2007-07-23_George_Kahoohanohano_et_al_v._State_of_Hawaii_et_al_-_Opinion_of_the_court_by_Justice_Acoba

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Kaho'ohanohano v. State Page 5 of 46 Stand. Comm. Rep. No. 486, in 1997 Senate Journal, at 1092 (emphasis added). Thus, in 1997 the legislature amended HRS § 88-107 with the addition of the following: In fiscal year 1996,twenty per cent of the actual investment earnings in excess of the investment yield rate shall be deposited in the pension accumulation fund;remaining excess earnings shall be applied to the amount contributed under section 88-123.1i8-�I Beginning in fiscal year 1997,one hundred per cent of the investment earnings shall be deposited in the pension accumulation fund. 1997 Haw. Sess. L. Act 327, § 2 at 774. But two years after passing Act 327, the legislature enacted Act 100, which amended HRS § 88-107 (Supp. 1998), and retroactively reduced the amounts the State and counties contributed to the ERS in fiscal years 1997 and 1998 by crediting actuarial investment earnings in excess of ten percent of the actuarial investment yield rate toward the State and county contributions. 1999 Haw. Sess. L. Act 100, § 1 at 368. Act 100 stated that "[t]he savings realized by the State and the counties . . . shall be utilized for the purpose of funding retroactive cost items for [the Hawaii Government Employees Association (HGEA)] and [United Public Workers (UPW)] contracts . . . and other necessary items." 1999 Haw. Sess. L. Act 100, § 3 at 369. Act 100, amended HRS § 88-107, entitled "Interest," by deleting the bracketed text and adding the underscored language to read as follows: " The board of trustees shall annually allocate the interest and other earnings of the system to the funds of the system,as follows: (1) The annuity savings fund shall be credited with the amount of regular interest credited to members'accounts; (2) The expense fund shall be credited with such sums as provided in section 88-116;and (3) The remaining investment earnings,if any, shall be credited to the pension accumulation fund. bb) Beginning with actual investment earnings in fiscal year 1995 in excess of the investment yield rate,to address outstanding unfunded pension obligations,ten per cent of such excess eamings shall be deposited in the pension accumulation fund;remaining excess earnings shall be applied to the amounts to be contributed under section 88-123. In fiscal year 1996,twenty per cent of the actual investment earnings in excess of the investment yield rate shall be deposited in the pension accumulation fund;remaining excess earnings shall be applied to the amount contributed under section 88-123. In fiscal years 1997 and 1998,actuarial investment earnings in excess of a ten per cent actuarial investment yield rate shall be applied to the amount contributed under section 88-123.Beginning in fiscal year[1997] 1999,one hundred per cent of the investment earnings shall be deposited in the pension accumulation fund. (c) The application of actuarial investment earnings to the amount contributed under section 88-123 for fiscal years 1997 and 1998 as provided in subsection(b)is a one-time only provision and no law shall be enacted to again require the employees'retirement system to apply actuarial investment earnings to offset the amount contributed under section 88-123. 1999 Haw. Sess. L. Act 100, § 1 at 368 (underscoring and brackets in original.) Section 1 of Act 100 took effect retroactive to July 1, 1996. 1999 Haw. Sess. L. Act 100, § 9 at 370. As emphasized supra, instead of permitting the ERS to retain one hundred percent of earnings beginning in 1997, as provided by Act 327 of the 1997 legislative session, Act 100 stated that "actuarial investment earnings in excess of a ten percent investment yield rate" in fiscal years 1997 and 1998, would be credited against employer contributions required for those years. 1999 Haw. Sess. L. Act 100, § 1 at 368. The ERS would not be able to retain one hundred percent of the excess earnings until fiscal year 1999. Id. There were no offsetting benefits to the system overall, such as the State's former guarantee to make up deficits in bad years. III. A. On April 23, 2002, Kahoohanohano, Andrade, and SHOPO filed a class action suit on behalf of the members of the ERS against the State alleging that Act 100 diverted $346.9 million from the ERS, in breach of the State's contractual obligations to ERS members, and in violation of article XVI, section 2 of the Hawaii Constitution. The lawsuit sought declaratory and injunctive relief, and specifically (1) a declaration that Act 100 was unconstitutional and otherwise unlawful; (2) an injunction preventing the State from taking any future actions that would "impair or diminish" the ERS; and (3)monetary damages in the amount of$346.9 million, plus lost earnings thereon. http://www.state.hi.us/jud/opinions/sct/2007/26178.htm 8/12/2008