James v. State of Oregon

732

Argued and submitted June 16; petitioners’ requests for relief challenging

Oregon Laws 2019, chapter 355, sections 1-19 and 39-40, denied August 6, 2020

Jennifer JAMES,

Lisa Riegel, Rosanne Scott, Robert Martineau,

Regina Thompson, Emily Marx, Dustin Andrews,

Brandon Silence, Thomas Cleary,

Petitioners,

v.

STATE OF OREGON;

State of Oregon by and through

the Department of Human Services and

the Department of Transportation;

Multnomah County; City of Portland;

City of Salem; Oregon Health & Science University;

Mount Hood Community College;

Molalla River School District; and

Public Employees Retirement Board,

Respondents.

(SC S066933)

471 P3d 93

Petitioners sought direct judicial review of two statutory amendments to

the Public Employees Retirement System (PERS). The first challenged amend-

ment redirects a member’s PERS contributions from the member’s individual

account program—the defined-contribution component of the member’s retire-

ment plan—to a newly created employee pension stability account, used to help

fund the defined-benefit component of the member’s retirement plan. The second

challenged amendment imposes a cap on the salary used to calculate a member’s

benefits. Held: (1) The challenged amendments do not impair petitioners’ con-

tract rights under the state Contract Clause, Article I, section 21, of the Oregon

Constitution, because the amendments do not operate retrospectively to decrease

the retirement benefits attributable to work that the member performed before

the effective date of the amendments and because, although the amendments

operate prospectively to change the offer for future retirement benefits, the pre-

amendment statutes did not include a promise that the retirement benefits would

not be changed prospectively; (2) the challenged amendments do not breach peti-

tioners’ contract with participating employers; (3) the challenged amendments

do not violate the federal Contract Clause, Article I, section 10, clause 1, of the

United States Constitution; and (4) the challenged amendments do not constitute

an unconstitutional taking of petitioners’ property without just compensation in

violation of Article I, section 18, of the Oregon Constitution, and the Fifth and

Fourteenth Amendments to the United States Constitution.

Petitioners’ requests for relief challenging Oregon Laws 2019, chapter 355,

sections 1-19 and 39-40, are denied.

Cite as 366 Or 732 (2020) 733

En Banc

On petition for review under Oregon Laws 2019, chapter

355, section 65.

Aruna A. Masih, Bennett Hartman, LLP, Portland, argued

the cause and filed the briefs for petitioners on review. Also

on the brief was Gregory A. Hartman.

Benjamin Gutman, Solicitor General, Salem, argued the

cause and filed the brief for respondents State of Oregon and

the Public Employees Retirement Board. Also on the brief

was Ellen F. Rosenblum, Attorney General.

Daniel Simon, Deputy City Attorney, argued the cause

and filed the brief for respondents City of Portland and

Multnomah County. Also on the brief were Tracy Reeve,

City Attorney, and Robert L. Taylor, Chief Deputy City

Attorney.

William F. Gary, Harrang Long Gary Rudnick P.C.,

Eugene, argued the cause for respondents City of Salem,

Oregon Health and Science University, Mount Hood

Community College, and Molalla River School District.

Sharon A. Rudnick filed the brief. Also on the brief was

William F. Gary.

Paul C. Elsner, Beery, Elsner & Hammond, LLP,

Portland, filed the brief for amici curiae League of Oregon

Cities and Association of Oregon Counties. Also on the brief

was Ashley O. Driscoll.

WALTERS, C. J.

Petitioners’ requests for relief challenging Oregon Laws

2019, chapter 355, sections 1-19 and 39-40, are denied.

734 James v. State of Oregon

WALTERS, C. J.

The Public Employees Retirement System (PERS)

is a retirement-benefit program for covered public employee

members. In 2019, the legislature made various changes to

PERS by enacting amendments set out in SB 1049. Or Laws

2019, ch 355. Petitioners are PERS members challenging

two of those amendments. Respondents are the state, the

Public Employees Retirement Board (the board), and vari-

ous state and local public employers.

The first amendment that petitioners challenge

redirects a member’s PERS contributions from the mem-

ber’s individual account program—the defined-contribution

component of the member’s retirement plan—to a newly cre-

ated employee pension stability account, used to help fund

the defined-benefit component of the member’s retirement

plan. Or Laws 2019, ch 355, §§ 1-19. The second amendment

that petitioners challenge imposes a cap on the salary used

to calculate a member’s benefits. Or Laws 2019, ch 355,

§§ 39-40.

Petitioners primarily argue that the amendments

impair their contractual rights and therefore violate the

state Contract Clause, Article I, section 21, of the Oregon

Constitution. For the reasons that follow, we disagree. The

challenged amendments do not operate retrospectively to

decrease the retirement benefits attributable to work that

the member performed before the effective date of the

amendments. And, although the amendments operate pro-

spectively to change the offer for future retirement benefits,

the preamendment statutes did not include a promise that

the retirement benefits would not be changed prospectively.

We resolve petitioners’ other claims on similar grounds and

deny their requests for relief.

I. BACKGROUND

A. Jurisdiction and Evidentiary Record

This court has original jurisdiction to determine

whether the PERS amendments contained in SB 1049 breach

the contracts between PERS members and their employers

or otherwise violate provisions of the state or federal consti-

tution. Or Laws 2019, ch 355, § 65(1). After petitioners filed

Cite as 366 Or 732 (2020) 735

a complaint challenging the PERS amendments, the court

appointed Senior Judge Marilyn E. Litzenberger to serve as

special master. The special master proceedings resulted in

a Revised Joint Stipulated Facts and General Stipulations,

which includes factual stipulations necessary to establish

petitioners’ standing. We rely on those stipulations as the

evidentiary record in this case.

B. PERS Funding and Benefits

PERS is administered by the board. Public employ-

ees become PERS members after working six months in a

qualified position for the state or one of the other 900-plus

PERS-participating public employers. ORS 238.015(1); ORS

238A.100(1)(a); ORS 238A.300(1). As of October 2018, there

were more than 367,000 members in the PERS system,

which includes active, inactive, and retired members. There

are three categories of PERS members: Tier One members,

Tier Two members, and Oregon Public Service Retirement

Plan (OPSRP) members. Whether members fall into one

category or another depends on their start date. Moro v.

State of Oregon, 357 Or 167, 178, 351 P3d 1 (2015). Tier One

members were hired before January 1, 1996; Tier Two mem-

bers were hired from January 1, 1996, to August 28, 2003;

and OPSRP members were hired after August 28, 2003.

Id.

PERS is a tax-qualified defined-benefit governmen-

tal plan, which, since 2004, has included a defined bene-

fit with a defined-contribution component. Id. at 176 (dis-

tinguishing defined-benefit plans and defined-contribution

plans). The defined-benefit component is the service retire-

ment allowance or pension. And the defined-contribution

component is the individual account program (IAP).

