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AG Ellen Rosenblum #753239

SG A nna M . Joyce #013112

AAG Keith L. Kutler #852626

AAG Matthew J. Merritt # 122206

AA G M ichael A. Casper #062000

Oregon D epartment of Justice

1162 C ourt Street.NE.

Salem, OR 97301-4096

Telephone: 503-37-8-4402

Facsimile: 503-378-6306

anna.ioyce@doj. state. or.us

keith. kutler@doj . state. or. us

matthew. m erritt(~

,doi . state. or.us

[email protected]

Attorneys for State. Respondents

Harry Auerbach #821830

Kenneth A. McGair #990148

Office of the City Attorney

1221 SW 4`'' Avenue, Ste 430

Portland, OR 97204

Telephone: 503-823-4047

Facsimile: 503-823-3089

harry. auerbachgportlandoregon. go v

ken.McGair(~,portlaindoregon. gov

Attorney for Respondent City of

Portland

Eugene J. Karandy II #972987 .

Ofrice of County Attorney

Linn County Courthouse

104 SW Fourth Avenue, Room 123

Albany, OR 97321

Telephone : 541-967-3 840

F acsimile : 541-928-5424

gkarandyA co. linn. or. us

Attorney for Respondent Linn County

W illiam F. Gary #770325,

william.f.g_

ry@harran .

com

Sharon A. Rudnick#830835

[email protected]

Harrang Long'Gary Rudnick PC

360 E. 10 `'' Ave ., suite 300

Eugene, OR .97401

Telephone: -503-242-00.00:

Facsimile: 541-686=6564

Attorneys for Respondents Linn

County, Estacada, Oregon City,

Ontario, W est Linn School D istricts

and B eaverton School D istricts; and

Intervenors Oregon School Boards

Association and Association of

Oregon Counties

DanieJ B. A tchison #040424

Kenneth Scott Montoya #064467

Office of City Attorney

555 Liberry Street SE R m 205

Salem, OR 97301

Telephone: 503-588-6003

Facsimile: 503-361-2202

datchison(~,cityofsalem.net

[email protected]


Salem

Edward F. Trompk e #843653

Jordan Ramis PC

Tw o Centerpointe Drive, 6`

h

Floor

Lake Oswego, OR 97035

Telephone: 503-598-5532

Facsimile: 503-598-7373

ed. trompke(a~

j ordanramis. com

Attorney for Respondent Tualatin

Valley Fire and Rescue

WAYNE STANLEY JONES''EXTENDED REPLY BRIEF SEPTEMBER 2014


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Lisa M. Frieley #912763

Oregon School Boards Association

PO Box 1068

Salem, OR 97308

Telephone: 503-588-2800

Facsimile: 503-588-2813

[email protected]

Attorney for Respondents Estacada,

Oregon City, Ontario, and West Linn

School Districts and Intervenor


Rob Bovett #910267

Association of Oregon Counties

1201 Court St. NE Ste 300

Salem, OR 97301

Telephone: 971-218-0945

rbovett

e

aocweb.org

Attorney for Linn County

1Vlichael D. R eynolds (Petitioner Pro

Se)

8012 Sunnyside Avenue N.

Seattle, WA 98103

Telephone: 206-910-6568

[email protected]

Petitioner pro se

Sara K. Drescher #042762

Tedesco Law Group

3021 NE Broadway

Portland, OR 97232

Telephone: 866-697-6015

[email protected]

Attorney for Amicus Curiae IAFF

W. Michael Gillette #660458

Leora Coleman-Fire #113581

Sara Kobak #023495

William B. Crow #610180

Schwabe Williamson & Wyatt PC

1211 SW 5`

h

Ave Suite 1900

Portland, OR 97204

Telephone: 503 -222-9981

Facsimile: 503-796-2900

wm [email protected]

Attorneys for Intervenor League of

Oregon Cities

George A. Riemer (Petitioner Pro

Se)

23206 N. Pedregosa Drive

Sun City West, AZ 85375

Telephone: 623-238-5039

[email protected]

Petitioner pro se

Gregory A. Hartman #741.283

HartmanGgbennettthartman. com

Aruna A. Masih #973241

[email protected]

Bennett Hartman Morris

210 SW Morrison Street, Suite 500

Portland, OR 97204

Telephone: 5 03 -546-9601

Attorneys for Petitioners Moro,

Domenigoni, Custer, Hawkins,

Arken, Ditter, O'Kief, Smith,

Johnson, Clouseer, Silence,

Veckery, and Voek

Craig A. Crispin #82485

Crispin Employment Lawyers

1834 SW 58t h

Avenue, Suite 200

Portland, OR 97221

Telephone: 503-293-5759

[email protected]

Attorney for Amicus Curiae AARP

WAYNE STANLEY JONES' EXTENDED REPLY BRIEF SEPTEMBER 2014


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Assignment of E rror No. 5 Petitioner Jones' contractual right to his full PERS

retirement benefit, including the pre-2013 COLA, was fulfilled when he retired;

they are not a windfall, a gratuity , or an ad hoc COLA as erroneously

alleged by Respondents and Intervenors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

A.

