117 Misc. 2d 178 | N.Y. Sup. Ct. | 1983
OPINION OF THE COURT
Plaintiffs move and the defendants cross-move for summary judgment (CPLR 3212) in an action where plaintiffs seek (1) to enjoin the transfer of moneys from the State Insurance Fund (SIF) to the New York State (State) General Fund pursuant to recently enacted chapters 55 and 404 of the Laws of 1982 and (2) for a declaration that such statutes are unconstitutional with respect to such transfers.
Plaintiffs are policyholders of the defendant SIF and their standing rests on such status.
Defendants are the SIF and State officials charged by law with duties relative to the administration of SIF. SIF was created by Statute to provide workers’ compensation insurance on a competitive basis with private insurers and accepts policyholders who are rejected by private insurers.
THE CHALLENGED LEGISLATION
Chapter 55 of the Laws of 1982, the omnibus budget measure for State revenues during the 1982-1983 fiscal
The transfers were to be effected on or before March 1, 1983 and expenditure of the appropriation, if any, is to be made no later than July 1 of the next fiscal year.
plaintiffs’ contentions
Constitutional violations, Federal and State, are the basis for the claimed unconstitutionality of the legislation. The arguments may be summarized as follows:
(1) The legislation which provides for the transfer of SIF assets constitutes an impairment of plaintiffs’ contractual obligations with SIF. Section 10 of article I of the United States Constitution prohibits the States from enacting any law impairing the obligations of contracts.
(2) The legislation takes private property of plaintiffs in their SIF policies and SIF assets without due process of law. This due process argument proceeds under the Fourteenth Amendment of the United States Constitution and section 6 of article I of the New York Constitution.
(3) The legislation which provides for the transfer of funds constitutes an unlawful intrusion upon the discretion of State officials. Section 3 of article V of the New York Constitution imposes limitations on the power of the legislative branch over the executive branch.
(4) The legislation, guaranteeing the solvency of SIF, constitutes a loan or gift of the State’s credit, which article VII (§ 8, subd 1) of the New York Constitution prohibits, except for certain educational or health purposes.
(6) The legislation, which contains an implicit requirement that appropriated funds are to be expended, constitutes an unlawful appropriation scheme in violation of section 7 of article VII of the New York Constitution and section 40 (subd 2, par [a]; subd 3) of the State Finance Law.
(7) The legislation, insofar as interest is lost on the transferred funds, constitutes a loss to plaintiffs and higher premiums constituting a de facto tax. This practice violates section 22 of article III of the New York Constitution which specifies the procedures for the imposition of a tax.
Defendant SIF concurs with plaintiffs’ arguments and submits two additional arguments supporting the unconstitutionality claims of plaintiffs.
(1) The transferred funds constitute “fiduciary funds” as defined in section 70 (subd 1, par [g]) of the State Finance Law.
(2) Vested property rights are present in the Workers’ Compensation Law and SIF insurance.
defendants’ contentions (except sif)
The arguments may be summarized as follows:
(1) A strong presumption of constitutionality attaches to the legislation.
(2) There is no impairment of contract rights as constitutionally interpreted.
(3) Plaintiffs have not established property rights or a taking as constitutionally interpreted.
(4) The legislation comes within the legislative province and does not constitute either a debt of the State or a loan or gift of the State’s credit.
(5) The legislation does not constitute an unlawful appropriation scheme or de facto tax.
Summary
Defendants’ cross motion is granted and plaintiffs’ motion is denied. The plaintiffs have failed to overcome the strong presumption of constitutionality requisite to a finding of unconstitutionality of the legislation. They have failed to establish property rights or a “substantial impairment” of contract rights. The rationale underlying this ruling is the finding that based upon precedent and statutory interpretation, the State Insurance Fund is a State agency whose assets are not subject to the private property rights of plaintiffs. The money transfers are purely internal and not subject to the infirmities claimed. Impairment, even if present, of the policyholders’ contracts is incidental and prospective. Plaintiffs presuppose increases in premiums and guarantees of claimed rights as policyholders which are not supported by the Workers’ Compensation Law or any law, either statutory or decisional in this jurisdiction. There is no compulsion for plaintiffs to purchase insurance from SIF in the future and the effect, if any, of the transfer is prospective. A more detailed explanation of the holding follows this synthesis.
DETAILED DECISION
This court, in its role as a separate but equal partner in our democratic process, has a defined role in reviewing the actions of the legislative branch of government. This role is limited by the “simple, but well-founded, presumption that an act of the Legislature is constitutional and this presumption can be upset only by proof persuasive beyond a reasonable doubt”. (Hotel Dorset Co. v Trust for Cultural Resources of City of N.Y., 46 NY2d 358, 370; see, also, Cook v City of Binghamton, 48 NY2d 323.) Recognition of this standard necessarily precludes an examination by this court of the judgment exercised by the Legislature which should be debated in the legislative and public arenas where input by responsible groups strive to carry out public policy goals. Appreciating this role we now turn to the judicial role, namely, an examination of the legislation as to its constitutionality.
Plaintiffs, to succeed on this motion, must first point to rights or guarantees in the policies or the Workers’ Compensation Law. The sections of the Workers’ Compensation Law relied upon by plaintiffs to establish these guarantees are not promises but simply expressions of legislative policy. This critical distinction has been expressed by the Court of Appeals. (Cook v City of Binghamton, supra; Pennsylvania R. R. Co. v State of New York, 11 NY2d 504.) The court in Cook at page 329 distinguished that case from Patterson v Carey (41 NY2d 714) where a specific prior pledge to bondholders permitting an authority to raise tolls was violated by the Legislature rescinding the toll increase. The Supreme Court has adopted the same rule of statutory construction. “[I]t is settled that, before a law may be deemed to amount to a contract between the State and a third party, the statutory language must be examined and found to be ‘plain and susceptible of no other reasonable construction’ than that a contract was intended. (Stanislaus County v. San Joaquin C. & I. Co., 192 U. S. 201, 208)” cited with approval in Pennsylvania R.R. Co. v State of New York (supra, p 511).
