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P. Flisock v. State Div. of Retirement and Benefits (10/4/91), 818 P 2d 640
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Notice: This is subject to formal correction
before publication in the Pacific Reporter.
Readers are requested to bring typographical
or other formal errors to the attention of
the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, in order
that corrections may be made prior to
permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
PETER E. FLISOCK, )
) Supreme Court File
Appellant, ) No. S-3725
) Superior Court File No.
v. ) 1JU-89-51 Civil
)
THE STATE OF ALASKA, DIVISION ) O P I N I O N
OF RETIREMENT AND BENEFITS, )
) [No. 3758 - October 4, 1991]
Appellee. )
)
Appeal from the Superior Court of the
State of Alaska, First Judicial District,
Juneau,
Duane Craske, Judge.
Appearances: Susan R. Sharrock, Richard
W. Maki, Hell‚n, Partnow & Condon, Anchorage,
for Appellant. Virginia B. Ragle, Assistant
Attorney General, Juneau, and Douglas B.
Baily, Attorney General, Juneau, for
Appellee.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
COMPTON, Justice.
Peter E. Flisock seeks a higher monthly retirement
benefit under the Teachers' Retirement System (TRS)
than he is now receiving. Flisock argues that the
average base salary used in calculating his retirement
benefits should include the lump-sum payment he
received for unused leave he accrued over six years.
The Division of Retirement Benefits (division) did not
include the unused leave payment. The Teachers'
Retirement Board (board) and the superior court both
affirmed the division's decision. We conclude that the
division should have included the lump-sum Flisock
received for unused leave accrued during three of the
six years in calculating his average base salary.
Therefore we reverse.
I. FACTUAL AND PROCEDURAL BACKGROUND
From 1969 through 1988, Peter E. Flisock was employed
as a teacher, principal, or superintendent in four
rural Alaska communities. Flisock first became
enrolled in TRS1 in August 1969 when he was employed as
a teacher in Nulato. He served in that position for
three years, until assuming a position as principal in
Galena for the 1972-73 school year. From September
1973 to June 1980, he was superintendent of schools for
the Galena City School District. From July 1980
through June 1986, Flisock served as superintendent of
the Southwest Region School District (Southwest Region)
in Dillingham. From August 1986 to June 1988, he was
principal of the Napaaqtugmiut School for the Northwest
Arctic School District in Noatak.
Flisock retired on July 1, 1988, after nineteen years
of employment in these Alaska school districts. He was
allowed to claim credit for six years of "outside"
teaching service, and thus was entitled to full
retirement under AS 14.25.110(a)(4).2
At the time of Flisock's retirement, AS 14.25.110(d)
entitled a retired member of TRS to a monthly benefit
equal to "two percent of the member's average base
salary during any three school years of membership
service times the years of credited service, including
credited fractional years, divided by 12." A member's
average base salary is calculated by adding the
member's three highest years' base salary and dividing
by three. AS 14.25.220(5). Flisock earned his highest
salary, $98,700 annually, during the last three years
he was employed by the Southwest Region as
superintendent. This was the amount that the division
used to calculate Flisock's monthly retirement benefit.
According to Flisock, his base salary for 1985-86
should include an additional $35,304.66 he received
that year for ninety-three days of unused leave he had
accumulated over the six years he served as
superintendent of the Southwest Region. While employed
by the Southwest Region, Flisock had three separate
employment contracts. The first contract was a one-
year contract covering the 1980-81 school year; the
second was a two-year contract covering the 1981-83
school years; the third was a three-year contract
covering the 1983-86 school years. All three contracts
provided that Flisock could take thirty work days (six
work weeks) of leave per year. If he worked instead of
taking leave on some of these days, Flisock would be
paid his per diem rate for each day of additional
service up to fifteen days per year. Payment for these
additional days of service would be made at the end of
the contract period or any successive contract period.3
The division administrator denied Flisock's request to
have the amount paid to him for six years of unused
leave included in the determination of his TRS
benefits. Flisock appealed the decision to the board
pursuant to AS 14.25.035(e). The board affirmed the
decision of the administrator. Flisock then appealed
to the superior court, AS 22.10.020 and Alaska
Appellate Rule 602, which affirmed the board's
decision. Arguing that he should be allowed to include
at least the lump-sum he received for accrual of unused
leave during the three years used to calculate his
average base salary, Flisock petitioned for rehearing.
