BLUE v. BOARD OF TRUSTEES OF EMPLOYEES RETIREMENT SYSTEM OF TULSA COUNTY (2009)

¶ 1 The issue presented concerns the constitutionality of 19 O.S.Supp.2003, § 956.3.¹ We find the statute constitutional and affirm the trial court's issuance of a writ of mandamus.

BACKGROUND

¶ 2 In Oklahoma, the retirement plans of state employees are governed largely by the Oklahoma Public Employees Retirement System (OPERS), 74 O.S.2001 § 901, et seq.² With the exception of Oklahoma and Tulsa counties, all county governments and their employees are required to participate in this system. 74 O.S.Supp.2007, § 910. Pursuant to 19 O.S.2001, § 951, Oklahoma and Tulsa counties, as the only qualifying counties with a population of more than 300,000, were permitted to operate their own county retirement plan.³ Tulsa County operates a defined benefit plan in accordance with 19 O.S.2001, § 956; while Oklahoma County employees participate in a defined contribution plan pursuant to 19 O.S.Supp.2007, § 956.2.⁴

¶ 3 In 2003, the Legislature enacted 19 O.S.Supp.2003, § 956.3, which provides that a public employee, covered by OPERS, could move employment to a county with a § 951 defined benefit retirement plan and have his service credit consolidated. Effectively, this statute applied to all Tulsa County employees and those Oklahoma County employees who opted to remain part of the county's defined benefit system.

¶ 4 The appellee, Steven R. Blue, was employed by the State Auditor's Office for sixteen years during which time he participated in OPERS. He then took a job with the Tulsa County Treasurer's Office, which participated in the § 951 defined benefit retirement system operated by Appellant, Board of Trustees of Employees' Retirement System of Tulsa County (ERSTC). Appellee notified ERSTC that he wished to transfer his sixteen years of service credit from OPERS to ERSTC, pursuant to 19 O.S.Supp.2003, § 956.3. ERSTC denied Appellee's request to transfer his OPERS service credit claiming § 956.3 was unconstitutional.

¶ 5 Appellee filed the present action seeking a writ of mandamus directing ERSTC to implement the transfer of his service credit pursuant to § 956.3. The district court issued a writ directing ERSTC to comply with § 956.3 and recognize the transfer of Appellee's sixteen years of service with OPERS. ERSTC appealed and the Court of Civil Appeals, Division IV, reversed finding § 956.3 to be an unconstitutional, special law.

STANDARD OF REVIEW

¶ 6 A statute's constitutional validity as well as its construction and application are questions of law reviewed de novo, i.e., without deference. Gilbert v. Sec. Fin. Corp. of Okla., Inc., 2006 OK 58, ¶ 2, 152 P.3d 165, 171. A legislative act is presumed to be constitutional and will be upheld unless it is clearly, palpably and plainly inconsistent with the Constitution. EOG Resources Marketing, Inc. v. Oklahoma State Board of Equalization, 2008 OK 95, ¶ 13, 196 P.3d 511, 519. The burden is on ERSTC, the entity challenging the statute, to show beyond a reasonable doubt that 19 O.S.Supp.2003, § 956.3 is unconstitutional. See City of Enid v. Pub. Employees Relations Bd., 2006 OK 16, ¶ 5, 133 P.3d 281, 285.

DISCUSSION

¶ 7 ERSTC contends 19 O.S.Supp.2003, § 956.3 is a special law in violation of Okla. Const. art. 5, §§ 46 and 59.⁵ It also argues the statute impairs the obligation of contract it has with its members in violation of U.S.C. Const. art. I, § 10 and Okla. Const. art. 2, § 15, and amounts to an unconstitutional taking of private property for public use in violation of the U.S. Const., Fifth Amendment, Takings Clause and Okla. Const. art. 2, § 24.⁶ Conversely, Appellee argues that § 956.3 is constitutional as it operates uniformly on its intended class consisting of all public employees consolidating service credit from OPERS into a § 951 defined benefit retirement plan.

¶ 8 In reversing the writ issued by the district court, the Court of Civil Appeals (COCA) found § 956.3 to be an arbitrary, special law prohibited by Okla. Const. art. 5, § 46.⁷ COCA observed that the offending statute applied only to defined benefit plans and that, as a practical matter, only Tulsa County was substantially affected since Oklahoma County elected to implement a defined contribution plan under 19 O.S.Supp.2007, § 956.2. Finding no reason to treat Tulsa County any differently from Oklahoma County, COCA found the statute unconstitutional. We disagree and affirm the writ issued by the district court.

I. Special v. General Laws.

A. Okla. Const. art. 5, § 46.

¶ 9 Article 5, Section 46 of the Oklahoma Constitution prohibits the Legislature from creating a special law with respect to twenty-eight enumerated activities listed within the statute. The regulation of county affairs is one such prohibited area and is central to this dispute. As it is uncontested that 19 O.S.Supp.2003, § 956.3 involves the regulation of county affairs, we must determine whether the statute is general or special in nature. Reynolds v. Porter, 1988 OK 88, ¶ 17, 760 P.2d 816, 822.

