Paul J. SUNDERMIER, Plaintiff-Appellant,
STATE OF OREGON, acting by and through its Public Employees Retirement System and Public Employee Retirement Board, Trustee and fiduciary, Defendant-Respondent, and Paul R. CLEARY, et al., Defendants
Argued and Submitted July 1, 2014.
Marion County Circuit Court 12C13753. Lindsay R. Partridge, Judge.
Paul J. Sundermier argued the cause and filed the briefs for appellant, Pro se.
Peenesh H. Shah, Assistant Attorney General, argued the cause for respondent. With him on the brief were Ellen F. Rosenblum, Attorney General, and Anna M. Joyce, Solicitor General.
Before Garrett, Presiding Judge, and Egan, Judge, and DeVore, Judge.
[269 Or.App. 588] GARRETT, P. J.
This appeal involves two competing interpretations of a statute. The legislature enacted ORS 238.364, which provides some retired public employees with an additional retirement benefit to offset their state income tax liability. There is no dispute that that was the purpose of the law. Petitioner contends, however, that what the legislature actually enacted is a formula that entitles him to far more--thousands of dollars per month more--than is needed to off-set the state income tax on his pension benefit. As explained below, we reject petitioner's interpretation and affirm the judgment of the trial court.
Petitioner retired in 2011 after 30 years of service as a state employee. He obtained a determination of his monthly retirement allowance from the Public Employees Retirement System (PERS). Believing PERS's calculation to be incorrect, petitioner requested an audit. PERS upheld its benefit calculation in a written order. Petitioner sought judicial review pursuant to ORS 238.450(4), alleging several defects in the order. The trial court granted summary judgment to PERS. On appeal, petitioner challenges only one aspect of the trial court's decision: its ruling that PERS correctly calculated the portion of petitioner's retirement benefit attributable to ORS 238.364. Specifically, petitioner argues that PERS, in applying that statute, wrongly increased petitioner's benefit by only four percent instead of 36 percent.
The Supreme Court discussed the history of ORS 238.364 in Vogl v. Dept. of Rev., 327 Or. 193, 197-200, 960 P.2d 373 (1998). We summarize that history to provide context for our analysis.
For many years, Oregon exempted state pension income from income tax but did not similarly exempt federal retirement benefits. In 1991, the legislature repealed the state pension exemption in light of the United States Supreme Court's decision in Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989), which
had invalidated a similar state/federal pension distinction in Michigan. Oregon public retirees challenged the 1991 law as a breach of contract. The Oregon [269 Or.App. 589] Supreme Court held that the 1991 repeal of the tax exemption for state pension benefits was, indeed, a breach of the state's contractual obligation to its public employees. Hughes v. State of Oregon, 314 Or. 1, 838 P.2d 1018 (1992).
Following Hughes, the 1995 legislature enacted House Bill (HB) 3349, now codified at ORS 238.364, the statute at issue in this case. HB 3349 stated that its purpose was to provide a benefit increase " in compensation for damages suffered by those members and beneficiaries by reason of subjecting benefits * * * to Oregon personal income taxation." Or. Laws 1995, ch 569, § 2. In other words, HB 3349 established a mechanism by which the affected public employees would receive an additional benefit to remedy the breach of contract described in Hughes. As the Supreme Court later noted in Vogl, HB 3349 " expressly state[d], in a variety of ways, that the increased benefits are provided as full and final payment of damages for any claim arising out of the repeal of the previously existing exemption" for state pension benefits. 327 Or. at 200.
The relevant parts of ORS 238.364 are as follows:
" (1)(a) Upon retirement of an employee who is a member of the Public Employees Retirement System and computation of that member's service retirement allowance * * *, the Public Employees Retirement Board shall add to the amount of the allowance, * * * the greater of the percentage increase calculated under ORS 238.366 or a percentage increase calculated under subsection (4) of this section.
" * * * *
" (4)(a) The Public Employees Retirement Board shall calculate a multiplier for the purposes of this section equal to the percentage ...