The superior court denied rehearing. Flisock appeals.
II. STANDARD OF REVIEW
Since the superior court acted as an intermediate court
of appeal, we scrutinize directly and independently the
merits of the board's decision. Tesoro Alaska
Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903
(Alaska 1987). The fundamental issues in this case are
questions of law. We must interpret the definitions of
"base salary" and "compensation"used in AS 14.25.
Generally, we exercise our independent judgment when
reviewing issues of statutory interpretation. Id. at
903-04. "[W]here . . . the issues to be resolved turn
on statutory interpretation, the knowledge and
expertise of the agency is not conclusive of the intent
of the legislature in passing a statute." Union Oil
Co. v. State, Dep't of Revenue, 560 P.2d 21, 23 (Alaska
1977) (footnote omitted); see also Wien Air Alaska,
Inc. v. State, Dep't. of Revenue, 647 P.2d 1087, 1090
(Alaska 1982) ("As repeatedly noted by our court, it is
within the court's special competency to independently
interpret a statute."). Accordingly, we need not defer
to the board's interpretation of the relevant
definitions in AS 14.25.220.4
III. DISCUSSION
A. Does the Alaska Constitution require
that Flisock's retirement benefits be
calculated in accordance with the law and
practice in 1969, the year in which he first
entered the Teachers' Retirement System?
Article XII, section 7 of the Alaska Constitution
provides:
Membership in employee retirement
systems of the State or its political
subdivisions shall constitute a contractual
relationship. Accrued benefits of these
systems shall not be diminished or impaired.
Flisock argues that this constitutional provision requires that
his retirement benefits be calculated according to the
law and practice in 1969. Instead, the board applied
the law as it existed in 1980, the first year the
Southwest Region employed Flisock as superintendent.
Apparently the board reasoned that the unused leave at
issue did not accrue until Flisock began employment
with the Southwest Region. Therefore, the board
concluded that Flisock's expectations concerning the
inclusion in calculating his retirement benefits of
compensation for unused leave could not have arisen
until he entered an employment contract with the
Southwest Region.
We agree with the superior court that the board's
interpretation is erroneous. We have clearly stated
that an employee's rights to retirement benefits vest
on employment and enrollment in a retirement system
like TRS. Sheffield v. Alaska Pub. Employees' Ass'n,
732 P.2d 1083, 1085 (Alaska 1987); Hammond v.
Hoffbeck, 627 P.2d 1052, 1057 (Alaska 1981). We have
also said that the vested rights protected by article
XII, section 7 of the Alaska Constitution "necessarily
include . . . the dollar amount of the benefits
payable." Hoffbeck, 627 P.2d at 1058. It is
undisputed that Flisock first enrolled in TRS in 1969.
Therefore, Flisock is entitled to have his benefits
calculated according to 1969 law.
B. Is Flisock entitled to have the payments
he received for the days he worked in lieu of
taking annual leave included in calculating
"base salary"for purposes of determining his
retirement benefits?
As it read at the time of Flisock's TRS enrollment in
August 1969, AS 14.25.220(2) provided:
"base salary"or "basic salary"means
any remuneration accrued under a contract to
a teacher for professional services rendered
during any school year; for purposes of sec.
50 of this chapter, base salary accrued
includes any payments made after June 30 of a
school year for services rendered before the
end of the school year.
Ch. 84, 15, SLA 1969. In interpreting this statute we first
look to the plain meaning of its language. See North
Slope Borough v. Sohio Petroleum Corp., 585 P.2d 534,
540 (Alaska 1978) ("a fundamental principle of
statutory interpretation is that a statute means what
its language reasonably conveys to others").
Former AS 14.25.220(2) limits "base salary"to
remuneration for services rendered during the school
year. Clearly, the lump-sum payment of $35,304.66
Flisock received for unused leave accrued during the
six years he worked for the Southwest Region is not
part of his base salary for the sixth year. Most of
the $35,304.66 Flisock received in 1986 was not paid as
remuneration for professional services rendered during
the preceding school year.5
We conclude, however, that former AS 14.25.220(2)
entitles Flisock to include that portion of the
$35,304.66 which represents compensation for the
unused leave accrued during each of the three years
used in calculating his average base salary. Under a
literal interpretation of the words "any remuneration,"
payment for the days Flisock worked instead of taking
leave in a given year should be included in his base
salary for that year.6 Language excluding payments for
unused leave from base salary is absent from the 1969
definition of base salary.
