Josephine County v. PERB

150

Argued and submitted October 8, 2020, affirmed December 8, 2021

JOSEPHINE COUNTY

and Jackson County,

Petitioners-Appellants,

v.

PUBLIC EMPLOYEES RETIREMENT BOARD,

the state board of the

Public Employees Retirement System,

Respondent.

Marion County Circuit Court

17CV01027; A170263

504 P3d 624

Jackson and Josephine Counties (counties) appeal the trial court’s denial

of their challenge to the counties’ individual employer contribution rates set by

the Public Employees Retirement Board (board) for the 2017 to 2019 biennium.

Those rates incorporated the outstanding liabilities to the Public Employees

Retirement System (PERS) of The Job Council (TJC), an intergovernmental

entity that the counties created at some point before 1993 and dissolved in 2015.

The counties contend that the trial court erred in determining that the board

had statutory authority to collect TJC’s outstanding PERS liabilities by using the

board’s rate-setting power to increase the counties’ individual contribution rates.

Held: The outstanding PERS liabilities of TJC were the liabilities of the counties

by operation of ORS 190.080(3) and the board had the authority to collect that

liability under ORS 238.225. Accordingly, the board did not err in determining

that it could account for the counties’ liabilities, inclusive of TJC’s outstanding

liabilities, through its rate-setting abilities, and the trial court did not err in

reaching the same conclusion.

Affirmed.

Sean E. Armstrong, Judge.

Crystal S. Chase argued the cause for appellants. Also on

the briefs were Amy Edwards and Stoel Rives LLP.

Peenesh Shah, Assistant Attorney General, argued the

cause for respondent. Also on the brief was Ellen F. Rosenblum,

Attorney General, and Benjamin Gutman, Solicitor General.

Before DeVore, Presiding Judge, and DeHoog, Judge, and

Mooney, Judge.

Cite as 316 Or App 150 (2021) 151

DeVORE, P. J.

Affirmed.

152 Josephine County v. PERB

DeVORE, P. J.

Jackson and Josephine Counties (counties) appeal

the trial court’s denial of their challenge to the counties’

individual employer rates set by the Public Employees

Retirement Board (board) for the 2017 to 2019 biennium.1

Those rates incorporated the outstanding liabilities to the

Public Employees Retirement System (PERS) of The Job

Council (TJC), an intergovernmental entity that the coun-

ties established at some point before 1993 and dissolved in

2015. We write to address only the counties’ third assign-

ment of error. We reject the counties’ remaining assign-

ments of error without discussion.

In their third assignment, the counties contend that

the trial court erred in determining that the board had stat-

utory authority to collect TJC’s outstanding PERS liabilities

by using the board’s rate-setting power to increase the coun-

ties’ individual contribution rates. We conclude that TJC’s

liabilities are the liabilities of the counties by operation of

ORS 190.080(3) and that the board had the authority to col-

lect that liability through its broad rate-setting authority in

ORS 238.225. Accordingly, we affirm.

On appeal of a trial court’s decision on review of

an administrative order in an other than contested case,

we directly review the agency’s order, as relevant here, for

errors of law or whether the agency acted outside the range

of discretion delegated to it by law. ORS 183.484(5)(a) and

(5)(b); Ericsson v. DLCD, 251 Or App 610, 620, 285 P3d 722,

rev den, 353 Or 127 (2012). The facts relevant to our discus-

sion are undisputed.

The counties created the intergovernmental entity,

TJC, pursuant to ORS 190.010 at some point before 1993.2

1

The board’s orders at issue here are orders in other than contested cases.

The counties filed a petition for judicial review of those orders under ORS 183.484,

which provides, in part:

“Jurisdiction for judicial review of orders other than contested cases is con-

ferred upon the Circuit Court for Marion County and upon the circuit court

for the county in which the petitioner resides or has a principal business

office.”

2

Under ORS 190.010, “[a] unit of local government may enter into a written

agreement with any other unit or units of local government for the performance

Cite as 316 Or App 150 (2021) 153

The counties’ Boards of Commissioners signed the intergov-

ernmental entity agreement (IGA) in 1993. The purpose of

TJC was to enhance employment opportunities for citizens

of the counties through the planning and implementation

of workforce programs, as funded, in part, by the federal

Workforce Investment Act.

In May 1998, TJC joined PERS. The “Contract of

Integration” between TJC and PERS provided that TJC’s

employees would receive PERS credit for the length of their

employment prior to May 1998. Due to that credit, TJC

incurred an unfunded actuarial liability (UAL) in the “low

3 million range” upon joining PERS. Later, when joining

the PERS Local Government Rate Pool in 2000, TJC’s UAL,

then valued at $3,709,000, became its own “transition liabil-

ity” (PERS liability) that it was responsible for independent

of the other employers in the pool. By December 31, 2014,

TJC’s outstanding PERS liability had grown to $4,676,513.

In December 2014, Jackson County initiated the

process to dissolve TJC due to changes in federal fund-

ing requirements and TJC’s unsustainable PERS liability.

