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Underwood v. Hickel, State of Alaska and Dept. of Revenue (9/30/94), 881 P 2d 322
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Notice: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
CHARLES E. UNDERWOOD, JR., )
SUSIE G. UNDERWOOD, and ) Supreme Court No. S-5802
ANTHONY C. UNDERWOOD, )
) Superior Court No.
Appellants, ) 4FA-93-234 Civil
)
)
v. )
) O P I N I O N
STATE OF ALASKA, )
GOVERNOR WALTER J. HICKEL, ) [No. 4124 - September 30,
1994]
and DEPARTMENT OF REVENUE, )
)
Appellees. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Fourth Judicial District,
Fairbanks,
Mary E. Greene, Judge.
Appearances: Robert John, Law Office of
Robert John, Fairbanks, for Appellants.
Vincent L. Usera, Assistant Attorney General,
and Bruce M. Botelho, Attorney General,
Juneau, for Appellees.
Before: Moore, Chief Justice,
Rabinowitz, Matthews, Compton and Eastaugh,
Justices.
MOORE, Chief Justice.
At issue in this appeal is the constitutionality of a
1992 amendment to the permanent fund dividend (PFD) statutes,
Chapter 4, section 4, SLA 1992. The amendment changed the
qualifying date set forth in AS 43.23.005(a) for a 1993 PFD.
Charles E. Underwood, Jr., along with his wife and son, Susie G.
Underwood and Anthony C. Underwood (the Underwoods), allege that
they were unlawfully denied 1993 PFDs as a result of the change.
They instituted this action against the State of Alaska, Governor
Walter J. Hickel and the Department of Revenue (collectively "the
State"), claiming that the amendment violated a number of their
constitutional rights and that the State was estopped from
denying their dividend applications. The superior court granted
summary judgment in favor of the State. We affirm.
I. FACTS AND PROCEEDINGS
The facts are not in dispute. The Underwoods timed
their move from Texas to Alaska with the specific intention of
becoming Alaska residents in time to qualify for a 1993 PFD.
According to Charles Underwood, he understood that in order to
qualify for the 1993 PFD, the family members had to be state
residents on or before April 1, 1992. Although Charles otherwise
would have preferred to remain at his job in Texas until May
1992, he resigned in March. Had Charles remained at his job
until late May as he desired, Charles claims he would have earned
roughly another $3,000 in after tax wages. The family arrived in
Alaska on March 25, 1992.
On March 31, 1992, Governor Hickel signed Chapter 4,
section 4, SLA 1992, which amended AS 43.23.005 by changing the
eligibility requirements for a PFD to coincide with the calendar
year. As a result, to be eligible for a 1993 PFD, applicants had
to show Alaska residency as of January 1, 1992. Accordingly,
persons who established Alaskan residency between January 2, 1992
and April 1, 1992 were not eligible for a 1993 PFD, whereas under
prior law they would have been eligible.
The Underwoods brought suit in superior court
challenging the constitutionality of the enactment. They
specifically claimed that it violated the equal protection and
due process guarantees of the federal and state constitutions,
that it constituted an ex post facto law, that it was an
impermissible taking of property, and that the State was
equitably estopped from amending the law.
The superior court granted summary judgment in favor of
the State on all of the Underwoods' claims. The Underwoods
appeal.
II. DISCUSSION
The parties agree that there are no issues of material
fact, and that this case may be properly resolved as a matter of
law. The constitutional and other purely legal questions at bar
are issues to which this court will apply its independent
judgment. State v. Anthony, 810 P.2d 155, 156-57 (Alaska 1991);
Croft v. Pan Alaska Trucking, 820 P.2d 1064, 1066 (Alaska 1991).
A. The Challenged Enactment Does Not Violate The
Underwoods' Constitutional Rights.
Alaska Statute 43.23.005 governs the eligibility
requirements for a PFD. Following the enactment of Chapter 4,
section 4, SLA 1992, the statute provided that:
(a) An individual is eligible to
receive one permanent fund dividend each year
in an amount to be determined under AS
43.23.025 if
. . . .
(3) the individual was a state
resident for at least the calendar year
immediately preceding January 1 of the
current dividend year; . . . .
AS 43.23.005(a)(3) (emphasis added). Prior to the 1992
amendment, the statute required Alaska residency for the twelve
month period immediately preceding April 1 of the current
dividend year. AS 43.23.005(a)(2) (effective June 11, 1991).
