PRB Mistake on the Guarantee Fund

First, I wish to remind everyone who reads this article that I am NOT an attorney but am capable of reading and understanding Arkansas law.  My over twenty-three (23) years of service to the Little Rock Police Department coupled with my twenty (20) years of publishing the Arkansas Criminal Law Manual afforded me the opportunity to read numerous Acts and court decisions necessary to do my job, understand the law, and produce that publication.  With those facts stated, I will now continue with this article:

 The Arkansas Fire and Police Guarantee Fund (Guarantee Fund) was set up by the legislature in 1995 because some of the old “municipal fire and police pension funds may run out of funds before all of the promised benefits have been paid to their members, restraints, and beneficiaries” (A.C.A. § 24-11-209).  The Arkansas Fire and Police Pension review Board (PRB) was assigned to administer this Fund.

Unfortunately, the PRB has long held a mistaken interpretation of the Guarantee Fund law that has resulted in many pension funds that needed assistance being denied funding under the Guarantee Fund.  While I am confident that this was simply an oversight by the PRB and not intentional on their part, that fact still remains and it is important that this mistaken interpretation be remedied.  The mistaken interpretation of which I speak concerns an “unwritten” policy directive of the PRB that claims that any pension fund that has ever grated benefit increases to their membership in accordance with law are not eligible for Guarantee Fund assistance.

To examine the issue of that “unwritten” policy directive of the PRB, it is first necessary to briefly review the difference between a “rule” under the Administrative Procedures Act (APA) that must be followed by the PRB (§ 24-11-203(j)(2)), and a “guideline or policy directive” claimed by the PRB to be the “unwritten” policy directive in question.

A “rule” under the APA is defined as “any agency [or board] statement of general applicability and future effect that interprets law or policy or describes the practices of any agency.” (§ 25-15-202(8)(A) [Emphasis added])  Under the APA, the PRB would be required to follow certain procedures to develop a new “rule” which include, among other things, providing at least thirty (30) days notice of its intended action; that the notice be published in a newspaper for three (3) consecutive days; a public hearing be held on the matter; and that each rule be filed with the Secretary of State, the Arkansas Library, and the Bureau of Legislative Research (§ 25-15-204); none of which had to be accomplished for the “unwritten” guideline or policy directive in question because such “guideline or policy directive” is exempt from the provisions of the APA.

To use such a “policy directive” all that is required is for a Board to vote to establish one during an open meeting, which the PRB apparently did many years ago.  However, “the inquiry as to whether a statement is a rule, and subject to the rulemaking requirements [of the APA] must focus on the actual action undertaken by the directive, to see whether the policy being implemented has the effect of being a rule” and “an agency may not adopt a guideline or policy directive in lieu of a rule.”  2 Am. Jur. 2d Administrative Law, § 159.  It appears that this “policy directive” of the PRB is actually a “rule” and is therefore subject to the requirements of the APA as explained more fully below.

First, the content of A.C.A. § 24-11-209(b)(2)(B)(iv) used to establish the PRB “unwritten” policy directive must be examined.  This subsection of law states:

Any benefits, including refunds of active member contributions to terminating members, due after the date the local fund is receiving assistance from the Arkansas Fire and Police Pension Guarantee Fund, shall not exceed the minimum amount provided by law. [Emphasis added]

The PRB determination in their “unwritten” policy directive that it is necessary to deny Guarantee Fund assistance to pension plans who have granted their membership a benefit increase is based upon the language found in the above subsection of law that states, “Any benefits [paid to a pension funds membership] . . . shall not exceed the minimum amount provided by law” and the interpretation of the PRB that this subsection of law is referring only to the requirements found in §§ 24-11-422 and 24-11-818 both of which provide a voluntary retirement benefit of fifty percent (50%) of salary for police and fire members who retire after twenty (20) years of service.  To examine this interpretation in proper perspective, it is necessary to review a recent decision of the Supreme Court of Arkansas that summarized the prevailing rules of statutory interpretation:

