The Attorney General of Texas
August 20, 1980
MARK WHITE
Attorney General
Honorable Oscar H. Mauzy Opinion No. NW-22 1
Chairman
Senate Education Committee Re: Whether section 3.02(a)(lE).
Capitol Building Education Code, relating to the
Austin, Texas computation of retirement benefits,
should be applied retroactively
Dear Senator Mauzy:
~You hsve raised three questions concerning section 3.02(a)(18) of the
Education Code [formerly section 3.02(a)(21)] which, a,s amended in 1979,
provides as follows:
‘Best-five-years-average compensation’ means the
average annual compensation received by the member
as an employee &ring the 5 years of membership
service (whether or not consecutive) in which the
member earned the highest annual compensation.
Compensation in excess of the limits established in
the definition of ‘annual compensation’ shall be
excluded in calculating the ‘beat-five-years-average
compensation’ except that such average for a person
retiring on or after the date that such limits are
removed shall be based on actual compensation paid
or payable for service as an employee.
The term “annual compensation” is defined in section 3(a)(12) as:
. . . the compensation that is paid or payable to an
employee by his employers for service during a school
year, except that compensation in excess of $25,000
for school years after September 1, 1969, but before
September 1, 1979, and compensation in excess of
$8,400 for school years prior to September 1, 1969,
shall not be included as annual compensation.
You state that section 3.02(a)(lE) is being given “retroactive effect” by the
Teacher Retirement System, the result being that individuals with annual
salaries in excess of $25,000 who retire after August 27, 1979, the effective
date of the amendment, will receive retirement benefits calculated on the
basis of their full salary, even though at the time they performed their
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Honorable Oscar H. Mauzy - Page Two (W-221)
services the statute provioed that retirement would be calculated on a maximum of
$25,000 annual salary and even though contributions to the retirement system on their
behalf were limited to the first $25,000 annual earnings. You have asked the following
questions:
1. ls it proper for the Teacher Retirement System to apply
the 1979 amendments retroactively to accomplish the result
described above?
2. ls the manner in which the amendment is being applied,
as described above, in violation of article I, section 16 of the
Constitution of the State of Texas as constituting retroactive
legislation?
3. ls the manner in which the amendment is being applied,
as described above, in violation of article III, section 44 of the
Constitution of the State of Texas inasmuch as it is a grant of
extra compensation after the public service has already been
performed?
Your first and second questions are essentially the same and we will therefore
consider them together. By virtue of amendments passed by the 66th legislature,
section 3(a)@) now provides that the best-five-years-average compensation for a
person who retires on or after the date that the limits set forth in section 3.02(a)(12)
are removed shall be based on the actual compensation paid or payable to the
employee for services rendered. Section 3.02(a)(12), as amended, provides that
compensation in excess of $25,000 for school years after September 1,1969, but before
September 1, 1979, and in excess of $8,400 for school years prior to September 1, 1969,
shall not be included as annual compensation. The effect of these provisions is that
persons retiring “on or after the date that such limits are removed,” i.e., September 1,
1979, will have their best-five-years-average compensation calculated on the basis of
actual compensation paid or payable to them rather than on the basis of their salary as
limited by section 3.02(a)(12).
In our view, this legislation is not “retroactive” in the sense that the term is used
in article I, section 16 of the Texas Constitution, which provides that “No bill of
attainder, ex post facto law, retroactive law, or any law impairing the obligation of
contracts, shall be made.” Retroactive legislation is generally understood to mean
legislation that affects acts or transactions that occurred before the legislation came
into effect. See 53 Tex. Jur. 2d Statutes §28 (1964). The amendment to section
3(a)(l8), however, affects only those individuals who retire on or after September 1,
1979, which date is subsequent to the effective date of the amendment, and then only
to the extent that their best-five-years-average compensation will be computed in a
different manner.
Even assuming that this legislation were retroactive, moreover, it would not be
prohibited under article I, section 16 of the constitution. The constitutional prohibition
against retroactive legislation has been construed to apply only to laws that divest
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, ,
Honorable Oscar H. Mauzy - Page Three (m-221)
individuals of vested rights acquired under existing laws, see, s, State Board of
Registration for Professional Engineers v. Wichita Engineer= Co., 504 S.W. 2d 606
(Tex. Civ. App. - Fort Worth 1973, writ rePd n.r.e.1; Texas Water Rights Commission v.
