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Kaho'ohanohano v. State Page 27 of 46
<br /> This is because as noted before, Delegate Tavares had expressed concern that the amendment would require the ERS
<br /> to be continued perpetually. Id. at 497. Likewise, Delegate White was concerned that the amendment did not draw a
<br /> clear distinction between past benefits and future benefits. Id. at 497-98. To alleviate this uncertainty and clearly
<br /> differentiate between past and future benefits, Delegate Anthony "suggest[ed] that the word 'accrued' be inserted
<br /> before the word 'benefits."' Id. at 498. Delegate Anthony explained, "I was trying to get rid of the impasse and I think
<br /> the insertion of the word 'accrued' will do it." Id.
<br /> After the Chairman accepted the addition of"accrued," Delegate Anthony stated, "The purpose of the amendment will
<br /> be to preserve the accrued benefits but still leave the legislature free as to the future. In other words, the fear that
<br /> Delegate White and Delegate Tavares had, I think, are met by this insertion." Id. at 499 (emphasis added). Delegate
<br /> Tavares confirmed that the addition of"accrued" satisfied his initial concerns. Id. Delegate White did not object. Id.
<br /> Delegate Tavares further stated that the final version of the amendment agreed with Delegate Mau's interpretation of
<br /> the amendment which was made prior to the addition of the term "accrued." Id. Delegate Mau's interpretation was that
<br /> "the State can [at] any time cut out [the] retirement system, but those who belong to the system before it is terminated,
<br /> their rights and the benefits accrued to them still remain under this provision." Id. at 498 (emphasis added). The
<br /> Committee of the Whole incorporated this objective in its report stating,
<br /> It should be noted that the above provision would not limit the legislature in effecting a reduction in the benefits of a retirement system
<br /> providing the reduction did not apply to benefits already accrued. In other words,the legislature could reduce benefits as to (1)new
<br /> entrants into a retirement system,or(2)as to persons already in the system in[]so ffar as their future services were concerned. It could
<br /> not,however,reduce the benefits attributable to past services.Further,the section would not limit the legislature in making general
<br /> changes [to the] system,applicable to past members,so long as the changes did not necessarily reduce the benefits attributable to past
<br /> services.
<br /> Comm. of the Whole Report No. 18, Journal of the Const. Conv. of 1950, Vol. 1, at 330 (emphases added). This court
<br /> has previously adopted the Committee of the Whole's interpretation of the provision. See Chun v. Employees' Ret.
<br /> Sys., 61 Haw. 596, 606, 607 P.2d 415, 421 (1980) (accepting that "a member of the retirement system is entitled to the
<br /> benefits available under the system that have been accrued by the member" and concluding that article XVI, section 2
<br /> "was meant to protect an employee from a reduction in accrued benefits").
<br /> XXXVI.
<br /> A.
<br /> The New York cases have established that the constitutional non-impairment clause protects not only system member
<br /> benefits, but also the sources of funds for those benefits. See Sgaglione, 337 N.E.2d at 594. As noted before,
<br /> article V, section 7 of New York's constitution states, similar to article XVI, section 2, that "membership in any
<br /> pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits
<br /> of which shall not be diminished or impaired."
<br /> Particularly apt to Trustees' argument is Sgaglione, which addressed a New York statute requiring the State
<br /> comptroller to purchase $125,000,000 in bonds using the retirement funds from the State Employees' and the State
<br /> Policemen's and Firemen's Retirement Systems. Id. New York statutes provide that the State Comptroller is the
<br /> "trustee" of the retirement funds and is vested with discretion to invest such securities as are authorized by statute. Id.
<br /> (citing Retirement and Social Security Law §§ 13, 313; State Finance Law, § 98) (emphasis added). The issue in
<br /> Sgaglione was "whether the legislative device of mandatory investment of retirement funds entrusted to the charge of
<br /> the State Comptroller, despite the obviously compelling and urgent stringency with which the city and State are faced,
<br /> violates the constitutional nonimpairment clause." Id.
<br /> Sgaglione concluded that, "necessarily implied in this constitutional . . . protection of the underlying 'contract'
<br /> providing for benefits is the protection of the sources for those benefits, whether by way of continuing contributions
<br /> by employees, employers, or the reserve funds required to be maintained under the retirement plan." Id. (emphases
<br /> added). That court further noted that, "there is flexibility reserved to the Legislature, but it is not unlimited" and "[c]
<br /> lose examination is therefore required of any radical change in means chosen to maintain the integrity and security of
<br /> the sources from which the concededly protected benefits are to be paid." Id. at 595.
<br /> http://www.state.hi.us/jud/opinions/sct/2007/26178.htm 8/12/2008
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