1. Equal Protection
The Underwoods assert that the 1992 enactment denied
them equal protection and opportunity under both the Federal and
Alaska Constitutions. See U.S. Const. amend. XIV; Alaska Const.
art. I, 1. Because Alaska's equal protection clause "is more
protective of individual rights than the federal equal protection
clause,"State v. Anthony, 810 P.2d at 157, we focus our analysis
on the Alaska Constitution.1
We have adopted a sliding scale approach to equal
protection questions. State v. Erickson, 574 P.2d 1, 11-12
(Alaska 1978). Under this approach, "'[t]he applicable standard
of review for a given case is to be determined by the importance
of the individual rights asserted and by the degree of suspicion
with which we view the resulting classification scheme.'" State,
Dep't of Revenue v. Cosio, 858 P.2d 621, 629 (Alaska 1993)
(quoting State v. Ostrosky, 667 P.2d 1184, 1192-93 (Alaska
1983)). As the level of scrutiny selected moves up the sliding
scale, the asserted governmental interests must be relatively
more compelling, and the legislation's means-to-ends fit must be
correspondingly closer. Ostrosky, 667 P.2d at 1193. Conversely,
"if relaxed scrutiny is indicated, less important governmental
objectives will suffice and a greater degree of over/or
underinclusiveness in the means-to-ends fit will be tolerated."
Id. (footnote omitted).
We have held that an individual's interest in a PFD "is
merely an economic interest and therefore is entitled only to
minimum protection under our equal protection analysis."
Anthony, 810 P.2d at 158. Under this minimum level of scrutiny,
the State must show that the challenged enactment was designed to
achieve a legitimate governmental objective, and that the means
bear a "fair and substantial"relationship to the accomplishment
of that objective. Cosio, 858 P.2d at 629; Anthony, 810 P.2d at
158-59.2
The State asserts that the purpose of the challenged
legislation was to improve the overall efficiency of the PFD
program. By moving the qualifying date to coincide with the
calendar year, the PFD division of the Department of Revenue
gains three months to process applications. This additional time
should result in earlier detection of ineligible applicants and
fewer improperly paid PFDs, less need for temporary staff to
process applications, and quicker resolution of questioned
applications, thereby decreasing the number of delayed payments.
The State also asserts that the amendment was intended to
simplify the PFD program, thereby decreasing public confusion and
minimizing the many date-related errors that result in missed
dividends.
These objectives are legitimate ones, and we reject the
Underwoods' argument to the contrary. The Underwoods contend
that the cited objectives are not legitimate because they are
based on cost savings and efficiency. See Herrick's Aero-Auto-
Aqua Repair Serv. v. State, Dep't of Transp., 754 P.2d 1111, 1114
(Alaska 1988) ("[C]ost savings alone are not sufficient
government objectives under [Alaska's] equal protection
analysis."). However, the challenged legislation here is
distinguishable from that in Herrick's. It is not justified
solely by cost savings that are "achieved by excluding a class of
persons from benefits they would otherwise receive." Id.
(quoting Alaska Pac. Assurance Co. v. Brown, 687 P.2d 264, 272
(Alaska 1984)). Moreover, the State's goals of improved
efficiency and consumer understanding represent different
objectives than the mere goal of cost savings discussed in
Herrick's or in Brown. See id.; Brown, 687 P.2d at 272. We
therefore conclude that the goals of the 1992 amendment pass the
legitimacy test.
The means-to-ends tailoring of the amendment also
satisfies the "fair and substantial relation"test. In arguing
to the contrary, the Underwoods largely look to the fact that the
State extended the application period for 1993 PFDs through June
1992.3 Their argument is that, because the application period
for 1993 PFDs was extended, the legislature also could and should
have extended the eligibility period for 1993 PFDs.
However, the extended application period was
specifically intended to reduce public confusion resulting from
the 1992 statutory amendments, and it is substantially related to
the purpose of the legislation. Moreover, the fact that the
application time was extended says little about the claims at
issue in this case. The State does not assert that it rejected
the Underwoods' applications because of the additional burden in
processing them. The issue is merely whether the changed
qualifying date is fairly and substantially related to the goals
of the 1992 amendments. Certainly, the State could have elected
to permit applicants to achieve the one year residency
requirement any time during the extended 1993 application period,
thereby resulting in acceptance of the Underwoods' applications.