The specifics of the defined-benefit component vary

depending on whether a member falls in Tier One, Tier Two,

or OPSRP. Upon retirement, Tier One and Tier Two mem-

bers receive a defined benefit in the form of a service retire-

ment allowance calculated using one of three formulas:

Full Formula, Formula Plus Annuity, or Money Match. See

Strunk v. PERB, 338 Or 145, 160-61, 108 P3d 1058 (2005)

(detailing the benefit formulas). The Formula Plus Annuity

and Money Match formulas calculate a member’s service

736 James v. State of Oregon

retirement allowance using, among other things, the amount

that the member has contributed to his or her regular or

variable accounts, as well as the earnings on those contri-

butions. The Full Formula, on the other hand, calculates a

member’s service retirement allowance by multiplying the

member’s final average salary by a statutory factor of 1.67

percent (two percent for police officers and firefighters) and

then multiplying the resulting figure by the member’s years

of service. Id. The board uses whichever formula yields the

highest pension amount for that member. Id. at 161. Today,

most Tier One and Tier Two members retire under the Full

Formula.

The defined benefit earned by OPSRP members is

not as complicated. OPSRP members earn a pension that is

calculated in a manner like the Full Formula—by multiply-

ing the member’s final average salary by a statutory factor

of 1.50 percent (1.8 percent for police officers and firefight-

ers) and then multiplying the resulting figure by the mem-

ber’s years of service.

The defined benefit is funded, to a significant extent,

by employer contributions. From 2004 until the amendment

at issue here, the service retirement allowance for most Tier

One and Tier Two members was funded by employer contri-

butions, pre-2004 member contributions, and earnings on

those contributions. The pension for OPSRP members was

funded solely by employer contributions and earnings on

those contributions. Under SB 1049, some funding for the

defined benefit will also come from member contributions.

In addition to the defined benefit, PERS has

included a defined-contribution component—the IAP—that

is the same for Tier One, Tier Two, and OPSRP members.

Since 2004, active members have been required to contrib-

ute six percent of their salary to the IAP, which is invested

and adjusted annually to reflect earnings and administra-

tive expenses. The member contributions to the IAP may

be paid for by the member’s participating employer under

the terms of certain collective bargaining agreements. ORS

238A.335. At retirement, members can choose to receive the

account balance as a lump-sum payment or in installments

paid over time.

Cite as 366 Or 732 (2020) 737

C. Challenged Amendments

The amendments at issue in this case affect both

the defined-benefit and defined-contribution components. As

to the latter, for members with a salary over $2,500 a month,

the amendments will redirect a portion of a member’s sal-

ary contributions in years when PERS is less than 90 per-

cent funded. Or Laws 2019, ch 355, §§ 1-19 (the redirection

provision). For purposes of the redirection provision, PERS

is 90 percent funded when its actuary determines that the

relevant assets within PERS are equal to 90 percent of the

relevant accrued liabilities. Or Laws 2019, ch 355, § 1(2)(c).

PERS is currently less than 90 percent funded and is pro-

jected to remain less than 90 percent funded for at least the

next 15 years.

During that time, members still will be required

to make contributions totaling six percent of their salary,

but not all of the contributions will go to members’ IAP

accounts. Instead, some portion of members’ contributions

will go toward their IAP accounts and some portion will

go toward an “employee pension stability account” (EPSA).

Specifically, for Tier One and Tier Two members, 3.5 per-

cent of their salary will be credited to their IAP accounts

and 2.5 percent of their salary will go toward an EPSA. Or

Laws 2019, ch 355, § 1(2)(a)(B). For OPSRP members, 5.25

percent of their salary will be credited to their IAP accounts

and 0.75 percent of their salary will go toward an EPSA. Or

Laws 2019, ch 355, § 1(2)(b)(B).

Money in a member’s EPSA will be applied to par-

tially fund the cost of the member’s defined benefit accrued

on or after July 1, 2020. Or Laws 2019, ch 355, § 3(3)(a) (stat-

ing that the board will use money from the EPSA “to pay

the costs of the pension or other retirement benefits that

are payable to the member or the member’s beneficiary * * *

and that accrue on or after July 1, 2020”). That means that

some of the defined-benefit component that a member earns

after July 1, 2020, may be funded by new member contribu-

tions rather than solely by employer contributions. Money

in a member’s EPSA will be returned to the member in a

lump sum if it “exceed[s] the costs of the pension or other

738 James v. State of Oregon

retirement benefits that are payable to the member or the

member’s beneficiary.” Or Laws 2019, ch 355, § 3(3)(b).

The second challenged amendment imposes a cap

on the portion of a member’s salary that may be used in cal-

culating the defined-benefit and defined-contribution compo-

nents of the plan. Or Laws 2019, ch 355, §§ 39-40 (salary-cap

provision). For calculations made after January 1, 2020, the

definition of “salary” excludes any amounts in excess of the

cap for the particular calendar year. The cap is $195,000 for

2020, and the amount of the cap will be adjusted annually

to reflect changes in the cost of living. Or Laws 2019, ch 355,

§ 39(26)(c)(M), § 40(17)(c)(M). The cap has no effect on the

salary that a member may receive in a particular year; thus,

for example, a member may receive more than $195,000 in

salary in 2020. But, for the purposes of calculating PERS

benefits, including for calculating IAP contributions and

final average salary under the Full Formula and the OPSRP

pension program, the member will be credited with having

earned only $195,000 in 2020. Before the enactment of SB

1049, PERS contained no salary cap for Tier One members,

while Tier Two and OPSRP members were subject to a cap

to comply with IRS regulations. OAR 459-005-0525 (2017).

In 2019, that cap was $280,000.

By statute, final average salary is the greater of

(1) the average of the salary earned in the three years before

retirement in which a member was paid the highest sal-

ary, or (2) the member’s average salary paid over the last

36 calendar months of employment before retirement. ORS

238.005(9); ORS 238A.130(1). The board has adopted rules

implementing the salary-cap provision with respect to final

average salary. Under OAR 459-005-0525(7), the board will

calculate the final average salary “based on the amount of

compensation that is allowed to be taken into account under

[the salary-cap provision].”

II. ANALYSIS

Petitioners contend that the redirection and salary-

cap provisions in SB 1049 unconstitutionally impair their

employment contracts in violation of the state Contract

Clause, Article I, section 21, of the Oregon Constitution, and

the federal Contract Clause, Article I, section 10, clause 1, of

Cite as 366 Or 732 (2020) 739

the United States Constitution. In the alternative, they con-

tend that the amendments breach their contracts and con-

stitute an unconstitutional taking of their property with-

out just compensation in violation of Article I, section 18,

of the Oregon Constitution, and the Fifth and Fourteenth

Amendments to the United States Constitution.