[T]he first rule in considering the meaning and effect of a statute is to construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language.  When the language of a statute is plain and unambiguous, there is no need to resort to rules of statutory construction.  A statute is ambiguous only where it is open to two or more constructions, or where it is of such obscure or doubtful meaning that reasonable minds might disagree or be uncertain as to its meaning.  When a statute is clear, however, it is given its plain meaning, and this court will not search for legislative intent; rather, that intent must be gathered from the plain meaning of the language used.  King v. Ochoa, 373 Ark. 600, 601-602, 285 S.W.3d 602 (2008), citing Hanners v. Giant Oil Co. of Arkansas, Inc., 373 Ark. 418, 284 S.W.3d 468 (2008) (internal citations omitted).

The subsection of law in question uses the phrase “minimum amount authorized by law” and does not define or limit it in any manner because the legislative intent of this subsection is plain and unambiguous.  The phrase refers to ALL fire or police pension law and not to only particular chapters, subchapters, sections, or subsections of law.  This fact is evidenced by the requirements contained in § 24-11-423 and § 24-11-819 that provide for a benefit of sixty-five percent (65%) to be paid to disabled fire and police pension members and not the fifty percent (50%) claimed by the PRB in their “unwritten” policy directive and is also contained in subsection (a) of the very same code section which states at § 24-11-209(a):

The Arkansas Fire and Police Pension Guarantee Fund shall be created and established for the purpose of providing a state fund to provide financial assistance to certain municipal fire and police pension funds established under §§ 14-52-106, 24-11-401 — 24-11-403, 24-11-405 — 24-11-413, 24-11-416, 24-11-417, 24-11-422, 24-11-423, 24-11-425, 24-11-428 — 24-11-430, 24-11-801 — 24-11-807, 24-11-809, 24-11-810, 24-11-813 — 24-11-815, and 24-11-818 — 24-11-821.  [Emphsis added]

Thus, it is clear, the legislature intended to include the sections spelled out in the above subsection of law when it created subsection (b)(2)(B)(iv) of the same section and did not intend to limit the phrase “minimum amount provided by law” to only the fifty percent (50%) sections of pension law claimed by the PRB.  Had the legislature intended to authorize only particular chapters, subchapters, sections or subsections of law in that phrase, it could easily have done so.  See generally Gazaway v. Greene County Equalization Bd., 314 Ark. 569, 575, 864 S.W.2d 233 (1993)   Being well versed in the laws they create, it is not reasonable to conclude that the legislature had no knowledge of the other fire and police pension laws that they listed in subsection (a) and their obvious decision to not limit the provisions contained in subsection (b)(2)(B)(iv) to any particular chapters, subchapters, sections, or subsections of Arkansas Code was not error.

Thus, the decision reached by the PRB that the subsection in question referees only to the fifty-percent (50%) of salary provisions imposed under certain subsections of the fire or police pension law is unfounded as the phrase used in the subsection of law in question can only refer to the fire or police pension law in totality.  It is reasonable to conclude that statutes pertaining to the amount of pension benefits allowed under the chapter of Arkansas Code on Local Police And Fire Pension And Relief Funds are plain and unambiguous.  Therefore, when more than one statute relating to the same subject must be considered, they should be read together and in a harmonious manner, resolving apparent conflicts if possible and giving each its intended effect. See, e.g., Weiss v. Maples, 369 Ark. 282, 253 S.W.3d 907 (2007). 

