Request By:
Donna Stockton-Early
Executive Director
Kentucky Judicial Form Retirement System
Opinion
Opinion By: Albert B. Chandler III, Attorney General; Jennifer L. Carrico, David S. Kaplan, Assistant Attorneys General
SUMMARY
In Section 4 of House Bill 389, the General Assembly concealed their attempt to increase their pension benefits, because they could not do so under public scrutiny. The Kentucky Constitution requires that the General Assembly pass laws that can be plainly understood and readily applied. Section 4 of House Bill 389 is so vague and confusing that it cannot be implemented by those who are charged with its enforcement. The General Assembly's failure to provide clear meaning in the statute forces the Judicial Form Retirement System to guess as to its proper application. This improper delegation of legislative power violates the separation of powers in Sections 27 and 28 of the Kentucky Constitution.
OPINION OF THE ATTORNEY GENERAL
On Wednesday, March 29, 2000, the General Assembly enacted House Bill 389, entitled "An Act relating to retirement. " Section 4 of House Bill 389 amends KRS 21.450 in the Judicial Retirement Plan by adding the following language:
1. Any accrual of benefits provided under this or any other applicable statute shall be no less than the benefit adjustment provided for in KRS 21.405(4) from the date of the last establishment of that benefit.
The Executive Director of the Judicial Form Retirement System, which also administers the Legislative Retirement Plan, requests the Attorney General's opinion on the following questions regarding this amendment:
1. Does the amendment to KRS 21.450 require that the assumed salary in the Legislative Retirement Plan be annually increased by the CPI?
2. If the amendment to KRS 21.450 provides that the assumed salary under the Legislative Retirement Plan is to be annually increased by the CPI, is the increase retroactive?
3. If the amendment to KRS 21.450 provides that the assumed salary under the Legislative Retirement Plan is to be annually increased by the CPI, at what date is the increase to be first applied?
4. Does the amendment to KRS 21.450 provide that in a year in which a judicial salary increase falls below the CPI, will the salary be adjusted by the CPI? If the amendment requires that a judicial salary be adjusted by the CPI, is the increase retroactive? If the amendment requires that a judicial salary be adjusted by the CPI, at what date is the increase to be first applied?
5. Is the legislator or judge required to make personal contributions on the additional assumed salary or salary on which the benefits ultimately will be calculated?
6. To whom does the amendment apply - members, retirees, or both?
The number and complexity of the questions posed by the Judicial Form Retirement System illustrate that the language of the amendment is essentially indecipherable. The language of Section 4 purports to impose a minimum adjustment to an "accrual of benefits." HB 389, Section 4, Kentucky General Assembly, Regular Session (2000). However, it is indeterminate what particular benefits are impacted by this provision. The plain language of Section 4 refers to an accrual of benefits provided under "this or any other applicable statute. " Id. The reference to "this" statute in Section 4 is to KRS 21.450, which is the statute Section 4 amends. Id. KRS 21.450 is a section of the Judicial Retirement Plan (JRP) which governs management of the JRP fund and duties of its board of trustees. See Ky. Rev. Stat. § 21.450. In a nutshell, this section imposes a framework of accountability by establishing a standard of care for the board of trustees and requiring that pension benefits be funded through an authorized insurance company or investment portfolio. Id. Though KRS 21.450 establishes accountability standards, it plainly does not govern the accrual of retirement benefits. Id. Since KRS 21.450 does not govern the accrual of retirement benefits, a cost of living adjustment to benefits provided under "this" statute is meaningless.