Oregon case law affirms that Petitioner Jones' gave consideration for his

pre-2013 1egislation re tiremen t benefits . . . . . . : . . . . . . . . . : . . . . . . . . 20

B.

Intervenor League mischaraeterizes the CO LA which predates the 2013

legislation as

`ad hoc

. . . . 22

C.

Respondents and Intervenors erroneous characterization of Petitioner

Jones' pre-2013 contractual retirement benefits as a`windfall' or a

`gratuity' fails to recognize that upon his retirement, Petitioner

Jones'

right to his PERS contractual retirement benef ts were fully vested, and

the 2013 legislation resulted in a substantial iinpairment of those

rights 23

Assignment of E rror No. 6 State Respondent m isstates the facts in minimizing

the substantial impact of the removal of SB 656 and HB

3349 from Petitioner

Jones 24

Assignment of Error No. 7 Respondents and Intervenors are in error in

alleging Petitioner Jones must satisfy the criteria for a facial challenge ...... 26

Conclusion 26

Certificate of Compliance with Brief Length and Type Size

Requirements

Certificate of Service and Certificate of Filing

PETITIONER WAYNE STANLEY IONES' EXTENDED REPLY BRIEF


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iv

Taylor v. Multnomah County Deputy Sheriff's Retirement Board,

265 Or. 445 (1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

, 20-21

United Firefighters of Los Angeles C ity v. City of Los A ngeles,

210 Cal. App. 3 d 1095 (1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

United States v. Washington, .872

F.2d 874 (9th Cir. 1989) . . . . . . . . . . . . . . . 2

Vogl v. Department of Revenue, 327 Or: 193 (1998) . . . . . . . . . . . . . . . . . 19-20

CONSTITUTIONS, STATUTES, AND RULES

ORS 238.360(1) (2001) . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . 3, 7, 13

Or. Laws 1971, ch. 738 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 10, 20, 22

Or. Laws 1973, ch . 695 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 8, 14, 20-22, 24

Or. Laws 1995, ch. 569 (HB 3349) . . . . . . . . . . . . . . . . . . . . . . 16, 19-21, 24-25

Or. Law s 1991 , ch. 796 , (SB 656 ) . . . . . . . . . . . . . .. . . . . . . . . . . 5, 16-21 , 24-25

Or. Law s 2013, ch. 53 (S B 822 ) . . . . . . . . . . .' . . . . . . . . . . . 7-13, 15, 22-23, 26

Or. Laws 2013, ch 2(Special Session) (SB 861). ......... 7-13,

15, 22-23, 26

4 U .S.C . section 111 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

TREATISES AND OTHER AUTHORITIES

Black's Law Dictionary, 6`

h

Edition, www.foavc.org . . . . . . . . . . . . . . . . . . . . . 2

Consumer Price Index, 1913--,The Federal Reserve Bank

of Minneapolis; minneapolisfed.org

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Glossary in the

Guide to Implementation of GAS B Statement 67

on Financial Reporting for Pension Plans, by the

Governmental Accounting Standards Board (June 2013) . . . . . . . . . . . 22

SPECIAL MASTER'S FINAL REPOR T AND RECONIlVIENDED

FINDINGS OF FACT, April 30, 2014 (SMR) . . . . . . . . . . . . . 12-14

PETITIONER WAYNE STANLEY JONES' EXTENDED REPLY BRIEF


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EXTENDED REPLY BRIEF

Introduction

Petitioner Jones, in this consolidated reply brief, will correct a number

of errors of fact and/or errors of law contained in the Answering Briefs filed

by State Respondents, County/School District Respondents, and Intervenor

League [collectively hereinafter referred to as `Respondents and

Intervenors'].

ASSIGN ME NT OF ER RO R N O. 1 In an effort to undermine clear

precedent which favors Petitioner Jones' position, Respondents and

Intervenors urge this Court to disavow or reject all or part of its

prior decisions which hold PERS members have a contractual right to

their PERS benefits, including the COLA.

Respondents and Intervenors insist this Court should disavow or

reject a whole line of Oregon Supreme Court cases which establish that

PERS members have a contractual right to their PERS benefits, alleging

these decisions are superficial, are full of errors, and did not contain

strict and methodical inquiry.

A. Respondents' and Intervenors' request to overturn prior settled

Oregon case law, runs roughshod over the principle of

stare

decisis

1



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3

language and legislative history of the challenged case and rejected the

suggested need for further clarification. This is exactly the situation here.

