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OPINION 97026

DATE: April 29, 1997

SUBJECT: Constitutionality of Legislative Bill 532 Providing for Adjusted Supplemental Retirement Benefits

REQUESTED BY: Senators LaVon Crosby and Elaine Stuhr Nebraska

State Legislature

WRITTEN BY: Don Stenberg, Attorney General

Fredrick F. Neid, Assistant Attorney General




You have requested that the Attorney General address two

issues relating to the constitutionality of Legislative Bill 532.

The provisions of LB 532, for the most part, establish a

supplemental retirement benefit for certain retired members of the

School Retirement System and the Retirement System for Class V

School Districts based on years of creditable service.




It is FIRST inquired:




[D]oes LB 532 as written violate Article III, Section 18

of the Nebraska Constitution, i.e. whether it violates

the prohibition against special legislation.




In summary, the provisions of LB 532 establish minimum levels

of retirement benefits for retired members of the school retirement

systems having twenty or more years of creditable service at the

effective date of the legislative act. Section 2 of the Bill

establishes a two hundred fifty dollar minimum for retirees with

twenty years of service. The minimum benefit level is increased in

fifty dollar increments for each year of additional service beyond

twenty years to twenty-five years or more of creditable service.

A retiree having twenty-five or more years of service would receive

a minimal retirement benefit of five hundred dollars.




Neb. Const. art. III, § 18 provides in pertinent 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 art. III,

§ 18 if it (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). Thus, the

first inquiry focuses on whether the provisions of the legislative

act in question create an arbitrary and unreasonable method of

classification. In viewing classification issues, the Nebraska

Supreme Court has stated:




A legislative classification, in order to be valid, must

be based upon some reason of public policy, some

substantial difference of situation or circumstance, that

would naturally suggest the justice or expediency of

diverse legislation with respect to objects to be

classified. Classifications for the purpose of

legislation must be real and not elusive. They cannot be

based on distinctions without a substantial

difference. . . .




Classification is proper if the special class has some

reasonable distinction from other subjects of like

general character, which distinction bears some

reasonable relationship to the legitimate objectives and

purposes of the legislation The question is always

whether the things or persons classified by the act form

by themselves a proper and legitimate class with

reference to the purpose of the act.




Haman v. March, 237 Neb. 699, 711, 467 N.W.2d 836, 846 (1991)

(quoting State ex rel. Douglas v. Marsh, 207 Neb. 598, 300 N.W.2d

181 (1980). (emphasis added).




Review of LB 532 reflects that the purpose of the act is to

provide a supplemental pension benefit for the class of retirees

with twenty or more years of creditable service if current benefit

amounts are below certain dollar amounts. We believe the

classification(s) is reasonable in view of the fact that the

Legislature is accorded broad discretion as to conditions of public

employment and as to the 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 creates a

permanently closed class. We believe the classes of retirees

established under section 2 of the Bill constitute permanent closed

classes and therefore unconstitutional special legislation. The

classes are closed in the sense that only retirees having twenty or

more years of creditable service "as of the effective date of this

act" comprise membership of the classification as of its effective

date and leave no room for any increase in its membership. It has

been long held by the Nebraska Supreme Court 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 at 716, 467 N.W.2d at 848, [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)].




Accordingly, it is our opinion that LB 532 is constitutionally

suspect as special legislation in violation of Neb. Const. art.

III, § 18.




The SECOND issue you present is:




[D]oes LB 532 as written violate Article III,

Section 19 of the Nebraska Constitution, i.e. whether it

constitutes the granting of extra compensation to a

public servant after the service has been rendered and is

not in the form of a cost of living adjustment to a

retirement benefit.




Generally, the granting of a retirement or pension benefit in

instances 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 Employees 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 changes are permissible. Neb. Const. art. III, § 19 in

relevant part 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).




