State Ex Rel. Thomson v. Giessel

Brown, J.

Sec. 26, art. IV of the Wisconsin constitution states:

“Extra compensation; salary change. Section 26. The legislature shall never grant any extra compensation to any public officer, agent, servant, or contractor, after the services *55shall have been rendered or the contract entered into; nor shall the compensation of any public officer be increased or diminished during his term of office.”

Sec. 42.535, Stats., provides that every qualified retired teacher “shall be paid an additional $1 per month for each year of teaching experience” and it designates such payments as an “additional benefit” and an “additional annuity.” The benefits and annuities to which these are additional are those provided by other sections of ch. 42, Stats. By sec. 42.42 every contract of employment as a teacher made after July 8, 1921, is subject to the provisions of the State Retirement Law (secs. 42.20 to 42.54), which confers specific benefits. Thereby such retirement benefits become part of the teaching contract and are consideration for the teachers’ services; that is, compensation for them. Hence, “additional benefits” and “additional annuities” at first glance appear quite plainly to be additional compensation. Just as clearly, additional compensation is extra compensation; — that is, compensation outside of that previously agreed upon. Sec. 42.535 grants such benefits to certain teachers who retired before June 30, 1951. The new section became effective July 19, 1951. It is apparent, therefore, that this extra compensation is not granted until after the teaching contracts had not only been entered into but the teachers’ services had been performed and the teacher had ceased to serve. If it be true, then, that the additional benefits and annuities form extra compensation, which was not granted until after the contracts were entered into or until the services had been rendered, the prohibition of sec. 26, art. IV, Const., renders the legislation void.

The petitioner submits, however, that this legislation is of a sort not forbidden by the constitution, for several reasons, which are not necessarily consistent with each other but any one of which will serve to sustain the legislation. First, he says, benefits provided by sec. 42.535, Stats., are *56merely restoration or preservation of economic value of the compensation already granted, and he argues that the legislature by giving the retired teacher more dollars was, as nearly as possible, giving him only the equivalent of the fewer dollars which his contract promised: Hence there is no extra or additional compensation. Unfortunately for this contention, it has long been established that the compensation is governed by the contract’s terms. The purpose of sec. 26, art. IV, Const., said Chief Justice Ryan in Carpenter v. State (1876), 39 Wis. 271, 285, is to limit contractors with the state to the precise compensation fixed by their contracts. The teachers’ contracts for retirement benefits were contracts with the state and the compensation provided therein may not thereafter be increased by the legislature when the teaching is over. Their contract compensation was not expressed in purchasing power. Contracts can be so drawn and many of them are, whereby compensation is governed by a “cost of living” index or some other standard. The instant contracts, however, did not demand performance by the state in terms of goods, wares, or merchandise. Compensation was expressed in dollars, and additional dollars are extra compensation, which the constitution forbids the legislature to grant.

The petitioner then suggests that the additional benefits need not be regarded as compensation at all and are not payments made upon any contract, but on the contrary they are gratuities given former teachers by a sympathetic state, genuinely concerned over their economic plight, for the purpose of encouraging third persons to enter the profession and those now in it to stay in. A number of questions present themselves affecting this hypothesis. We find no declaration by the legislature that it had any such purpose in mind nor is there anything in the legislation to indicate that the economic plight of persons who are eligible for the benefits under the petitioner’s interpretation of eligibility differs from that of *57other teachers who were not included. The legislation itself, by requiring the return of deposits already withdrawn plus $100 per person indicates, rather, a lack of concern for the most destitute, when it extends its benefits only to those with some resources of cash or credit. Then, too, a purpose to retain or attract those whom the legislature wishes to have as teachers can hardly be read into an act for whose benefits such desirable teachers are not and cannot become eligible, and which tenders its advantages only to sixteen hundred thirty-five retired teachers (petitioner’s estimate of the number who are both theoretically and practically eligible) whom it does not expect or wish to attract. This alleged purpose of the legislation is the more doubtful when if it existed, it could obviously be easily, effectively, and directly served by similar inducements made to the prospective, desirable, teachers themselves. In this connection petitioner relies on State ex rel. Dudgeon v. Levitan (1923), 181 Wis. 326, 193 N. W. 499, in which we sustained the constitutionality of the 1921 Teachers’ Retirement Law and held that in establishing a pension system the legislature might constitutionally give pension credits for former teaching service. There was no element in that case of granting benefits to anyone whose teaching service was over, nor from the language used by the court can we infer that .the court would have considered such a provision constitutional. The opinion repeatedly stresses the fact that the prior-service credits are allowed only to teachers then active with the purpose of inducing them, not others, to continue in service. The reward was held out to the very persons whom the legislature hoped to induce to perform future service, which is directly the opposite of the present fact situation. It may even be argued that the emphasis placed upon the current and future services to be expected from the beneficiaries makes the Dudgeon Case, supra, authority for the proposition that benefits for past service are unconstitutional when no current or future *58services are to be rendered. We cannot treat the case as going that far because that question was not before the court, the legislature not having attempted to include as beneficiaries those whose services were finished, but at least State ex rel. Dudgeon v. Levitan, supra, is not authority for petitioner’s proposition that the effort to give gratuities or bonuses to ex-teachers is constitutional because, supposedly, it benefits the educational system.