B. Respondents and Intervenors have failed to prove error in prior

Oregon Supreme Court holdings; and their assertion attempts to

undermine the Court's careful review in these prior cases.

Respondents and Intervenors have alleged, but failed to give any

substantive evidence that proves any errors in this Court's prior judgments.

The Oregon Supreme Court has repeatedly reviewed and consistently

afftrmed the contractual nature of PERS retirement benefits and of PERS

members' right to these benefits, including the 1973 COLA. The case

history on this point is clear.

Strunk v. Public Employees Retirement Board,

338 Or. 145, 108 P.3d

1058 (Or. 2005) is determinative on this issue. The Court held that the ORS

238.360(1)(2001) COLA was part of the contractual PERS retirement

benefit.

Like the tax provision analyzed in

Hughes, the text of ORS

238.360(1)(2001) evinces a clear legislative intent to provide

retired members with annual COLAs on their service retirement

allowances, whenever the CPI warrants such COLAs. We

therefore conclude that the general promise embodied in ORS

238.360(1)(2001) was part ofthe statutory PERS contract

applicable to the group of retired members affected by the 2003

provisions at issue here.

Id. at 221.



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5

Id. at 20.

The Court spent several pages detailing the legislative history which

justified its decision. The Court then stated:

Thus, by virtue of the terms of

the statutes, the legislative history, and our holdings that PERS is a contract,

the contrdctual intent of the legislature in this case has been decided. Id.

at

21 (emphasis added).

Reaching back further into Oregon's case law history, the Oregon

Supreme Court in

Taylor v. Multnomah County Deputy Sherifs Retirement

Board,

265 Or. 445 (1973), found that plaintiff established a contractual

right to participate in the pension plan. The adoption of the pension plan

was an offer for a unilateral contract. Such an offer can be accepted by the

tender of part performance.

Id.

at 455. In reaching its conclusion, the Court

stated: Oregon has joined the ranks of those rejecting the gratuity theory of

pensions and has held that contractual rights to a pension can be created

between the employee and employer. Id.

at 450. Taylor recited Oregon's

prior adherence to this principle in two earlier Oregon cases of

Crawford v.

Teachers' Ret. Fund Ass'n.

164 Or. 77, 99 P.2d 729 (1940), and also in

Adams v. Schrunk, 6

Or.App. 580, 488 P.2d 831,

rev. denied

(November

16,

1971). The

Taylor

court said: We conclude from the above authorities that

Oregon has adopted not only the contractual concept of pensions; but, also,



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(hereafter sometimes referred to as the.2013 legislation ), provide a

formula for a reduced annual cost of living adjustment, dubbed CO LA,

that is actually no longer based on the Consumer Price Index (CPI). The

original 1971 COLA required an annual adjustment, based on the CPI for

Portland, Oregon, of up to 1.5 percent in the m onthly allowance paid to

retirees. Oregon Laws 1971, chapter 738. This COLA `cap' was increased

from 1.5 to 2.0 percent in 1973. Oregon L aws 1973, chapter 695. Th is 1973

change was an enhancem ent from the 1971 COL A. This change was

accepted by the employees as a function of their continued employment and

was accepted by new hires when they joined the work force. In

Rose C ity

Transit v. City of Portland, 271

Or. 588 (Or. 1975), the Oregon Supreme

Court held that This court has held that the adoption of a pension plan is an

offer for a un ilateral contract.

Id.

at 592. And it noted that an employee

pension or disability plan may be v iewed as an offer to the employee w hich

may be accepted by the employee's coiitinued employm ent, and such

employment constitutes the underlying consideration for the promise.

Id.

at 593. Because the legislature in 1973 provided for a permanent 0.5%

benefit increase for employees, there would be no reason to expect

employees to object to the change. An em ployer is always free under

contract law to unilaterally offer its employees increased com pensation

which the employees effectively accept by continued employment. H owever,



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an employer cannot unilaterally decrease and substantially impair an

employee's compensation under an employment contract without providing

a substantial substitute.

See Ellis v. Utah State Retirement Board,

752 P.2d

882 (Utah App. 1988), which held: Once the retirement benefits have

ested, however, the Legislature can modify the plan only upon a showing

that a vital state interest will be protected ... and

only where a substantial

substitute is provided for in lieu of the loss of benefits sustained. Id.

at 886

(emphasis added). The Respondents and Intervenors have failed on both of

these counts. No vital state interest has been demonstrated, nor has a

substantial substitute been provided to compensate Petitioner Jones for his

loss of benefits under the 2013 legislation.

