My Observations of the PRB Meeting of September 1, 2010 — Part 2

This is the second part of my multi-part series of articles on the last Meeting of the PRB.  Part 1 of this series involved the Approval of the March Minutes of the PRB.  Part 3 of this series will involve the discussion of the Little Rock Police Pension Board’s filing of an appeal on the DROP interest rates as provided by the PRB actuary and the statement to the PRB of our reasons for appeal of this matter by Board Treasurer Sara Lenehan.

For those who do not know, the local fire and police pension plans administered by the Arkansas Pension Review Board (PRB) all date back to the 1920’s to the early 1980’s and are “dieing plans” that do not accept new members and are only projected to last until only five (5) members of each plan survive at which time, under the law, the local plan will automatically merge with the State LOPFI system.  Local pension plans that have wisely invested their funds and received sufficient revenues to make the plans viable until that merger are deemed “finically sound” by the PRB actuary.  Because the plans do not accept any new members and the old members eventually die, many plans found themselves with a surplus of funds necessary to sustain the pension plan.  Rather than let the plans accumulate unneeded cash to know ones benefit when the members of such local plans do not receive any social security benefits and did not have any cost of living increases attached to their pension benefits leaving many persons with only the extremely small pension benefits from 20 to 40 years ago, the local plan could apply to the PRB for a benefit increase to ease the inflationary burden on their membership according to the laws established for that purpose.

Under the laws authorizing benefit increases, the local plan would provide detailed annual reports to the PRB who would cause an actuarial evaluation to be performed to make certain that the benefit increase would not jeopardize the plans future viability.  If the actuary report established that the local plan indeed could afford to provide its membership the benefit increase requested and still remain viable, the PRB could grant the local fund permission to give its membership the benefit increase as authorized by the actuary’s report.  However, several years later in 2008 during the severe stock market downturn, many such plans found themselves facing severe financial hardships due to no fault of their own.  Consequently, many local plans found the need to apply to the PRB to receive financial assistance from the State’s Guarantee Fund, which provides additional funding for a local pension plan to prevent that plan from financial ruin.  While this seemed to be a logical decision for those plans, they soon discovered that under the PRB misinterpretation of the law and their errant policy directive based on that misinterpretation, local funds that had granted their membership a benefit increase in the past were not eligible to receive Guarantee Fund assistance.  This was the case for the Little Rock Police Pension Fund after filing a written application with the PRB for Guarantee Fund assistance and having that application denied in a letter from the Administrative Director of the PRB.  Consequently, our Fund scheduled an appeal of that decision before the PRB.

On September 1, 2010, Mr. Lee Harrod and I delivered the Little Rock Police Pension Fund’s address to the PRB concerning our appeal of the PRB denial of our application for Guarantee Fund assistance and their “unwritten” policy directive that prevents pension funds that have granted their membership a benefit increase from participation in the Guarantee Fund that was originally created for local pension plans facing financial problems.  I must admit, we were rather shocked to notice that when Lee Harrod and I sat down at the PRB table to give our presentation, the legal counsel who represents the PRB from the Attorney General’s Office immediately joined us.  She spoke first on the issue and stated that our argument concerned points of law about the PRB policy directive and it was the prerogative of the PRB to decide whether to change this policy directive or not.  At first, we believed she may attempt to engage us in debate on those points of law but were later relieved to learn that she was only acting as a resource of information for the PRB without obviously taking either side in the issue to be discussed.

During the discussion of this issue after our presentation, Chairman Lundy stated that he distinctly remembered going to the legislature on the Guarantee Fund issue in 1995 and that the “intent of the legislature” that he recalled and the other members of the PRB had at that time, was that funds who granted benefit increases to their membership would not be eligible to receive Guarantee Funds and that he did not believe it would be proper to go back and renege on his commitment to the legislature now.  Because his “recollection” was not consistent with Arkansas law, I replied that, with all due respect, neither he nor any other members of the PRB were “legislators” and his recollection of those events did not change the obvious “intent of the legislature” as expressed in Arkansas law pertaining to this issue.  However, Mr. Lundy continued to maintain that his opinion was the correct intent of the legislature although our presentation clearly indicated otherwise.  Thus, it is painfully evident to me that because most of the other PRB members were not on the PRB in 1995, the sole reason for the PRB adherence to this flawed policy directive is due to Mr. Lundy’s unyielding and dominating “recollection” of an event that occurred over 15 years ago although he could not even recall an important matter that occurred during the last meeting of the PRB just three (3) months ago.  That is truly unfortunate and egregious for all the local fire and police pension plans that have desperately needed assistance from the Guarantee Fund in the past but knew or discovered, the PRB would deny them such assistance because of  their enforcement of Lundy’s “recollection” rather than the law.

As suggested by PRB member Farris Hensley, we cannot understand why any official of the PRB, with the exception of Bill Lundy, would want to purposely refuse financial assistance to funds they represent when such funds have clearly obeyed every law on the books but still get denied assistance because they are not paying their membership the “minimum amount authorized by law,” according to Lundy’s policy directive that is clearly inconsistent with the laws of this State.  The other PRB members questioned their attorney about this matter extensively; however, to her credit, she maintained a neutral response to all questions including my own when I asked if she agreed that my case cites concerning the Arkansas Supreme Court rulings on statutory construction were correct.  She stated she did; but that she did not believe the issue would turn on matters of statutory construction, as a review of the statutes would first be based on the clear and unambiguous language of the statutes involved.  While that is undoubtedly true in a court of law or in an opinion from the Attorney General’s Office, we did not include the issues involving statutory construction for those more learned in the law than ourselves but, instead, included them only to illustrate the improper and illogical conclusions under the law that the PRB had reached in its policy directive on this matter because the PRB had obviously failed to see that those sections of Arkansas law were “clear and unambiguous” and that funds who had authorized their membership a benefit increase in the past were not ineligible for Guarantee Fund assistance in the future.

