Untitled Texas Attorney General Opinion ( 2009 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
November 23,2009
The Honorable Steve Ogden Opinion No. GA-0746
Chair, Senate Finance Committee
Texas State Senate Re: Validity of appropriation of a one-time
Post Office Box 12068 payment to annuitants of the Teacher Retirement
Austin, Texas 78711-2068 System and the Employees Retirement System
(RQ-0801-GA)
The Honorable Jim Pitts
Chair, House Committee on Appropriations
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910
Dear Senator Ogden and Representative Pitts:
The Eighty-first regular session of the Texas Legislature appropriated funds to the
Comptroller of Public Accounts to provide a one-time payment to eligible annuitants of the Teacher
Retirement System of Texas ("TRS") and the Employees Retirement System of Texas ("ERS"). You
inquire about the statutory and constitutional validity of this appropriation. 1 Essentially you ask
whether the Legislature is authorized to make a one-time payment to certain retirees. As discussed
below, while the short answer to this question is "yes," the Legislature may do so only in a legally
authorized manner. Moreover, the Legislature established an unusual and virtually insurmountable
legal standard for making the proposed payment by requiring that this office issue a "conclusive
opinion that such one-time payments are constitutionally and statutorily permissible." General
Appropriations Act, 81stLeg., R.S., ch. 1424, art. IX, § 17. 13 (a), (b)(4), (c)(3), 2009 Tex. Gen. Laws
4483, 5375-76 [hereinafter General Appropriations Act]. In order to issue a "conclusive opinion,"2
lRequest Letter (available at http://www.texasattomeygeneral.gov).
2The term "conclusive" is defmed as "putting an end to debate or question esp. by reason of irrefutability."
MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 258 (lIth ed. 2004). Both Texas and federal courts recognize this
definition of the term "conclusive." Tex. Democratic Partyv. Benkiser, 459 F.3d 582, 592 n.16 (5th Cir. 2006) (citing
WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY UNABRIDGED (2002), BLACK'S LAW DICTIONARY 308 (8th ed.
2004); Cope v. State, 39 S.W.2d 891, 892 (Tex. Crim. App. 1931».
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The Honorable Jim Pitts
we must be able to irrefutably state that the payments are constitutionally and statutorily
permissible. 3
I. Relevant Law
Article IX, section 17.13(a) of the General Appropriations Act for the 2010-11 biennium
provides, in relevant part:
(a) There is hereby appropriated to the Comptroller of
Public Accounts an amount estimated to be $155,248,741 out of the
General Revenue Fund which consists of an amount estimated to be
$34,723,050 for the Employees Retirement System and an amount
estimated to be $120,525,691 for the Teacher Retirement System for
the purpose of providing a one-time payment (equivalent to the
annuitant's monthly benefit, not to exceed $500) to eligible members
of the Employees Retirement System and the Teacher Retirement
System as defined below in sections b and c.
General Appropriations Act, art. IX, § 17. 13 (a), at 5375.
The Comptroller is further directed to transfer these funds to subaccounts within the TRS and
the ERS for payment of the referenced amounts. See id. Subsection (b) provides additional details
for eligible members ofERS. See id. § 17.13(b), at 5376. Eligibility for payment to ERS annuitants
is restricted to a person who retired from the employee class on or before December 31, 2008, and
who is receiving a retirement annuity under certain provisions of chapter 814 of the Government
Code. See id. Eligibility for payment to TRS annuitants is restricted to a person who retired on or
before December 31,2008, and is made "[c ]ontingent on the passage of Senate Bill 2567 , or similar
legislation authorizing the payment." Id. § 17.1 3(a), at 5375. Senate Bill 2567 did not become law,
but similar legislation, House Bill 3347, was enacted to provide for the one-time payment. Act of
May 31,2009, 81st Leg., R.S., ch. 1171, § 5,2009 Tex. Gen. Laws 3704, 3707.
Payments to both classes of annuitants are also contingent "upon the issuance of an Attorney
General opinion that indicates the ... one-time payments are constitutionally and statutorily
permissible." General Appropriations Act, art. IX, § 17.l3(a), at 5375. Moreover, "[i]ftheAttorney
General does not provide a conclusive opinion that such one-time payments are constitutionally and
statutorily permissible, amounts appropriated herein shall be transferred" to the respective retirement
funds. Id. § 17.l3(b}-(c), at 5376.