The County/School District Respondents erroneously assert if the

CPI remains unchanged for a sustained period, retirees will generally earn

ore in COLA benefits under the 2013 legislation than they would have.

under the prior law . County/School District Respondents' Answering Brief

at 52 53.

Respondents also suggest that if Oregon were to experience a

sustained economic turndown, that justifies their `betterment' speculation

because the COLA in the 2013 legislation is given annually, regardless of

he CPI. (This assertion of a`betterment' even in an economic turndown,

fails to account for the fact that some retirees have a banked positive

adjustment from prior years that would extend their annual adjustment if

PETITIONER WAYNE' STANLEY IONES' EXTEN DED REPLY BRIEF


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11

PERS employees will earn more under the 2013 legislation than under the

prior law .

Id.

at 53-54. Respondents failed to establish facts in the Special

Master's Report evidencing any PERS retiree whose situation is financially

improved by this change, so we are left with unsupported hypotheticals.

In contrast, the Special Master's Report, Page 35, says Taken

together, SB 822 and SB 861, reduced the PERS UAL because the

legislation reduced the amount of benefits projected to be paid to members

in the future. Those liability reductions were estimated to total about $5.3

billion, stated on a system-wide, present value basis.

Id.

So, if the state

estimates it will save $5.3 billion, obviously, the projected savings is

substantial. But if, as the Respondents cJaim, the COLA changes are a

`betterment' for the majority of retirees, then the state and County/School

District Respondents would not be saving $5.3 billion.

The faulty reasoning on the part of the Respondents is incomprehensible.

The County/School District Respondents' assert that

Strunk

holds that

a substantial impairment is measured by

percentage reduction, and a

reduction in benefits of between ' 12% to 20% per month' is 'illustrative of a

substantial impairment' .... County/School District Respondents

Answering Brief at 49. The Strunk

court did not decide, define, or state what

percentage constitutes a substantial reduction, but only that in this particular



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12

instance, reductions of 12% to 20% are illustrative o f a substantial

impairment of a PE RS con tract. Strunk at 206.

The 2013 legislation reduced the PERS retirees COL A from 2% to a

fixed annual increase of 1.25%. Applying the Strunk

percentage reduction

illustration to Petitioner Jones, it is clear that there has been substantial

impairment to his PE RS retirement contract. For Petitioner Jones, who se

PERS retirement benefit is

greater than $60,000 per year, the 2013

legislation reduced his COLA by 50%. (This reduction was determined by

comparing the A ugust 1, 2014 actual CO LA adjustment for Petitioner Jones,

which was a$64.98 per month increase or a plus 0.977% increase from 2013

under the 20131egislation, with the CO LA betnefit he wo uld have received

under the pre-20131egislation, in which case the COLA would have

increased by 2.0%): Using the

Strunk

illustration of a 12% to 20% reduction

in PERS benefits as a substantial impairment, the 50% reduction in

Petitioner Jones' COLA benefits under the 2013 legislation, satisfies the

substantial impairment test. Compounded over-Petitioner Jones' life

expectancy of 21.3 years; (SMR at 74) this 50% annua l reduction in his

COLA retirement benefits will continue to exponentially decrease his COLA

retirement benefits over his projected lifetime, resulting in a projected

lifetime decrease of $314;507. ($398,823 {total reduction if 2013 legislation



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13

is upheld} minus $84,316 {elimination of SB656/HB3349 benefits}.) SMR

at 75 and Petitioner Jones' Brief at 44-45.)

Strunk isdispositive as to the unconstitutional impairment of the

COLA in the 20131egislation.

Strunk

specifically held the text of ORS

238.360(1) (2001) evinces a clear legislative intent to provide retired

members with annual COLAs on their service retirement allowances,

whenever the CPI warrants such COLAs. We therefore conclude that the

general promise embodied in ORS 238.360(1)(2001) was part of the

statutory PERS contract applicable to the group of retired members affected

by the 2003 provisions at issue here.

Id. at 221. The Strunk

holding

validated the PERS retirees' right to an annual ORS 238.360(1) (2001),

COLA that is based on the CPI. The 20131egislation, in establishing a

minimal, fixed, annual increase, is no longer a true cost of living adjustment.

It does not refer to or rely on the CPI at all.

Petitioner Jones has qualified for and satisfied all the prerequisites to

having fully vested contractual rights in his PERS retirement benefits

existing at the time of his retirement in 1998, including the COLA existing

prior to the 2013 legislation.

Petitioner Jones' COLA benefits and their method of calculation is

part of his PERS contract, and his contract rights may not be reduced after

retirement. In

United Firefighters of Los Angeles City v. City of Los



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Assignment of Error N o: 4 Respondents and Intervenors are in error

in asserting that the Oregon

Legislature may remove that part of

Petitioner Jones' PE R S contractual retirement b enefits provided in SB

656 a nd H B 3349 , solely b ecause he lives out of state, as that action

would violate Ragsdale

the principles of intergovernm ental tax

immu nity, and the legislative intent in enacting these two b ills.