Wright, 464 S.W. 2d 642 (Tex. 19711, and section 3.02(a)(lE) does not divest anyone of
any such vested right. See also Attorney General Opinion H-1121 (19781, H-634 (1975)
(legislature may retroactively place obligations on the state and its agencies).
You next ask whether the amendment violates article III, section 44 of the Texas
Constitution on the ground that it constitutes a grant of additional compensation after
the public service bs been performed. Article III, section 44 provides, in pertinent
part:
The Legislature shall provide by law for the compensation of
all officers, servants, agents and ~public contractors, not
provided for in this Constitution, but shall not grant extra
compensation to any officer, agent, servant, or public con-
tractors, after such public service shall have been performed or
contract entered into, for the performance of same; . . .
As the interpretive commentary and the leading cases construing this provision clearly
indicate, the prohibition against granting additional compensation for services already
rendered was intended to prevent payments in the nature of gratuities for services
already performed. See, s, Byrd v. City of Dallas, 6 S.W. 2d 738 (Tex. Comm’n.
App. 1928); City of Sfintonio v. Baird, 209 S.W. 2d 224 (Tex. Civ. App. - San Antonio
1948, writ ref’d).
Byrd v. City of Dallas, w, involved a challenge to statutes that authorized
cities with a population exceeding 10,000 to pay pensions to policemen and firemen who
served 20 years in either department, filed written statements indicating their desire
to become beneficiaries, and contributed a portion of their salary to the fund. The
Texas Supreme Court ruled that the statutes did not violate article III, section 44 of
the Texas Constitutution. After noting that the purpose of article III, sections 44, 51,
52 and 53 was “to prevent the application of public funds to private purposes; in other
words, to prevent the gratuitous grant of such funds to any individual . . .
whatsoever,” the court observed that:
If the pension provided for in this act is a gratuity or
donation to the beneficiary, it is clearly forbidden by the
fundamental law. On the other hand, if it is a part of the
compensation of such employee for services rendered to the
city, or if it be for a public purpcee, then clearly it is a valid
exercise of the legislative power. 6 S.W. 2d at 740.
The pension plan adopted by the City of Dallas did not, in the Court’s view, violate this
provision:
The plan.. . contemplates. . . that as compensation the
officers and employees named shall receive the salaries agreed
upon to be paid periodically and shall be entitled to participate
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Honorable Oscar H. Mauxy - Page Four (MW-221)
in the fund provided for pensions according to the statutory
plan. The law pertaining to such employment is necessarily a
part of the contract of employment and is read into the
contract as fully as though it had been actually incorporated
therein. . . . When an. . . employee. . . evidences his assent to
the pension scheme, he thereupon has a binding contract with
his employer for the stipulated salary and likewise to be
‘entitled to participate’ in the fund upon the terms prescribed.
The right to participate in such fund is therefore not a gratuity
or donation in any sense. It is as much a part of the agreed
compensation as is the monthly stipend. 6 S.W. 2d at 740 - 741.
IEmphasis added).
The amendment to section 3.02(a) became effective August 27, 1979, and under
its terms, only indiviaals who retire on or after September 1, 1979, sre affected.
Necesssarily, anyone who will be affected would have been employed as of the
effective date of the amendment, and would therefore still be performing services at
that time. Accordingly, under the rationale of Byrd and subsequent cases, see City of
San Antonio v. Baird, -, the benefits created by the amendment, which accrue only
to indivi&als still employed and, therefore, still performing services on Algust 27,
1979, do not amount to a gratuity or &nation or provide additional compensation after
services have already been rendered. Consequently, the amendment &es not violate
article III, section 44 of the Texas Constitution.
SUMMARY
Section 3.02(a)(18) of the Education Code does not violate
article I, section 16 or article Ill, section 44 of the Texas
Constitution.
2zL*
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
Prepared by Jon Bible
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
C. Robert Heath, Chairman
Jon Bible
Susan Garrison
Rick Gilpin
Nancy Lynch
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