# Spiller v. State > Supreme Judicial Court of Maine · June 23, 1993 · 627 A.2d 513 URL: https://www.frixlaw.com/law-library/cases/9755749 ## Case - **Full name:** Lorraine SPILLER, Et Al. v. STATE of Maine, Et Al. - **Court:** Supreme Judicial Court of Maine - **Decided:** June 23, 1993 - **Citations:** 627 A.2d 513; 1993 Me. LEXIS 109 - **Precedential status:** Published - **Opinion:** Opinion of the court by Clifford - **Judges:** Wathen, Roberts, Glassman, Clifford, Collins, Rudman, Dana - **Cited by:** 30 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9755749 ## How later opinions describe it (automated extraction) - holding that Maine's retirement system law did not create contractual rights as to employees who had not yet satisfied the creditable service requirement because no "intent to do so [was] clearly stated” - declining to imply contractual rights where no intent expressed in statutory language; retirement program merely reflection of public policy although state employees have "legitimate retirement expectations” entitling them to due process - finding no benefits “due to” plaintiff members, none of whom had met eligibility requirements ## Opinion text CLIFFORD, Justice. Defendants, the State of Maine and certain named officials, appeal from a judgment of the Superior Court (Kennebec County, Chandler, J.) declaring unconstitutional legislative modifications made to the statutes establishing pension benefits for state employees and enjoining enforcement of those modifications. Because the statutory changes do not impact any constitutionally protected rights of the plaintiffs, we vacate the judgment. Plaintiffs are the Maine State Employees Association and a certified class of all current and former state employees whose employment commenced prior to enactment of the modifications and who did not have seven years of creditable service on December 1, 1991. 1 The employees are members of the Maine State Retirement System. The system was created in 1942 for the purpose of encouraging “qualified persons to seek public employment and to continue in public employment during their productive years.” 5 M.R.S.A. § 17050 (1989). Membership in the retirement system is mandatory for state employees, 2 and plaintiffs are required to contribute 6.5% to 7.5% of their salaries to the pension fund. 5 M.R.S.A. §§ 17701, 17701-A, 17708-17712-A (1989 & Supp.1992). The State is required to provide additional contributions annually in order to maintain a fund that will discharge the State’s future pension obligations. See 5 M.R.S.A. § 17153(1-A)(B) (Supp.1992). State employees do not qualify to receive service retirement benefits until they have at least ten years of creditable service. 3 5 M.R.S.A. § 17851 (1989 & Supp.1992). All members of the system, including the plaintiffs in this case, are entitled, at the least, to the return of their contributions together with interest if their service terminates. 5 M.R.S.A. § 17705(2) (1989 & Supp.1992); see 5 M.R.S.A. § 17157 (Supp.1992). In addition, the legislature has provided that certain benefits offered by the retirement system, such as life insurance and disability retirement benefits, are immediately vested and due regardless of the employee’s length of service. 5 M.R.S.A. §§ 17904, 18051-18061 (1989 & Supp.1992). In 1991, state government experienced a significant shortfall in revenue, and as part of an effort to reduce state expenditures to close the gap between revenues and expenditures, the legislature modified the prospective retirement benefits for all state employees with fewer than seven years of creditable service as of December 1, 1991. P.L.1991, ch. 591, § EEE (codified at 3 M.R.S.A. § 851 (Supp.1992); 4 M.R.S.A. § 1351 (Supp.1992); 5 M.R.S.A. §§ 17001, 17851-17852 (Supp.1992)). The 1991 statutory changes exclude from the definition of “earnable compensation” payment received for unused leave for sickness or vacation; raise the ,minimum age for retirement with full benefits by two years to age 62; and *515 increase the penalty for retirement before the minimum age. The modifications substantially reduce the annual contribution required from the State. 4 Plaintiffs brought this action in the Superior Court seeking a declaratory judgment that the modifications violate the contract clauses of the Maine and United States Constitutions 5 and requesting injunctive relief. 