¶ 10 General laws are those which have a uniform application. Uniformity, however, does not mandate that the law must operate upon every person and every locality in the state. City of Enid v. Pub. Employees Relations Bd., 2006 OK 16, ¶ 8, 133 P.3d 281, 286. In fact, a class may be very limited and include but only one member. City of Enid, 2006 OK 16, ¶ 13, 133 P.3d at 287.

¶ 11 This Court's precedent has established a classification-based analysis for challenges brought under Art. 5, § 46. That is, where a classification created by statute is founded on real and substantial distinctions, and does not target for different treatment less than an entire class of similarly situated persons or things, the statute will be deemed permissible. See Reynolds v. Porter, 1988 OK 88, ¶ 17, 760 P.2d 816, 823; EOG Resources Marketing, Inc. v. Oklahoma State Board of Equalization, 2008 OK 95, ¶ 20, 196 P.3d 511, 521. Special laws are those that rest on a false or deficient classification and do not embrace all of their natural class. Barrett v. Bd. of County Comm'rs, 1939 OK 68, ¶ 17, 90 P.2d 442, 446, quoting School District No. 85, Kay County v. School District No. 71, Kay County, 1928 OK 689, 276 P. 186. Article 5, § 46 absolutely prohibits the passage of any special law relating to one of its enumerated subjects.

¶ 12 In City of Enid, this Court reiterated the importance of the classification inquiry. We held that:

“[W]here a statute operates upon a class, the classification must not be capricious or arbitrary and must be reasonable and pertain to some peculiarity in the subject-matter calling for the legislation. As between the persons and places included within the operation of the law and those omitted, there must be some distinctive characteristic upon which a different treatment may be reasonably founded and that furnish[es] a practical and real basis for discrimination.”

City of Enid, 2006 OK 16, ¶ 14, 133 P.3d at 287, citing and quoting Burks v. Walker, 1909 OK 317, ¶ 23, 109 P. 544, 549. The law must operate uniformly upon all brought within the class by common circumstances, even though the number of persons or things upon which the law has direct effect may be very few. EOG Resources Marketing, Inc. v. Oklahoma State Board of Equalization, 2008 OK 95, ¶ 20, 196 P.3d at 521.

¶ 13 In Glasco v. State ex rel. Oklahoma Dept. of Corrections, 2008 OK 65, 188 P.3d 177, the plaintiff asserted that the challenged statute was unconstitutional because it targeted state employees for different treatment than other injured workers. Upholding the statute, we found that it “facially treats alike all members of the class of state employees on leave without pay” and creates a reasonable classification. Glasco, 2008 OK 65, ¶ 28, 188 P.3d at 184.

¶ 14 As in Glasco, we find that the classification created by § 956.3, pertaining to defined benefit retirement plans, is a reasonable legislative classification. The subject class consists of all active employees of a § 951 defined benefit retirement plan whose retirement benefits are based on years of service. The statute applies equally to all qualifying employees in Oklahoma and Tulsa counties. The challenged legislation does not single out Tulsa County for special treatment, but rather treats both counties in the same manner.

¶ 15 Oklahoma County employees participating in the § 956.2 defined contribution plan are not affected by the terms of § 956.3 because that statute is irrelevant to a plan where years of service are not used to determine plan subscriber benefits.⁸ This distinguishing characteristic is practical and reasonable.

¶ 16 The fact that § 956.3 may “substantially apply” only to Tulsa County is likewise immaterial to our inquiry. We have previously held that a class of one can pass constitutional muster under an art. 5, § 46 analysis. See City of Enid, 2006 OK 16, ¶ 13, 133 P.3d at 287. Because § 956.3 operates uniformly across the entire class of similarly situated § 951 defined benefit retirement plan members, we find the statute permissible under art. 5, § 46.⁹

B. Oklahoma Const., art. 5, § 59.

¶ 17 ERSTC next asserts that § 956.3 is an impermissible special law in violation of Okla. Const. art. 5, § 59. We find it unnecessary to address ERSTC's contention as the statute in question concerns one of the enumerated subjects listed in art. 5, § 46 of the Oklahoma Constitution and we have previously found it not in violation thereof. If the statute is not deemed an unconstitutional special law under a § 46 analysis, it follows that it also would not violate § 59. See Reynolds v. Porter, 1988 OK 88, ¶ 17, 760 P.2d at 822, 823. Further, this argument has been abandoned as it was not addressed by ERSTC in its appellate brief. See Peters v. Golden Oil Co., 1979 OK 123, 600 P.2d 330.

II. Impairment of Contract under U.S.C. Const. art. I, § 10; Okla. Const. art. 2, § 15.

¶ 18 Both the United States and Oklahoma constitutions prohibit the state from enacting any law “impairing the obligation of contracts.” U.S.C. Const. art. I, § 10; Okla. Const. art. 2, § 15. ERSTC claims that § 956.3 violates these provisions because it will significantly impair the fiscal soundness of the plan and, as a result, will affect the contractual rights of its members. ERSTC alleges that the retirement benefits of its members are threatened and “will likely” have to be reduced. We are not persuaded by ERSTC's unsupported assumption of the threat to its plan.