Because the accrual of benefits under KRS 21.450 is meaningless, the accrual of benefits under "any other applicable" statute is absurd. Section 4 provides that the accrual of benefits also may apply to "any other applicable statute. " From the context, "applicable" appears to mean "pertinent," "relevant," or perhaps "analogous." See, e.g., Webster's Third New International Dictionary (1963); Webster's New World Dictionary (1974). Unfortunately, Section 4 does not provide any criteria for determining what particular statutes should be deemed "applicable." Since KRS 21.450 is specifically referenced, the term "any other applicable statute" could refer to any other accountability statute regarding public pensions. This necessarily would include KRS 21.440 describing duties of the investment committee and the board; KRS 21.530 regarding coordination of legislators' retirement and judicial retirement plans; KRS 21.540 regarding the duties of the board of trustees; KRS 21.550 and KRS 21.560 regarding investments of the Judicial and Legislative Retirement Plans; KRS 61.570 regarding Kentucky Employees Retirement System (KERS) fund assets; KRS 61.645 regarding duties of the KERS board of trustees; KRS 61.65 regarding KERS investments; and KRS 61.660 regarding the KERS custodian of funds. However, like KRS 21.450, none of these accountability statutes govern an "accrual of benefits."
It is elementary that a legislative enactment altering the "accrual of benefits" must reference the particular statutes under which benefits actually accrue. The only statutes that govern the accrual of benefits in the Judicial Retirement Plan are KRS 21.400 and KRS 21.405. The analogous statutes in the Legislators Retirement Plan are KRS 6.520 and KRS 6.521. KRS 6.520 and KRS 21.400 provide formulas for the monthly service benefits paid under these plans. KRS 6.521 and KRS 21.405 provide an annual cost of living adjustment to those monthly service benefits. However, with the exception of KRS 21.405(4), Section 4 does not reference these statutes, nor are these statutes "applicable to" KRS 21.450. The mere existence of these statutes, without reference to them in Section 4 of HB 389, simply does not provide a basis for a court to determine which benefits are impacted by Section 4. See, e.g., Liberty Nat'l. Bank and Trust Co. v. George, 70 B.R. 312 (W.D.Ky. 1987) (the court will not torture beyond recognition words of a statute even in an attempt to reach what may be an equitable result). Therefore, it is impossible to determine from the language of Section 4 to which "benefit" that section refers.
The only conceivable benefit adjustment contemplated by the language of Section 4 would be patently redundant. According to Section 4, the "accrual of benefits" is to be "no less than the benefit adjustment provided for in KRS 21.405(4)." HB 389, Section 4, Kentucky General Assembly, Regular Session (2000). As explained earlier, the benefit adjustment provided in KRS 21.405(4) applies an annual cost of living increase to monthly pension benefits for retirees in the Judicial Retirement Plan. The language of Section 4 appears to require that any accrual of benefits meet or exceed this cost of living adjustment. Id. However, based on the foregoing discussion, the only "accrual of benefits" to which Section 4 refers is the accrual of benefits in KRS 21.405(4) itself. This means that Section 4 would apply a cost of living adjustment to a statute that by its own terms already applies a cost of living adjustment to pension benefits. This adjustment would be a blatantly duplicate appropriation of state funds and, therefore, null and void. Ky. Rev. Stat. § 48.312 ("any . . . enactment by the General Assembly which contains an appropriation provision for the same purpose and the same amount shall be construed as duplicate sums, and no additional moneys shall be provided for the duplicate appropriation" ).Finally, the primary provisions of HB 389 provide no direction in determining the meaning of Section 4. HB 389 extends health insurance benefits to judicial retirees who relocate to other states. HB 389, Kentucky General Assembly, Regular Session (2000). Since that issue is not even remotely related to the accrual of pension benefits under the Kentucky Retirement Systems, none of the provisions in Sections 1 through 3 of HB 389 lend meaning to Section 4.
In circumstances such as the present, where the meaning of an enactment may not be determined by its plain language, the court may seek assistance from the legislative history. See Overnite Transport Co. v. Gaddis, Ky.App., 793 S.W.2d 129 (1990); Bradley v. Austin, 841 F.2d 1288 (6th Cir. 1985). To establish the meaning of an enactment through its legislative history, courts may rely on reports and minutes of legislative committees, prior drafts of the statute, and words spoken in debate. See Fiscal Court of Jefferson County v. City of Louisville, et al., Ky., 559 S.W.2d 478, 480 (1977).
Unfortunately, there is practically no legislative history for Section 4 of HB 389. Section 4 did not exist in HB 389 when it was introduced in the House on January 18, 2000. This means that there is no explanation for Section 4 in prior drafts of HB 389 or in the minutes of the House Committee on State Government, which favorably reported the bill on March 7, 2000. Similarly, because it did not exist in the bill passed by the House, there was no mention of Section 4 in the March 13th floor debates of HB 389.