The petitioner also relies on State ex rel. Atwood v. Johnson (1919), 170 Wis. 251, 176 N. W. 224, in which the constitutionality of the Soldiers’ Educational Bonus Law was upheld. Petitioner submits that benefits paid in gratitude for past services to the state are for a proper public purpose,— an encouragement to others to go and do likewise,- — and do not constitute extra compensation within the contemplation of sec. 26, art. IV, Const. He reinforces this argument by Brodhead v. Milwaukee (1865), 19 Wis. *624, in which expenditure of public funds as bounties to induce men to volunteer for military service was upheld. The benefits in the Brodhead Case, supra, as in the Dudgeon Case, supra, and as absent in the case at bar, were payable to those who were serving and to those who would serve in the future but, in another respect, we regard both the Atwood and the Brod-head Cases, supra, as having a common element which distinguishes them from all others, to wit: That the beneficiaries performed military service in time of war. That, alone, is of such paramount public importance that men may be, and are, conscripted to serve, often at the sacrifice of their lives. The difference between the service of the soldier, whether conscript or volunteer, and that of the civilian public servant is so great that it becomes a difference in kind, historically recognized, not merely one of degree. Precedents approving as constitutional pensions or bonuses for veterans do not carry over as authority for like rewards to civilians.

*59The Cash Bonus Law, sustained in this court by State ex rel. Atwood v. Johnson (1919), 170 Wis. 218, 230, 175 N. W. 589, expressly stated that it was “ ‘a token of appreciation of the character and spirit of their patriotic service, and to perpetuate such appreciation as a part of the history of Wisconsin.’ ” The Educational Bonus Law, State ex rel. Atwood v. Johnson (1919), 170 Wis. 251, 176 N. W. 224, did not so declare its purpose but it was a companion law to the Cash Bonus Act and Mr. Chief Justice Vinje, at page 255, stated that the same purpose could be derived from the act itself, supplemented by contemporary history. Sec. 42.535, Stats., lacks any such declaration of purpose and we can read none into it either from the language of the section nor any contemporary history corresponding to that which, following the armistice of 1918, produced the soldiers’ bonus legislation. But even if there was a preamble to the section in question, or language in its body declaring similar gratitude toward retired teachers, we would be unable to find that such an expression cleared away the difficulties and established a gratuity to them as a public purpose justifying the expenditure of public funds. Noble and useful as the profession of teaching in the public schools and institutions of higher education may be, as much may be said for most other forms of service to the public. If such a declaration by the legislature is sufficient to support, as an expenditure for a public purpose, a bonus for former teachers and an inducement to bring successors into this field of public service, we see no way to exclude from similar benefits any individual or group of individuals who have performed public service at least as fundamental to the survival of government and as essential to public welfare as the teaching profession. If gratitude for past services and a concern for the future of former teachers will validate the constitutionality of legislation granting bonuses *60to them when their services have been rendered and their contracts not only entered into but on their part fully executed, so must the same considerations support and require judicial approval of whatever, for the same declared purpose, the legislature sees fit to confer on any other person who has labored in the public interest. If an alleged public purpose justifies such legislation today in behalf of one person because once he was a teacher, it must tomorrow equally justify similar legislation in behalf of another because once he served as an executive or administrative officer, a legislator, or judge. If the former teacher can constitutionally be voted a gratuity by a grateful state to encourage others to take similar employment and perpetuate a public function, a former governor may receive belated financial recognition for the same reason and so may the former employees of our sanitary systems without whose labors teachers, governors, and the rest of us would die of the plague. And if the veterans’ bonus legislation is to be a precedent, it would not be necessary that the beneficiaries should even have been employed by some arm of the state of Wisconsin, since the veterans were not. Under this theory there is literally no constitutional limit to the persons eligible to receive public funds nor the amounts which they may receive. It would only require the legislature’s express or implied belief that a public purpose is to be served, and that the means are adapted to that end, to validate a grant from the public treasury. The express prohibition of sec. 26, art. IV, Const., does not yield to such a concept nor do the military-bonus cases of State ex rel. Atwood v. Johnson, supra, and Brodhead v. Milwaukee, supra, require it.