In support of a literal interpretation of former
AS 14.25.220(2), Flisock offers evidence of procedures
under TRS followed by the Anchorage School District,
the state's largest school district. In an affidavit,
L. Thomas Freeman, a former administrator with the
Anchorage School District, stated that in the early
1970's:
[A]ll monetary compensation received by
a member of the TRS during any given school
year, for whatever purpose, was included as
that member's base salary for purposes of
determining the amount of money that was
required to be contributed to the TRS.
Further, if that year was one of the member's
three highest years of earnings, all that
monetary compensation was used for purposes
of determining the amount of the member's
monthly retirement benefits.
(Emphasis in original). Freeman stated that he was responsible
for administering the district's compliance with TRS
rules and regulations. Therefore, his affidavit
provides some evidence of the division's practices at
the time.7 We believe that a literal interpretation is
appropriate, especially in light of the fact that the
state offered no evidence that the division's practice
in 1969 was to exclude payments for unused leave.
The legislature did not explicitly exclude payment for
unused leave days from the calculation of retirement
benefits under TRS until 1982. The definition of
"compensation"in AS 14.25.220(10) was then amended to
read as follows:
"compensation"means the total
remuneration paid under contract to a member
for services rendered during a school year,
including cost-of-living differentials,
payments for leave that is actually used by
the member, the amount by which the member's
wages are reduced under AS 39.30.150(c), and
the amount deferred under an employer-
sponsored deferred compensation plan or the
tax shelter annuity plan approved by the
Department of Education, but does not include
retirement benefits, welfare benefits, per
diem, expense allowances, workers'
compensation payments, or payments for leave
not used by the member, whether those leave
payments are scheduled payments, lump-sum
payments, donations, or cash-ins; for
purposes of AS 14.25.050, compensation paid
includes any payment made after June 30 of a
school year for services rendered before the
end of the school year.
Ch. 137, 25, SLA 1982 (emphasis added). In the same act, the
legislature made similar changes to the definition of
compensation under PERS. Ch. 137, 68, SLA 1982.
The state argues that the 1982 amendments were simply
meant to clarify the system rather than to change it.
Legislative history supports the state's
interpretation. The governor's transmittal letter
accompanying the bill described the amendments as
codifying "the division's continuing practice with
respect to the definition of `compensation' by listing
some of the items that are typically included or
excluded from `compensation' for retirement purposes."
1982 Senate Journal 428. The division's bill analysis
also indicated that amended language "is consistent
with longstanding practice and does not constitute a
change." The interpretation of legislation by the
governor and the agency that sponsored the bill is
entitled to be given weight by the court in construing
the intent of the statute. 2A C. Sands, Sutherland
Statutory Construction 48.05, at 305-06 (4th ed.,
rev. 1984); State, Div. of Agriculture v. Fowler, 611
P.2d 58, 60 (Alaska 1980).
Our holding, however, is not inconsistent with the
state's interpretation of the 1982 amendments as a
codification of existing practice, as distinct from
what may have been legally required. First,
legislative history of the 1982 amendments is of little
help in determining the law in 1969. As we stated in
Hillman v. Nationwide Mutual Fire Ins. Co., 758 P.2d
1248, 1252 (Alaska 1988):
While the legislature is fully empowered
to declare present law by legislation, it is
not institutionally competent to issue
opinions as to what a statute passed by an
earlier legislature meant. If the
legislature were in some form to declare its
opinion as to the meaning of prior law, that
declaration would be entitled to the same
respect that a court would afford to, for
example, an opinion of a learned commentator;
that is, the court would examine the
reasoning offered in support of the opinion
and either reject or accept it based on the
merit of the reasons given. However,
instances where the legislature offers
reasons in support of an opinion as to the
meaning of prior law are very rare.
Second, in his affidavit, Freeman states that in the
mid-1970's the division changed its practice from
including payments for unused leave to excluding such
payments from an employee's base salary for purposes of
calculating retirement benefits. We need not determine
the legal effect of this practice change in this case
since Flisock entered the system in 1969, before the
change.