Ragsdale

made it clear that Petitioner Jones' retirement com pensation

includes the benefits provided, in SB 656, and that the O regon Legislature

intended those benefits to apply 'equally to, in state and out of state Oregon

retirees.

SB 656 (Oregon Laws 1991, chapter 796) was challenged by a federal

retiree in

Ragsdale v. Department of Revenue, 321

Or. 216, 895 P.2d 1348

(Or. 1995), on the basis that the benefit given to Oregon state employees in

SB 656 discriminated in taxation between state and federal retirees in

violation of federal constitutional and statutory doc trine of

intergovernmental tax immunity. The Appellant asserted the increased

benefit given to state retirees amounted to a tax refund aind that federal

retirees were entitled to that same refund. The Court gave five reasons why

the SB 6 56 benefits given to state PER S retirees were not a tax rebate or a

tax beneft. Tlie last of these is particularly instructive to the current case:

Fifth and last, we'find no correlation, either direct or indirect,

between state retirees' state tax obligations and the amount of



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17

increased PERS retirement benefits, if any, to which they may

be entitled under the provisions of Oregon Laws, 1991, chapter

796. As noted, the amounts of increased retirement benefits are

based on the PERS members' years of service, not on their state

income tax obligations. All eligible PERS retirees receive

those benefits. .. . Indeed, taxpayer's claim for a ta.z refund

measured by the increased benefit paid to state retirees -

incorrectly assumes that every state retiree who receives an

increase in benefits paid state income taxes, but it is

conceivable that many state retirees paid little or no state

income tax for 1991.... In sum, taxpayer's argument lacks

both a factual and a legal predicate. The system of state

taxation is not implicated by the 1991 increase in retirement

benefits to some state retirees and the principle of

intergovernmental tax immunity does not apply, because there

is

no discrimination in taxation on account of the source of the

compensation.

Id.

at 228-229 (italics added).

Ragsdale confirms that the Court and the Legislature knew that not all state

retirees were paying Oregon income tax, but they were all still receiving the

SB 656 benefit.

The Ragsdale challenge relied on

Sheehy v. Public Employees

Retirement Division, 262 Mont. 129, 864 P.2d

762 reh. den.

(1993), which

held that the Montana legislative adjustment to Montana state retirement

benefits in response to the Davis

decision was a partial tax rebate for state

retirees, though named otherwise, and therefore violated federal law as

discriminatory taxation of federal retirees who do not receive the same

benefits. Before Davis,

Montana, like Oregon, taxed federal retirement

benefits but exempted state retirement benefits.

Id.

at 764. Appellant



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18

Ragsdale

argued Oregon's SB 656 should

fail for those sam e reasons. The

Court disagreed and upheld SB 656, saying:

The

Sheehy court's conclusion that the Montana adjustment is

a partial tax rebate that violated federal law relied heavily on

two features of the Montana enactment:

(1) that only retirees

who are Mo ntana residents will receive the benefit,

and (2) that

the retirement benefits at issue are funded solely by the .

Montana general fund.

Id.

The Court went on to find:

In

contrast, under. Oregon Law s 1991, chapter 796, every state

retiree who qualifies for benefits (based on years of service)

will receive the benef ts, regardless of the state retiree s

..

residency.

Moreover, the challenged provisions of Oregon

Laws 1991, chapter 796, do not appropriate money from the

Oregon general fund. Rather, the increased PERS retirement

benefits are funded by contributions from all PERS employers

to the PERS retirement trust fund.

Id. (emphasis added). The Court held the benefits paid to Oregon state

retirees did not violate 4 U.S.C. section 111 and the cons titutional principle

of intergovernmental tax immunity.

Ragsdale

upheld the constitutionality of SB 656 because, every state

retiree who qualifies for the benefits (based on years of s ervice) will receive

the benefits, regardless of the state retiree's residency. Id.

at 230.

Ragsdale

also confirmed that the benefits provided in SB 656 are `compensation' to

state retirees.

Id.

at 231. As compensation, the benefits provided under SB

656

became part of the compensation base within the overall PERS

retirement system, which Petitioner Jones is contractually entitled to receive.

Ragsdale

makes it clear that SB 656 benefits may not be confined only to

PETITIONER WAYNE STANLEY JONES .EXTENDED REPLY BRIEF


28/44

19

retirees living in Oregon. The 2013 legislation is unconstitutional under

Ragsdale.

In

Vogl v. D epartment of Revenue,

327 Or. 193, 960 P.2d 373 (1998),

a federal retiree challenged HB 3349, the 1995 law that gave a pension

benefit to state retirees based on their total years of service before 1991.