Respondents rejoin that the challenged amend-

ments do not impair any contractual obligation, because

they do not deny a member a contractual PERS benefit that

the member already has earned. Similarly, respondents

argue, the same analysis applies to petitioners’ breach of

contract and takings claims and they should be rejected on

the same grounds.

A. State Contract Clause

We begin with petitioners’ argument under the

state Contract Clause, which provides that “[n]o * * * law

impairing the obligation of contracts shall ever be passed[.]”

Or Const, Art I, § 21; see also Moro, 357 Or at 192 (“When

presented with arguments arising under both state and fed-

eral law, we generally attempt to dispose of the case on state

law grounds before reaching questions of federal law.”).

1. Framework

This court recently analyzed the state Contract

Clause’s application to PERS benefits in Moro. To apply the

state Contract Clause, “we consider the potential impair-

ment of contractual obligations arising only from contracts

entered into before the effective date of the law being chal-

lenged.” Moro, 357 Or at 194 (emphasis in original). Although

courts are hesitant to read statutes as creating contractual

obligations, this court has “repeatedly held that the legisla-

ture intended and understood that PERS benefits are con-

tractual and, as a result, PERS is a contract between a par-

ticipating employer and its employees.” Id. at 195 (internal

quotation marks and citations omitted).

Like other contracts, the PERS contract results

from an offer and an acceptance. “The PERS statutes estab-

lish that PERS benefits are a statutorily required term

in the offer that each participating employer makes to its

740 James v. State of Oregon

employees.” Id. at 197. Thus, “each participating employer

offers a promise to its employees to provide compensation,

including PERS benefits, in exchange for the employees’ ser-

vices.” Id.

The PERS contract is formed when the employee

accepts the offer. Id. at 198. An employee “accept[s] the offer

by providing the services” that his or her employer sought,

resulting in a unilateral contract. Id. “The PERS contract

reaches only as far as a member has accepted the offer[.]”

Id. at 201. And, because the employee accepts the offer

through performance, “a member’s acceptance reaches only

as far as the work that the member has performed.” Id.

After an employee accepts the offer through perfor-

mance, the employer continues to offer further PERS ben-

efits in exchange for further services from the employee.

In that sense, “the PERS offer is a continuing offer.” Id. at

201. And “PERS members repeatedly accept their employ-

ers’ PERS offers by continuing to work and thereby earn

additional contractual rights to PERS benefits for that addi-

tional work.” Id. at 220. As a result, “[e]ach additional ren-

dition of service accepts any open offer for additional PERS

benefits.” Id. at 201. Because an employee accepts the PERS

offer by working, “[t]he PERS contract binds a participating

employer to compensate a member for only the work that the

member has rendered and based on only the terms offered

at the time that the work was rendered.” Id.

The fact that an employee has accepted an offer of

benefits by performing services does not necessarily prevent

the employer from changing the terms of the offer for future

work. As explained further below, an offer for future work

may be changed unless the offer is irrevocable, such as when

“one of the express or implied terms offered and accepted

included a promise that the participating employers would

not change the terms of the offer, even prospectively.”

Id. at 201; see also Strunk, 338 Or at 192 n 40 (“The predi-

cate question—which we determine to be dispositive in these

cases—is whether the contract offer that the particular pen-

sion plan presents contains such a promise, i.e., a promise

that extends over the life of a covered member’s service.”

(Emphasis in original.)).

Cite as 366 Or 732 (2020) 741

As a result, when a member accepts an offer of spec-

ified retirement benefits by providing services, the member

has earned the right to have those benefits paid after the

member retires. And, if the accepted offer also included

a component of irrevocability, then the member also has

earned the right to continue to earn the specified retire-

ment benefits by performing additional work in the future.

A member cannot be denied a contractual PERS benefit that

the member already has earned, whether that benefit is the

right to specified retirement benefits or the right to continue

to earn those benefits in the future.

Amendments to contractual provisions of PERS are

therefore assessed along two lines to determine whether

they impair a member’s contract rights.1 First, a PERS

amendment impairs a member’s contract rights if it oper-

ates retrospectively to reduce the retirement benefits

attributable to work that the member performed before the

amendments went into effect. Second, a PERS amendment

impairs a member’s contract rights if the pre-amendment

offer was irrevocable and the amendment operates prospec-

tively to reduce the retirement benefits offered to a member

for future work.2

This court’s decision in Moro provides an example of

that analysis. There, the court considered the constitution-

ality of a PERS amendment that reduced the cost-of-living

adjustment (COLA) that would be applied to the member’s

defined-benefit retirement service allowances and pensions.

The court explained that, pre-amendment, the statutes

had offered members a defined benefit that would be paid

on retirement, with the addition of a COLA, up to a spec-

ified cap, in each succeeding year. Members who accepted

1

We have previously recognized that “not every provision within the PERS

statutory scheme is a term in the PERS contract.” Moro, 357 Or at 204. There is

no dispute in this case, however, that the relevant provisions are contractual.

2

That impairment-of-contract analysis applies to all categories of PERS

members, even though OPSRP members are subject to a legislative reservation of

rights that does not apply to Tier One and Tier Two members. See ORS 238A.470

(“The Legislative Assembly may change the benefits payable to [OPSRP mem-

bers] as long as the change applies only to benefits attributable to service per-

formed and salary earned on or after the date the change is made.”). That reser-

vation of rights merely codifies the analysis that applies to Tier One and Tier Two

members under the common law and the state Contract Clause.

742 James v. State of Oregon

the pre-amendment offer were entitled to receive the defined

benefit and the specified COLA attributable to work per-

formed while the pre-amendment offer was in effect. When

the legislature amended the statutes, it reduced the COLA

without providing that it would apply only to benefits earned

after the effective date of the amendment. Therefore, the

court determined that the amendment operated both retro-

spectively to reduce the value of the benefits already earned

through past work and prospectively to reduce the value of

the benefits offered for future work.

Consequently, the court held that the legislature’s

retrospective change had impaired petitioners’ contractual

rights. By completing past work, the members had accepted

an offer for a higher COLA with respect to benefits that the

members had earned for that work, and the amendment

denied members that higher COLA. On the other hand,

the court held that the legislature’s prospective change in

the COLA cap was constitutional as applied to work that

members had not yet performed because the earlier offer to

pay the higher COLA was not irrevocable. Thus, the court

concluded that the legislature did not violate members’ con-

tractual rights when it changed the COLA cap in the offer

for future benefits attributable to future work. The court

observed that PERS members who worked before and after

the COLA amendment would “be entitled to receive during

retirement a blended COLA rate that reflects the different

COLA provisions applicable to benefits earned at different

times.” Moro, 357 Or at 232.