REVERSED and REMANDED for further proceedings
consistent with this opinion.
_______________________________
1. AS 14.25.10-.220 provides for teachers' retirement.
Both the board and the superior court inadvertently
referred to the Public Employees' Retirement System
(PERS) as provided for in AS 39.35.010-.690. Although
the two systems are similar, they are provided for in
two separate sections of the statutes.
2. AS 14.25.110(a)(4) provides:
Subject to AS 14.25.167, a member is
eligible for a normal retirement benefit if
the member . . . has at least 25 years of
credited service, the last five of which have
been membership service.
3. Paragraph 9 of the 1983-86 contract provided:
In addition to annual salary the
SUPERINTENDENT shall receive the following
forms of compensation in consideration of the
faithful performance of the duties of the
SUPERINTENDENT of the SOUTHWEST REGION SCHOOL
DISTRICT: . . .
(e) The SUPERINTENDENT shall
accrue annual leave at the rate of two and
one-half (2 1/2) days per month, with the
provision that at least fifteen (15) days of
said leave must be used during the annual
period of this contract. Unused leave shall
be paid at the daily per diem rate at the
termination of this contract or, in the event
that a new contract is entered into, may be
carried forward as accrued leave.
Virtually identical provisions were included in each of Flisock's
first two contracts with the Southwest Region.
4. This court has occasionally deferred to an agency's
interpretation of a statute where it is clear that the
legislature intended to leave the agency with
discretion to interpret that statute, or where
undefined or ambiguous terms appear in the statutory
language. See, e.g., Absher v. State, Dep't of
Highways, 500 P.2d 1004, 1005 (Alaska 1972); London v.
Fairbanks Mun. Utils. Employers Group, 473 P.2d 639,
642 n.2 (Alaska 1970). However, there is no indication
of any such legislative intent in this case, nor any
undefined terms left to agency discretion. Thus, the
superior court's reliance on Absher and London in
deciding to apply a rational basis standard of review
was misplaced. Reliance on Absher is particularly
inappropriate since we later rejected the agency
interpretation at issue in that case. See Bailey v.
Litwin Corp., 713 P.2d 249, 256-58 (Alaska 1986)
(overruled Absher method of calculating lump-sum
permanent disability benefits under Workers'
Compensation Act by multiplying maximum amount
recoverable to percentage impairment).
5. Even assuming that the Division's practice in 1969 was
to include in an employee's base salary for one year
payment for unused leave accrued over several years,
this fact would not entitle Flisock to include the
entire $35,304.66 in his base salary for 1985-86. Such
practice by the Division was a misinterpretation of
unambiguous language in former AS 14.25.220(2).
Flisock does not have a vested right in a mistaken
application of the retirement system. See Whaley v.
State, 438 P.2d 718, 720 (Alaska 1968); Crumpler v.
Board of Administration Employees' Retirement System,
108 Cal. Rptr. 293, 307 (Cal. App. 1973); see also
Nevitt v. United States, 828 F.2d 1405, 1407 (9th Cir.
1987) (court need not accept agency interpretation of
statute that is "clearly contrary to the [statute's]
plain meaning").
6. When evaluating a definition of base salary similar to
the broad definition in this case, the New York Court
of Appeals held that payments for accumulated vacation
credits "represent compensation for services actually
rendered." Kranker v. Levitt, 281 N.E.2d 840, 841
(N.Y. 1972); see also Washington Fed'n of State
Employees v. State, 658 P.2d 634, 635 (Wash. 1983)
(lump-sum payments for accrued vacation time included
under former statute in "greatest compensation
earnable" for the purpose of determining pension
benefits). These two cases are easier to resolve than
the one now before us because a former administrative
practice of including leave cash-ins was undisputed.
7. In addition to Freeman's affidavit, Flisock offered his
own affidavit in which he testified that he "always
understood"that all monetary compensation he received
during a given year would be included in his base
salary for purposes of calculating his monthly
retirement benefit. Apparently, this was also the
understanding of the Southwest Region which included
the payment to Flisock for his unused leave when
determining the employee and employer contributions to
TRS for the 1985-86 school year.
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