6 The parties stipulated to the essential facts and moved for a summary judgment. The court construed the retirement statute to give to plaintiffs, on acceptance of employment, contractual rights to pension benefits and concluded that the modifications substantially impaired those rights. Although the court found that the goal of reducing the state’s deficit was a significant and legitimate public purpose, it did not find that the impairment of rights was reasonable and necessary to accomplish that purpose. Accordingly, the court held that the statutory modifications violated the contract clauses of both the Maine and United States Constitutions. This appeal followed. In this case, there is no dispute about the historical facts and the court properly entertained the motions for summary judgment. Lewiston Bottled Gas Co. v. Key Bank, 601 A.2d 91, 93 (Me.1992). At issue is the construction of the statutory scheme establishing pension benefits, that is a question of law for the court. Maine Beer & Wine Wholesalers v. State, 619 A.2d 94, 97 (Me.1993). “[Legislative enactments are presumed constitutional and the party challenging the constitutionality of a statute bears the burden of proof.” Maine Beer & Wine Wholesalers, 619 A.2d at 97 . Under time honored rules of construction, a statute will not be presumed to create contractual rights, binding future legislatures, unless the intent to do so is clearly stated. National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66 , 105 S.Ct. 1441, 1451 , 84 L.Ed.2d 432 (1985). See also Dodge v. Board of Educ., 302 U.S. 74, 78-79 , 58 S.Ct. 98, 100 , 82 L.Ed. 57 (1937) (statute providing annuities for retired teachers not a contract); Pineman v. Oechslin, 195 Conn. 405 , 488 A.2d 803, 809 (1985) (state employees retirement act did not create contractual rights); Fumarolo v. Chicago Bd. of Educ., 142 Ill.2d 54 , 153 Ill.Dec. 177, 200 , 566 N.E.2d 1283, 1306 (1990) (statute establishing tenure for school principals did not create a contractual right). [Ajbsent some clear indication that the legislature intends to bind itself contractually, the presumption is that "a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.” This well-established presumption is grounded in the elementary proposition that the principal function of a legislature is not to make contracts, but to make laws that establish the policy of the state. Policies, unlike contracts, are inherently subject to revision and repeal, and to construe laws as contracts when the obligation is not clearly and unequivocally expressed would be to limit drastically the essential powers of a legislative body. National R.R. Passenger Corp., 470 U.S. at 465-66 , 105 S.Ct. at 1451 (quoting Dodge *516 v. Board of Educ., 302 U.S. 74, 79 , 58 S.Ct. 98, 100 , 82 L.Ed. 57 (1937)) (citations omitted). See United States R.R. Retirement Bd. v. Fritz, 449 U.S. 166, 174 , 101 S.Ct. 453, 459 , 66 L.Ed.2d 368 (1980) (railroad retirement benefits and social security benefits are not contractual and may be altered). In the retirement statute being construed here, not only is there no clear indication of a legislative intent to create immutable contractual rights for all state employees, the statutory language compels a contrary conclusion. Sections 17050 and 17051, 7 relied on by the plaintiffs, do not create contractual rights. Rather, they state general policy principles, none of which are changed by the enactment of P.L.1991, ch. 591, § EEE. In addition, section 17801 provides that it is only those retirement benefits that “would be due to a member ... on the date immediately preceding the effective date of the amendment” that cannot be reduced by amendment to the retirement statute. 8 By implication, the language reserves to future legislatures the power to modify prospective service retirement benefits for employees to whom benefits are not then due. None of the benefits at issue here were due to any plaintiff on the effective date of this legislation. Although a number of courts have employed a contract analysis, a careful reading of the cases reveals the diversity of circumstances in which the analysis arises. 9 Even in jurisdictions that have decided contractual rights may be implied from a statutory scheme, there is no consensus about when such rights arise. 