FACTS AND PROCEDURAL HISTORY
¶ 1 The focus of this appeal concerns the validity of HB 2630; 2014 Okla. Sess. Laws c. 375 (effective November 1, 2014).
¶ 2 Prior to November 1, 2015, most state employees and some other governmental employees have participated in the OPERS defined benefit plan. A defined benefit plan provides an employee who retires from the plan a fixed periodic payment based upon a formula. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999). In other words, it provides a pension. As the name implies, the benefit is defined. If you know the factors to place in the formula you can determine the benefit. In the case of the OPERS defined benefit plan, both the employer and employee make monthly contributions to fund the plan. The plan assets are kept in a pool of assets rather than individual dedicated accounts for employees. The employer bears the entire investment risk and underfunding may result in a myriad of ways including a shortfall in the plan's investments, insufficient contributions or inaccurate actuarial assumptions. These plans typically use actuaries to determine assumptions concerning the necessary contributions and investment return
¶ 3 HB 2630 creates a new defined contribution system within OPERS. Title 74 O.S. Supp. 2014, § 935.2. Under a defined contribution plan there can never be an insufficiency of funds to cover promised benefits. Hughes, 525 U.S. at 439, 119 S.Ct. 755 (citations omitted). The obvious incentive for creating this new defined contribution system is its certainty and inability to be underfunded. Defined contribution plans provide an individual account for each participant and benefits are based solely upon the amounts contributed to the participants account and the earnings on those contributions. Id. As its name implies, the amount contributed is defined, however, the future benefit such an account will bring is unknown. The risk is shifted from the employer to the employee. In this new defined contribution system employees contribute between 3% to 7% of compensation and the employer shall match that contribution. Title 74 O.S. Supp. 2014, § 935.5. In addition, HB 2630 also requires employers making contributions on behalf of those employees in the new defined contribution system to make an additional contribution to the now closed defined benefit plan. Title 74 O.S. Supp. 2014, § 935.10 provides the amount of this contribution to the defined benefit plan will be equal to the difference between the employer contribution made to the defined benefit plan and the employer contribution made on behalf of the members in the new defined contribution system. The stated purpose for this contribution is to help "reduce the liabilities of the defined benefit pension plan." Title 74 O.S. Supp. 2014, § 935.10 (B). HB 2630 also requires each employer with employees participating in the new defined contribution system to pay an amount "to reimburse the cost of administration of the defined contribution system, as determined by the Board." Title 74 O.S. Supp. 2014, § 935.6 (E).
¶ 4 On October 24, 2014, the Plaintiffs/Appellants, Joe Stevens and Cecil Dooley (Appellants) filed their Petition for Declaratory and Supplemental Relief challenging the validity of HB 2630. The Appellants claimed they have both taxpayer standing as resident Oklahoma taxpayers and individual standing as vested members in the OPERS defined benefit plan to bring this action. The Appellants' prayer for relief requested HB 2630 be found void ab initio because it is unconstitutional and in violation of certain sections of the Oklahoma Pension Legislation Actuarial Analysis Act (62 O.S. § 3101-3114) (OPLAAA). They also requested the Defendants/Appellees Joseph A. Fox, Executive Director of the Oklahoma Public Employees Retirement System, Dewayne McAnally, Steve Paris, Michael D. Evans, Jill Geiger, James R. "Rusty" Hale, Thomas E. Kemp, Jr., Don Kilpatrik, Brian Maddy, Lucinda Meltabarger, Michael Moradi, Cleve Pierce and Frank Stone, as and constituting the Board Of Trustees of the Oklahoma Public Employees Retirement System (collectively, Appellees), be enjoined from enforcing HB 2630.
¶ 5 The Appellants asserted the Legislature violated OPLAAA when it enacted HB 2630. OPLAAA was enacted in 2006; 2006 Okla. Sess. Laws c. 292 (SB 1894). OPLAAA establishes legislative procedures for introducing, hearing, and passing retirement legislation. It provides separate legislative procedures for fiscal and non-fiscal retirement bills. Since 2007, it has been applicable to "retirement systems" defined in 62 O.S., § 3103 (9) as "the Teachers' Retirement System of Oklahoma, the Oklahoma Public Employees Retirement System, the Uniform Retirement System for Justices and Judges, the Oklahoma Firefighters Pension and Retirement System, the Oklahoma Police Pension and Retirement System, the Oklahoma Law Enforcement Retirement System, or a retirement system established after January 1, 2006." 2007 Okla. Sess. Laws c. 186, §§ 2-3; see also 62 O.S. 2011, § 3102.
