99-3297 Wisconsin Professional Police Association, Inc. et al. v. Lightbourn et al.

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Plaintiffs assert, as one argument, that participants in the state retirement system have a property right to have the investment earnings of the fixed trust (the transaction amortization account or TAA) distributed in the manner set by the pre-Act 11 statute because any change deviating from the established mechanism violates a participant’s property rights.

“During the last quarter century, as noted above, the TAA has been changed several times. These changes serve as precedent for the $4 billion distribution. The creation of the TAA resulting in curtailed distributions, the changes in the TAA since 1975 resulting in increased distributions, and the pending closure of the TAA all conflict with the proposition that participants in the WRS have a property right in a particular distribution mechanism frozen in time. If we approved WPPA’s position, we would be concluding that past special distributions from the TAA were unlawful. If we accepted WPPA’s argument, we would be holding that only 20 percent of the TAA could be distributed each year, regardless of investment performance. This position is untenable. Wisconsin Stat. sec. 40.19(1) specifically recognizes the authority of the legislature to enact statutory changes to Chapter 40, so long as accrued benefits are not abrogated. …

“WPPA quotes WRS actuaries to the effect that ‘[c]hanging the flow of funds from the TAA to the various fixed reserves affects the distribution of WRS benefits among individual participants.’ This statement is true. But it does not establish that the $4 billion distribution ‘takes’ any accrued benefit ‘due’ for service rendered. To block the $4 billion distribution on grounds that not all participants enjoy the distribution equally would paralyze the TAA and prevent the legislature from adjusting the draw from the TAA to reflect successful investment performance.

“The $4 billion distribution is a legitimate recognition of gains in the TAA, properly dispersed to those who are entitled to receive them. The annuity reserve receives its full share of the TAA distribution. The employee reserve receives its full share of the TAA distribution. The employer reserve receives its full share of the TAA distribution. No participant’s accrued benefits are abrogated, damaged, or threatened. Most participants will receive substantial benefit improvements.

“We conclude that WPPA has failed to show beyond a reasonable doubt any taking of property because of the $4 billion distribution from the TAA. …

“To sum up, this court concludes that Act 11 is constitutional, having been approved by the requisite number of votes, namely, “a three-fourths vote of all the members elected to both houses of the legislature.” The Act does not take the petitioners’ property without just compensation, nor does it impair the obligations of their contract with the State of Wisconsin. It does not violate the fundamental principles of Chapter 40 or any right preserved in Wis. Stat. sec. 40.19(1). It does not violate trust principles. Rather, it strengthens the hand of the ETF Board. Consequently, the relief requested by petitioners is denied and the injunction issued by this court is lifted.

Rights declared and declaratory relief denied.

DISSENTING IN PART: Bablitch, J. “I join the majority opinion with the exception of part IV.D. regarding the $200,000,000 credit given to employers. This credit is a forgiveness of a debt owed by employers to the Wisconsin retirement system (WRS). It is not the state’s to forgive. The state is not the owner of this debt; the employees are. Accordingly, I respectfully dissent to this part of the majority opinion.”

DISSENTING OPINION: Abrahamson, Ch. J., with whom Bradley, J., joins “It is the province of this court to decide the constitutionality of legislation, not the wisdom of the legislature. I conclude that Act 11 is an unconstitutional intrusion on the state pension fund.”

Original action of declaratory judgment; Prosser, J.

Attorneys:

For Appellant: John Charewicz, David Mahoney, Susan Armagost, Steven Urso, Lester A. Pines, Carol Grob, Linda Harfst, Madison

For Respondent: George Lightbourn, Jack C. Voight, Ann Ustad Smith, Madison