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AGO Opinion 98003

Constitutionality of Legislative Bill 650 Providing for Supplemental Retirement Benefits
Opinion 98003

DATE: January 9, 1998

SUBJECT: Constitutionality of Legislative Bill 650 Providing for Supplemental Retirement Benefits

REQUESTED BY: Senator D. Paul Hartnett, Nebraska State Legislature

WRITTEN BY: Don Stenberg, Attorney General

Fredrick F. Neid, Assistant Attorney General




You have inquired concerning the constitutionality of

Legislative Bill 650 introduced in the 1997 legislative session.

LB 650 would amend the provisions of the Nebraska State Patrol

Retirement Act, Neb. Rev. Stat. §§ 81-2014 to 81-2036 (1994, Cum.

Supp. 1996, and Supp. 1997), to provide supplemental retirement

benefits for certain retired state patrol officers or surviving

spouses in an amount equal to 3 percent for the years 1985 through

1991.




From a constitutional viewpoint, an increase in retirement

benefit amounts for retired public employees is viewed in the

context of whether the supplemental benefit for certain retired

employees would constitute special legislation in violation of

Article III, § 18, of the Nebraska Constitution; and, secondly,

whether the benefit increase would constitute a gratuity in

violation of Article III, § 19, of the Nebraska Constitution.




SPECIAL LEGISLATION




Neb. Const. art. III, § 18 states in particular part:


The Legislature shall not pass local or special laws in

any of the following cases, that is to say: . . . .

Granting to any corporation, association, or individual

any special or exclusive privileges, immunity, or

franchise whatever. . . . In all other cases where a

general law can be made applicable, no special law shall

be enacted.




A legislative act constitutes special legislation under this

constitutional provision if the act (1) creates an arbitrary and

unreasonable method of classification or (2) creates a permanently

closed class. See City of Ralston v. Balka, 247 Neb. 773, 530

N.W.2d 594 (1995); Henry v. Rockey, 246 Neb. 398, 518 N.W.2d 658

(1994). Accordingly, the first inquiry is whether the provisions

of LB 650 would create an arbitrary and unreasonable method of

classification.




The purpose of LB 650 is to provide supplemental retirement

benefits for a class of retirees under the State Patrol Retirement

Act. We generally believe the classification is reasonable since

the Legislature is accorded broad discretion as to the conditions

of public employment and as to requirements, classifications,

contributions to, and benefits conferred by a retirement act. See

Gossman v. State Employees Retirement System, 177 Neb. 326, 129

N.W.2d 97 (1964).




The second inquiry is whether the legislative act would

establish a permanently closed class. It is our view that the

class of retirees to be benefited constitutes a permanently closed

class and, therefore, unconstitutional special legislation. The

class to be created is closed in the sense that only those retirees

who retired prior to December 31, 1991, would receive the increased

benefit amount. The Nebraska Supreme Court has long held that:




The rule appears to be settled by an almost unbroken line

of decisions that a classification which limits the

application of the law to a present condition, and leaves

no room or opportunity for an increase in the numbers of

the class by future growth or development, is special,

and a violation of the constitution above quoted. . . .




Haman v. Marsh, 237 Neb. 699, 716, 467 N.W.2d 836, 848 (1991)

[citing City of Scottsbluff v. Tiemann, 185 Neb. 256, 262, 175

N.W.2d 74, 79 (1970) (quoting State v. Kelso, 92 Neb. 628, 139

N.W.2d 226 (1912)]. (Emphasis added).




For this reason, it is our conclusion that LB 650 is

constitutionally suspect as special legislation offensive to Neb.

Const. art. III, § 18.




GRANTING OF EXTRA COMPENSATION




The granting of a retirement or pension benefit where no part

of the service was rendered subsequent to the enactment of the law

is a gratuity in violation of Neb. Const. art. III, § 19. Retired

City Civilian Employees Club v. City of Omaha Ret. Sys., 199 Neb.

507, 260 N.W.2d 472 (1977); Gossman v. State Employees Retirement

System. However, adjustments to retirement benefits of public

employees to reflect cost of living and wage changes are

constitutionally permissible. In relevant part, Article III, § 19,

states:




The Legislature shall never grant any extra compensation

to any public officer, agent or servant after the

services have been rendered . . . except that retirement

benefits of retired public officers and employees may be

adjusted to reflect changes in the cost of living and

wage levels that have occurred subsequent to the date of

retirement. . . .




(Emphasis supplied).




Adjustments that are based on changes in the cost of living

and wage levels are not offensive to this constitutional provision.

However, it is problemsome that the provisions of LB 650 purport to

provide increases to reflect changes in the cost of living and wage

levels equal to 3 percent for certain specified years. The

provisions of the bill do not define the term "cost of living," and

the adjustments are not expressly based on a specific cost of

living index. This office has previously concluded that "the

percentage of increase implemented would necessarily be based on a

cost of living index." See Ops. Att'y Gen. 93020 (1993) and 97026

(1997).




It does not appear, or at least it cannot be readily

ascertained, whether the percentage increases are based on

increases that have occurred in the cost of living and wage levels

as measured by a consumer price index. Thus, the adjustments would

be gratuitous in the absence of any showing that the adjustment

amounts are tied to a cost of living index. Accordingly, we

believe the provisions of LB 650 are constitutionally suspect as

offensive to Neb. Const. art. III, § 19.




You also request that the Attorney General "provide some

guidance on steps which might be taken to cure any potential

constitutional defects. . . ." As we pointed out above, the

legislative act should not create a permanently closed class. As

the Nebraska Supreme Court has concluded, the class created should

have room for future growth or opportunity for an increase in

numbers. An open class would not constitute special legislation.




In other respects, any increase in benefits, after services

are rendered, should be tied to a consumer price index. We point

out that provisions of the State Patrol Retirement Act include

benefit adjustments that are based on a consumer price index. See

Neb. Rev. Stat. § 81-2027 (1994). We refer you to this statutory

provision only because benefit adjustments are tied to increases

determined by a consumer price index.




You have also inquired whether "any potential constitutional

defects in LB 650 call into question the validity of the earlier

legislation?" The earlier legislation you refer to is Neb. Rev.

Stat. § 81-2035 (1994) which includes provisions similar to LB 650.

Generally, we decline to respond to legislative inquiries regarding

the constitutionality of statutes as a matter of policy. See Op.

Att'y Gen. No. 157 (1985).




Sincerely yours,




DON STENBERG

Attorney General




Fredrick F. Neid

Assistant Attorney General