State Ex Rel. State Employees' Retirement Board v. Yelle

201 P.2d 172, 31 Wash. 2d 87, 1948 Wash. LEXIS 250

• Court: Washington Supreme Court
• Decided: July 1, 1948
• Docket: No. 30601.
• Status: Published

Opinions

Steinert, J.

— The relator, state employees’ retirement board, instituted in this court an original mandamus action, seeking to compel respondent, the state auditor, to honor a voucher and issue a warrant in payment of a claim for refund of contributions made by a former state employee to the state employees’ retirement fund. An order to show cause was issued by this court, and in response thereto the state auditor appeared and demurred to relator’s petition. The matter is now before us on the pleadings and the law applicable to the case as presented thereby.

The facts, as set forth in the petition and admitted by the demurrer, are these: On November 10, 1947, one Clarence Fleming, theretofore a state employee and member of the state employees’ retirement system, made written demand upon the state employees’ retirement board, relator herein, for refund to him of all contributions previously paid by him and standing to his credit in the employees’ savings fund of the retirement system, as permitted by, and in accordance with, the provisions of chapter 274, p. 1168, Laws of 1947 (Rem. Supp. 1947, § 11072-1 et seq.), commonly known as the state employees’ retirement system act. The board, having found that the claimant was eligible to receive the refund and that the amount claimed by him was correct and proper, prepared a voucher authorizing the state auditor to draw a warrant for the payment of the claim, under the provisions of the 1947 legislative act. The auditor acknowledged receipt of the voucher, but refused to approve or honor the claim, for the reason and upon the ground that he could find no statutory appropriation made for that purpose, as required by law. In consequence of the stand taken by the state auditor, this action was instituted by the relator.

Chapter 274, Laws of 1947 (Rem. Supp. 1947, § 11072-1 et seq.), establishes a retirement system embracing in its membership all state, monthly salaried employees, with certain exceptions, and also the employees of such political subdivisions of the state as shall exercise the option of coming under the act. The administration and management of the system are vested in a retirement board consisting of four state officers and three state employees.

As contemplated by the act, moneys for use in payment of the benefits prescribed therein are accumulated by employee and employer contributions. Beginning October 1, 1947, each employee is required to contribute annually five per cent of that part of his compensation earnable, not in excess of thirty-six hundred dollars per annum, and the amount so contributed is paid into what is designated in the act as the “Employees’ Savings Fund.” The employee is also required to contribute one dollar and fifty cents per annum to what is designated in the act as the “Expense Fund.” Further reference to the expense fund, its purposes, and the means of replenishing it will be made a little later herein.

Beginning April 1, 1949, the state as employer, and any political subdivision thereof becoming an employer under the provisions of the 1947 act, will be required to contribute periodically to the “Employer’s Accumulation Fund” certain amounts, determined in accordance with the provisions of the act and realized from legislative appropriations in such amounts as the retirement board shall have ascertained to be necessary.

In addition to these specific funds mentioned above, the retirement act also creates several other “funds” designated respectively as the “Annuity Reserve Fund,” the “Pension Reserve Fund,” and the “Income Fund,” but with these we are not here particularly concerned. These descriptive terms have reference simply to the accounting records of the retirement board, and not to any segregation or identification of moneys in the state treasury. In fact, all moneys coming to the retirement board through contributions or otherwise are kept on deposit in the state treasury under what is designated as the “Washington State Employees’ Retirement Fund.” The state treasurer is by the express terms of the act made the custodian of all funds of the retirement system, and is authorized and required to deposit any portion of the moneys not needed for immediate use “in the same manner and subject to all the provisions of law with respect to the deposit of state funds by such Treasurer.” That officer is further required to furnish annually to the retirement board a statement of the amount of moneys in his custody belonging to the retirement system.

The members of the retirement board are trustees of the several funds created by the act, with full power to invest them in certain types of bonds and other obligations, and to purchase insurance contracts as specified in the act. For the purpose of meeting disbursements for annuities and other payments in excess of its receipts, the retirement board is required to keep available, on deposit in the state treasury, an amount not exceeding ten per cent of the total amount of its funds.