2. Redirection provision

In applying that framework, we begin our analysis

with the redirection provision of SB 1049. Between 2004

and the effective date of the redirection provision, an active

PERS member was required to contribute six percent of his

or her salary to PERS, and the entire contribution was cred-

ited to the member’s IAP—the defined-contribution com-

ponent of PERS. Former ORS 238A.330(1) - (2) (2017). The

redirection provision in SB 1049 requires that, under cer-

tain circumstances, future member contributions be divided

between the member’s IAP account and an EPSA. Or Laws

2019, ch 355, § 1(2). And the EPSA may be used to pay the

Cite as 366 Or 732 (2020) 743

defined-benefit component of PERS that the member earns

after SB 1049 goes into effect—benefits that, without SB

1049, would have been paid for by employer contributions.

Or Laws 2019, ch 355, § 3(3)(a).

Petitioners do not argue that the redirection provi-

sion operates retrospectively to reduce retirement benefits

that they already have earned. The money that a member

already has contributed to the IAP account—contributions

that are attributable to work already performed—remains

in the IAP account. The redirection provision makes no

changes to the benefit in that regard. Instead, the redirec-

tion provision redirects only future member contributions.

As a result, the redirection provision operates prospectively

to reduce the retirement benefits offered for future work.

Petitioners instead contend that the redirection pro-

vision impairs their contract rights because, prior to amend-

ment, the PERS statutes included an irrevocable offer to con-

tinue to provide a defined benefit funded solely by employer

contributions—at least as to portions of the defined benefit

earned beginning in 2004. Petitioners argue that the text

and context of the PERS statutes establish both express and

implied terms of irrevocability.

To establish that the pre-amendment statutes con-

tained an express term of irrevocability, petitioners rely on

three separate statutory provisions. First, petitioners rely

on ORS 238.200(4), which provides that a member “is not

permitted or required to make employee contributions to

the fund for service performed on or after January 1, 2004.”

Although SB 1049 does not expressly amend that provi-

sion, petitioners argue that SB 1049 impliedly amends it.

According to petitioners, that provision prohibits members

from contributing to the EPSA because a contribution to the

EPSA represents a contribution to the fund.3

3

Respondents argue that SB 1049 does not impliedly amend ORS 238.200(4),

and that there is no conflict between that provision and the redirection provision,

because the EPSA is not part of the “fund” referred to in ORS 238.200(4). Neither

petitioners nor respondents presented briefing on the meaning of the term “fund,”

which is defined as “the Public Employees Retirement Fund.” ORS 238.005(12).

At oral argument, the City of Salem argued that “fund” cannot mean all PERS

accounts. According to the City of Salem, the legislature adopted ORS 238.200(4),

prohibiting members from contributing to the “fund,” during the same session

744 James v. State of Oregon

Second, petitioners rely on former ORS 238.300(2)(a)

(2017), which provided that Tier One and Tier Two mem-

bers “shall receive a service retirement allowance which

shall consist of * * * [a] life pension (nonrefund) for cur-

rent service provided by the contributions of employers.”

SB 1049 amends that provision to provide that Tier One

and Tier Two members will receive “[a] life pension (non-

refund) for current service provided by the contributions of

employers and, for pension benefits that accrue on or after

July 1, 2020, amounts in the employee pension stability

account established for the member under section 3 of this

2019 Act.” Or Laws 2019, ch 355, § 13(2)(A).

Finally, petitioners rely on former ORS 238A.330(2)

(2017), which provided that employee contributions by an

IAP member—all active Tier One, Tier Two, and OPSRP

members—“shall be credited” to the employee’s IAP account.

SB 1049 amends that provision to provide that employee

contributions by an IAP member “shall be credited” to either

the member’s IAP account or the member’s EPSA according

to the criteria described above. Or Laws 2019, ch 355, § 1(2).

In relying on those statutes, petitioners confuse

the standard for determining whether a benefit that has

been offered and accepted is contractually protected with

the standard for determining whether a benefit that has

been offered is irrevocable. The pre-amendment statutes on

which petitioners rely certainly describe benefits that, once

earned, were contractually protected. Before SB 1049, par-

ticipating employers offered the described benefits to mem-

bers who accepted those offers by providing services. As a

result, participating employers are contractually obligated

to provide the benefits that members have already earned

through work the member has already performed. But noth-

ing in those statutes suggests that the legislature intended

that it created the IAP and required that members contribute to the IAP. See Or

Laws 2003, ch 67, § 1(4), as amended by Or Laws 2003, ch 625, § 9 (adopting the

current version of ORS 238.200(4)); Or Laws 2003, ch 733, § 32(1) (“A member of

the individual account program must make employee contributions to the indi-

vidual account program of six percent of the member’s salary.”), codified as ORS

238A.330(1). The City of Salem argued that, if the IAP is outside the definition

of “fund,” then the EPSA could also be outside the definition of “fund.” We do not

resolve that dispute, because we reject petitioners’ argument for irrevocability

even if SB 1049 impliedly amends ORS 238.200(4).

Cite as 366 Or 732 (2020) 745

those offers to be irrevocable and not subject to change with

respect to future work that members have not yet performed.

In Moro, this court distinguished between text that

made an earned benefit contractual and text that made an

offer irrevocable:

“The legislature’s use of ‘shall,’ without more, is plainly

insufficient to establish the irrevocability of an offer.

Although this court has considered the use of ‘shall’ as a

factor that can weigh in favor of finding a statutory con-

tract offer, the use of ‘shall,’ without more, has not been

used to establish irrevocability. Consider, for instance, an

employer’s promise that it ‘shall’ pay a potential employee

$3,000 per month. That promise does not expressly provide

that the employer will not change the employee’s compen-

sation in the future, nor can we imply from the word ‘shall’

a promise to maintain that salary without change.”

357 Or at 225-26 (internal citations omitted); see also Strunk,

338 Or at 192 (“Nothing in the text of ORS 238.200(1)(a)

(2001), which required PERS members to contribute six per-

cent of their salaries to the fund, supports petitioners’ argu-

ment that the legislature intended that contribution to be

immutable.”).

