AFT MICHIGAN V STATE OF MICHIGAN (Concurring Opinion)

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STATE OF MICHIGAN COURT OF APPEALS AFT MICHIGAN, AFT, AFL-CIO, ALPENAMONTMORENCY-ALCONA ISD PARAPROFESSIONALS/TEACHERS, ARENAC EASTERN FEDERATION, BAY ARENAC SKILLS CENTER FEDERATION, BROWN CITY EMPLOYEES FEDERATION, BROWN CITY FEDERATION OF TEACHERS, CHEBOYGAN OTSEGO PRESQUE ISLE INTERMEDIATE PARAPROFESSIONALS AND BUS PERSONNEL, CHEBOYGAN OTSEGO PRESQUE ISLE ISD TEACHERS, CHEBOYGAN OTSEGO PRESQUE ISLE SUPPORT PERSONNEL, CHESANING UNION AUXILIARY SERVICE EMPLOYEES, CLAREGLADWIN ISD FEDERATION, CRAWFORD AU SABLE BUS DRIVERS FEDERATION, CRAWFORD AU SABLE CUSTODIANS/SECRETARIAL FEDERATION, CRAWFORD AU SABLE SUPPORT STAFF FEDERATION, CRAWFORD AU SABLE FEDERATION OF TEACHERS, CRESTWOOD FEDERATION OF TEACHERS, DEARBORN FEDERATION OF SCHOOL EMPLOYEES, DEARBORN FEDERATION OF TEACHERS, DETROIT ASSOCIATION OF EDUCATIONAL OFFICE EMPLOYEES, DETROIT FEDERATION OF PARAPROFESSIONALS, DETROIT FEDERATION OF TEACHERS, EAST DETROIT FEDERATION OF TEACHERS, ECORSE FEDERATION OF TEACHERS, FAIRVIEW FEDERATION OF TEACHERS, GLEN LAKE FEDERATION OF TEACHERS, HALE FEDERATION OF TEACHERS, HAMTRAMCK FEDERATION OF TEACHERS, HEMLOCK FEDERATION OF TEACHERS, HEMLOCK AUXILIARY SERVICE EMPLOYEES, HENRY FORD COMMUNITY COLLEGE ADJUNCT FACULTY ORGANIZATION, HENRY FORD COMMUNITY COLLEGE FEDERATION OF -1- FOR PUBLICATION January 14, 2014 TEACHERS, HIGHLAND PARK FEDERATION OF PARAPROFESSIONALS, HIGHLAND PART FEDERATION OF TEACHERS, IMLAY CITY FEDERATION OF TEACHERS, INKSTER FEDERATION OF TEACHERS, IOSCO ISD INTERMEDIATE FEDERATION OF AUXILIARY EMPLOYEES, IOSCO FEDERATION OF TEACHERS, KINGSLEY FEDERATION OF TEACHERS, KIRTLAND COMMUNITY COLLEGE FEDERATION OF TEACHERS, LAKE CITY SUPPORT STAFF FEDERATION, LAKE CITY TEACHERS AND PARAPROFESSIONALS FEDERATION, LAKE SHORE FEDERATION OF EDUCATIONAL SECRETARIES, LAKE SHORE FEDERATION SUPPORT STAFF, LAKE SHORE FEDERATION OF TEACHERS, LAMPHERE FEDERATION OF PARAPROFESSIONALS, LAMPHERE FEDERATION OF TEACHERS, LANSING COMMUNITY COLLEGE ADMINISTRATIVE ASSOCIATION, LES CHENEAUX FEDERATION OF SUPPORT STAFF, LES CHENEAUX FEDERATION OF TEACHERS, MACOMB INTERMEDIATE FEDERATION OF PARAPROFESSIONALS, MACOMB INTERMEDIATE FEDERATION OF TEACHERS, MELVINDALE/NAP PARAPROFESSIONALS, MELVINDALE/NAP FEDERATION OF TEACHERS, MIDLAND FEDERATION OF PARAPROFESSIONALS, MIDLAND ISD FEDERATION OF PARAPROFESSIONALS, MIDLAND ISD FEDERATION OF TEACHERS, NORTHVILLE FEDERATION OF PARAPROFESSIONALS, ONAWAY FEDERATION OF SCHOOL RELATED PERSONNEL, ONAWAY FEDERATION OF TEACHERS, PLYMOUTHCANTON COMMUNITY SCHOOLS SECRETARIAL UNIT, PLYMOUTH-CANTON FEDERATION OF PLANT ENGINEERS, ROMULUS FEDERATION OF PARAPROFESSIONALS, ROSEVILLE FEDERATION OF TEACHERS, RUDYARD FEDERATION OF AIDES, RUDYARD FEDERATION OF TEACHERS, SAGINAW ISD FEDERATION OF TEACHERS, TAWAS AREA -2- FEDERATION OF TEACHERS, TAYLOR FEDERATION OF TEACHERS, UTICA FEDERATION OF TEACHERS, VAN DYKE EDUCATIONAL ASSISTANTS FEDERATION, VAN DYKE PROFESSIONAL PERSONNEL, WARREN WOODS FEDERATION OF PARAPROFESSIONALS, WASHTENAW INTERMEDIATE SCHOOL EMPLOYEES FEDERATION, WATERFORD ASSOCIATION OF SUPPORT PERSONNEL, WAYNE COUNTY COMMUNITY COLLEGE PROFESSIONAL & ADMINISTRATIVE ASSOC, WAYNE COUNTY COMMUNITY COLLEGE FEDERATION OF TEACHERS, WAYNE COUNTY RESA SALARIED STAFF, WEXFORD-MISSAUKEE ISD FEDERATION OF TEACHERS, WHITEFISH TOWNSHIP FEDERATION OF TEACHERS, Plaintiffs-Appellants, and MICHIGAN EDUCATION ASSOCIATION, Plaintiff, v No. 313960 Court of Claims LC No. 12-000104-MM STATE OF MICHIGAN, Defendant-Appellee, and STATE TREASURER, JOHN E. DIXON, PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM, PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM BOARD, PHIL STODDARD, DEPARTMENT OF TECHNOLOGY MANAGEMENT AND BUDGET, and TRUST FOR PUBLIC EMPLOYEE RETIREMENT HEALTH CARE FUND, Defendants. -3- MICHIGAN EDUCATION ASSOCIATION, Plaintiff-Appellant, and AFT MICHIGAN, AFT, AFL-CIO, ALPENAMONTMORENCY-ALCONA ISD PARAPROFESSIONALS/TEACHERS, ARENAC EASTERN FEDERATION, BAY ARENAC SKILLS CENTER FEDERATION, BROWN CITY EMPLOYEES FEDERATION, BROWN CITY FEDERATION OF TEACHERS, CHEBOYGAN OTSEGO PRESQUE ISLE INTERMEDIATE PARAPROFESSIONALS AND BUS PERSONNEL, CHEBOYGAN OTSEGO PRESQUE ISLE ISD TEACHERS, CHEBOYGAN OTSEGO PRESQUE ISLE SUPPORT PERSONNEL, CHESANING UNION AUXILIARY SERVICE EMPLOYEES, CLAREGLADWIN ISD FEDERATION, CRAWFORD AU SABLE BUS DRIVERS FEDERATION, CRAWFORD AU SABLE CUSTODIANS/SECRETARIAL FEDERATION, CRAWFORD AU SABLE SUPPORT STAFF FEDERATION, CRAWFORD AU SABLE FEDERATION OF TEACHERS, CRESTWOOD FEDERATION OF TEACHERS, DEARBORN FEDERATION OF SCHOOL EMPLOYEES, DEARBORN FEDERATION OF TEACHERS, DETROIT ASSOCIATION OF EDUCATIONAL OFFICE EMPLOYEES, DETROIT FEDERATION OF PARAPROFESSIONALS, DETROIT FEDERATION OF TEACHERS, EAST DETROIT FEDERATION OF TEACHERS, ECORSE FEDERATION OF TEACHERS, FAIRVIEW FEDERATION OF TEACHERS, GLEN LAKE FEDERATION OF TEACHERS, HALE FEDERATION OF TEACHERS, HAMTRAMCK FEDERATION OF TEACHERS, HEMLOCK FEDERATION OF TEACHERS, HEMLOCK AUXILIARY SERVICE EMPLOYEES, HENRY FORD COMMUNITY COLLEGE ADJUNCT FACULTY ORGANIZATION, HENRY FORD COMMUNITY COLLEGE FEDERATION OF TEACHERS, HIGHLAND PARK FEDERATION OF PARAPROFESSIONALS, HIGHLAND PART -4- FEDERATION OF TEACHERS, IMLAY CITY FEDERATION OF TEACHERS, INKSTER FEDERATION OF TEACHERS, IOSCO ISD INTERMEDIATE FEDERATION OF AUXILIARY EMPLOYEES, IOSCO FEDERATION OF TEACHERS, KINGSLEY FEDERATION OF TEACHERS, KIRTLAND COMMUNITY COLLEGE FEDERATION OF TEACHERS, LAKE CITY SUPPORT STAFF FEDERATION, LAKE CITY TEACHERS AND PARAPROFESSIONALS FEDERATION, LAKE SHORE FEDERATION OF EDUCATIONAL SECRETARIES, LAKE SHORE FEDERATION SUPPORT STAFF, LAKE SHORE FEDERATION OF TEACHERS, LAMPHERE FEDERATION OF PARAPROFESSIONALS, LAMPHERE FEDERATION OF TEACHERS, LANSING COMMUNITY COLLEGE ADMINISTRATIVE ASSOCIATION, LES CHENEAUX FEDERATION OF SUPPORT STAFF, LES CHENEAUX FEDERATION OF TEACHERS, MACOMB INTERMEDIATE FEDERATION OF PARAPROFESSIONALS, MACOMB INTERMEDIATE FEDERATION OF TEACHERS, MELVINDALE/NAP PARAPROFESSIONALS, MELVINDALE/NAP FEDERATION OF TEACHERS, MIDLAND FEDERATION OF PARAPROFESSIONALS, MIDLAND ISD FEDERATION OF PARAPROFESSIONALS, MIDLAND ISD FEDERATION OF TEACHERS, NORTHVILLE FEDERATION OF PARAPROFESSIONALS, ONAWAY FEDERATION OF SCHOOL RELATED PERSONNEL, ONAWAY FEDERATION OF TEACHERS, PLYMOUTHCANTON COMMUNITY SCHOOLS SECRETARIAL UNIT, PLYMOUTH-CANTON FEDERATION OF PLANT ENGINEERS, ROMULUS FEDERATION OF PARAPROFESSIONALS, ROSEVILLE FEDERATION OF TEACHERS, RUDYARD FEDERATION OF AIDES, RUDYARD FEDERATION OF TEACHERS, SAGINAW ISD FEDERATION OF TEACHERS, TAWAS AREA FEDERATION OF TEACHERS, TAYLOR FEDERATION OF TEACHERS, UTICA -5- FEDERATION OF TEACHERS, VAN DYKE EDUCATIONAL ASSISTANTS FEDERATION, VAN DYKE PROFESSIONAL PERSONNEL, WARREN WOODS FEDERATION OF PARAPROFESSIONALS, WASHTENAW INTERMEDIATE SCHOOL EMPLOYEES FEDERATION, WATERFORD ASSOCIATION OF SUPPORT PERSONNEL, WAYNE COUNTY COMMUNITY COLLEGE PROFESSIONAL & ADMINISTRATIVE ASSOC, WAYNE COUNTY COMMUNITY COLLEGE FEDERATION OF TEACHERS, WAYNE COUNTY RESA SALARIED STAFF, WEXFORD-MISSAUKEE ISD FEDERATION OF TEACHERS, WHITEFISH TOWNSHIP FEDERATION OF TEACHERS, Plaintiffs, v STATE OF MICHIGAN, STATE TREASURER, JOHN E. DIXON, PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM, PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM BOARD, PHIL STODDARD, DEPARTMENT OF TECHNOLOGY MANAGEMENT AND BUDGET, and TRUST FOR PUBLIC EMPLOYEE RETIREMENT HEALTH CARE FUND, No. 314065 Court of Claims LC No. 12-000104-MM Defendants-Appellees. Before: SAAD, P.J., and K. F. KELLY and GLEICHER, JJ. GLEICHER, J. (concurring). I concur with the result reached by the majority. I write separately to clarify my reasons for doing so. In broad outline, plaintiffs have raised constitutional challenges to two portions of 2012 PA 300. The first involves pension benefits. Pursuant to the act, members of the Michigan Public School Employees Retirement System (MPSERS) must increase their payroll deductions to maintain the 1.5 percent pension factor that formerly applied to all public school employee pensions. And under PA 300, MPSERS members must pay an increased healthcare premium -6- equivalent to 3 percent of their compensation or instead elect to join a Tier 2 defined contribution benefit plan. I concur with the majority s resolution of plaintiffs healthcare benefit claim. As the majority explains, the Supreme Court concluded in Studier v Michigan Pub Sch Employees Retirement Bd, 472 Mich 642; 698 NW2d 350 (2005), that public school employees have no constitutional entitlement to healthcare benefits. The Studier Court held, the Legislature intended for payment of health care benefits by the MPSERS under MCL 38.1391(1) to simply be a fringe benefit to which public school employees would never have a contractual entitlement. Id. at 667-668. Healthcare benefits do not even qualify as financial benefits protected under Const 1963, art 9 § 24, the Studier Court further held, because they are not in the form of monetary payments. Id. at 655. As Justice Cavanagh articulated in dissent, the Studier majority found it constitutionally acceptable for our State to promise healthcare benefits to its teachers, and to break this promise at will. Id. at 679 (CAVANAGH, J., dissenting). Nevertheless, in AFT Michigan v Michigan, 297 Mich App 597, 604; 825 NW2d 595 (2012), this Court struck down on constitutional grounds a statutory modification of plaintiffs healthcare benefit formula. The 2010 act required that public school districts . . . withhold three percent of each employee s wages and remit the amount to the MPSERS as employer contributions to the trust that funds retiree health care benefits. Id. The AFT Michigan Court held that the law impaired contractual rights and allowed the government to take private property without compensation. Id. The Legislature made virtually no change to the language struck down in AFT Michigan, but added a provision § 91a(5) permitting members to avoid the three-percent wage withholding by joining a Tier 2 plan. The majority reasons that the voluntary nature of 2012 PA 300 allowing public school employees to opt in or opt out of the legislative scheme cured the constitutional infirmities discerned by the AFT Michigan Court. Plaintiffs fail to persuasively counter this logic. Plaintiff Michigan Education Association (MEA) argues that the act impose[s] a significant contribution requirement on all MPSERS members, including those who have been members of the retirement system for many years and whose rights to retiree health premium payments have vested. The MEA concedes, however, that Studier negates this argument. On the other hand, I agree with plaintiffs that pension benefits are clothed with constitutional protection from impairment or diminishment. Const 1963, art 9, § 24 serves to ensure that public pensions be treated as contractual obligations that, once earned, could not be diminished. In re Request for Advisory Opinion Regarding