Sections 19 to 26, inclusive, of the act (Rem. Supp. 1947, §§ 11072-19 to 11072-26, inclusive), provide for and specify the various benefits to which an employee is or may be entitled on his retirement from service, whether his retirement be optional, compulsory, or resulting from disability. These benefits consist generally of (a) an annuity; (b) a basic service pension; (c) a membership service pension; and (d) a prior service pension.

Section 27 of the act (Rem. Supp. 1947, § 11072-27), relating to refunds of contributions on withdrawal of an employee from service before retirement, provides:

“Should a member cease to be an employee before attaining age sixty (60), or after such age but before becoming eligible for benefits, for reasons other than his disability or death as provided in sections 21, 22, 23, 24, 25, 26 and 28, he shall be paid all or part of the contributions standing to his credit in the Employees’ Savings Fund, with regular interest additions, as he shall demand in writing upon forms furnished by the Retirement Board, subject to the provisions of section 30 [which section has no bearing upon the question under consideration in this case]. Any person who has withdrawn his contributions from the Employees’ Savings Fund, as provided for in this section, and who again becomes a member, may restore to the Employees’ Savings Fund all or part of such contributions previously withdrawn by him.” (Italics ours.)

The claim for refund here involved was made pursuant to the section just quoted.

The contention and argument of the respondent state auditor may be summarized as follows: The funds of the state employees’ retirement system are required by statute to be kept in the state 'treasury and, in fact, are actually placed and kept there; any refund made pursuant to the claim here in question would have to be made from the Washington state employees’ retirement fund actually in the state treasury; moneys in the state treasury cannot be withdrawn therefrom or expended except upon specific legislative appropriation; no such appropriation has ever been made in this instance; hence, the respondent cannot lawfully be required to draw a warrant for the refund of the contribution made by the claimant employee. Respondent’s contention is based fundamentally upon Art. VIII, § 4, of the Washington constitution, as revised by the eleventh amendment, which reads:

“No moneys shall ever be paid out of the treasury of this state, or any of its funds, or any of the funds under its management, except in pursuance of an appropriation by law; nor unless such payment be made within one calendar month after the end of the next ensuing fiscal biennium, and every such law making a new appropriation, or continuing or reviving an appropriation, shall distinctly specify the sum appropriated, and the object to which it is to be applied, and it shall not be sufficient for such law to refer to any other law to fix such sum.”

In support of his contention, respondent cites and relies upon State ex rel. Davis v. Clausen, 160 Wash. 618, 295 Pac. 751, and Mason-Walsh-Atkinson-Kier Co. v. Department of Labor & Industries, 5 Wn. (2d) 508, 105 P. (2d) 832.

Opposing respondent’s reasoning and argument, the relator contends that the funds of the retirement system are not public funds within the scope and meaning of the Washington constitution, but are proprietary funds committed to the custody of the state treasurer as trustee for particular objects and purposes, and subject to disbursement upon authorization of the retirement board, and that repayment of an employee’s contribution out of such funds does not require an appropriation by the legislature. In support of this contention, relator cites and relies upon State ex rel. Sherman v. Pape, 103 Wash. 319, 174 Pac. 468; State ex rel. Washington Toll Bridge Authority v. Yelle, 195 Wash. 636, 82 P. (2d) 120; State ex rel. Van Orsdel v. Yelle, 15 Wn. (2d) 320, 130 P. (2d) 889.

Messrs. Wettrick, Flood, and O’Brien, appearing “amicus curiae” for Washington Federation of State Employees, A. F. of L., join in the contention made by the relator.

Each of the parties litigant endeavors to distinguish the cases cited by its or his opponent. For reasons which will presently appear, however, we will not discuss or quote from any of these judicial decisions.

As indicated above, respondent’s refusal to honor the claim for refund and his present contention in this controversy are based on the theory that the required legislative appropriation for such purpose has never been made. Relator and amicus curiae seemingly concede, or at least likewise proceed upon the assumption, that no specific appropriation has yet been made by the legislature for refund of an employee’s contributions to the employees’ savings fund. Proceeding upon that theory, counsel make their respective contentions as summarized above and rely upon the cases heretofore cited.