The standard for establishing an express term of

irrevocability is heightened in the context of statutory con-

tracts because “legislatures generally do not intend to bind

future legislatures.” Moro, 357 Or at 226. “An irrevocable

statutory offer—particularly one that could involve poten-

tially decades of new and significant financial liabilities—

would deviate widely from that general presumption.” Id. As

a result, this court has required an express term of irre-

vocability to be clear and unambiguous. See Strunk, 338

Or at 192-93 (“In other words, the text of ORS 238.200

(1)(a) (2001) and its statutory context do not establish

clearly and unambiguously that the legislature intended

to promise members that they could contribute six per-

cent of their salaries to their regular accounts throughout

their PERS membership so as to maximize their pension

component calculation under the Money Match.”). Nothing

in the provisions identified by petitioners indicates that

the legislature made a clear and unambiguous promise, as

petitioners contend, that the defined-benefit component of

746 James v. State of Oregon

their retirement benefits always would be funded solely by

employer contributions.

Petitioners also argue that the pre-amendment offer

of PERS benefits includes an implied term of irrevocability.

As we described in Moro, “an offer is impliedly irrevocable

if the invited form of acceptance takes time to complete and

the accepting party is attempting to complete the accep-

tance.” 357 Or at 223. The court noted that “[t]hat type of

implied irrevocability might apply, for example, if it takes

an employee a year to satisfy the conditions necessary for

a retention bonus.” Id. The term of irrevocability is implied

to address the injustice that might result if the accepting

party provides partial performance but the offering party

then denies the accepting party the opportunity to complete

the performance necessary to accept the offer. Id.; see also

Taylor v. Mult. Dep. Sher. Ret. Bd., 265 Or 445, 452, 510 P2d

339 (1973) (discussing the operation of partial performance).

Petitioners’ argument for implied irrevocability, how-

ever, makes no effort to establish that it takes time to

complete acceptance of the specific IAP benefits that were

amended by the redirection provision. Petitioners, instead,

reassert an argument that this court expressly rejected in

Moro—namely, that accepting pension benefits inherently

takes time to complete. Contrary to petitioners’ argument,

although acceptance of some pension benefits might take

time to complete, that is not true for the acceptance of all

pension benefits. Moro, 357 Or at 223-24. And, in Moro, this

court held that the COLA benefits at issue were among those

not subject to a term of implied irrevocability:

“[T]he COLA benefit at issue in this case does not impose

conditions on acceptance that take time to complete. As

discussed above, the COLA benefit accrues incrementally

as a PERS member renders additional service to his or

her employer. The member’s work continually and serially

completes the performance necessary to accrue the benefits

attributable to that work[.]”

Id. at 224-25.

In reaching that conclusion, the court acknowl-

edged that it had not applied that principle consistently.

In Oregon State Police Officers’ Assn. v. State of Oregon

Cite as 366 Or 732 (2020) 747

(OSPOA), 323 Or 356, 918 P2d 765 (1996), this court took

the position that petitioners assert in this case, relying on

Taylor. In Moro, however, this court “disavow[ed] the reason-

ing that we applied in OSPOA,” noting that the reasoning

“is not supported by Taylor and is inconsistent with our ear-

lier decision in Hughes [v. State of Oregon, 314 Or 1, 838 P2d

1018 (1992)], with our later decision in Strunk, and with the

analysis set out” in Moro itself. 357 Or at 225. We decline

petitioners’ request that we revisit that line of cases.

We also observe that this court approved a similar

redirection of employee contributions under similar rea-

soning in Strunk. In that case, the court permitted PERS

amendments redirecting future member contributions away

from the member’s regular account and into the IAP.

Strunk, 338 Or at 191-93. The court noted that, under the

pre-amendment PERS statutes, members were required

to contribute six percent of their salaries to their regular

accounts, and, after the amendment, they were prohibited

from contributing to their regular accounts. Although the

court held that the pre-amendment provisions were con-

tractual as to benefits already earned for work already per-

formed, the court did not find the pre-amendment provisions

irrevocable as to benefits not yet earned for work not yet

performed. Id. at 192-93. Here, the redirection of member

contributions away from the IAP and into the ESPA is no

different, and we conclude that it does not violate a term of

implied irrevocability.

Finally, petitioners contend that the redirection pro-

vision violates trust fund obligations that this court has rec-

ognized as “part of the statutory PERS contract.” Arken v.

City of Portland, 351 Or 113, 163, 263 P3d 975 (2011), opin-

ion adh’d to on recons sub nom Robinson v. Public Employees

Retirement Board, 351 Or 404, 268 P3d 567 (2011). In par-

ticular, petitioners maintain that the redirection provision

violates a trust principle “prohibiting the diversion of trust

fund assets to favor one set of beneficiaries of the trust over

another.” Id. at 164.

In Arken, the board had attempted to recoup over-

payments made to a set of PERS members—called the

“Window Retirees”—by charging the overpayments as

748 James v. State of Oregon

administrative expenses. Doing so would have cancelled

the Window Retirees’ obligation to repay the overpayments

and still made the the Public Employee Retirement Fund

(PERF) whole. Those administrative expenses, however,

were not paid by money generated only by the Window

Retirees. Instead, administrative expenses were paid with

money generated by earnings on all Tier One and Tier Two

member contributions. Id. at 163.

This court rejected that method for correcting the

overpayments, explaining that it diverted earnings belong-

ing to all Tier One and Tier Two members to pay for debts

owed by only the Window Retirees, allowing the Window

Retirees, in effect, to keep the overpayments that they

received:

“[T]he distribution of PERF earnings among the various

accounts is a ‘zero-sum’ matter: If overpayments beyond

what should be charged are made to one account, then lesser

amounts than should be allocated will be available for pay-

ments to other accounts. Here, if overpayments made to the

Window Retirees are allocated as administrative expenses

of the PERF, then a lesser amount of the PERF earnings

will be available for distribution to the reserve accounts or

to the accounts of all other PERS members with existing

accounts.”

Id. As a result, this court held that those PERF earnings

could be used only “for the benefit of those members whose

contributions generated the fund assets,” and could not be

used to benefit only the Window Retirees. Id.

Petitioners contend that the redirection provision at

issue in this case is like the diversion of earnings at issue

in Arken. According to petitioners, the redirection provision

reduces employer costs by using some member contributions—

those directed to the EPSA—to pay defined-benefit compo-

nents that would have been paid by employers under the pre-

amendment terms. And, according to petitioners, employers

may use those savings to pay for existing employer liabilities

owed to other PERS members. Petitioners maintain that it

violates trust principles described in Arken to “divert” their

employee contributions from their IAP accounts in order

to reduce employer costs associated with general funding

Cite as 366 Or 732 (2020) 749

of the system, including benefits attributable primarily to

other PERS members—notably, retirees.

Petitioners’ argument has no merit: In this instance,

there is no diversion of trust assets from one trust benefi-

ciary to another. All member contributions that are subject

to redirection will be used to pay for benefits owed to the

member who contributed the funds. As noted above, money

from a member’s EPSA will be used “to pay the costs of the

pension or other retirement benefits that are payable to the

member or the member’s beneficiary * * * and that accrue

on or after July 1, 2020.” Or Laws 2019, ch 355, § 3(3)(a)

(emphasis added). And, if not used for that purpose, money

in the EPSA will be paid to the member or the member’s

beneficiary in a lump sum. Or Laws 2019, ch 355, § 3(3)(b).

