Moro v. State of Oregon

The legislature cannot enact laws that would retroactively disable a defined benefit of government employee pension plans (PERS), and to do so would be in violation of the Oregon Constitution. The legislature can, however, prospectively change those benefits.

In 2013, the Oregon Legislature attempted to mitigate the under-funding in PERS, which was caused primarily by the market crash of 2008, by passing Senate Bills (SB) 822 and 861. Part of this was to pass legislation that would withhold certain benefits from PERS beneficiaries in two ways: to eliminate certain tax offset provisions from individuals not otherwise subject to the State's tax assessment and to reduce the promised cost-of-living-adjustment rates (COLA). Petitioners argued that SB 822 and 861 unconstitutionally impair their employment contracts in violation of Oregon's Contracts Clause, in Article I, Section 21 of the Oregon Constitution as well as the Federal Contracts Clause of Article I, Section 10, clause 1 of the U.S. Constitution. Petitioners also argued that the laws constitute an unconstitutional taking under Oregon's Constitution Article I, Section 18 as well as the Fifth Amendment of the U.S. Constitution. Petitioners further argued that the laws violate the State Equal Privileges and Immunities Clause, Article I, Section 20, or the Oregon Constitution as well as Article IV, Section 2, clause 1 of the U.S. Constitution and the Equal Protection Clause of the Fourteenth Amendment. The Court here first held that there was indeed a contract made between the State and the PERS beneficiaries. The terms of the contract offered included COLA benefits; however, the contract did not secure tax offset benefits. The COLA benefits for work performed, therefore, was part of a contract and the State is therefore bound to those terms for work already performed but because COLA benefits were for work performed, the legislature could alter the contract prospectively. Thus, the provisions of the laws that sought to retroactively disable COLA benefits are in violation of Oregon's Contract Clause. Because the tax-offset benefits were not part of the original contract, those benefits could freely be altered. [Brewer, J. concurring.]