While you do not cite any particular provisions ofthe Texas Constitution, several are relevant
to your question. Article XVI, section 67 authorizes the Legislature to "enact general laws
3This opinion is limited to the legislative appropriation passed during the 2009 legislative session that is the
subject of your opinion request and specifically does not address a retirement system's authority to pay other benefits
pursuant to article XVI, section 67 of the Texas Constitution.
The Honorable Steve Ogden - Page 3 (GA-0746)
The Honorable Jim Pitts
establishing systems and programs of retirement and related disability and death benefits for public
employees and officers." TEx. CONST. art. XVI, § 67(a). This provision requires the Legislature to
establish a Teacher Retirement System and an Employees Retirement System. Id. § 67(b)(1)-(2).
Sections 44 and 53 of article III prohibit the granting of extra compensation after service has been
performed or rendered or after a contract for performance has been entered into. Article ill, section
44 provides, in relevant part:
The Legislature shall provide by law for the compensation of
all officers, servants, agents and public contractors, not provided for
in this Constitution, but shall not grant extra compensation to any
officer, agent, servant, or public contractors, after such public service
shall have been performed or contract entered into, for the
performance of the same ....
TEx. CONST. art. III, § 44. Similarly, article III, section 53 provides in relevant part:
The Legislature shall have no power to grant, or to authorize
any county or municipal authority to grant, any extra compensation,
fee or allowance to a public officer, agent, servant or contractor, after
service has been rendered, or a contract has been entered into, and
performed in whole or in part ....
Id § 53. 4 Enabling legislation adopted to authorize the referenced payment to retirees became
effective on September 1,2009, the same date as the General Appropriations Act. s
II. Analysis
We begin our analysis with the proposition that the referenced appropriations for the benefit
ofERS and TRS annuitants are presumed to be constitutionally permissible. See TEx. GOV'T CODE
ANN. § 311.021 (Vernon 2005) ("In enacting a statute, it is presumed that: (1) compliance with the
constitutions of this state and the United States is intended ...."); see also Tex. Mun. League
Intergovernmental Risk Pool v. Tex. Workers' Compo Comm'n, 74 S.W.3d 377,381 (Tex. 2002)
(stating that a statute must be construed "in a manner that renders it constitutional and gives effect
to the Legislature's intenf'). In the present instance, however, the Legislature has explicitly waived
the applicability of this presumption by conditioning the appropriations on the issuance of a
"conclusive opinion" by the Attorney General that the payments are "constitutionally and statutorily
permissible." In doing so, the Legislature expressed its concern that the legislation might, in fact,
4In an analysis ofthe Texas Constitution, one author states that "[n]ot only is no difference between the sections
[44 and 53] recognized by the courts, they sometimes rely on both sections in the same case or use Section 53 cases for
precedent in a Section 44 case or vice versa." GEORGE D. BRADEN, THE CONSTITUTION OF THE STATE OF TEXAS: AN
ANNOTATED AND COMPARATIVE ANALYSIS 189 (1977).
5See Act of May 31, 2009, 81stLeg., R.S., ch. 1171, § 5,2009 Tex. Gen. Laws 3704, 3707 (TRS),seeaisoAct
of May 29, 2009, 81st Leg., RS., ch. 1308, § 42, 2009 Tex. Gen. Laws 4099,4110 (ERS).
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The Honorable Jim Pitts
not be constitutional. Thus, the question will be reviewed without regard to the presumption of
constitutionality.
Briefing received by our office argues that the one-time payments provided under the General
Appropriations Act are valid payments under the state retirement systems mandated by article XVI,
section 67 of the Texas Constitution. 6 Indeed, the statutes relating to both ERS and TRS authorize
the trustees of each system to increase the amount of annual benefits paid to a retiree pursuant to
article XVI, section 67 of the Texas Constitution, so long as the funds remain actuarially sound. 7
See, e.g., TEX. GoV'T CODE ANN. §§ 811.006, 814.602(ERS), 821.006, 824.701 (TRS) (Vernon
2004). Other statutes governing ERS and TRS contemplate supplemental payments under certain
defined circumstances, see id. §§ 814.603 (ERS), 825.402 (TRS), and as recently as 2007, the
Legislature provided for a one-time supplemental payment to TRS retirees. In each of these
instances, however, the legislation authorizing the increase in benefits or supplemental payments
directs the respective retirement systems to make such payments, and in making such payments the
trustees of those systems had to· act in accordance with their authority and attendant duties under
article XVI, section 67.