Additionally, because the PRB’s “unwritten” rule or policy directive is based upon their mistaken interpretation of the above subsection of law in question, they believe such action to be prohibited by law as explained above.  However, the law found at § 24-11-102 clearly spells out, with great specificity, the procedure used to obtain a benefit increase for fire and police pension funds under Arkansas law.  While this section of law is noteworthy in that effort, the section of law above it is of greater interest to this discussion.  Section 24-11-101  Legislative Intent, states at (b):

It is not the intent of this subchapter [governing pension benefit increases] to repeal or modify any of the existing firemen’s or policemen’s pension and relief fund laws of this state, and this subchapter shall be construed to supplement and to be in addition to any of those laws in effect. [Emphasis added]

Therefore, even if the PRB could somehow maintain their flawed interpretation of § 24-11-209(b)(2)(B)(iv) as indicated above, the basic rule of statutory construction to which all other interpretive guides must yield is to give effect to the intent of the legislature. Flowers v. Norris, 347 Ark. 760, 765, 68 S.W.3d 289, 292 (2002)  Clearly, the intent of the legislature is specifically spelled out in the above quoted subsection of law and mandates that all benefit increases must be construed “to supplement and be in addition to any of those laws in effect.”  It should be noted that the “laws in effect,” in the above quoted subsection of law, included the statutes pertaining to the pension benefits paid under the voluntary and disability pensions of both the fire and police pension funds at the time of its passage by the legislature and, therefore, benefit increases must be included in addition to the other requirements of law in any reasonable analysis of the phrase “minimum amount provided by law” found in § 24-11-209(b)(2)(B)(iv).

Thus, this “unwritten” policy directive of the PRB appears to be in direct contravention of the provisions found in § 24-11-209(b)(2)(B)(iv) and § 24-11-201(b) of Arkansas law.  It must be recognized that it is well established that “an agency has no right to promulgate a rule or regulation contrary to a statute[.]”  McLane, 353 Ark. at 546, 110 S.W.3d at 256.  See also McLane Co., Inc. v. Weiss, 332 Ark. 284, 965 S.W.2d 109 (1998); Pledger v. C.B. Form Co. 316 Ark. 22, 871 S.W.2d 333 (1994) and that, generally speaking, a legislature is not permitted to authorize administrative officers to make regulations which conflict with or vary the provisions of a statute. 16 C.J.S. Constitutional Law § 144 at 470.  Therefore, this “policy directive” of the PRB is just as improper as a “policy directive” as it would be if it were considered to be a “rule” of the PRB and, for this reason, cannot stand.

Also, because this so called “policy directive” was intended to be of “binding effect in all cases” as expressed by the PRB Executive Director, does not allow any discretion by the Executive Director or the PRB as evidenced by PRB records, and even prevents the timely notification of funds who are denied such financial assistance if they have granted their membership benefit increases, this “unwritten” policy directive is clearly a “rule” of the PRB and, as such, “[has] no effect unless promulgated pursuant to the Arkansas Administrative Procedures Act.”  AGO #99-215.

For these reasons, this “unwritten” policy directive of the PRB cannot stand judicial review as either a “rule” under the APA or as a “guideline or policy directive” exempt from the APA and meets the test of the courts to overturn this rule or policy directive as “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law.”  McLane Co., Inc. v. Davis, 353 Ark. 539, 110 S.W.3d 251 (2003); Department of Human Servs. v. Berry, 297 Ark. 607, 764 S.W.2d 437 (1989).  For those reasons, this “unwritten” rule or policy directive of the PRB must be considered void and not applicable to any application for financial assistance from the Guarantee Fund as indicated by the APA in § 25-15-203(b), which states:

No agency rule, order, or decision shall be valid or effective against any person or party, nor may it be invoked by the agency for any purpose, until it has been filed and made available for public inspection as required in this subchapter.

In conclusion, I deeply regret that I was not aware of these facts in time to assist other pension funds with this problem but the time to end this mistake has come and I will be speaking to the PRB about this matter in an effort to get them to withdraw or substantially modify this “unwritten” policy directive in accordance with the information presented in this article at their next scheduled meeting held on September 1, 2010, and would greatly appreciate your help and support by the attendance at that meeting of anyone who agrees with this article.