Thus, none of the contributions subject to redirec-

tion will be used to benefit anyone other than the member

who made the contribution. Although petitioners’ argument

suggests that already retired members benefit from the redi-

rection of current members’ contributions, that suggestion

is incorrect. Retired members will receive the same retire-

ment allowances and pensions regardless of the redirection

provision.

It is true, however, that participating employers are

better off as a result of the redirection provision because

some benefits—those earned after the redirection provi-

sion takes effect—that would otherwise have been paid by

employer contributions will now be paid in part by member

contributions. As a result, participating employers will not

have to contribute as much to pay for future benefits earned

by active members. But Arken does not prohibit the legis-

lature from providing them with that benefit. Money that

employers are not required to pay into PERS never enters

the trust in the first place. And the legislature can relieve

them of the obligation to spend nontrust money without vio-

lating the trust principles articulated in Arken.

As a result, the redirection provision bears no

resemblance to the diversion of trust assets at issue in Arken

and does not violate trust principles. We reject petitioners’

argument that the redirection provision impairs petitioners’

contract rights.

750 James v. State of Oregon

3. Salary-cap provision

We now turn to petitioners’ challenge to SB 1049’s

salary-cap provision. As explained above, that provision

amends the definition of “salary” used for the purposes of

calculating PERS benefits. Before SB 1049, Tier One mem-

bers were subject to no such salary cap, while Tier Two and

OPSRP members were subject to a higher salary cap, which

was $280,000 for 2019. After SB 1049, beginning in 2020, the

definition of “salary” will exclude amounts over $195,000.

SB 1049 further provides that the cap will be adjusted in

future years to account for cost of living adjustments.4

Petitioners’ objection to the salary cap is based

on the fact that the cap will reduce the service retirement

allowances and pensions that some members could have

otherwise earned. As permitted by statute, the board uses

a member’s final average salary to calculate both the ser-

vice retirement allowance under the Full Formula for Tier

One and Tier Two members and the pension benefit for

OPSRP members. In both instances, the board determines

the benefit by multiplying a member’s final average salary

by a statutory factor and the member’s years of service. As

noted above, “final average salary” is defined as the greater

of (1) the average of the salary earned in the three years

before retirement in which a member was paid the highest

salary, or (2) the member’s average salary paid over the last

36 calendar months of employment before retirement. ORS

238.005(9); ORS 238A.130(1).

The operation of the salary cap can be shown with

an example: A Tier Two member worked for a participat-

ing employer for 20 years, starting at the beginning of 2002

and retiring at the end of 2021. Through 2018, she earned

under $195,000. In 2019, however, she got a raise and made

4

See Or Laws 2019, ch 355, § 39(26)(c)(M), § 40(17)(c)(M) (defining “salary” to

exclude, “[f]or years beginning on or after January 1, 2020, any amount in excess

of $195,000 for a calendar year. If any period over which salary is determined is

less than 12 months, the $195,000 limitation for that period shall be multiplied

by a fraction, the numerator of which is the number of months in the determina-

tion period and the denominator of which is 12. On January 1 of each year, the

board shall adjust the dollar limit provided by this subparagraph to reflect any

percentage changes in the Consumer Price Index for All Urban Consumers, West

Region (All Items), as published by the Bureau of Labor Statistics of the United

States Department of Labor.”).

Cite as 366 Or 732 (2020) 751

$210,000 during the final three years of her employment

(2019, 2020, 2021).

Without the salary-cap provision, her top three

years of salary would have been the $210,000 of salary

that she earned in 2019, 2020, and 2021. Because she made

$210,000 in each of those years, her final average salary

without the salary-cap provision would have been $210,000.

The board would then multiply her $210,000 final average

salary by the statutory factor of 1.67 percent and multiply

that by her 20 years of service to calculate her service retire-

ment allowance under the Full Formula. In this example,

the member’s annual service retirement allowance would be

$70,140.

The salary-cap provision, however, imposes a cap of

$195,000 beginning in 2020. The member would still receive

her salary above $195,000 for her final three years of service,

but, for the purposes of calculating her final average salary,

the board would apply the cap to the salary that she earned

after the salary-cap provision went into effect—in and after

2020. As a result, the board would calculate her final average

salary by crediting her full $210,000 salary for 2019, which

she earned before the cap was in place, and her capped sal-

ary of $195,000 for 2020 and 2021, which she earned after

the cap was in place. Using that approach, the board would

calculate her final average salary as $200,000—the aver-

age of $210,000 (2019), $195,000 (2020), and $195,000 (2021).

The board would then multiply her $200,000 final average

salary by the statutory factor of 1.67 percent and multiply

that by her 20 years of service to calculate her service retire-

ment allowance under the Full Formula. In this example,

the member’s annual service retirement allowance would be

$66,800.5

a. Whether the salary-cap provision reduces earned

retirement benefits

As noted above, one way that a PERS amendment

can impair a member’s contract rights is if it operates

5

This example and the variations of the example below ignore the fact that,

under SB 1049, the board would adjust the salary cap to account for changes to

the cost of living.

752 James v. State of Oregon

retrospectively to reduce the retirement benefits that a

member already has earned—that is, retirement benefits

attributable to work that the member performed before

the amendments went into effect. Determining whether an

amendment reduces retirement benefits that already have

been earned requires comparing the retirement benefit that

a member would be entitled to receive for work completed

before the amendment went into effect with the retirement

benefit that the member would be entitled to receive for that

same work thereafter.

That SB 1049 does not have that effect is best shown

by returning to the example above. Using that example, we

can assume that the member earned $175,000 in 2017 and

2018, before getting her raise to $210,000 in 2019. At the

end of 2019, when the salary-cap provision went into effect,

her final average salary would be $186,667 because the sal-

ary from her three highest years would be $175,000 from

2017, $175,000 from 2018, and $210,000 from 2019. And, at

that point, she would have worked for 18 years. As a result,

the retirement benefits attributable to work that she per-

formed between the start of 2002 and the end of 2019 would

be $186,667 x 1.67 percent x 18 years, which is an annual

service retirement allowance of $56,112.10.