In the Senate, HB 389 first was sent on March 19th to the Senate Committee on Appropriations and Revenue in the very same form in which it passed the House. The bill then was recommitted to the Senate Committee on State and Local Government, where Section 4 mysteriously appeared at the end of the bill. It appears from the minutes of that Committee meeting on March 23rd that a committee substitute bill containing Section 4 was adopted by voice vote without discussion in an unscheduled committee meeting in the back of the Senate chamber. The Senate adopted HB 389 as part of the Consent Calendar without debate on the very last day of the legislative session, March 29, 2000. Sometime around 9:00 p.m. on that same day, the House concurred with the Senate Committee Substitute for HB 389 after only a brief comment by its sponsor.
Therefore, the entire legislative history of Section 4 of House Bill 389 is contained in the following comment made on the floor of the House by the bill's sponsor:
"Section 4 was added . . . and I have a report here . . . from the retirement system . . . that says . . . 'I am unable to determine the fiscal impact, if any, of Section 4.'"
Video Recording, Kentucky General Assembly, House Floor Debate, March 29, 2000.
This brief legislative history is even less helpful than the language of Section 4 itself. However, the circumstances surrounding its adoption suggest that Section 4 reflects the effort of the General Assembly to increase significantly their retirement benefits since early in the 2000 Regular Session. The 2000 General Assembly introduced Senate Bill 349, which proposed a number of changes to the Kentucky Retirement Systems, including a substantial increase in legislative pensions. S.B. 349, Kentucky General Assembly, Regular Session (2000). Upon introduction, Senate Bill 349 immediately was inundated in controversy. Peter Baniak, Retirement Bill Offers Benefit for Lawmakers , Lexington Herald-Leader, March 3, 2000; Michael Quinlan, Legislators Leery of Raising Pensions , The Courier Journal, March 4, 2000. As required by KRS 6.350, the Senate Committee on State and Local Government received an actuarial analysis of the economic impact of SB 349 on the public retirement system. That report estimated that if the legislators' assumed salary actually had increased from $ 27,500 to $ 45,000 between 1982 and 1999, the estimated additional funding would have totaled $ 11.5 million in additional tax dollars. Stephen A. Gagel, Legislators Proposed Salary Increase , William M. Mercer, Inc., Letter to Executive Director, Kentucky Judicial Form Retirement System, March 10, 2000.
After public controversy reminiscent of controversy surrounding the so-called "Greed Bill," the Senate Committee on State and Local Government removed the provision from SB 349 before reporting it to the Senate floor. Audio Recording, Senate Committee on State and Local Government, Kentucky General Assembly, Regular Session (March 13, 2000). The Senate passed SB 349 as reported by the Committee without the assumed salary increase, but the bill eventually died in the House. Dave Baker, Options Run Out For Pension Hike , State Journal, April 13, 2000 at A2.
When the clear language increasing the assumed salary in SB 349 was rejected so soundly after intense public scrutiny, the General Assembly adopted the ambiguous language of Section 4 in HB 389 at the last minute, without public discussion, just hours before the close of the session. Contrary to the statement made on the floor of the House regarding Section 4, there was no actuarial study of the amendment as required by KRS 6.350. The letter written by the Executive Director of the Kentucky Judicial Form Retirement System to the Legislative Research Commission, which states that "I am unable to determine the fiscal impact, if any, of Section 4," does not meet the actuarial requirements of KRS 6.350. KRS 6.350 requires that the General Assembly obtain an actuarial analysis of any bill that would increase pension benefits or change the financial liability of any public retirement system. Id. According to this statute, the analysis must "be prepared by an actuary who is a Fellow of the Society of Actuaries, a member of the American Academy of Actuaries, or an enrolled actuary under the Employees Retirement Income Security Act of 1974." Id. The actuarial analysis must show the economic effect of the bill on the public retirement system, project the costs of increased benefits, and describe assumptions and methods of computation. Id. The General Assembly failed to comply with these requirements when it adopted Section 4 of HB 389.