Federal retirees asserted HB 3349 violated the equal tax treatment required

by the federal doctrine, of intergovernmental tax immunity. The Court

noted:

as with the 1991 increase, entitlement to the 1995 increase is not

conditioned on actual liability for an equivalent amount in state taxes.

PER S recipients receive the inct-ease even if they pay little or no state

income tax on their PERS benefits. Id.

at 380 (emphasis added).

However, unlike

Ragsdale,

the Court found the benefit increase was, in

substance, a tax rebate. The Court said two facts countered that conclusion:

There is relatively little in the statute to pit against that

sugges tion only the facts that the increase is to be funded by

employer contributions, ... and that

it applies without regard

to individual tax circumstances.

Although those latter factors

were deemed sufficient in Ragsdale to counteract the relatively

weak evidence that the 1991 increase was a tax rebate, they

cannot carry the day against the stronger circumstances in the

present context.

Id.

at 381(emphasis added.)

The

Vogl

Court held that the federal retirees are entitled to an

equivalent tax benefit. The Court then addressed the potential ripple of its



29/44

20

decision and held: W e-emphasize that our holding necessarily is confined

to the 1995 statute.

W e- do not overrule Ragsdale or its analysis of the 1991

law.. Id.

(emphasis added).

The Court made it clear in Ragsdale

and Vogl

that the Oregon

Legislature, in enacting SB 656 and HB 3349, intended to avoid potential

constitutional challenges under federal intergovernmental tax imm unity by

providing that every state retiree who qualifies for benefits (based on years

of service), will receive the benefits ; regardless of the s tate retiree's

residency.

Assignm ent of Error No. 5 Petitioner Jones' contractual right to his

full PERS retirement benefit, including the pre-2013 CO LA , was

fulfilled when he retired; they are not a windfall, a gratuity , or an

ad hoc CO LA as erroneously alleged by Respondents and Intervenors.

A. O regon case law affirms that Petitioner Jones gave consideration

for his pre-20131eg islation retirem ent benefits.

Allegations that Petitioner Jones' retirement benefits are a windfall

or gratuity,'.' as erroneously alleged by State Res pondents and

County/School District Respondents, fails to account for this Court's

holding in

Taylor and Rose C ity Transit. Petitioner Jones', continued

employm ent affter the enactment of the COL A in 19 71 and enhancem ent in

1973, and the enactment of SB 656 in 1991 and HB 3349 in 1995 constitutes

PETITIONER WAYNE STANLEY ]ONES' EXTENDED REPLY BRIEF


30/44

21

his acceptance of these terms. These legislative changes were included as

integral parts of PERS retirement benefits when Petitioner Jones retired in

1998. Petitioner Jones is contractually entitled to his full retirement benefit,

which includes the pre-2013 COLA, and those benefits provided in SB 656

and HB 3349.

Taylor v. Multnomah County Deputy Sheriff's Retirement Board,

265

Or. 445 (1973), settles the matter that retirement.benefits are not a`windfall'.

or a`gratuity'. In Taylor,

the Oregon Supreme Court reviewed the history of

contract theory, which looks upon a pension as part of the employee's

promised but delayed compensation for the performance of his job. The

Court held:

Oregon has joined the ranks of those rejecting the gratuity

theory of pensions and has held that contractual rights to a pension can be

created between the employee and employer. Id.

at 450 (emphasis added).

The benefits payable to Petitioner Jones under SB 656 and HB 3349

and the 1973 COLA are clearly accrued, earned benefits that Petitioner

Jones has given consideration for and is fully entitled to receive as a retired

employee. Petitioner Jones' right to his contractual PERS retirement

benefits was entirely fulfilled when he retired. In

Rose City Transit v. City

of Portland, 271

Or. 588 (Or. 1975), the Oregon Supreme Court noted that

an employee pension or disability plan may be viewed as an offer to the

employee which may be accepted by the employee's continued employment,



31/44


32/44

23

C. Respondents and Intervenors erroneous characterization of

Petitioner Jones pre-2013 contractual retirement benefits as a

`windfall or a`gratuity fails to recognize that upon his

retirement, Petitioner Jones right to his PERS contractual

retirement benefits were fully vested, and the 20131egislation

resulted in a substantial impairment of those rights.

Petitioner Jones, upon his retirement in 1998, having contributed as a

member of the PERS pension system for over 30 years, had fulfilled all the

obligations of the PERS retirement pension plan; and his benefits could not

thereafter be substantially impaired. Oregon courts have affirmed this

principle.