We do not agree with the theory upon which respective counsel apparently proceed, and, for that reason, we do not follow their argument nor analyze the cases upon which they severally rely.

In our opinion, there was a specific legislative appropriation, broad enough to cover claims of the kind involved here. If there was such appropriation, it necessarily follows, and counsel for both parties would no doubt concede, that the warrant in this instance should have issued and the amount thereof paid. We shall briefly state our reasons for this conclusion.

Section 42 of the 1947 act, p. 1194, providing for an appropriation, which section does not appear in Rem. Supp. 1947, reads as follows:

“There is hereby appropriated for the biennium ending March 31, 1949, from the General Fund of the State of Washington, the sum of one hundred thousand dollars ($100,000) or as much thereof as shall be found necessary. The money is to be allocated to the Expense Fund, as provided for in section 11 of this act [Rem. Supp. 1947, § 11072-11(f)], and is to be used to actuate and carry out the provisions of this act.” (Italics ours.)

It will be noted that the amount of this appropriation is allocated to the expense fund of the retirement system and is to be used to actuate and carry out the provisions of the act, which act vests in the retirement board the administration and management of the system of retirement.

Section 11 (f) of the act (Rem. Supp. 1947, § 11072-11 (f)), in so far as material here, provides as follows:

“The Expense Fund shall be the fund from which shall be paid the expenses of the administration of this act, exclusive of amounts payable as retirement allowances and other benefits provided for in this act. The Retirement Board shall ascertain and shall request from the Legislature an appropriation equal to the amount necessary to defray and cover the expenses of administering this act during the ensuing biennium. . . . ” (Italics ours.)

It will be noted that, by express provision, no part of the expense fund is to be used for the payment of retirement allowances or other1 benefits provided for in the act, but only for the payment of the expenses incident to the administration of the act.

The refund of an employee’s contributions on his withdrawal from service before retirement is not a “retirement allowance,” nor is it one of the “benefits” to which a “retiring member” is entitled under the act. An employee who withdraws from service, or any member of the retirement system who ceases to be an employee, before the prescribed time for his retirement, is not a “retiring member” under the act and is not entitled to any .of the “benefits” of the retirement system, such as an annuity or pension. By such withdrawal or cessation of membership, he is effectively precluded from receiving any of the prescribed benefits. His only right, under such circumstances, is to demand and receive a refund of the contributions made by him while he was a member in good standing of the retirement system. But such a refund, or the right to receive it, is not one of the prescribed “benefits” of the act. In a sense, the contribution paid by the employee into one of the funds which the retirement board administers may be compared to the price paid by one for admission to a game or play, or for a railroad ticket. If the holder thereof declines to use the ticket, or puts himself in such position that he cannot use it, he forfeits any benefits that he might otherwise have derived from his contract. His only right in such instance would, in any event, be to have the amount of the purchase price refunded to him.

In our opinion, the refunding of contributions to an employee who has withdrawn from service, or to a member of the retirement system who has ceased to be an employee, before retirement constitutes one of the duties imposed upon the retirement board in its administration and management of the retirement system; and one of the purposes of the appropriation provided in § 42 of the act as passed by the legislature was to enable the board “to actuate and carry out the provisions of this act” by making such refund.

While the contributions by the employee may originally have been paid into the employees’ savings fund and may, as a matter of accounting, be still standing therein to the credit of the employee, we are of the considered opinion, for the reasons heretofore set forth, that the refund of the contributions to the employee is to be made from the expense fund; that the legislative appropriation provided in § 42 of the act was intended to cover, among other things, such refund as constituting an expense of administering the retirement system; and that the use of such appropriation to the extent necessary for such refund is a function to be exercised by the retirement board under its duty “to actuate and carry out the provisions of this act.”

Since, in our opinion, there was thus an express appropriation for paying such refund, the claimant was entitled to have a warrant therefor issued and paid.

Let a writ issue directing the respondent to honor the voucher and issue a warrant pursuant thereto.

Mallery, C. J., Beals, Robinson, and Jeffers, JJ., concur.