Michigan Gov. Rick Snyder (R) said his administration intends to appeal a Michigan Court of Appeals ruling [AFT Mich. v. State, 2012 Mich. App. LEXIS 1632 (Mich. Ct. App. Aug. 16, 2012) [enhanced version available to lexis.com subscribers]] that declared unconstitutional a 2010 law requiring school employees to pay 3 percent toward their health care in retirement. The ruling, which said the law impaired contracts and took private property without compensation or due process, will now be considered by the Wolverine State Supreme Court.
If upheld, the ruling could force the state to refund $508 million currently being held in escrow.
The governor announced the appeal one day after signing legislation (SB 1040) the Detroit Free Press reports will shave approximately $15 billion from the Michigan Public School Employees Retirement System's (MPSERS) roughly $45 billion in unfunded liabilities. The new law gives most school employees the option of increasing their pension contributions or receiving reduced pensions, requires most employees to pay 20 percent of the cost of their health insurance and eliminates retiree health care coverage for school employees hired after Aug. 1, moving them instead to a 401(k)-style health care account.
Gov. Snyder said the new legislation puts the state on firmer legal footing because it specifies that the money will go toward paying future retiree health care costs. He also said the current system would have collapsed without substantive changes. The bill is expected to save schools about $970 million over the next few years.
"It's not just about the short term, it's about the long term," he said.
The new law, however, has already been partially blocked. Just one day after Snyder signed the bill, Ingham County Circuit Judge Rosemarie Aquilina granted a request by the American Federation of Teachers Michigan to block a portion of the bill that gave educators a 52-day window to decide if they would participate in the new pension system. The union argued that 52 days was not sufficient for school workers to make a "major, life altering" retirement financial planning decision at the start of the school year. Aquilina also signed another order that if the law is later found unconstitutional, then the financial decisions school employees make under the statute could be voided. (DETROIT FREE PRESS, DETROIT NEWS, LANSING STATE JOURNAL, WNEM.COM [SAGINAW])
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