¶ 6 OPLAAA requires the Legislative Service Bureau to contract with a firm or entity
¶ 7 Each party filed a motion for summary judgment. The Appellants' primary argument was the Legislature failed to follow the regulations it set for itself under OPLAAA and therefore HB 2630 is void. They alleged the Legislative Actuary incorrectly certified HB 2630 as being a non-fiscal retirement bill because it created a new retirement system and created or increased the costs, benefits, normal cost and actuarial accrued liability of OPERS.
¶ 8 The Appellants asserted they have both taxpayer and individual standing. Their taxpayer standing argument is based on their challenge to an "alleged illegal expenditure of public funds." Oklahoma Pub. Employees Ass'n v. Oklahoma Dep't of Cent. Servs., 2002 OK 71, ¶ 10, 55 P.3d 1072. Their individual standing argument is based on their vested status in the OPERS defined benefit plan which they claimed, pursuant to Taylor v. State & Educ. Employees Grp. Ins. Program, 1995 OK 51, 897 P.2d 275, gives them a cognizable interest in the actuarial soundness of their pension funds.
¶ 9 In Appellees' motion for summary judgment they argued OPLAAA (62 O.S. 2011, § 3105) grants the Legislative Actuary sole authority for determining whether a retirement bill is fiscal or non-fiscal and his certification was correct for the following reasons: 1) OPLAAA's definition of "retirement system" (62 O.S. 2011, § 3103 (9)) is focused on the body corporate (OPERS) and not on the individual plans of a retirement system (defined contribution system); and 2) HB 2630 did not create or increase benefits, normal cost or actuarial accrued liability. They further contested the Appellants' basis for standing, asserting their alleged injuries are too speculative to invoke the district court's jurisdiction to issue a declaratory judgment (12 O.S. § 1651)
¶ 10 Lastly, the Appellees asserted even if the Legislature violated OPLAAA it presents
¶ 11 The trial court heard the motions for summary judgment on July 21, 2015, and filed a Journal Entry of Judgment on January 6, 2016. As to individual standing, it specifically found the Appellants had standing based upon their allegations HB 2630 adversely affected the actuarial soundness of the defined benefit plan. Taylor v. State & Educ. Employees Group Ins. Program, 1995 OK 51, 897 P.2d 275. The trial court determined that in order to obtain a declaratory judgment a plaintiff must establish (1) a justiciable controversy exists, (2) between persons whose interests are adverse, (3) plaintiff has a legal interest in the controversy, and (4) the issues are ripe for judicial review. Knight v. Miller, 2008 OK 81, ¶ 8, 195 P.3d 372. The trial court determined the issues were not ripe for judicial review. HB 2630 does not immediately threaten the actuarial soundness of the defined benefit system, unreasonably impair the contract rights of retired public employees and those eligible for retirement, and does not increase contributions or reduce the benefits of retired public employees or those eligible to retire. Taylor, 1995 OK 51 at ¶ 20, 897 P.2d 275. On the contrary, it found HB 2630 actually provided for continuing funding of the defined benefit plan by requiring employers to pay the difference in contributions to the defined benefit plan.
¶ 12 The trial court also held OPLAAA had not been violated. It first determined a new retirement system under 62 O.S. 2011, § 3103 (9) would have to provide retirement benefits to a new group of employees not covered by a current retirement system which did not occur here. It found HB 2630 did not immediately affect the costs or funding factors of OPERS, did not increase "retirement benefits" as the term is commonly understood, and did not immediately increase the actuarial accrued liability or normal cost of the defined benefit system. The trial court sustained the Appellees' motion for summary judgment and the Appellants filed their Petition in Error on February 4, 2016.