There is no promise in either the Workers’ Compensation Law or the insurance policies which has been shown to have been violated.
Assuming, arguendo, that plaintiffs establish the requisite promises, they would then have to prove a “substantial impairment” of the contract. (Allied Structural Steel Co. v Spannaus, supra.) Incidental effect on a contract is not equivalent to an impairment of contract in the constitu
The second argument raised by plaintiffs is that the legislation effected a taking of property without due process of law. Plaintiffs claim a property interest in SIF assets and contractual rights to certain insurance rates and dividends. Plaintiffs must prove a right or interest in this property. The requisite showing is stated in Board of Regents v Roth (408 US 564, 577) where the court said:
“Certain attributes of ‘property’ interests protected by procedural due process emerge from these decisions. To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined * * *
“Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that
Plaintiffs claim a property right in the assets of SIF contending that it is not a State agency and its assets are “fiduciary funds”. SIF is a State agency whose moneys are State moneys for which the State is liable and which give rise to no constitutionally protected property interest of plaintiffs. Among the characteristics of SIF leading to this conclusion are:
(a) The selection of directors by the Governor with the - advise and consent of the Senate (Workers’ Compensation Law, § 77);
(b) Legislative selection of State officials as treasurer and investment adviser (Workers’ Compensation Law, §§ 85, 87);
(c) Employee selection under civil service rules (Workers’ Compensation Law, § 82);
(d) Deposit of excess moneys as State funds (Workers’ Compensation Law, § 85);
(e) Legislative approved budget and expenditure preaudit by State Comptroller (Workers’ Compensation Law,
§ 88; L 1981, ch 1056; L 1982, ch 50), and
(f) Legislatively mandated investments (Workers’ Compensation Law, §§ 87-a — 87-c).
Decisional law has established that SIF fund moneys are State moneys. (Matter of State Ins. Fund v Boyland, 282 App Div 516, affd no opn 309 NY 1009, and Matter of Cahill v Tremaine, 245 App Div 773, affd no opn 269 NY 573.)
Reliance on section 70 of the State Finance Law to establish a property right in the assets of SIF is misplaced. This section, entitled Accounting, Financial Reporting and Budget Accountability Reform Act of 1981 (Reform Act) (L 1981, ch 405), created seven categories of State funds ranging from “general funds” to “fiduciary funds”. This law does not create any substantive rights in plaintiffs and its purpose is to establish guidelines for good accounting procedure. The section gives the State Comptroller the
Plaintiffs alleged “entitlement” cannot rest on contractual rights since it has already been established that the plaintiffs have none, and the same reasoning of an “incidental” effect on the policyholders is applicable. (Tron v Condello, 427 F Supp 1175, supra; Withers v Teachers’ Retirement System of City of N. Y., 447 F Supp 1248, supra.) A mere diminution in value does not equate with a taking in a constitutional sense. (Andrus v Allard, 444 US 51.)
Plaintiffs and SIF have failed to establish a “legitimate claim of entitlement” to the property or a taking which rises to the limit of a constitutional deprivation.
The third argument of plaintiffs alleges legislative intrusion upon the discretionary powers of officers of the executive branch, relying on the general rule enunciated in Saxton v Carey (44 NY2d 545, 549) that each branch of government is to be free from interference by either of the other two branches. The powers of the Legislature over the executive branch are prescribed in section 3 of article V of the New York Constitution.
Plaintiffs’ fourth argument is that the two statutes, chapters 55 and 404 of the Laws of 1982, violate article VII (§ 8, subd 1) of the New York Constitution which prohibits a loan or gift of the State’s credit. This contention is refuted by the language of subdivision 1 of section 8 itself which limits its application to aiding “any individual, or public or private corporation or association, or private undertaking”, a definition which does not extend to SIF, which is a State agency rather than a corporate entity. (Board of Supervisors of County of Cayuga v State of New York, 153 NY 279.)
Plaintiffs’ fifth argument urges that chapter 55 creates a debt from the State to SIF in violation of sections 9 and 11 of article VII of the New York Constitution, which refer to short-term and long-term debts, respectively. Plaintiffs describe the interplay in subdivision 2 of section 92 of chapter 55 which takes $190 million from SIF and the several parts of section 86 which establish an appropriation mechanism, require payment to SIF and deem any appropriation an admitted asset of SIF. Plaintiffs charac-.
Plaintiffs’ sixth argument is that an appropriation scheme prohibited by section 7 of article VII of the New York Constitution has been created insofar as it does not require expenditure of the appropriation within the two-year constitutional time limitation. Plaintiffs rely on Matter of County of Oneida v Berle (49 NY2d 515), which is distinguishable since that court held that executive impoundment of municipal sewage treatment funds was not necessitated by the Governor’s duty to balance the budget, which extended only to proposing one and not to maintaining it throughout the year. The present statutory scheme does not involve impoundment but instead provides for an expenditure within the two-year limitation measured from the time of appropriation as set out in section 7 of article VII.
The final argument of plaintiffs is that the transfer of $190 million from SIF resulted in a loss of investment income and a consequent de facto tax on employer-insureds in violation of section 22 of article III of the New York
CONCLUSION
The court denies plaintiffs’ motion for summary judgment and grants defendants’ cross motion for summary judgment declaring that the provisions of chapters 55 and 404 of the Laws of 1982 considered herein are constitutionally valid.