Dissolution was to be effective June 30, 2015. Pursuant to its

IGA, TJC’s executive director, James Fong, served as the liq-

uidating agent responsible for winding down TJC. In April

2015, Fong, on behalf of TJC, sent a letter to PERS to alert

it to TJC’s pending dissolution. A majority of TJC’s employ-

ees were hired by ResCare, a national, for-profit entity that

took over some of TJC’s workforce training activities. At the

counties’ direction, Fong transferred TJC’s assets, includ-

ing $427,553 in cash, to the Rogue Workforce Partnership,

a private nonprofit that subsequently hired Fong and some

of TJC’s employees. TJC and Fong did not provide for any

entity to assume TJC’s mounting PERS liability. On June 23,

2015, Fong officially contacted PERS to request that TJC be

put on “inactive status.”

PERS responded to TJC via letter on June 29,

2015, informing the counties that TJC’s PERS liability of

$4,738,287 would need to be addressed upon TJC’s disso-

lution. Although, at that time, PERS did not have a formal

of any or all functions and activities that a party to the agreement, its officers or

agencies, have authority to perform.”

154 Josephine County v. PERB

policy for collecting outstanding UALs when participating

employers dissolved, PERS alerted the counties that its

“preference would be to arrive at an agreement with Jackson

and Josephine counties in which the counties would assume

whatever portion of [TJC’s PERS liability] remains after its

assets are liquidated.” Rather than collect the amount in a

lump sum, PERS said that it would prefer to collect TJC’s

outstanding liability by amortizing the amount as a part

of each county’s employer contribution rates over several

years.

On October 30, 2015, Josephine County told PERS

that it had “no interest, intent or ability” to assume any por-

tion of TJC’s liability.

On July 18, 2016, the chief administration officer

of PERS wrote to the counties to alert them that the board

was planning to proceed as outlined in its June 2015 letter.

PERS explained that it believed that, by operation of ORS

190.080,3 which governs intergovernmental entities subject

to IGAs, TJC’s liability became that of the counties upon its

dissolution and could therefore be collected as the counties’

liability through the counties’ individual contribution rates.

For a few months, the board postponed, at the

counties’ request, adoption of the counties’ 2017 to 2019

employer contribution rates. But, in November 2016, the

board accepted PERS staff’s recommendation and increased

Jackson County’s and Josephine County’s 2017 to 2019 con-

tribution rates by 0.51% and 1.77% of their respective pay-

rolls to reflect the amortization of TJC’s PERS liability (the

November 2016 order).

In January 2017, the counties filed a petition for

judicial review challenging the board’s order. As allowed

by ORS 183.484(4), the board notified the trial court that

it was withdrawing its November 2016 order for “purposes

of reconsideration” to either “affirm, modify or reverse its

order.” At the recommendation of PERS staff, the board

3

Explained in further detail below, ORS 190.080(3) provides that “[t]he

debts, liabilities and obligations of an intergovernmental entity shall be, jointly

and severally, the debts, liabilities and obligations of the parties to the intergov-

ernmental agreement that created the entity, unless the agreement specifically

provides otherwise.”

Cite as 316 Or App 150 (2021) 155

reaffirmed its November 2016 order and adopted additional

grounds for its decision in a June 2018 order. The addi-

tional grounds included (1) that the Contingency Reserve,

a $25 million emergency fund for insolvent employers under

ORS 238.670(1)(a), was not available to cover TJC’s liabil-

ity because TJC did not meet the definition of an “insol-

vent employer” under OAR 459-009-0400(1) and (2) that

the counties were also responsible for the PERS liability

as TJC’s “successor” as provided by OAR 459-009-0070(12)

(November 4, 2005).

The trial court granted the counties a partial sum-

mary judgment, concluding that the board had impermissi-

bly applied the insolvent employer rule retroactively to the

counties in its June 2018 order and could not rely on that

basis to support its rate order. After a trial on the board’s

remaining justifications, the trial court denied the counties’

petition for review. The trial court concluded that the board

had authority to set employer contribution rates under ORS

238.225; TJC’s liabilities were the liabilities of the counties

by operation of ORS 190.080(3); TJC’s IGA provided that the

counties would be equally responsible; there was substantial

evidence to support the board’s determination of the PERS

liability; and the board properly exercised its discretion to

decline use of the contingency reserve in favor of collecting

the PERS liability through its rate-setting authority.

In their third assignment of error, the counties

argue that the board erred or acted outside the range of its

discretion by concluding that it had statutory authority to

collect TCJ’s PERS liability through the counties’ employer

contribution rates. As we explain, however, the relevant

statutes provided the board straightforward authority to

collect the PERS liability through the board’s rate-setting

power.

The counties created TJC as an intergovernmental

entity under ORS 190.010, which provides, in part:

“A unit of local government may enter into a written agree-

ment with any other unit or units of local government for

the performance of any or all functions and activities that

a party to the agreement, its officers or agencies, have

authority to perform.”

156 Josephine County v. PERB

Unless the intergovernmental agreement (IGA) between the

two units of local government provides otherwise,

“[t]he debts, liabilities and obligations of an intergovern-

mental entity shall be, jointly and severally, the debts, lia-

bilities and obligations of the parties to the intergovern-

mental agreement that created the entity.”