The petitioner also submits that the “extra compensation” provision of the constitution does not apply to the present transaction because a new contract has been entered into, or an old one modified, whereby, in return for the repayment of moneys previously withdrawn, plus $100, the state now con*61tracts to pay the retired teacher a lifetime annuity at the rate of $1 per month for each year of teaching experience. A somewhat similar device was sustained by the supreme court of Illinois against the charge that it conflicted with a constitutional provision essentially like our own. Raines v. Board of Trustees Pension Fund (1937), 365 Ill. 610, 7 N. E. (2d) 489; Ridgley v. Board of Trustees (1939), 371 Ill. 409, 21 N. E. (2d) 286; Krebs v. Board of Trustees of Teachers’ Retirement System (1951), 410 Ill. 435, 102 N. E. (2d) 321. Because the Illinois retirement law made deductions from the teacher’s salary optional with the teachers, the Illinois court concluded that the fund in which they were deposited was not a public fund and, as the constitution prohibited extra compensation out of public funds, only, the prohibition did not apply to payments from funds which were not public. Whether the Illinois court would have reached the same result if the deductions from salaries had been compulsory we cannot say. It did stress the voluntary character of the deductions and the separate fund in which they were deposited, whereas the deductions from teachers’ salaries are compulsory under Wisconsin law.

The funds into which Wisconsin teachers’ salary deductions are paid is the retirement deposit fund, to which the state also makes a contribution determined by law. This is comparable to the single fund which, in Illinois, receives all contributions and makes all disbursements. The retirement deposit fund is unable, even without the demands of sec. 42.535, Stats., to meet the drafts upon it and the assets of the contingent fund must be drawn upon. This is a fund set up as a sort of shock absorber and out of which the annuities are paid. Into this fund each year the state pays an amount calculated according to the present value of the fund’s liabilities. The state gets the money to make payments to the contingent fund from the general fund, into which all income-tax collections go, including the proceeds of the teachers’ *62retirement surtax. The $100, which each teacher is to pay in order to become eligible for the benefits of the section, is also paid by such teacher into the general fund, per sec. 42.535. Among all the contentions which have been made in this action it has not been asserted that the general fund is not a public fund. The progress of the money which pays the controversial additional annuity is from the general fund, to the contingent fund, to the annuity reserve fund, to the retired teacher. Each of these transfers is said to be for a public purpose but somewhere under the three shells it is asserted that the little pea has shed its public character and become private and, as such, acquired freedom from the restraints of sec. 26, art. IV, Const. We yield to no one in our realization of the intricacies of governmental finance and our admiration of the man who understands it, but we confess inability to follow the taxpayer’s dollar from the general fund through the others, each transfer being to effect a public purpose, and arrive at a conclusion that before it gets into the hands of the teacher it has somehow ceased to be public money. To be sure, the constitutional prohibition does not distinguish between public and nonpublic funds. If the time comes when the legislature awards extra compensation pay-able out of funds which are not public we may have to construe the Article with that in mind, but that question is not presented here. We conclude that the present benefits are payable from public funds and, as the Illinois court held their fund was not a public one, the Illinois cases are not persuasive authority.

