, § 24–51–136, 1975 Colo. Sess. Laws 839.
¶ 13 In 1987, the General Assembly repealed and reenacted the PERA statutes, with substantial amendments. As relevant here, it changed the supplemental COLA to the lesser of three percent times the number of years the benefit had been paid (one and one-half percent for judicial division members), or the percentage increase in the CPI between the year before payment of the initial benefit and the current year. Ch. 194, sec. 8, § 24–51–1002(1), (2), 1987 Colo. Sess. Laws 1071. The latter option—a so-called “banking” provision—allowed PERA retirees to take advantage of years in which the CPI increase had been more than three percent by adding the CPI for those years to the years in which it had been less (thereby “banking” the above-three percent increases), but only so long as the total percentage increase averaged less than three percent per year.
¶ 14 The General Assembly also enacted a new provision in 1987 which stated:
Cost of living increases in retirement benefits and survivor benefits shall be made only upon approval by the general assembly. Such increases in benefits shall be calculated in accordance with the provisions of sections 24–51–1006 [the base COLA] to 24–51–1008 and shall be paid from the cost of living stabilization fund.
Ch. 194, sec. 1, § 24–1–1001(2), 1987 Colo. Sess. Laws 1071.
¶ 15 In 1988 and 1992, respectively, the General Assembly increased the supplemental COLA available to judicial members 4 and non judicial members.5 During this period, it continued to increase the base COLA. See Ch. 175, sec. 10, § 24–51–1006, 1992 Colo. Sess. Laws 1137–38; Ch. 182, sec. 1, § 24–51–1006, 1990 Colo. Sess. Laws 1254–55; Ch. 187, sec. 1, § 24–51–1006, 1988 Colo. Sess. Laws 973–74.
¶ 16 In 1993, the General Assembly eliminated the base COLA and amended the supplemental COLA for all PERA members. It fixed the supplemental COLA at the lesser of three and one-half percent, compounded annually, times the number of years a member's benefit had been payable after 1993, or the percent increase in the CPI from the latter of 1992 or the year before a member's benefit became payable (thereby resetting the “banking” provision to exclude pre–1992 CPI changes). Ch. 138, secs. 6–7, 13, §§ 24–51–1001, –1002, –1006, 1993 Colo. Sess. Laws 478–80.6 The General Assembly also repealed subsection 24–51–1001(2), which, as noted, had provided that cost of living increases to retirement benefits could be made only upon approval by the General Assembly. Ch. 138, sec. 6, § 24–51–1001, 1993 Colo. Sess. Laws 478.
¶ 17 In 2000, the General Assembly eliminated the COLA increase alternative tied to the CPI, and set the supplemental COLA...
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