STANDARD OF REVIEW
¶ 13 Summary judgment is a pretrial procedure available where there is no dispute as to the material facts and the inferences that may be drawn from the undisputed material facts and where the evidentiary materials establish each and every material fact necessary to support the judgment as a matter of law. State ex rel. Pruitt v. Native Wholesale Supply, 2014 OK 49, ¶ 11, 338 P.3d 613. An appeal on summary judgment comes to this Court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶ 2, 914 P.2d 1051. On appeal, this Court assumes "plenary independent and non-deferential authority to reexamine a trial court's legal rulings." Kluver v. Weatherford Hospital Auth., 1993 OK 85, ¶ 14, 859 P.2d 1081, 1084. This Court will affirm a correct judgment on any applicable theory. See In re M.K.T., 2016 OK 4, ¶ 86, 368 P.3d 771.
¶ 14 The Appellants' claims can be categorized as one individual standing claim and two taxpayer standing claims. The trial court
¶ 15 The Appellants' first taxpayer standing claim concerns an alleged illegal expenditure of public funds based upon a violation of OPLAAA. This claim was decided by the trial court. The Appellants' Brief in Chief states "this is a case about the legislature ignoring its own legal obligations as a mere matter of convenience." Their primary contention is the Legislature failed to comply with OPLAAA in passing HB 2630. The Appellants allege the trial court erred as a matter of law in finding there was no violation of OPLAAA and assert they have taxpayer standing to present their claims. In order to have taxpayer standing we have held "a taxpayer possesses standing to seek equitable relief when alleging that violation of a statute will result in illegal expenditure of public funds." Thomas v. Henry, 2011 OK 53, ¶ 6, 260 P.3d 1251. Here the alleged illegal act was the passage of HB 2630 in violation of OPLAAA's procedures. The alleged expenditure of public funds was largely based on speculation concerning future expenditures which may or may not occur as a result of HB 2630. However, the Appellants did provide some evidence of expenditures. They provided invoices from OPERS's attorneys concerning the new defined contribution system which they alleged is evidence of start-up costs related to HB 2630. In addition, the Appellants point to the provisions of HB 2630 which require the OPERS employers to reimburse certain administrative costs related to the new defined contribution system. 74 O.S. Supp. 2014, § 935.6 (E). The Appellants assert, because this is a reimbursement, the assets of the defined benefit plan must have been used to pay those administrative costs up-front. It is not clear from the record if such administrative costs were ever actually paid, the amount of such costs or from what source such costs were or would have been paid.
¶ 16 The Appellants' arguments focus on whether HB 2630 violated OPLAAA. They allege HB 2630 violated OPLAAA because it was passed as a non-fiscal retirement bill rather than a fiscal retirement bill. The Appellants assert the Legislative Actuary's certification that HB 2630 was a non-fiscal retirement bill was incorrect because HB 2630 creates a new retirement system and, based upon the Appellants' independent analysis, its provisions affect OPERS's costs and funding factors in an unacceptable manner (62 O.S. 2011, § 3103 (5)).
¶ 17 The dispositive issue, however, rests on a matter of first impression, i.e., whether a violation of OPLAAA is justiciable. The Appellees assert a violation of OPLAAA is non-justiciable, relying on the separation of powers doctrine and asserting OPLAAA is merely a legislative procedural statute created by the Legislature pursuant to its constitutional rulemaking powers (Okla. Const. art. 5, § 30). The Appellees cite Dank v. Benson, 2000 OK 40, 5 P.3d 1088 for support. In Dank the Petitioner, a member of the Oklahoma House of Representatives, sought a declaratory judgment and writ of mandamus asking this Court to construe the phrase "read at length" found in Okla. Const. art. 5, § 34 to mean "reading each and every
This Court ultimately did not find the Petitioner's action justiciable because it did not deal with a specific piece of legislation and only concerned a hypothetical situation. Id. at ¶¶ 7-10.