We were surprised that some PRB members seemed to be genuinely interested in our arguments and one member suggested the possibility of obtaining an Attorney General’s Opinion on the matter and most of the other members seemed to agree; however, the PRB attorney said that may not be possible as the Opinion section of the Attorney General’s Office has long held that they would not opine on an issue in front of a court and may view the PRB similarly.  We knew this to be true, because a recent Attorney General’s Opinion [2006-029] states, “This office has followed a long-standing policy against issuing opinions on matters that are the subject of pending litigation.  This policy has consistently been applied to matters pending before administrative agencies [or Boards] as well as before the courts.”  Because we never believed the PRB would show any interest in obtaining an Attorney General’s Opinion and would just rule that their errant policy directive was correct, we decided to provide them the opportunity to obtain an Attorney General’s Opinion on this matter by withdrawing our appeal of that issue, knowing we could again appeal if it became necessary.

As for our petition for rule making authority under the Administrative Procedure Act [A.C.A. § 25-15-201 et seq.] to attempt the overturning of this “unwritten” policy directive, we also suspended that petition to allow the Attorney General’s Office time to respond.  While the decisions to withdraw our appeal and suspend our petition may have been mistakes for our fund, it was our original intent in addressing the PRB on that matter to only obtain the adverse rulings of the PRB on both issues and give our new attorney the unfettered option of immediately taking legal action against the PRB on this issue because Arkansas courts have ruled that one must first exhaust all administrative appeals before taking any legal action against a state agency.  However, the PRB decision to agree to look at an Attorney General’s Opinion and, perhaps, rule based upon its results gave us hope that other local pension plans could benefit from such an opinion and that the legal expense that would become necessary in a protracted judicial review of this matter may not have to be incurred by our pension fund to obtain Guarantee Fund assistance from the PRB.  Thus, our actions to withdraw the appeal and suspend the request for rule making authority were only made in an effort to receive a more expeditious review of this matter, help other similarly situated local pension plans, and save our fund money.

Concerning Attorney General’s Opinions, I would like to state that during my employment with the Attorney General’s Office many years ago, I had numerous occasions to read many of their opinions on various matters as they were easily available on their computer systems and, usually, those opinions were straight up, on point, and given without any consideration of politics; however, I do recall at least one occasion where an opinion was clearly written, in my opinion, in an obvious attempt to foreclose a valid argument due to political reasons and thereby cause a party to the opinion to seek judicial relief when it was obvious such relief could probably not be afforded by the party.  While I am NOT alleging that this will be the case in our opinion or that our fund could not afford a judicial review, the fact that Bill Lundy spoke so smugly of his ability to “handle it” concerning the opinion request from the Attorney General’s Office, his obvious snug relationship with the Governor as evidenced by his reappointment to the PRB even though the Governor proclaimed his actions as Chairman of the PRB were “unacceptable,” and the fact that the Governor could lose his current ability to pilfer our Guarantee Fund money in support of the Arkansas State Police who have very generous pension benefits that are in constant need of funding gives me some cause for concern in this matter.

On September 8, 2010, we received an email from David Clark at the PRB that contained a copy of the request for an Attorney General’s Opinion filed by Bill Lundy and the attached copy of the Little Rock Police Pension Board’s statement to the PRB concerning this issue.  While Chairman Lundy attempted to portray the Little Rock Police Pension Fund as having “knowingly forfeited the opportunity for additional Guarantee Fund assistance” in his request for an opinion, the Little Rock Police Pension Fund never “knowingly forfeited” its rights under the laws of this State on that or any other issue and the only “forfeit[ure]” we unknowingly agreed too was as a result of Lundy’s errant policy directive.  For that reason, we now await the Arkansas Attorney General’s Opinion on this issue with great anticipation.  Generally speaking, it usually takes approximately thirty (30) days for the Attorney General’s Office to respond to such a request.

Of course, an Attorney General’s Opinion is not binding on any court of law or on the PRB; however, if they should opine in accordance with our presentation to the PRB, we cannot imagine that the PRB would not change their current “unwritten” policy directive and consequently rule that the Little Rock Police Pension Fund is entitled to Guarantee Fund assistance.  However, if either the Attorney General’s Office should opine or the PRB should rule against the Little Rock Police Pension Fund’s request for Guarantee Fund assistance, that matter will be brought to the attention of our new legal counsel to see what, if any, action the Little Rock Police Pension Fund needs to pursue in that event.

We will post an “UPDATE” to this article when the Attorney General’s Opinion becomes available and have our fingers crossed for all the similarly situated local fire and police pension funds in this State that need and will subsequently request Guarantee Fund assistance from the PRB if this matter is resolved in accordance with the presentation made by the Little Rock Police Pension Fund.

Listen to the 40 minute excert of the Little Rock Police Pension Funds Presentation to the PRB below:

Read our written request for Guarantee Fund assistance HERE

Read the Letter of denial from the PRB Executive Director HERE

Read the Presentation to the PRB of the Little Rock Police Pension Fund HERE

Read the request of the PRB for an Attorney General’s Opinion HERE

Read Part 1 of this Series of Articles HERE