3% Retirement Health Care Ruled Unconstitutional

3% Retirement Health Care Ruled Unconstitutional
A new state law requiring state employees to give 3 percent of their salaries to cover their retiree health care expenses is unconstitutional because it didn't go though the proper Civil Service Commission (CSC) channels, an Ingham County judge has ruled.

Copies of the Judge William COLLETTE decision were snail-mailed Tuesday and received by labor and state attorneys today. He ruled that the Legislature side-stepped the well-established constitutional rules in dealing with state employee compensation when they created the 3 percent mandate as part of last year's early retirement plan.

Joy YEAROUT of the state Attorney General's office said the staff is still reviewing the decision, but labor union attorneys said that the A.G. has made it clear in earlier hearings that they plan to take the case to the Court of Appeals as soon as possible.

Because of this, attorneys on the labor side are acting quickly. They will ask Collette as soon as Friday to give back to state employees the 3 percent that has been collecting in an escrow account and end further automatic withdrawals for retiree health care expenses.

"We believe this was an overreach by the Legislature," said Phil THOMPSON, SEIU 517M executive vice president. "Legislators, particularly the new lawmakers, need to understand there is a clear Constitutional role for the Civil Service Commission and they need to take it seriously."

The Constitution states that the CSC accepts or rejects employee contracts that emerge from collective bargain negotiations with the State Employer and the state's six employee labor unions. The Governor must bake these recommendations into his or her budget and the Legislature has 60 days after that to reject it with two-thirds support in the House and Senate.

In passing a mandatory 3 percent contribution, Collette ruled that the Legislature went around the Constitution by, essentially, redirecting the 3 percent pay increase the unions collectively bargained for and received in Fiscal Year (FY) 2011.

"(T)he Legislature could not get two thirds of each house to disapprove of Plaintiff's 3 percent increase so it decided that it would wait and pass a bill by simple majority that, in effect, eliminated the wage increase," Collette ruled. "If this were allowed, it would basically read the two thirds voting requirement out of the constitution."

While Collette's decision was not unexpected among Capitol observers, House Speaker Jase BOLGER (R-Marshall) said he still found it "unfortunate."

He said asking state employees to help fund their retiree healthcare is not only constitutional, it's the right thing to do.

"The taxpayers of Michigan cannot afford to be as generous as they once were with public employee benefits and, therefore, those employees must help with the increasing financial burdens facing Michigan," Bolger said.

Today's decision did not impact a separate suit involving school employees who were also asked to make 3 percent contributions to cover their future retirement health care costs. That case remains in the Ingham County Circuit Court.

It's expected this case will climb to the state Supreme Court, where Republican-affiliated justices have a 4-3 majority, a perceived advantage for the state of Michigan and not the 51,000 state employees impacted by the decision.

All told, state employees are estimated to pay $75 million a year for three years under this new law. While the 3 percent contribution is slated to sunset on Sept. 30, 2013, Republican House members are already pushing legislation to extend it into perpetuity.

Collette's decision in the AFSCME Council 25, et al v. Michigan State Employees Retirement System can be read here.