The petitioner suggests that the legislation may be sustained as a contract, with no involvements concerning past services or extra compensation, because the state is agreeing to provide a new annuity for a new consideration, — the payment of $100 into the general fund. It appears to us that if the factor of past services and compensation therefor is withdrawn, we have nothing left but a group of people in whom *63the legislature has become interested and to whom it is willing to sell a life annuity. When the applicants rest their claims on their former service they are entangled with sec. 26, art. IV, Const. When they free themselves from that by relying only upon the new consideration to support a new contract they put themselves into the class of other private citizens, with former teaching status as an identifying mark only, and the special benefit granted them is a use of public funds for a private interest and, hence, unconstitutional. State ex rel. Smith v. Annuity & Pension Board (1942), 241 Wis. 625, 6 N. W. (2d) 676; Attorney General v. Eau Claire (1875), 37 Wis. 400, 436.

The petitioner further submits that the statesmen who drew sec. 26, art. IV, Const., did not have retirement systems in mind and we would pervert their intent if we applied that Article to a retirement or bonus plan for state employees. He argues that it was contracts for other purposes which the constitution intended to circumscribe. We cannot agree with the reasoning or the conclusion. Conceding that retirement plans, as distinguished from pensions, were not, in 1848, customary ways of spreading the employees’ compensation over a greater number of years, the framers were well aware that public servants, including teachers, were employed for compensation accepted or agreed upon by express or implied contract and that an agreement to render personal service for a consideration is a contract equally with one for the furnishing of materials or accomplishing some specific result. They knew the meaning of every word in the Article and the meanings have not changed with the passage of time. “Services,” “contracts,” and “compensation” are not new terms or new concepts. The language of the Article admits of no doubt that it was the intent of the draftsmen who prepared it and the electors who adopted it that, when a person rendered public service for compensation agreed upon, his right to compensation depended upon and was limited by his agreement. “The exact measure of his right is deter*64mined absolutely by his contract, under the constitution; and there exists nowhere a discretion to vary it.” Carpenter v. State (1876), 39 Wis. 271, 283. Why should it be thought that if the constitutional conventions of 1846 and 1848 had been mindful of the deferred and diffused compensation of retirement systems they would have taken such contracts out of the prohibition which they thought wise to impose regarding compensation and contracts generally? Nothing in the language of the constitution suggests such a possibility to us and we are not able to rest a decision on the surmise that it might be so.

It has not escaped the attention of the court that a decision sustaining'an increase of benefits for already retired teachers would clear the way for legislation increasing benefits for all public employees, including judges, granted by the legislature from time to time after their retirement, and such a decision would be consonant with the selfish interests of the court. Nevertheless, as we read sec. 26, art. IV, Const., this would involve an exception to a clear and unmistakable command. If exceptions are to be made, they should not come from the legislature or the court but from those whose proper function it is to amend the constitution. When the people determined that the times required state participation in the construction of highways, airports, veterans’ housing, and the preservation and development of forests, they adopted amendments to the constitution excepting these interests from the terms of sec. 10, art. VIII, which forbade the state to engage in works of internal improvement. If, now, to underwrite certain contracts against the effects of inflation is deemed, by the people, to be desirable, or if they consider that the cause of public service requires power in the legislature to grant bonuses, apart from compensation, to retired public servants, the road to amending the constitution is well traveled, and in such an amendment guides and limits to legislative and judicial authority can be set in such wise *65as the people consider best meets the problem to be dealt with „ and provides safeguards against abuse.

With regret that we are not persuaded by petitioner’s arguments and authorities, we conclude that the effect of sec. 42.535, Stats., is to grant extra compensation to public servants after the services are rendered and to public contractors after the contracts are entered into, in violation of sec. 26, art. IV of the state constitution. We find it unnecessary to our decision to determine whether there is unconstitutional discrimination in limiting the benefits of sec. 42.535, Stats., to those teachers who had retired before June 30, 1951, and who, on that date, were either actually receiving retirement benefits or had applied for them. For the same reason we need not explore the question of whether or not the obligation to pay additional benefits would create a state debt in violation of sec. 4, art. VIII, Const. Sec. 42.535, Stats., conflicts with sec. 26, art. IV, Const. We must, therefore, hold it void.

We wish to express our appreciation to all counsel for unusually able and informative briefs and argument.

By the Court. — Alternative writ of mandamus quashed. Petition for a peremptory writ of mandamus denied.