LANSING – Michigan employees scored a victory Thursday against the move made last year to require them to contribute 3 percent of their salary toward their retirement health care coverage when a judge ruled the law “clearly unconstitutional,” but both sides began preparing for an appeal.
The decision, issued by Ingham Circuit Judge William Collette, will have no impact on a separate lawsuit filed by public school employees against the state for a similar 3 percent mandatory contribution imposed by a companion law enacted last year.
That’s because Collette ruled the law affecting state employees unconstitutional on the basis that it violated Article V, Section 11, that gives the Civil Service Commission the power to determine classified employees’ compensation. The commission does not regulate public school employee pay.
“Allowing the legislature to do this would basically allow it to completely usurp the CSC’s constitutionally given authority to ‘fix rates of compensation,'” Collette wrote in his ruling, quoting the Constitution. “If Defendant’s argument were accepted any time the legislature needed money to fund current retirees, it could simply confiscate a wage increase granted by the CSC without having the required two-thirds vote of each house constitutionally required.”
The administration of Governor Rick Snyder indicated it would appeal. And the case almost surely will eventually end up in the hands of the Supreme Court.
“We’re reviewing the opinion,” said Kurt Weiss, spokesperson for the Department of Technology, Management and Budget. “We anticipate the filing of an appeal, and we’re going to continue to look for ways to reform the unsustainable employee benefits currently facing the state.”
Weiss said the Snyder administration, which is seeking $180 million in concessions from state employees for the 2011-12 fiscal year, will need to work with state employee unions and their members on how to handle “this incredible liability that’s facing the state.”
Collette gave no indication of what should happen to the $24 million being held in escrow from the contributions state employees have made so far. But all sides expected that contributions would continue while the legal process plays out. Weiss said the state would not make any changes to employees’ payroll as a result of the decision.
Unions also accused the state of breach of contract in the case, but Collette said all other legal issues became moot due to the constitutional violation of the Civil Service Commission’s authority.
State employee unions hailed the decision.
“I think it’s imperative that we recognize the violation of the Constitution,” said Ken Moore, president of the Michigan State Employees Association, which represents about 5,000 employees handling safety and regulatory issues. “The fact of the matter is contributing individuals, state employees, are not necessarily guaranteed that they’ll reap a benefit from the fund that’s being built.”
Phil Thompson, executive vice president of the Service Employees International Union 517M, said the decision affirmed the Civil Service Commission’s authority.
“We applaud the court today for upholding Michigan’s Constitution and putting the law ahead of politics,” he said in a statement. “Michigan’s hardworking state employees have led by example and made difficult sacrifices time and time again to reform government and save tax dollars in these tough economic times. We look forward to working with the Legislature and the Snyder administration to reform government, so everyone – including CEOs and powerful special interests – shares in the sacrifice, and not just state employees.”
Cindy Estrada, vice president of United Auto Workers and director of UAW’s public sector and health care servicing department, said in a statement that the union hopes the state will respect the decision and not appeal.
“Judge Collette’s decision upholds what we have been saying all along: That the Michigan Legislature overstepped its authority during last year’s budget process and violated the Michigan Constitution when it decided that state civil servants should have 3 percent of their pay deducted to fund health care for current state retirees,” she said. “Only the Michigan Civil Service Commission has jurisdiction over state worker compensation. We filed the lawsuit to protect a bargaining system that has worked in Michigan state government for the past 30 years.”
The judge’s ruling was not unexpected, but unfortunate, House Speaker Jase Bolger (R-Marshall) said Thursday.
Bolger said he supports the state appealing the court decision.
“I think it’s very clear the Legislature has purview over retirement issues and that is what this is,” he said, adding that in time of fiscal constraint on the state it’s proper for employees to be asked to give this concession.
The commission last month had found that the payroll deduction, as it applies to non-union employees, was a violation of its authority and ordered the state to stop withholding the 3 percent. The department said it would not abide by the commission decision until the court actions on the issue were completed.
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