10 We are unpersuaded by the reasoning of those jurisdictions that have discerned in the statutory language the creation at the time of employment of binding contractual rights. See, e.g., Betts v. Board of Administrators of Pub. Employees Retirement Sys., 21 Cal.3d 859 , 148 Cal.Rptr. 158 , 582 P.2d 614 (Cal.1978). Our retirement statute con *517 tains no language expressing an intent to create such rights and we decline to imply them in the absence of such language. 11 To rule otherwise would prohibit the State from amending its retirement plan without giving many years of notice and would unduly restrict the power of the legislature. Pineman v. Fallon, 662 F.Supp. 1311, 1318 (D.Conn.1987), aff'd 842 F.2d 598 (2d Cir.1988), cert. denied 488 U.S. 824 , 109 S.Ct. 72 , 102 L.Ed.2d 48 (1988). Although we reject the Superior Court’s conclusion that the retirement statute creates immutable contractual rights on acceptance of employment that cannot be impaired under the contract clauses of our constitutions, retirement benefits are more than a gratuity to be granted or withheld arbitrarily at the whim of the sovereign state. 12 See Note, Public Employee Pensions in Times of Fiscal Distress, 90 Harv.L.Rev. 992, 994-95 (1977). Although one may conclude that it was unnecessary or even unwise for the legislature to have enacted P.L.1991, ch. 591, § EEE, it is not for this court “to substitute its opinion on the merits or desirability of the legislation for that of the legislature.” Pineman v. Fallon, 662 F.Supp. at 1317 . Rather, it is for us to determine if the amendments are unconstitutional. In this instance, there is no constitutional violation. The entry is: Judgment vacated. Remanded to the Superior Court for entry of a judgment for defendants. ROBERTS, COLLINS, RUDMAN and DANA, JJ. concurring. . In deciding this case, we do not address the rights of those state employees who have, pursuant to 5 M.R.S.A. § 17851 (1989 & Supp.1992), qualified for service retirement benefits. . Membership is also mandatory for teachers, who are defined by statute as state employees for purposes of the retirement system. 5 M.R.S.A. §§ 17001(14) & 17651 (1989). Membership is optional for certain elected or appointed officials. 5 M.R.S.A. § 17652 (1989). In addition, judges are required to be members of the separate Maine Judicial Retirement System, 4 M.R.S.A. § 1301 (1989), and legislators are required to be members of the separate Maine Legislative Retirement System, 3 M.R.S.A. § 801 (Supp.1992). Although the legislature also modified the pension benefits of teachers, legislators, and judges, 3 M.R.S.A. § 851 (Supp.1992); 4 M.R.S.A. § 1351 (Supp. 1992); 5 M.R.S.A. §§ 17001, 17851-17852 (Supp. 1992), these groups are not included in the certified class of plaintiffs. The Maine Teachers’ Association has filed a brief as amicus curiae. .Employees also may qualify for service retirement benefits if they have been in state service for one year immediately before the statutory age for retirement. 5 M.R.S.A. § 17851. . The total savings to the State from these and other modifications not at issue in the present case are estimated at $8,850,000 for fiscal year 1991-1992 and $25,550,000 for fiscal year 1992-1993. The precise savings from the particular modifications at issue here are not specified in the record but constitute a substantial portion of the total savings. . The Maine Constitution provides: The Legislature shall pass no bill of attainder, ex post facto law, nor law impairing the obligation of contracts, and no attainder shall work corruption of blood nor forfeiture of estate. Me. Const, art. I, § 11. The United States Constitution provides: No State shall ... pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility. U.S. Const, art. I, § 10. .Plaintiffs also allege a taking of property without compensation and without due process of law. Me. Const, art. I, § 21; U.S. Const, amend. XIV, see infra note 12. The Superior Court decided the case on the basis of the contract clauses. . 5 M.R.S.A. § 17050 (1989) provides: It is the intent of the Legislature to encourage qualified persons to seek public employment and to continue in public employment during their productive years. It is further the intent of the Legislature to assist these persons in making provision for their retirement years by establishing benefits reasonably related to their highest earnings and years of service and by providing suitable disability and death benefits. 