In

Hughes,

the Oregon Supreme Court stated:

Oregon is in line with the theory of pensions which holds that

pensions are a form of compensation and that employees

acquire vested contractual rights in pension benefits. ... An

employee's contract right to pension benefits becomes vested at

the time of his or her acceptance of employment. ... On vesting,

an employee's contractual interest in a pension may not be

substantially impaired by subsequent legislation.

Hughes v. State of Oregon,

838 P.2d 1018, 1029 (Or. 1992). The Court also

determined that:

a pension right `is an integral part of contemplated

compensation', and ... public employment gives rise to certain

obligations which are protected by the contract clause of the

Constitution, including the right to payment of salary which has

been earned.' Therefore, in making any change in retirement

benefits, it is essential to adhere to the principle that an

employe's [sic] right to retirement benefits can not be destroyed

`by a repeal of a statute without the enactment of a substitute'.



33/44

4

Id.

at 1028.

In

Hart v. W ashington Cou nty Rural Fire Protection District No. 1,

52 Or. App. 1005, 630 P.2d 390 (Or.App. 198 1), plaintiffs retired under a

1973 pension plan of the defendant. Defendant modified its pension plan in

1976 and began paying the plaintiff decreased pension amounts. The

Oregon Court of Appeals determined this change impaired plaintiffs'

contractual pens ion rights:

Once the employe [sic] has fulfilled all of his obligations

under the plan and has retired, rights under the pens ion plan

become ves ted, and those rights m ay not be impaired by the

subsequent action of the employer. ... Plaintiffs here all knew

of the original plan adopted by defendant, fulfilJed their

employment obligations under that plan and retired while the

original planwas in effect. Their rights in the original plan

vested when they retired and may not now be impaired.

Id. at 392, n.2, n.3 The Court held that Plaintiffs, upon retirement, were

entitled to rely upon the benefits provided in the original plan. Id.

at 393.

(As a side note, W. Michael Gillette participated as the presiding judge in

this unanimous decision.)

Assignment of Error No. 6 State Respondent misstates the facts in

minimizing the substantial impact of the removal.of SB 656 and HB ~

3349 from Petitioner Jones.



34/44

25

State Respondents' argument that removing SB 656 and HB 3349,

`tax remedy' change, does not rise to the level of a substantial impairment,

misstates the facts and minimizes the substantial impairment wrought by

removing these contractual retirement benefits from Petitioner Jones.

The numbers and percentage reduction attributed to Petitioner Jones by the

State Respondents Answering Brief at 76-77 are invalid and understate the

substantial impact of SB 656 and HB 3349,

for three reasons: First, State

Respondents' take into account only SB 656, the first of the two bills

providing a remedy for PERS members after the

Davis

decision; Second,

Petitioner Jones actually receives the benefits provided under HB 3349,

which bill authorized an increase in his employee refund of accumulated

employee contributions under either SB 656 or HB 3349, whichever

provides the greater percentage increase to him. And for Petitioner Jones,

his benefits under HB 3349 are approXimately twice as much as under SB

656. And third, Petitioner Jones' retirement benefits are paid to him over his

lifetime, but State Respondents show his present value only. The true

value of Petitioner Jones' total reduction and its attributable percentage are

substantially greater than those given in the State Respondents' figures. The

measurement tools used by the State are intended to substantially understate

the actual impact of Petitioner's loss.



35/44


36/44

Respectfully submitted this 18th day of September, 2014.

Wayne Stanley Jones, Pro Se

18 North Foxhill Road

North Salt Lake, Utah 84054

Telephone: 801-296-1552

Email: wstanm~

tggrnail.com

7



37/44

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38/44

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39/44


40/44

Ap

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29


41/44


42/44

CERTIFICATE OF FILING

I certify that on September 18, 2014, I filed the original and 7 copies of the

WAYNE STANLEY JONES' EXTENDED REPLY BRIEF with the

Appellate Court Administrator by United States Postal Service, first class,

priority mail, certified mail, return receipt requested at this address:

Appellate Court Administrator

Appellate Court Records Section

1163 S tate Street -

Salem, OR 97301-2563

gppealsclerk@ oj d. s tate. or.us

CERTIFICATE OF SERVICE

I certify that on September 18, 2014, I served two copies of the foregoing

WAYNE STANLEY JONES' EXTENDED REPLY BRIEF by United

States Postal Service, first class mail, and also emailed an electronic copy to:

AG Ellen Rosenblum 4753239

SG Anna M. Joyce #013112

AAG Keith L. Kutler

#852626

AA G Matthew J. M erritt # 122206

AAG Michael A. Casper #062000

Oregon Department of Justice

1162 Court Street NE

Salem, OR 97301-4096

Telephone: 503-378-4402

F acs imile : 5 03 -3 78-63 06

anna. j oyce(~

,doj . state. or. us

keith.kutler(~

,doi . state. or.us

matthew.merritt c

~

,doj.state.or.us

michael. casper@ doj . state. or. us

Attorneys for State Respondents

W illiam F. G ary #770325

william.f.g_

ry@harran .