In fact, the circumstances surrounding the adoption of Section 4 reveal that legislators were attempting to increase their pension benefits in secrecy because they could not do so under public scrutiny. In a letter to this office, Senator Albert Robinson, the Chairman of the Senate Committee on State and Local Government, stated the following regarding Section 4:
"Since it was our intent to not make the provision of the amendment so visible ; and based on staff's proposal, we decided to place the substance of our proposal on one of the judicial statutes . . . ."
Letter from Senator Albert Robinson to the Office of the Attorney General (May 18, 2000) (emphasis added). In other words, legislators adopted an intolerably vague amendment that they hoped eventually would result in a substantial increase in their own pension benefits.
The Kentucky Constitution provides for the separation of the three branches of government and expressly forbids each branch from encroaching on the powers of the others. See Ky.Const. §§ 27 & 28. The landmark case of Legislative Research Commission v. Brown reaffirmed the principle that the three branches of government are coequal and may only exercise the powers affirmatively granted to them by the Constitution. 664 S.W.2d 907, 912-14 (1984). Just as the Legislature may not encroach on the constitutional authority of a coequal branch, so it may not simply divest itself of its own affirmative grant of power. See Ky.Const. § 27. Thus, a delegation providing insufficient standards to control administrative discretion is invalid under separation of powers principles. See Holsclaw v. Stephens, Ky., 507 S.W.2d 462, 471 (1974). "The separation of powers doctrine is fundamental to Kentucky's tripartite system of government and must be 'strictly construed.'" LRC v. Brown, 664 S.W.2d at 912.
The prohibition against vague delegations of legislative authority, derived from Sections 27 and 28 of the Constitution, recognizes that unintelligible statutes present hazards to a society based on rule of law. See Diemer v. Commonwealth, Ky., 786 S.W.2d 861, 864 (1990). Accordingly, the Kentucky Supreme Court will invalidate a statute if it is "so vague that persons of common intelligence must necessarily guess at its meaning and differ as to its application." Raines v. Commonwealth, Ky., 731 S.W.2d 3, 4 (1987); Diemer, 786 S.W.2d at 864. It must do so because such statutes fail to provide fair warning of legal requirements and create the risk of arbitrary application. See id. Vague legislative delegations pose these risks and, moreover, threaten the very structure of our system of government by violating the principle of separation of powers. Id. Our courts do not tolerate such insults to these time-honored constitutional principles.
The Commonwealth strictly enforces the principle that the General Assembly may not delegate any portion of its legislative function to another authority. "The legislative scheme must be essentially complete on its face, leaving to regulatory authority administrative rather than policy decisions." Diemer, 786 S.W.2d 865. In other words, "delegation of legislative power, to be lawful, must not include the exercise of discretion as to what the law shall be." LRC v. Brown, 664 S.W.2d at 915. Because of the strict separation of powers, Kentucky courts strictly apply the delegation doctrine. For example, in Diemer , the Kentucky Supreme Court found that a statute establishing limitations on the erection and maintenance of billboards was unconstitutionally vague because it failed to define with sufficient precision areas affected by the statute. Id. at 886-87. The statute at issue in Diemer provided in relevant part:
"The erection or maintenance of any advertising device located outside of an urban area and beyond six hundred and sixty (660) feet of the right-of-way which is legible and/or identifiable from the main traveled way of any interstate highway or federal aid primary highway is prohibited . . . ."
Id. at 862-63 (emphasis added). The court found that the term "urban area" failed to put a particular property owner on notice as to whether his property was or was not within the proscribed area. Id. Additionally, the statute allowed the Secretary of Transportation broad discretion in determining the definition of an urban area. Id.
Similarly, in Flying J Travel Plaza v. Commonwealth, Ky., 928 S.W.2d 344 (1996), the Supreme Court held a regulation governing the placement of lighted signs to be an unconstitutionally vague delegation. In this case, the state statute provided that, with the exception of those giving "public service information," illuminated advertising devices were prohibited. Id. at 348. The regulation under this statute prohibited signs containing flashing, moving or intermittent lights, except those time and date signs that comply with a limited cycle. Id. at 346. The court decided that the regulation was an unconstitutionally vague delegation because the Transportation Cabinet did not define the words "public service information." Id.; see also State Board for Elementary and Secondary Education v. Howard, Ky., 834 S.W.2d 657 (1992) (statute vague in part because of the failure to define the word "activities.")
