Education Association, the state's largest public school employee union, is
suing to have the Michigan Legislature's recent revision of school employee
retirement benefits declared unconstitutional. The suit should have little
chance, given decades of court opinion and the failure of a similar MEA lawsuit
in 2005. The union's unwillingness to recognize the weakness of its case
suggests it does not properly appreciate the burden its members' generous
retirement benefits place on state taxpayers.
The MEA is objecting to this provision at the very time state government faces spending problems, a listless economy, high unemployment and swelling health care costs.
at issue, Public Act 75 of 2010, covers a range of topics, including an early
retirement incentive for public school employees and a requirement that they
contribute 3 percent of their base salaries to help finance school retiree
medical benefits. These health benefits can pay up to 100 percent of medical
and 90 percent of dental, hearing and vision insurance premiums for school
retirees and slightly less for their dependents.
This is a
generous retirement benefit. Nevertheless, the MEA alleges that requiring the
new contribution violates public school employees' "contractual rights" to
their retiree medical benefits under the Michigan and U.S. constitutions.
It's true that
both the Michigan and federal constitutions prevent the impairment of
contracts. With public employees, however, the pivotal question is whether
legislation related to their compensation actually represents a contract.
To deal with
this question, courts in the late 19th and early 20th centuries developed a
constitutional doctrine stating that absent an unmistakable intent to be
contractually binding, a law passed by a legislature only sets a policy. As the
U.S. Supreme Court explained: "This well-established presumption is grounded in
the elementary proposition that the principal function of a legislature is not
to make contracts, but to make laws that establish the policy of the state.
Policies, unlike contracts, are inherently subject to revision and repeal. ..."
The delegates at
Michigan's 1963 constitutional convention were aware of this distinction when
they inserted a constitutional provision stating, "The accrued financial
benefits of each pension plan and retirement system of the state and its
political subdivisions shall be a contractual obligation thereof which shall
not be diminished or impaired thereby." This passage is an unmistakable
commitment to a contract, and it's a key element in the MEA's case.
But just five
years ago, following an earlier MEA lawsuit alleging that an increase in
retiree health co-pay was unconstitutional, the Michigan Supreme Court analyzed
the state constitution's pension provision to determine whether it covered
retiree health benefits. In a 5-2 vote, the court said no. The justices
clarified that while cash pensions are typically considered financial benefits,
health benefits are not, since they don't "accrue" like a pension. Thus, the
court concluded the Legislature could legally reduce state or local government
retirees' health benefits.
should hold in the current lawsuit. In the disputed law, the Legislature
explicitly stated that it was not making a binding commitment to the provision
of retiree health benefits, although it appears to have made a clear contractual
promise to spend the 3 percent employee contributions it receives on school
retiree health care. Ironically, then, the MEA is suing to remove the one
provision of the law that may really place the state under a contractual
retiree health care obligation (albeit limited).
This 3 percent
provision asks public school employees to contribute part of the cost of their
generous retiree health care benefits — benefits that most Michigan taxpayers
do not have themselves. The MEA is objecting to this provision at the very time
state government faces spending problems, a listless economy, high unemployment
and swelling health care costs.
In fact, aside
from the money allocated to this 3 percent fund, the Legislature could legally
reduce retiree health benefits for public school employees to zero — and not
just for future employees, but for current ones as well. If the MEA cannot
recognize the burden that financing its members' expensive benefits places on
state taxpayers, its members may be confronting much harder sacrifices in the
years to come.
Patrick J. Wright
is director of the Mackinac Center Legal Foundation at the Mackinac Center for
Public Policy, a research and educational institute headquartered in Midland,
Mich. Permission to reprint in
whole or in part is hereby granted, provided that the author and the Center are