The amendment in SB 1049 would not result in a

reduction of that allowance. Beginning at the start of 2020,

the salary-cap provision would go into effect and the member

in the example would continue to work. The member’s final

average salary at the end of 2020 would go up to account for

the fact that she worked another year and that she earned

$210,000 during that year. Because the salary-cap provision

would be in effect in 2020, the member would get credit only

for $195,000 of the salary that she earned during that year

in calculating her PERS benefit. As a result, her three years

of highest salary would be $175,000 from 2018, $210,000

from 2019, and $195,000 from 2020. That gives her a final

average salary of $193,333. Therefore, the retirement bene-

fits attributable to the work that she performed between the

start of 2002 and the end of 2020 is $193,333 x 1.67 percent

x 19 years, which is an annual service retirement allowance

of $61,344.56. That is more than what she would have been

Cite as 366 Or 732 (2020) 753

owed at end of 2019, before the salary-cap provision went

into effect.

The example member’s retirement benefits would

continue to go up for work that she performed through

the end of 2021, when she retired. As explained above, her

annual service retirement allowance at that point would

be $66,800. The difference between what she was owed

at the end of 2019 and what she was owed at the end of

2021 is attributable to the work that she performed during

2020 and 2021, after the salary-cap provision went into

effect. Thus, after the salary-cap provision went into effect,

she increased her annual service retirement allowance by

$10,687.90.

If the salary-cap provision had not taken effect, the

member would have increased her annual service retirement

allowance even further during 2020 and 2021. Without the

salary-cap provision, the member would have increased her

annual service retirement allowance by $14,027.90 during

2020 and 2021. The member would have received a greater

annual service retirement allowance had the amendment

not taken effect, but that consequence is attributable to the

value of the services performed after the amendment. The

salary-cap provision thus operates prospectively to reduce

the retirement benefits offered to members for work per-

formed after its effective date; the salary-cap provision does

not operate retrospectively to reduce the retirement benefits

that members earned before its effective date.

In sum, calculating a member’s retirement benefit

using post-amendment-salary increases allows a member’s

retirement to increase each year to reflect the incremen-

tal benefit attributable to the additional work performed

and the additional salary earned. But the salary-cap pro-

vision does not reduce the retirement benefit attributable

to the work previously performed and the salary previously

earned. Rather, the salary-cap provision limits only the

extent to which that incremental benefit can increase the

amount owed to the member. Thus, the salary-cap provision

functions prospectively to reduce the retirement benefits

offered for future work.

754 James v. State of Oregon

b. Whether the salary-cap provision violates an

irrevocable offer

That is not the end of our analysis, however. Because

the salary-cap provision reduces the retirement benefits

offered to members for future work, it impairs members’

contract rights if the pre-amendment definition of “salary”

was irrevocable. As described above, an offer can be either

expressly or impliedly irrevocable. Petitioners argue that

the pre-amendment definition of “salary” was both.

In support of an express term of irrevocability,

petitioners point out that the formula used to calculate a

member’s defined benefit—whether a service retirement

allowance or pension—is a core pension benefit that is unam-

biguously contractual. And, petitioners maintain, because

the definition of “salary” plays a key role in that calculation

formula, the pre-amendment definition of “salary” is equally

contractual.

Like petitioners’ argument for irrevocability with

respect to the redirection provision, petitioners’ argument

here confuses contractual terms and irrevocable terms. At

most, petitioners’ argument establishes that, to the extent

that it is used to determine benefits attributable to pre-

amendment work, the pre-amendment definition of “salary”

is contractual. Petitioners do not demonstrate that the leg-

islature promised that that definition would not be revoked

with respect to future offers for future work. As noted above,

an offer of express irrevocability must be clear and unam-

biguous. Petitioners point to nothing in the pre-amendment

definition of “salary” or any other aspect of the PERS stat-

utes that clearly and unambiguously promises not to change

the definition of “salary” with regard to future benefits.

There is, therefore, no express term of irrevocability.

In support of an implied term of irrevocability, peti-

tioners argue that, because a final average salary is not cal-

culated until the member retires, the final-average-salary

component of the retirement benefit takes time to complete

and is, therefore, impliedly irrevocable. We reject petition-

ers’ argument, which we see as a reformulated version of the

argument for irrevocability that we rejected in Moro.

Cite as 366 Or 732 (2020) 755

Retirement benefits are almost always calculated

at retirement. The question is not when the benefits are cal-

culated. Instead, the question is when the offers for bene-

fits are accepted—and, in particular, whether the offers for

benefits “impose conditions on acceptance that take time

to complete.” Moro, 357 Or at 224. This court identified a

retirement benefit that took time to complete in Taylor,

“which required employees to work for 20 years before vest-

ing.” Moro, 357 Or at 223. The employee in that case, there-

fore, was required to work for 20 years before completing the

acceptance of the retirement benefit offered.

A final average salary is not like the vesting require-

ment in Taylor. Instead, a final average salary is like the

COLA benefit at issue in Moro, which “accrues incremen-

tally as a PERS member renders additional service to his or

her employer.” Id. at 224. As demonstrated with the example

above, when a member earns a higher salary, the member

incrementally increases the final average salary used to cal-

culate the retirement benefits that the member has earned.

Unlike the employee in Taylor, the member can choose not to

continue working and will still be entitled to receive retire-

ment benefits attributable to the work that the member has

already completed. In that sense, “[t]he member’s work con-

tinually and serially completes the performance necessary

to accrue the benefits attributable to that work, thus elimi-

nating the concern of uncompensated work that drove this

court’s analysis in Taylor.” Moro, 357 Or at 225.

We therefore reject petitioners’ argument that pre-

amendment definition of “salary” contains an implied term

of irrevocability limiting the extent to which employers may

change an offer for a benefit that has not yet been earned.

As a result, like the redirection provision, the salary-cap

provision does not violate the state Contract Clause.

c. Blending the highest average salary

Finally, petitioners argue—presumably to ensure

that the salary-cap provision operates prospectively only—

that the salary-cap provision must be implemented in a par-

ticular manner that blends two different highest average

salaries. Under petitioners’ proposed approach, the board

756 James v. State of Oregon

would calculate a member’s final average salary as if the

salary-cap provision never went into effect and weight that

final average salary according to the number of years that

a member had worked before the salary cap was in place.

And then the board would calculate a member’s final aver-

age salary as if the salary-cap provision had always been in

effect and weight that according to the number of years that

a member worked while the salary cap was in place.

We return to our example from above, where a Tier

Two member retired at the end of 2021 after working for 20

years. She earned a salary of $175,000 in 2017 and 2018.

And she earned a salary of $210,000 in 2019, 2020, and

2021. Under petitioners’ approach, the board would calculate

the member’s service retirement allowance under the Full

Formula using two calculations. First, petitioners would

use the member’s final average salary of $210,000, as if the

salary-cap provision had never been in effect, multiply that

by the statutory factor of 1.67 percent, and multiply that by

the 18 years of service that the member completed before

the salary-cap provision went into effect. Second, petitioners

would use the member’s final average salary of $195,000, as

if the salary-cap provision had always been in effect, multi-

ply that by the statutory factor of 1.67 percent, and multiply

that by the two years of service that she completed after

the salary cap was imposed. Petitioners would then add the

resulting numbers together to get the member’s annual ser-

vice retirement allowance, which would be $69,639.