Constitutionality of 2011 PA 38, 490 Mich 295, 311; 806 NW2d 683 (2011). See also Kosa v Treasurer of State of Mich, 408 Mich 356, 360; 292 NW2d 452 (1980) ( To gain protection of their pension rights, Michigan teachers effectively lobbied for a constitutional amendment granting contractual status to retirement benefits. ). As the Supreme Court explained in Advisory Opinion re Constitutionality of 1972 PA 258, 389 Mich 659, 662-663; 209 NW2d 200 (1973), it was the intention of the framers of the constitution to make the accrued financial benefits of public pensions contractual rights. -7- Plaintiffs contend that the enforceable contract includes the 1.5-percent multiplier formula in effect by statute since 1945. However, no evidence supports that 2012 PA 300 impairs or reduces the benefits earned pursuant to the 1.5-percent multiplier that accrued before 2012 PA 300 took effect. Further, in Advisory Opinion re Constitutionality of 1972 PA 258, 389 Mich at 663 (emphasis added), the Supreme Court observed that under Const 1963, art 9, § 24, the Legislature cannot diminish or impair accrued financial benefits, but we think it may properly attach new conditions for earning financial benefits which have not yet accrued. Plaintiffs have failed to distinguish this language from the case at bar. Although plaintiffs have pointed to caselaw from other jurisdictions that reached a result contrary to the majority opinion, in most of those cases the courts found that statutory language created binding contracts. To date, our Supreme Court has not found any binding contractual obligations residing within legislative enactments. To the contrary, in Studier, 472 Mich at 661, the Supreme Court emphasized the strong presumption that statutes do not create contractual rights. Finally, plaintiffs contend that 2012 PA 300 violates the second sentence of art 9, § 24, which states: Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities. MEA s brief contends that the act uses current service contributions levied against the members to finance the unfunded accrued liabilities of MPSERS, i.e., the $15.6 billion of the State s unfunded accrued liability that accrued to MPSERS members in the past. 1 According to plaintiffs, 2012 PA 300 is an attempt to make the members of MPSERS pay for a large portion of the pension benefits which had already accrued to them prior to the act s passage. The record neither supports nor refutes that at the time 2012 PA 300 was enacted, the MPSERS balance sheet included unfunded accrued liabilities that will be paid through a mechanism created by the act. Nor does the record demonstrate whether the Legislature, or MPSERS, has applied current member contributions against unfunded accrued liabilities. If 2012 PA 300 has resulted in the collection of money used to meet pre-2012 unfunded accrued liabilities through a borrowing scheme similar to that condemned in Kosa, 408 Mich 356, I would agree that as applied, the act raises constitutional concerns. In my view, this issue should be addressed with the benefit of a full evidentiary record in a different case. Because the evidence necessary to evaluate this issue is not before this Court, I concur with the majority that based on the challenges raised here, 2012 PA 300 passes constitutional muster. /s/ Elizabeth L. Gleicher 1 Earlier in the same brief, the MEA proclaims: There is no financial crisis regarding MPSERS. It is and has been paying for all pension benefits that come due. The Michigan Legislature has never declared that there was a financial crisis regarding MPSERS. MPSERS has sufficient money to meet its financial commitments to its retirees. -8-