com

Sharon A. Rudnick#830835

sharon.rudnick@harran .

com

Harrang Long Gary Rudnick PC

360 E. 10`

Ave., suite 300

Eugene, OR 97401

Telephone: 503 -242-0000

F acsimi le : 541-686-6564

Attorneys for Respondents Linn

County, Estacada, Oregon City,

Ontario, West Linn School Districts

and Beaverton School Districts, and

Intervenors Oregon School Boards

Association and Association of

Oregon Counties



43/44

Harry Auerbach #821830

Kenneth A. McGair #990148

Office of the City Attomey .

1221 SW 4

t h

Avenue, Ste 430

Portland, OR 97204

Telephone: 503-823-4047

Facsimile: 503-823-3089

[email protected]

[email protected]

Attorney for Respondent C ity of.

Portland

Eugene J. Karandy II #972987

Office of County A ttorney

Linn County Courthouse

104 SW Fourth Avenue, Room 123

Albany, OR 97321

Telephone: 541-967-3 840 .

F acs im ile : 541-92 8-5 424

g,karandyna,co. linn. or. us

Attorney for Respondent Linn Count

,

Lisa M. Frieley #912763


PO Box 1068

Salem, OR 97308

Telephone: 503-5 88-2800

Facsimile: 503-588-2813

[email protected]

Attorney for Respondents Estacada,

Oregon City, Ontario, and West Linn

School Dis tricts and Intervenor


Rob Bovett #910267

Association of Oregon Counties

1201 Court St. NE Ste 300

Salem, OR 97301

Telephone: 971-218-0945

rbovett(~

,aocweb.org

Attorney for Linn County

Daniel B. Atchison #040424

Kenneth Scott Montoya #064467

Office of City Attorney ..

555 L iberty Street SE Rm 205

Salem, OR 97301

Telephone : 5 03 -5 8 8-6003

Facsimile: 503-361-2202

[email protected]

[email protected]


Salem

Edward F. Trompke #843653

Jordan Ramis PC

Two Centerpointe Drive, 6 t

'' Floor

Lake Oswego, OR 97035

Telephone: 503-598-5532

Facsimile: 503-598-7373

[email protected]

Attorney for Respondent Tualatin

Valley Fire and Rescue

W. Michael Gillette #660458

Leora Coleman-Fire .#113581

Sara Kobak#023495

W illiam B . Crow #610180

Schwabe Williamson & W yatt PC

1211 SW 5`

h Ave Suite 1900

Portland, OR 97204

Telephone: .503-222-9981

Facsimile: 503-796-2900

[email protected]

Attorneys for Intervenor League of

Oregon Cities

George A. Riemer (Petitioner Pro

Se)

23206 N. Pedregosa Drive

Sun City West, AZ 85375

Telephone: 623 -23 8-503 9

[email protected]

Petitioner pro se



44/44

Michael D. Reynolds (Petitioner Pro

S e )

8012 Sunnyside Avenue N.

Seattle, WA 98103

Telephone: 206-910-6568

[email protected]

Petitioner pro se

Sara K. Drescher #042762

Tedesco Law Group

3021 NE Broadway

Portland, OR 97232

Telephone: 866-697-6015

[email protected]

Attorney for Amicus Curiae IAFF

Thomas A. Woodley

tawAwmlaborlaw. com

Douglas L. Steele

[email protected]

Woodley & McGillivary

1101 Vermont Ave., NW, Suite 1000

Washington, DC 20005

Telephone: 202-697-6015

Attorneys for Amicus Curiae IAFF

d l

Wayni Stanley Jon s

Petitioner, Pro Se

Gregory A. Hartman #741283

HartmanG(~

,bennettthartman. com

Aruna A. M asih #973241

[email protected]

Bennett Hartman Morris

210 SW Morrison Street, Suite 500

Portland, OR 97204

Telephone: 503-546-9601

Attorneys for Petitioners Moro,

Domenigoni, Custer, Hawkins,

Arken, Ditter, O'Kief, Smith,

Johnson, Clouseer, Silence,

Veckery, and Voek

Craig A. Crispin #82485

Crispin Employment Lawyers

1834 SW 58

t

Avenue, Suite 200

Portland, OR 97221

Telephone: 503-293-5759

[email protected]

Attorney for Amicus Curiae AARP

The Honorable Stephen K. Bushong

Multnomah County Circuit Court

1021 S.W. 4

h

Avenue

Portland, OR 97204

Telephone: 503-988-3546

stephen.k. bushong@oi d. state. or.us

jones reply brief

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