ORS 190.080(3). Parties to an IGA may, but are not required

to, “assume responsibility for specific debts, liabilities or obli-

gations of the intergovernmental entity.” ORS 190.080(4).

Contrary to the counties’ view, the plain language

of ORS 190.080(3) provides that any debts accrued by an

intergovernmental entity “shall be” considered, jointly and

severally, the liabilities of the parties who created the entity.

By operation of the statute alone, without any further court

proceeding, the debts of the intergovernmental entity are the

debts of the parties that created the entity. See Doyle v. City

of Medford, 347 Or 564, 570, 227 P3d 683 (2010) (explaining

that “[o]rdinarily, use of the word ‘shall’ implies that the leg-

islature intended to create an obligation”). In this case then,

the debts of TJC, by operation of ORS 190.080(3), are the

debts of the counties.

The counties argue that, even so, the IGA in this

case provided that the counties should not be responsible

for the debts of TJC at all. The counties point to Article VII,

section 2 of the IGA, which provides:

“Upon any termination of this Agreement, TJC shall pay

or make provision for payment of its creditors, including

reimbursement to the federal government or other govern-

mental agencies of amounts required to be paid to them

upon termination of this Agreement and the liquidation of

TJC. Thereafter, the assets remaining shall be distributed

equally to the Governments.”

The counties argue that, under that provision, “The Job

Council is solely responsible for any debts or liabilities

remaining upon termination of the 2012 IGA.” (Emphasis

in counties’ brief.)

Contrary to the counties’ view, that provision merely

directs the TJC to satisfy its debts when dissolving. The

Cite as 316 Or App 150 (2021) 157

provision does not provide that TJC’s debts would remain

with TJC, even after its dissolution. It does not resolve the

situation, as here, where TJC dissolved without making

“provision for payment of its creditors.” Even if allowing the

counties to abandon TJC’s debts would be viable as a way to

“specifically provid[e] otherwise” for TJC’s debts under ORS

190.080(3), such a notion is contradicted by Article VII, sec-

tion 1 of the IGA, which provides:

“Any liability which may accrue to the Governments due

to TJC’s acts, errors, or omissions or TJC’s performance or

failure to perform pursuant to the requirements of state or

federal law shall be apportioned among the Governments

equally.”

(Emphasis added.) Therefore, to the extent that specific pro-

visions of the IGA bear on whether the counties are respon-

sible for TJC’s liabilities, the IGA does not provide that the

counties may absolve themselves of TJC’s debts, but that the

counties would share any liabilities equally. In short, the

debts of TJC, including the PERS liability, are the debts of

the counties by operation of statute, and that conclusion is

not negated by any provision of the IGA.

The board had the authority to collect that liabil-

ity by adjusting the counties’ employer contribution rates to

reflect the amortization of that debt over a period of years.

In general, an agency has the power to carry out activi-

ties as conferred by its organic legislation as well as such

implied power as is necessary to carry out the power that

is expressly granted. Service Employees Int’l Union Local

503 v. DAS, 183 Or App 594, 606, 54 P3d 1043 (2002). The

legislature has expressly granted PERS broad rate-setting

authority, providing that,

“[f]rom time to time, the board shall determine the liabili-

ties of the system and shall set the amount of contributions

to be made by participating public employers, and by other

public employers who are required to make contributions

on behalf of members, to ensure that those liabilities will

be funded no more than 40 years after the date on which

the determination is made.”

ORS 238.225. Further, that authorizing statute provides

that employers participating in PERS

158 Josephine County v. PERB

“shall, at intervals designated by [the board], transmit to

the board those amounts the board determines to be actu-

arially necessary to adequately fund the benefits to be pro-

vided by the contributions of the employer * * *.”

ORS 238.225. Those rate-setting abilities provided by the

legislature instruct the board to determine an employer’s

liabilities and set an employer’s contribution rate at a level

that ensures that those liabilities are funded within, at

least, 40 years after the date such determination is made.

That authority gives the board the implied powers neces-

sary to carry out those designated functions.

Under that scheme, the board is expressly instructed

to determine the liabilities of each participating employer.

That necessarily includes the implied ability to look to other

statutes to determine the nature of an employer and assess

whether those statutes affect the PERS liability of a partic-

ipating employer. As described above, ORS 190.080(3) pre-

scribes that the debts of TJC are the debts of the counties

as the “parties to the intergovernmental agreement that

created the entity.” Although the counties argue that ORS

190.080(3) does not expressly delegate power to the board,

the counties point to no statutory provision limiting the

implied powers of the board so as to prohibit the board from

acknowledging the applicable liabilities of a participating

employer.

Given that ORS 190.080(3) fixed the liability of the

counties for the intergovernmental entity they created and

dissolved, the rate-setting authority of ORS 238.225 allowed

the board to set the counties’ liabilities at a level that would

fund those liabilities “no more than 40 years after the date”

that determination was made. Accordingly, the board did

not err in determining that it could account for the counties’

liabilities, inclusive of TJC’s outstanding liabilities, through

its rate-setting abilities, and the trial court did not err in

reaching the same conclusion. For those reasons, we affirm.

Affirmed.