However, the State's decision not to extend the qualifying date
along with the application deadline does not mean that the
enactment fails to satisfy the fair and substantial relation
test. To the contrary, viewing the goals and means of the
challenged legislation, we conclude that the State was not
constitutionally required to extend the eligibility period for
1993 PFDs simply because it was feasible to do so.
The Underwoods next rely on Isakson v. Rickey, 550 P.2d
359, 363-65 (Alaska 1976), to argue that the exclusion of people
in their situation from 1993 PFD eligibility fails the fair and
substantial relation test. However, Isakson does not control the
outcome in this case. There, the purpose of the challenged
statute was to allocate limited entry commercial fishing permits,
with selection to be based upon certain hardship standards. Id.
at 360. To demonstrate hardship, the statute specified that the
applicant must have been the holder of a gear license prior to a
cut-off date of January 1, 1973. Id. at 360-61. It was assumed
that holders of gear licenses obtained after January 1, 1973
could not show hardship. We determined that the January 1, 1973
cut-off date was not fairly and substantially related to
identifying the hardship necessary for an entry permit. Id. at
365. We found that the cut-off date was both overbroad and
underinclusive. It was overbroad because it would include pre-
1973 gear license holders who were no longer involved in
commercial fishing and could not show hardship; it was
underinclusive because it would exclude other persons who
actively participated in and were economically dependent upon the
fishery. Id.
The statute at issue in Isakson cannot be logically
compared to the challenged amendment in this case. Unlike the
extremely loose tailoring in Isakson, the action moving the
qualifying date for 1993 PFDs by three months is fairly and
substantially related to the purpose of simplifying the PFD
program in order to decrease public confusion and to improve
efficiency and accuracy in administering the program. There is
no significant danger of over or underinclusiveness as a result
of the State's action.
Because the challenged amendment derives from a
legitimate governmental objective, and the means bear a fair and
substantial relation to that objective, the 1992 amendment to AS
43.23.005(a) survives minimal scrutiny under Alaska's
Constitution. Accordingly, the Underwoods' equal protection
claim fails.
2. Due Process
The Underwoods next assert that the enactment violated
their due process rights because upon their arrival in Alaska in
March 1992, they had a vested right to 1993 PFDs, subject only to
their continuing residence.4 We disagree.
As of March 31, 1992, the Underwoods had been Alaska
residents for approximately six days, far short of the twelve
month requirement of AS 43.23.005 as it existed when the
Underwoods arrived. At that time, the Underwoods possessed
nothing more than an inchoate expectancy of a 1993 PFD that is
not afforded constitutional protection. See Norton v. Alcoholic
Beverage Control Bd., 695 P.2d 1090, 1092 n.4 (Alaska 1985)
(vested property rights are protected against state action by the
due process clauses of the Alaska and United States
Constitutions); Bidwell v. Scheele, 355 P.2d 584, 586 (Alaska
1960) (same).
The Underwoods cite to real property cases from other
jurisdictions to support their claim that their reliance on AS
43.23.005 at the time of their move to Alaska should give them a
vested right in the law as it existed on the date of their move.
The Underwoods' analogy between real property transactions and
the present case is unpersuasive. Unlike real property
situations in which the complaining party indisputably possesses
property rights in specific land, the Underwoods had no property
right whatsoever in a 1993 PFD.5 Accordingly, there is no due
process violation in this case.
3. Ex Post Facto Law
The Underwoods next assert that the 1992 amendment
constitutes an ex post facto law in violation of the Alaska
Constitution.6 An ex post facto law is a law "'passed after the
occurrence of a fact or commission of an act, which
retrospectively changes the legal consequences or relations of
such fact or deed.'" Danks v. State, 619 P.2d 720, 722 n.3
(Alaska 1980) (quoting Black's Law Dictionary 520 (5th ed.
1979)).
In determining whether a statute affecting pre-
enactment conduct is unconstitutionally retrospective, one
inquiry is into whether the statute affects vested rights. See
Norton, 695 P.2d at 1092; see also Black's Law Dictionary 1317-18
(6th ed. 1990) (A "retrospective"or "retroactive"law is
generally defined as a law which "takes away or impairs vested
rights acquired under existing laws, or creates new obligations,
imposes a new duty or attaches a new disability in respect to
transactions or considerations already past.") (citation
omitted). The Underwoods had no vested right to a 1993 PFD as of
March 31, 1992, just as no Alaskan had a vested right to a 1993
dividend at that time.7 Therefore, under a vested rights
inquiry, the amendment clearly does not constitute an
impermissible ex post facto law in violation of the Alaska
Constitution. See Property Owners Ass'n v. City of Ketchikan,
781 P.2d 567, 574 n.12 (Alaska 1989) (a statutory change which
merely disappoints economic expectations and does not affect
vested rights is not an ex post facto law).