5 M.R.S.A. § 17051 (1989) provides: No law outside of this Part which provides wholly or in part at the expense of the State or of any subdivision of the State for retirement benefits for employees, or for the surviving spouses or other beneficiaries of those employees, may apply to members or beneficiaries of the retirement system or to the surviving spouses or other beneficiaries of those members or beneficiaries. A member may not receive service credit toward a benefit under this Part and under another system supported wholly or in part by the State for the same service. . 5 M.R.S.A. § 17801 (1989) provides: No amendment to this Part may cause any reduction in the amount of benefits which would be due to a member based on creditable service, earnable compensation, employee contributions, pick-up contributions, and the provisions of this Part on the date immediately preceding the effective date of the amendment. . Some jurisdictions employing a contract clause analysis have done so because (1) the statutory change affected an existing collective bargaining agreement, see Association of Surrogates & Supreme Court Reporters v. State of New York, 940 F.2d 766 (2d Cir.1991); (2) the state constitution specifically provided that public employees’ pension rights are contractual in nature, see Hammond v. Hoffbeck, 627 P.2d 1052 (Alaska 1981); or (3) a statute provided that membership in the retirement system establishes contractual rights and benefits, see Opinion of the Justices, 364 Mass. 847 , 303 N.E.2d 320 (1973). None of these circumstances are present in this case. . Compare Betts v. Board of Administrators of Pub. Employees Retirement Sys., 21 Cal.3d 859 , 148 Cal.Rptr. 158 , 582 P.2d 614, 617 (1978) (contractual right accrues on acceptance of employment) with Singer v. City of Topeka, 227 Kan. 356 , 607 P.2d 467, 474 (Kan.1980) (employee acquires contract right in pension plan after "[c]ontinued employment over a reasonable period of time during which substantial services are furnished to the employer, plan membership is maintained, and regular contributions into the fund are made”); Petras v. State Bd. of Pension Trustees, 464 A.2d 894, 896 (Del.1983) (contract arises once pension vests, meaning eligibility requirements for a pension have been satisfied); Baker v. Oklahoma Firefighters Pension & Retirement Sys., 718 P.2d 348, 350-51 (Okla.1986) (contract right arises at time of eligibility to receive pension). . Cases and commentators have criticized the contract approach for a variety of reasons. [T]he contract approach plays havoc with basic principles of contract law, traditional contract clause analysis and, most importantly, the fundamental legislative prerogative to reserve to itself the implicit power of statutory amendment and modification. Pineman v. Oechstin, 195 Conn. 405 , 488 A.2d 803, 808 (1985); see also Fumarolo v. Chicago Bd. of Educ., 142 Ill.2d 54 , 153 Ill.Dec. 177 , 566 N.E.2d 1283, 1306 (1990); Note, Public Employee Pensions in Times of Fiscal Distress, 90 Harv. L.Rev. 992, 1002 (1977). . We have said that state employees have legitimate retirement expectations. Huard v. Maine State Retirement Sys., 562 A.2d 694, 698 (Me.1989); Soucy v. Board of Trustee of Maine State Retirement Sys., 456 A.2d 1279, 1281 (Me.1983). Those expectations may constitute property rights that the legislature cannot deprive them of without due process of law. Pineman v. Oechslin, 488 A.2d at 810 ; Fumarolo, 153 Ill.Dec. at 201 , 566 N.E.2d at 1307 ; Spina v. Consolidated Police & Fireman’s Pension Fund Comm’n, 41 N.J. 391 , 197 A.2d 169, 175 (1964); see also Note, 90 Harv.L.Rev. at 1003-04. Alternatively, the State may be estopped from changing certain benefit provisions in the retirement statutes. See Christensen v. Minneapolis Mun. Employees Retirement Bd., 331 N.W.2d 740, 748 (Minn.1983). The changes made in this case, however, do not result in a violation of due process. Nor is the State estopped from making them. We do not here determine whether additional changes to the retirement statute would implicate the contract, takings (see Note, Harv.L.Rev. at 1003-04), or due process clauses of our constitutions, or the doctrine of promissory estoppel. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9755749. Public record. Not legal advice.