Due to this express exception, adjustments to retirement

benefits are not violative of the constitutional provision to the

extent the adjustments are based on changes in the cost of living

and wage levels that have subsequently occurred. The difficulty

with the adjustments provisions of the Bill is that it cannot be

determined from its provisions whether the adjustments are based on

widely accepted cost of living index or other indices. Section 1

of the Bill characterizes the adjustments "to reflect changes that

have occurred subsequent to the date of retirement for each person

who is retired." However, the provisions of the Bill do not define

the term cost of living or expressly base adjustment amounts to a

specific cost of living index. We have previously concluded that

"the percentage of increase implemented would necessarily be based

on a cost of living index." See Op. Att'y Gen. 93020 (1993).




A fundamental canon of statutory construction is that, unless

otherwise defined, words will be interpreted as taking their plain,

or ordinary and popular meaning. Southern Nebraska Rural Public

Power Dist. v. Nebraska Elec. Generation and Transmission Co-op,

Inc., 249 Neb. 913, 546 N.W.2d 315 (1996); Baker's Supermarkets,

Inc. v. State Dept of Agriculture, 248 Neb. 894, 540 N.W.2d 574

(1995).




In the absence of statutory definition or established common

law meaning, the plain and ordinary meaning of "cost of living" is

"the cost of purchasing those goods and services which are included

in an accepted level of consumption." Webster's Third New

International Dictionary 515. Based on this popular definition,

federal courts have interpreted the phrase, cost of living, as

having this ordinary meaning and that it is properly measured by

the Consumer Price Index. Harris v. Sullivan, 968 F.2d 263 (2nd

Cir. 1992) (further citing other federal case authorities).




Section 2 of the Bill establishes minimum levels of retirement

benefit amounts on a graduated scale from two hundred fifty dollars

a month for retirees with twenty years of service to five hundred

dollars each month for retirees with twenty-five or more years of

service. It does not appear or at least cannot be readily

determined whether the incremental increases are based on increases

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

measured by a consumer price index. The adjustment would be

gratuitous in the absence of any showing that the adjustment

amounts are tied to a cost of living index. For this reason, it is

our opinion that the adjustment provisions of LB 532 are

constitutionally suspect as violative of Neb. Const. art. III,

§ 19.




Since we have concluded that the cost of living adjustment

provisions of LB 532 are violative of art. III, § 19, it is not

necessary to engage in a lengthy discussion of the related issue

whether the specific authorization for cost of living adjustments

of art. III § 19 supersedes the special laws prohibition of art.

III, § 18. This issue arises because the cost of living adjustment

provisions of art. III, § 19 were added by 1972 Neb. Laws, LB 1414,

§ 1 after adoption of the provisions of art. III, § 18. However,

we point out that we do not perceive any conflict between these

constitutional provisions. The provisions of §§ 18 and 19 are not

conflictive since cost of living adjustments for retired public

employees may be accomplished without the creation of permanent

closed classes.




The Nebraska Supreme Court has opined:




A state constitution is the supreme written will of the

people of a state regarding the framework for their

government and is subject only to the limitations found

in the federal Constitution. (citation omitted). The

state Constitution, as amended, must be read as a whole.

(citation omitted). A constitutional amendment becomes

an integral part of the instrument and must be construed

and harmonized, if possible, with all other provisions so

as to give effect to every section and clause as well as

to the whole instrument. (citations omitted). If

inconsistent, a constitutional amendment prevails over a

provision in the original instrument; but a court will

find distinct constitutional provisions repugnant to each

other only when they relate to the same subject, are

adopted for the same purpose, and are incapable of

enforcement without substantial conflict.




Jaksha v. State, 241 Neb. 106, 110-11, 486 N.W.2d 858, 863 (1992)

(quoting other authorities) (emphasis added).




The amendment of art. III, § 19 authorizing cost of living

adjustments for retired public employees may be harmonized with the

provisions of art. III, § 18 prohibiting special legislation. That

is to say, provisions for cost of living adjustments for public

employees may be legislatively enacted without the creation of

permanent closed classes proscribed by art. III, § 18. Thus, the

constitutional provisions may be applied without conflict.




Sincerely yours,




DON STENBERG

Attorney General




Fredrick F. Neid

Assistant Attorney General






Approved By:

Attorney General






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