In enacting section 17.13 of the 2010-11 General Appropriations Act, the Legislature
circumvented this constitutional framework. Instead, it opted to make a direct appropriation of state
funds to the Comptroller for the purpose of providing payments to recipients outside of the trust
funds. By utilizing this approach, the Legislature chose to bypass the trustees of the respective
retirement systems and thus prevented the funds from becoming trust funds of the respective
retirement systems. 8 As discussed above, the Legislature is aware of legal means by which to
provide additional benefits to retirees. It conspicuously failed to utilize such approaches during the
Eighty-first legislative session, and in bypassing the retirement systems the Legislature rendered
suspect any reliance on article XVI, section 67 as authority for such payments. As such, we cannot
irrefutably state that the proposed payments are independently authorized under article XVI, section
67. See Request Letter and attachments.
The focus of our analysis then shifts to the issue of whether the proposed payments would
constitute prohibited "extra compensation" under article III, sections 44 and 53 of the Texas
Constitution. The key question when analyzing the proposed payments under these provisions is
6Brief from Deats, Durst, Owen & Levy, P .L.L.C., on behalf of the American Federation of State, County and
Municipal Employees, AFL-CIO, at 1 (July 20,2009) (on file with the Opinion Committee).
7Briefmg received by our office raises questions about the actuarial soundness of the trust funds. See Brief from
Employees Retirement System of Texas, at 2 n.1 (June 26, 2009) (stating that "[a]n increase in the state's overall
contributions to the trust funds will bring the fund closer to actuarial soundness") (on file with the Opinion Committee)
[hereinafter ERS Brief].
8ERS Brief at 2.
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The Honorable Jim Pitts
whether the payments about which you inquire were authorized under the employment contracts or
laws in place at the time the services were provided. 9
In the situation you describe, the one-time payments authorized by section 17.13 were not
made pursuant to or provided for under the statutory retirement plans and were not effective until
the effective date of the General Appropriations Act: September 1,2009. Neither was the general
legislation supporting the payments effective until that date. 10 And yet these one-time payments are
made to apply only to those individuals who retired, died", or would have otherwise been eligible on
or before December 31,2008. See General Appropriations Act, art. IX, § 17.13(a), at 5375. As a
result, authority for the one-time payment did not exist during the time those persons were employed
or prior to the time they retired.!! Thus, neither the payment nor its enabling statutes could have
formed part of the employment contract of any person eligible to receive the referenced payment.
Furthermore, we have found no other law in existence on or before December 31, 2008, and none
have been cited to us', that would have authorized the paymentsY We are therefore obliged to
conclude that a court could find that the one-time payments to ERS and TRS retirees, as authorized
91t has been suggested by ERS that section 17.13 does not, for ERS retirees, contravene the prohibitions of
article III, sections 44 and 53 against "extra compensation" because the contemplated payments arguably do not even
constitute "compensation," on the. ground that the term "compensation," as defmed in section 811.001 of the
Government Code, does not include supplemental payments. ERS Brief at 3. The TRS statutes do not define the word
"compensation." Even if we were to accept ERS 's defmition of the term "compensation" in the ERS statutes, they would
not control the meaning of "extra compensation" for purposes of the Texas Constitution. Moreover, ERS contends that
"[t]he '13th checks' that ERS has distributed from the trust funds in the past have never been considered compensation
for purposes of the federal [Internal Revenue Code]." ld. But, as we have indicated, the payments authorized by section
17.13 cannot be viewed constitutionally as 13th checks precisely because they are not distributions from trust funds under
article XVI, section 67. Rather, they are direct payments from the Legislature to the Comptroller that bypass the trustees
of the retirement systems.
10See supra note 5.
l1COurtS "look to the retirement plan and the law governing the plan in effect when the employee entered
retirement status" to determine whether a retiree constitutionally may receive a post-retirement increase in benefits. Tex.
Att'y Gen. LG-97-113, at 3. See also Tex. Att'y Gen. Gp. No. JC-0383 (2001) at 2 ("a county generally may not
increase a former employee's retirement benefits beyond those for which the county provided at the time of retirement").
If a statutory provision is not in effect during any period of a person's employment, or at the time of retirement, it cannot
have constituted a part of his employment contract, and this difficulty raises constitutional concerns.
