By David Eggert
Associated Press
LANSING (AP) — The Michigan Supreme Court has upheld a law requiring veteran state employees to contribute 4 percent of their pay to qualify for a full pension in retirement.
Justices ruled that the measure, signed in 2011 by Republican Gov. Rick Snyder, does not infringe on the powers of the state Civil Service Commission in part because voters did not consider pensions or other fringe benefits to be “compensation” when they ratified the state constitution in 1963.
Last week’s 6-1 decision, which reversed an appeals court declaration that the law was unconstitutional, was a setback for roughly 15,000 current workers hired before April 1997 and another 2,000 former employees, all who qualify for a defined benefit pension plan.
Those hired since — about 34,000 on the active payroll — are in a defined contribution 401(k)-style plan.
The law gave employees with pensions a choice: Pay 4 percent of their paycheck to stay in the plan or freeze the pension benefit and move to a 401(k).
State budget office spokesman Kurt Weiss said the state has collected $134 million in pension deductions since 2012.
Writing for the majority, Chief Justice Robert Young Jr. rejected state unions’ contention that the Legislature could not alter employees’ “rates of compensation” or “conditions of employment” because the constitution gives only the commission that authority.
The majority also said the commission consented by approving a rule in 2001 to make classified employees eligible for retirement benefits “as provided by law.”
“The commission’s authority to regulate does not permit the commission to enact, amend, or maintain the laws of this state,” Young wrote.
Liza Estlund Olson, director of the 8,100-member SEIU Local 517M, said the ruling — issued the same day that justices also said state employees cannot be forced to pay union fees — is part of a “continued race to the bottom in terms of getting rid of the middle class.”
“It’s 4 percent for your pension. It’s another 20 percent for your health care. It’s very small pay increases or no pay increases over the last 10, 15 years,” she said.
Snyder spokesman Dave Murray said the pension law protected post-retirement promises to employees while reducing long-term liabilities by more than $5 billion.
“The changes gave pension members a choice and were an instrumental part of the reforms that have improved Michigan’s fiscal stability long into the future,” he said.
Dissenting Justice Richard Bernstein said pensions are a condition of employment and the commission cannot waive its constitutional authority. Justices Mary Beth Kelly and Bridget McCormack agreed with reversing the 2013 Court of Appeals decision but disagreed with parts of the majority ruling.
McCormack, for instance, said the court should take a second look if the commission objects to the law in the future.
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