Petitioners’ approach breaks down the member’s

years of service into two segments, intending to represent

the time that the member worked before and after the

salary-cap provision. The problem with petitioners’ approach

is that the segments are a mix of benefits attributable to

work performed both before and after the salary-cap provi-

sion went into effect.

Petitioners’ approach requires applying a final

average salary of $210,000 to the member’s first 18 years of

service—that is, before the salary-cap went into effect—

which results in an annual service retirement allowance of

$63,126. But, as described above, when the member com-

pleted her first 18 years of service, she had earned a highest

Cite as 366 Or 732 (2020) 757

average salary of only $186,667, because the salary from

her three highest years would have been $175,000 from

2017, $175,000 from 2018, and $210,000 from 2019. That

would result in an annual service retirement allowance of

$56,112.10. In this example, petitioners’ approach leads to a

greater benefit because it calculates the highest average sal-

ary using salary that the member earned in 2020 and 2021,

after the salary-cap provision went into effect. In other

words, the greater benefit calculated under petitioners’

approach is attributable to work performed after the

salary-cap provision took effect. In that regard, petitioners’

approach operates prospectively, affecting the value of the

benefits that a member can earn after the salary-cap provi-

sion took effect.

Thus, petitioners’ approach is not necessary to avoid

retrospectively decreasing retirement benefits attributable

to the work performed before the salary-cap provision took

effect.6 Instead, petitioners’ approach operates prospectively,

and failing to apply petitioners’ approach would impair a

member’s contract rights only if the pre-amendment defini-

tion of salary or some other PERS provision included some

aspect of irrevocability. For the reasons described above, we

conclude that they did not.

Without grappling with that impediment, petition-

ers nevertheless repeatedly assert that, in Moro, this court

“mandated” the blended approach that they claim is required

here. To support that assertion, petitioners cite a footnote in

which the court stated, “We do not decide, nor have we been

asked to decide, the proper manner for calculating an appro-

priate blended rate.” Moro, 357 Or at 232 n 36. The court

then cited, as an example, a statute that uses a blended-rate

formula to apply a tax offset provision to PERS benefits. Id.;

see ORS 238.364(5) (calculating the blended rate resulting

6

If the salary-cap provision were applied to limit to $195,000 the final aver-

age salary of a member who had earned more than that amount for one or more

years before the amendment—and who had then retired after the amendment—

its effect would be retroactive and it would appear to change the terms of the

contract which the member had accepted when she worked before the amendment

at a salary of more than $195,000. However, the salary-cap provision avoids those

problems by providing that all the pre-amendment years in which her salary was

more than $195,000 will be used in calculating her final average salary regard-

less of when she retires.

758 James v. State of Oregon

from the tax exemption repeal by “divid[ing] the number of

years of creditable service performed before [the repeal of

the tax exemption], by the total number of years of credit-

able service during which the pension income was earned”).

Petitioners’ argument, however, fails to consider

the difference between this case and Moro. As we explained

above, the COLA cap in Moro had both retrospective and

prospective elements. The pre-amendment COLA offer was

accepted and earned at the time that the pre-amendment

services were provided and, as a matter of contract, that

COLA had to be provided for those years of service. The

post-amendment COLA also was accepted and earned when

the post-amendment services were provided and that was

the COLA that had to be provided for those years of service.

A blended rate was necessary.

Final average salary is very different. As explained,

post-amendment increases to the final average salary

are attributable only to post-amendment work. A member

increases a retirement allowance by providing additional

work that earns a higher salary, much the same way a mem-

ber increases the allowance by continuing to work and add-

ing to the years of service used in calculating the benefit. An

amendment changing the definition of final average salary

precludes a member from increasing the benefits that the

member may earn, but it does not reduce the benefits that

the member already has earned. A blended approach is not

necessary when an amendment operates only prospectively.

We conclude that the blended approach for which petitioners

argue is not required to ensure that the salary-cap provi-

sion does not violate the state Contract Clause.

B. Other Claims

In addition to arguing that SB 1049 violates the

state Contract Clause, petitioners argue that SB 1049

violates the federal Contract Clause of the United States

Constitution, US Const, Art I, § 10, breaches their PERS

contracts, and violates the takings provisions of the Oregon

Constitution and the United States Constitution, Or Const,

Art I, § 18; US Const, Amends V, XIV. Our analysis above

resolving the state Contract Clause issue also resolves peti-

tioners’ remaining claims. The state Contract Clause was

Cite as 366 Or 732 (2020) 759

based on the federal Contract Clause and the two apply

equally to the claims at issue in this case. Moro, 357 Or at

192-93 (noting that the federal Contract Clause applies the

same retrospective/prospective distinction applied under the

state Contract Clause). And, in concluding that SB 1049 did

not impair petitioners’ contract rights, the analysis above

similarly resolves petitioners’ breach of contract claim and

“obviates the fundamental premise” of petitioners’ takings

claims. Strunk, 338 Or at 238.

C. Motion to Dismiss

Finally, two respondents, the City of Portland and

Multnomah County, argue that they are not proper parties

to this lawsuit and have moved to be dismissed. In asserting

that argument, they rely on the direct review provision of

SB 1049 that provides this court with jurisdiction to hear

this matter. Section 65(3) of that provision requires a peti-

tioner challenging the bill to serve a copy of the petition on

PERB, the Attorney General, and the Governor. And sec-

tion 65(5) requires the Supreme Court to allow participating

employers to intervene in any such direct review proceed-

ing. Portland and Multnomah County read those provisions

together to mean petitioners are prohibited from suing

anyone other than PERB, the Attorney General, and the

Governor, and that participating employers may be parties

to this lawsuit only by intervening.

The text of those provisions does not support the

reading offered by Portland and Multnomah County. Section

65(3) merely states who must be served with the petition. It

does not preclude suing anyone. Section 65(5) merely autho-

rizes participating employers to intervene. It does not protect

anyone from suit. To be sure, the legislature has included

those same provisions in the PERS amendments at issue

in Moro. Or Laws 2013, ch 53, § 19(3), (5). And, in that case,

numerous participating employers were sued as respon-

dents. If the legislature had intended a different result in

this case, it would have written the jurisdictional provision

differently. We therefore deny the motion to dismiss.

Petitioners’ requests for relief challenging Oregon

Laws 2019, chapter 355, sections 1-19 and 39-40 are denied.