As in these cases, the delegation of authority under Section 4 of House Bill 389 is a patently unconstitutional delegation of legislative power to an administrative authority. Its language is so vague as to require "the exercise of discretion as to what the law shall be." LRC v. Brown, 664 S.W.2d at 915. Its meaning is so opaque as to leave the agency with no guidance as to its precise application. The questions posed by the Executive Director of the Judicial Form Retirement System illustrate that reasonable persons necessarily must guess at the meaning of Section 4 and differ as to its application. As illustrated above, it is impossible to determine even the scope of Section 4, much less the meaning of "accrual of benefits," or the term "this or any other applicable statute. "
Section 4 does not provide sufficient standards or guidelines for its application and is confusing to the point of unintelligibility. The Judicial Form Retirement System would be unable to determine which benefits must be adjusted, and the method of adjustment cannot be determined from the plain language of the provision or from the legislative history of HB 389. In order to find a meaningful rule that might guide the Judicial Form Retirement System in interpreting Section 4, the provision would have to be rewritten entirely. However, this is not permissible because, as the Supreme Court in Diemer stated, "we cannot go so far as to add additional words to give constitutionally permissible meaning where none would otherwise exist." Id. at 864 citing Musselman v. Commonwealth, Ky., 705 S.W.2d 476 (1986).
The vague language of Section 4 invites arbitrary interpretation. The language of Section 4 is so unintelligible that it could be interpreted to grant a pension increase to every member of the Kentucky Retirement Systems. Such an application could jeopardize the solvency of the systems. Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 721 (1978) ("drastic changes in the legal rules governing pension and insurance funds" can "jeopardizee the insurer's solvency and, ultimately, the insured's benefits"). This kind of threat to the pension funds in Kentucky's public retirement plans could, in turn, violate the Contracts Clause. In re State Employees' Pension Plan, 364 A2d 1228 (Del. 1976) (state statute that increased pension benefits to certain named retired public employees was an unconstitutional impairment of vested contractual rights where the statute made unreasonable modifications in state pension trust.).
Finally, Section 4 could be interpreted to grant a gratuitous increase in pension benefits to persons who already have retired. Section 4 purports to make a cost of living increase to "the accrual of benefits." Since benefits continue to accrue in retirement accounts post-retirement, Section 4 could be construed to impact retirees. Granting a retroactive pension increase to retired pensioners would be an unconstitutional emolument in exchange for past public service that would violate Section 3 of the Kentucky Constitution. Littleton v. Reed, Ky., 456 S.W.2d 695 (1970) (under Kentucky Constitution § 3, legislature could not compensate by way of pension or retirement benefits a former judge whose public service had been completed prior to the enactment of the statute). The vague language of Section 4 of HB 389 could be interpreted to permit this illegal result.
Therefore, Section 4 of House Bill 389 is an unconstitutionally vague delegation of legislative power to the Judicial Form Retirement System. It is impossible to determine from the plain language of the amendment or its legislative history the meaning of the words in Section 4. In fact, Section 4 is so intolerably vague that it provides no rule of law whatsoever to guide the discretion of the Judicial Form Retirement System in its application. In its language and effect, Section 4 violates the strict separation of powers that ensures that the General Assembly is accountable to the people. We recognize that courts must attempt to find constitutionality in an ambiguous enactment. However, as the Supreme Court stated in Sibert et al. v. Garrett et al., Ky., 246 S.W. 455 (1922):
"such admonition does not destroy the power of the courts to pronounce an act unconstitutional when its enactment is either expressly or by necessary implication inhibited and subversive of the purposes and intention of the makers of the [Kentucky] Constitution."
CONCLUSION
Section 4 of House Bill 389 is an unconstitutional delegation of legislative power to the Judicial Form Retirement System. Consequently, the questions posed by the System are moot.