12Section 17.13 also provides that the one-time payments to ERS and TRS annuitants "are due to the availability
of' federal funds authorized by the American Recovery and Reinvestment Act of 2009 (the "ARRA"). See General
Appropriations Act, art. IX, § 17.13(d), at 5376. Some briefs have argued that the ARRA might give rise to federal
preemption. See, e.g., Brief from Morgan, Lewis & Bockius, LLP, on behalf of Texas Retired Teachers Association,
to Honorable Greg Abbott, Attorney General of Texas, at 16-19 (July 20,2009) (citing to the ARRA) [hereinafter
Morgan Brief]. Although the Legislature indicated that the relevant appropriations were made possible by the availability
of ARRA funds, nothing in the ARRA mandates, or even suggests, that those funds are to be expended for the purpose
of making a one-time payment to retired teachers or retired state employees. See American Recovery and Reinvestment
Act of 2009, Pub. L. 111-5, 123 Stat. 115 passim. There is certainly no clear statement of Congressional intent to
preempt state law or constitutional provisions governing such payments.
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by section 17.13 of the 2010-11 General Appropriations Act, might well constitute extra
compensation in contravention of both sections 44 and 53 of article III of the Texas ConstitutionY
The language of section 17.13 requires that "[i]f the attorney general does not provide a
conclusive opinion that [the] one-time payments are constitutionally and statutorily permissible,"
the "amounts appropriated ... shall be transferred to" the respective retirement systems. General
Appropriations Act, art. IX, § 17. 13 (b)(4), (c)(3), at 5376. Because we cannot conclusively opine
that such payments "are constitutionally and statutorily permissible," it follows that the relevant
appropriated funds must be directed to the Comptroller of Public Accounts for transfer to ERS and
TRS in accordance with the directive of section 17.13. These transfers will increase the state
contribution rate to ERS from 6.45 percent to 6.95 percent and the state contribution rate to TRS
from 6.40 percent to 6.644 percent. General Appropriations Act, art. IX, § 17.13(b)-(c), at 5376.
As a brief received from ERS notes, "[a]n increase in the state's overall contributions to the trust
fund will bring the fund closer to actuarial soundness, and, therefore, will increase the fund's long-
term financial stability. Such a result inures to the benefit of both annuitants and active
employees. ,,14 Moreover, when the funds are actuarially sound, the trustees ofthe respective systems
are independently authorized to consider increases in the benefits paid to retirees.
13 Several briefs have contended that sections 51 and 52( a), article III of the Texas Constitution, which prohibit
"any grant of public moneys" to any private individual or corporation, are also implicated by your questions. See, e.g.,
Morgan Brief at 5-10. Because we have concluded that a court could find that payments authorized under section 17.13,
article IX of the General Appropriations Act are invalid under sections 44 and 53 of article III, we need not address that
provision's validity under section 51 or 52(a). See TEX. CONST. art. III, §§ 51, 52(a).
14ERS Brief at 2 n.1.
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The Honorable Jim Pitts
SUMMARY
The Legislature is authorized to arrange for one-time
payments to eligible retirees. To accomplish such payments, the
Legislature may appropriate funds directly to the Teacher Retirement
System of Texas ("TRS") and the Employee Retirement System of
Texas ("ERS") for distribution to retirees of the respective systems.
In enacting section 17.13 of the General Appropriations Act, the
Legislature chose not to pursue that path. The Legislature instead
appropriated funds to the Comptroller for the purpose of providing
payments to the recipients outside of the TRS and ERS trust funds.
By utilizing this approach, the Legislature chose to bypass the trustees
and therefore prevented the funds from becoming trust funds of the
respective retirement systems. The path chosen by the Legislature
calls into question a reliance on article XVI, section 67 of the Texas
Constitution as authority for such payments and raises questions
about whether the payments would violate article III, sections 44 and
53 ofthe Texas Constitution. Because the language of section 17.13
requires a "conclusive opinion that such one-time payments are
constitutionally and statutorily permissible" and because the
appropriation raises questions about compliance with article III,
sections 44 and 53 of the Texas Constitution, the appropriation
provision on its very face makes it impossible for us to conclusively
opine that such payments "are constitutionally and statutorily
permissible."
As a result, the Legislature has mandated that the relevant
appropriated funds must be transferred to TRS and ERS in
accordance with the directive of section 17.13. Such transfers will
bring the trust funds closer to actuarial soundness and thus increase
.the long-term financial stability of the funds, a result that should
benefit both current and future retirees. Moreover, when the funds
are actuarially sound, the trustees of the respective systems are
independently authorized to consider increases in the benefits paid to
retirees.
Very truly yours,
The Honorable Steve Ogden - Page 8 (GA-0746)
The Honorable Jim Pitts
ANDREW WEBER
First Assistant Attorney General
JONATHANK. FRELS
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Rick Gilpin
Assistant Attorney General, Opinion Committee