The Underwoods alternatively urge us to reject a vested
rights inquiry and instead review the challenged enactment for
fairness and reasonableness. See Norton, 695 P.2d at 1092-93
(noting the deficiencies of the vested rights analysis in
determining whether a statute is in fact retroactive and whether
it is unconstitutional); 2 Norman J. Singer, Sutherland Statutory
Construction 41.05, at 369-71 (5th ed. 1993) (fairness
considerations represent a more meaningful standard of evaluating
retroactive laws than a vested rights analysis). Even under such
a standard, however, we find that the 1992 amendment at issue in
this case withstands constitutional scrutiny.
The effective date of the 1992 amendment to AS
43.23.005 was January 1, 1993. The amendment made state
residency during calendar year 1992 relevant to eligibility for a
1993 PFD, thereby bearing some relation to events dating back to
January 1, 1992, instead of April 1, 1992 as under the prior law.
We are satisfied that this change did not unfairly or
unreasonably impinge upon any property rights or settled
expectations. Thus, we find that the amendment does not violate
the constitutional prohibition against retroactive legislation.
The Underwoods' claim on this ground therefore fails. See, e.g.,
ARCO Alaska, Inc. v. State, 824 P.2d 708, 710-12 (Alaska 1992)
(upholding a tax law amendment which retroactively applied to a
seven month period); Wien Air Alaska, Inc. v. State, Dep't of
Revenue, 647 P.2d 1087 (Alaska 1982) (assuming the
constitutionality of amendments to a tax statute retroactively
applying to a six month period).
B. The State Is Not Equitably Estopped From
Denying the Underwoods Their 1993 PFDs.
The Underwoods lastly claim that the State should be
estopped from enforcing the 1992 amendment as to them because
they acted in detrimental reliance on the prior law. We reject
this claim. In short, the Underwoods undertook a calculated risk
when they decided to move to Alaska in March rather than May of
1992. The State engaged in no conduct encouraging this action,
or in any way guaranteeing that the Underwoods would qualify for
a 1993 PFD if they arrived in March. Thus, while it is
unfortunate that the Underwoods' calculated risk did not pay off,
the State is not obligated to pay for any losses incurred by the
Underwoods as a result of their decision to move to Alaska in
March.
III. CONCLUSION
The State's amendment to the eligibility statute for
1993 PFDs did not violate the Underwoods' constitutional rights.
Nor is the State equitably estopped from denying the Underwoods a
1993 dividend. Accordingly, the superior court's order granting
summary judgment in favor of the State is AFFIRMED.
_______________________________
1 Article I, section 1 of the Alaska Constitution states,
"[t]his constitution is dedicated to the principle[] that . . .
all persons are equal and entitled to equal rights,
opportunities, and protection under the law . . . ." Although
the parties do not specifically address the issue, the class
allegedly subject to disparate treatment under the amendment
includes all persons who would have been eligible for a 1993 PFD
but for the three month change in the qualifying date.
2 Although the Underwoods acknowledge that the rational
basis test ordinarily applies to a person's interest in a PFD,
they assert that the 1992 enactment interferes with their right
to travel, thereby implicating strict scrutiny analysis.
However, the issues in this case do not implicate the right to
travel and are properly subject to rational basis review.
3 The PFD application period is governed by AS 43.23.011,
which became effective on January 1, 1993 and requires that
applications for PFDs be filed between January 2 and March 31 of
the dividend year. Chapter 4, section 19(b), SLA 1992 provided
that, notwithstanding this section, the application period for
1993 would extend through June 30, 1993.
4 Article I, section 7 of the Alaska Constitution
provides: "No person shall be deprived of life, liberty, or
property, without due process of law. . . ." The Fifth Amendment
to the United States Constitution contains a similar guarantee.
5 Similarly, because the Underwoods had nothing more than
an inchoate expectancy of a 1993 PFD, they had no property that
could have been the subject of a taking in violation of the Fifth
Amendment of the Federal Constitution and Article I, section 18
of the Alaska Constitution. Accordingly, this argument also
fails.
I6 fact, because the entire dividend program is a creat
ure of the legislature, it could have been abolished during the 1
992 legislative s
7 In fact, because the entire dividend program is a
creature of the legislature, it could have been abolished during
the 1992 legislative session, so that no Alaskan received a 1993
PFD.
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