¶ 18 The Appellees also cite as persuasive authority a decision from another jurisdiction with a similar issue. In Board of Trustees of Judicial Form Retirement System v. Attorney General of the Commonwealth of Kentucky, 132 S.W.3d 770 (Ky. 2003), the Supreme Court of Kentucky ruled on a statute which contained similar restrictions as those contained in OPLAAA (KRS 6.350). KRS 6.350 prohibits a retirement bill from being reported out of a legislative committee if it increases benefits and is not accompanied by an actuarial analysis. Board of Trustees of Judicial Form Retirement System, 132 S.W.3d at 776. The Attorney General of Kentucky determined House Bill 389 (4), which sought to increase legislative retirement benefits, was void because it was enacted without obtaining the required actuarial analysis. Id. The Supreme Court of Kentucky held KRS 6.350 was procedural in nature and had no constitutional implications. Id. at 777. The Court determined "[s]o long as those rules do not violate some other provision of the Constitution, it is not within our prerogative to approve, disapprove, or enforce them." Id. It noted that while the separation of powers doctrine prohibited it from telling the general assembly what system or rules to enact, it retained jurisdiction to determine whether such systems violated any constitutional mandates. Id. The Supreme Court of Kentucky ultimately found KRS 6.350 had not been violated because an actuarial analysis had been obtained concerning another failed piece of legislation which dealt with the same issue that session. Id. at 778. The analysis the Supreme Court of Kentucky undertook is useful to our present case.
¶ 20 As to the Appellants' first contention, the required attachment of the actuarial certification to the enrolled bill does not change the procedural nature of OPLAAA. Title 62 O.S. 2011, § 3114 provides:
OPLAAA requires the attachment of the actuarial certification to follow through the entire legislative process. See 62 O.S. 2011, §§ 3105, 3109, and 3110. The obvious intent and purpose behind the actuarial certification is to provide actuarial information to the Legislature. We find no precedent concerning attachments to enrolled bills. This characteristic appears unique to OPLAAA. The actuarial certification is not contained in the four corners of the enrolled bill. It is neither codified nor does it appear as a non-codified law or receive any mention in the Oklahoma Session Laws (2014 Okla. Sess. Laws c. 375). It simply does not become law. The mere fact the certification is attached to the enrolled bill does not change OPLAAA's procedural nature nor our observance of the Legislature's constitutional powers for creating its own rules of procedure (Okla. Const. art. 5, § 30).
¶ 21 The Appellants' second contention, that OPLAAA forbids a retirement bill having a fiscal impact without concurrent funding from taking effect even if passed by the Governor, was also asserted to show OPLAAA was not merely procedural in nature. This argument is based on the provisions of 62 O.S. 2011, § 3111 (A) which provide in pertinent part:
Two provisions of OPLAAA appear to contain more than mere legislative procedure. Section 3111 (above) as well as parts of 62 O.S. 2011, § 3112 which requires the State Board of Equalization to make certain determinations and requires information be provided by executive branch agencies, affect more than just the Legislature and are not merely legislative procedure. However, the issue before us is based on the Legislative Actuary's certification. The Appellants' arguments stem from an assertion the certification was incorrect. The bulk of OPLAAA's fourteen sections, including those concerning the Legislative Actuary's certification, are codified legislative procedure. The fact that some portions of OPLAAA may be more than legislative procedure does not alter our determination that OPLAAA is procedural in nature especially as it pertains to the effect of the Legislative Actuary's certification.
¶ 22 The pertinent provisions of OPLAAA relevant to this action are part of a codified set of legislative procedures. These codified procedures amount to self-imposed limitations on how retirement legislation is presented and passed during the legislative process. The result is the same if the legislative procedure is adopted by rule or if it is codified. Board of Trustees of Judicial Form Retirement System, 132 S.W.3d at 777. These procedures require certain actuarial information be provided concerning a retirement bill, require this information to follow the bill, and prohibit a retirement bill's continuation through the legislative process if certain conditions are not met. Here, the Legislature obtained the required actuarial certification, thus complying with its own procedures. The Appellants challenge the correctness of the Legislative Actuary's certification.
¶ 23 The Appellants also raised a second taxpayer claim. They assert HB 2630 violated Okla. Const. art. 23, § 12 as well as Internal Revenue Code § 401 (a) (2) (26 U.S.C. § 401 (a) (2)). This claim is independent of any claims related to OPLAAA. The Appellants assert money used to establish the defined contribution system and up-front administrative costs under HB 2630 had to come from the OPERS defined benefit plan assets and were therefore not used for the exclusive benefit of the defined benefit plan members.
ALL JUSTICES CONCUR.
1964 OK 74, ¶0, 391 P.2d 242 (syl. No. 1 by the Court).
Board of Trustees of Judicial Form Retirement System, 132 S.W.3d at 777.