¶ 19 We have held that the legislature may modify public employees' pension rights, even though the rights are contractually based, so long as the modifications are reasonable and necessary and provide offsetting advantages to the disadvantages. Taylor v. State and Education Employees Group Insurance Program, 1995 OK 51, ¶ 13, 897 P.2d 275, 279. The modifications will be approved so long as they do not impair the actuarial soundness of the fund, or detrimentally affect vested rights, which are matters of proof. Taylor v. State and Education Employees Group Insurance Program, 1995 OK 51, ¶ 13, 897 P.2d at 279.

¶ 20 In Taylor v. State, 1995 OK 51, 897 P.2d 275, legislation was enacted that transferred $39,600,000 from the teachers' retirement system to an education employees' insurance reserve fund. Some members of the teachers' retirement system were not beneficiaries of the insurance reserve fund and challenged the constitutionality of the new act. This Court found the legislation constitutional as it “neither increased teacher contributions to OTRS nor reduced benefits” and the actuarial soundness of the OTRS was not impaired. Taylor v. State, 1995 OK 51, ¶ 20, 897 P.2d at 280.

¶ 21 ERSTC offers mere speculation that its members' benefits might have to be reduced at some unspecified future date. No evidence has been offered regarding the actuarial soundness of the fund or a detrimental effect on vested rights. Certainly the terms of § 956.3 itself do not call for an increase in member contributions or a reduction in benefits to ERSTC members which might trigger an impairment. Because ERSTC has offered no proof that the application of § 956.3 will unconstitutionally impair the contractual obligations to its employees, we cannot render the statute unconstitutional on these grounds.

III.The Takings Clauses in the U.S. Const., Fifth Amendment and the Okla. Const., art. 2, § 24.

¶ 22 ERSTC argues that § 956.3 amounts to an unconstitutional taking of private property for public use contrary to the U.S. Const., Fifth Amendment, Takings Clause and the Okla. Const., art. 2, § 24.¹⁰ ERSTC maintains that monies contributed to its plan constitute private funds in the form of delayed compensation, to which vested ERSTC members are entitled upon retirement. In support of its argument, ERSTC claims that § 956.3 requires it to pay funds from the pool of member contributions to individuals who have not made similar contributions to the plan. ERSTC's argument is without merit.

¶ 23 ERSTC has failed to identify any owner of private property whose private property is being taken. There is simply no evidence presented that ERSTC members entitled to retirement benefits will not receive the benefits to which they are so entitled. Accordingly, we conclude that under the facts and circumstances presented, the transfer of service credit under § 956.3 does not constitute a taking of private property for public use under the constitutions of the United States and the State of Oklahoma.

IV.Appellee's Standing.

¶ 24 It is undisputed that Appellee properly began the process for requesting a credit transfer as set forth in § 956.3. On May 18, 2004, Appellee provided notice to ERSTC and OPERS of his election to transfer his credit pursuant to § 956.3. The statute provides that ERSTC must then notify OPERS of the approval of the transfer and, within thirty days thereafter, OPERS would send to ERSTC all of Appellee's employee contributions. 19 O.S.Supp.2003, § 956.3(B). ERSTC denied Appellee's request notwithstanding the mandatory language of § 956.3.

¶ 25 Despite Appellee's initiation of the transfer process, ERSTC argues that Appellee has no standing to enforce § 956.3 because he had not yet vested in the plan and had not yet requested any payment of retirement benefits from ERSTC. Specifically, ERSTC claims that it is not required to take action approving a transfer request or notifying OPERS thereof under § 956.3 until a member becomes entitled to benefits. ERSTC's argument is misguided and ignores the crucial detail that it has, in fact, already taken action to deny Appellee's request for transfer of service credit.

¶ 26 The terms of § 956.3 do not require employees' retirements rights to have vested before they can take advantage of the statute's provisions. To the contrary, § 956.3 specifically provides that the service credit sought to be transferred cannot be used in fulfilling the vesting requirements of the plan. 19 O.S.Supp.2003, § 956.3(C). As such, Appellee rightfully initiated the transfer process under § 956.3 and ERSTC is obligated to implement the requested transfer.

CONCLUSION

¶ 27 Section 956.3 applies equally to all employees whose retirement is under a § 951 defined benefit plan. The challenged legislation creates a reasonable classification and does not constitute a special law. Because we find the statute constitutional, we affirm the district court's issuance of a writ of mandamus. ERSTC is directed to implement the transfer of Appellee's service credit pursuant to the terms of 19 O.S.Supp.2003, § 956.3.

CERTIORARI PREVIOUSLY GRANTED; OPINION OF THE COURT OF CIVIL APPEALS VACATED; JUDGMENT OF THE DISTRICT COURT AFFIRMED.

WINCHESTER, J.

CONCUR: EDMONDSON, C.J., TAYLOR, V.C.J., OPALA, KAUGER, WINCHESTER, JJ. DISSENT: HARGRAVE, WATT, COLBERT, JJ. NOT PARTICIPATING: REIF, J.