News Manager

Court of Appeals Hears Arguments on 4% Pension Contribution

The lawsuit was brought up last year, and the Ingham County Circuit Court ruled the PA 264 of 2011 unconstitutional because the legislature didn't have the authority to overstep the power of Civil Service Commission (CSC) (See "Unions Win Ruling Against Non CSC-Approved 4% Contribution," 9/28/12).
To determine whether the legislature can bypass the CSC, Attorney General special assistant Larry BRYA said one needs to look at the 1963 Constitution, and even earlier, the PA 240 of 1940 -- the State Employees' Retirement Act, which gives the commission the authority to fix the rates of compensation for state employees and regulate conditions of employment.
"If the ratifiers of 1963 would have intended to eliminate the legislature's authority to continue to amend PA 240, they would put some language in the 1963 constitution, but they didn't," he said. "In fact, they increased the authority of legislature by giving it the authority by a two thirds vote to rescind any CSC increase of compensation."
But the COA judges challenged him on how one could interpret the perception of past lawmakers.
One main focus of the argument is whether pension is part of the compensation. Brya argued the constitution didn't include that provision.
The constitution "gives the CSC authority over compensation for employees, but there was nothing about pension for retirees," he said.
But Brandon W. ZUK, lawyer for the Coalition of State Employee Unions, argued the pension is part of compensation and the change would affect the condition of employment, which should be determined by the CSC.
"How do you argue that one day, when I come in, I have four percent taken out of my pay which hadn't been taken out before, just because I voluntarily choose to stay in the program?" he said. "This is a lot of change of my condition."
Judges Cynthia Diane STEPHENS and Elizabeth L. GLEICHER, asked if PA 264 would affect the rate of compensation.
Brya said PA 264 didn't change anyone's pension, because it's a voluntary choice for employees -- to contribute four percent or to switch to a 401(k).
"It's much like employees today voluntarily decrease their compensations to purchase their health insurances and parking spots," he said.
In a similar 2011 case regarding a required 3 percent contribution for retiree health care benefits from school employees, the Michigan Supreme Court (MSC) shot down the legislation as unconstitutional (See "Supremes Let Stand Ruling On 3% Employee Deduction," 12/14/11).
Brya said today's case was a different situation because the 2011 case was over a mandated law. Under PA 264, employees have a choice between contributing and switching to a 401(k).
He also pointed out in the previous case, the CSC didn't reject that law, and he cited other cases in which the commission has never challenged laws in relation to employee benefits.
For those cases, Gleicher asked if that was because the commission thought it was a good idea, regardless of constitutional violation.
"If legislature says all judges can have free parking and free breakfast, are we gonna challenge that, even if it's obviously an intrusion of our power?"
The court didn't issue an opinion today and Chief Judge William B. MURPHY said they would review the case carefully.