Lawyers for MEA and AFT Michigan argued before the Michigan Supreme Court Wednesday in a dramatic culmination to a seven-year legal battle the two unions have waged seeking the return of $550 million taken from the paychecks of 200,000 public school employees.
The state’s high court is expected to issue a decision by next summer in Gov. Rick Snyder’s third appeal of lower court rulings against the state. Snyder has reportedly spent at least $196,000 of taxpayer money to hire an outside law firm to handle the final leg of the case – Attorney General Bill Schuette was responsible for litigating all the prior appeals.
Wednesday’s legal wrangling centered on the constitutionality of a law passed during a 2010 financial downturn in Michigan. PA 75 mandated school districts withhold 3 percent of school employees’ pay and give the money to the state to fund health care costs of existing retirees.
The money was collected for nearly two years, from 2010 through 2012, but has been held in escrow pending the outcome of litigation ever since the lawsuit was filed in 2010.
“The selection of current public school employees to pay for a benefit for those currently retired is unreasonable,” said Mark Cousens, a lawyer representing AFT Michigan. “The state took the money without consent and without assurance of benefit.”
At issue is whether PA 75 represented an impairment of contracts, an unconstitutional taking of property without compensation, and violation of substantive due process. On those issues, the attorney hired by Snyder to argue the state’s case, Gary Gordon, at times faced withering questions from Justice Richard Bernstein.
“Is it a tax?” Bernstein asked Gordon about the state’s unilateral taking of school employees’ wages. “What is it?”
Gordon hesitated before answering, “It could be construed as a tax.”
“If it’s a tax, is this a special tax for teachers?” Bernstein continued. “If I’m a teacher, I’m going to pay a special teacher tax?”
Gordon responded that he had misspoken. “It’s more of a user fee,” he said.
Three earlier lower court rulings found PA 75 violated federal and state constitutional protections.
PA 75 did not guarantee school employees would receive the health care benefits they were supposedly paying for with the extraction of 3 percent of their pay. Meanwhile, amid the legal fight, lawmakers passed PA 300 in 2012 to fix constitutional infirmities with the earlier law.
PA 300 passed legal muster, because it gave school employees a choice to pay the 3 percent for guaranteed health benefits in retirement or to opt out of the payment and the benefit.
Justice David Viviano asked the attorney for the state about the second law passed in 2012: “PA 300 only addresses money collected going forward, doesn’t it?”
Gordon tried to argue that PA 300 was intended to supersede the earlier law and should be applied retroactively to the hundreds of millions of dollars collected for two years under PA 75. But MEA and AFT Michigan lawyers said the law contains no such provision.
Legal precedent would require the Legislature to be “clear, direct, and unequivocal” in statutory text if the intent were to apply a law retroactively, argued MEA attorney Timothy Dlugos. No such language exists in PA 300, Dlugos said, adding of the state’s argument otherwise: “This has been a connect-the-dots analysis.”
The choice that school employees made in 2012 under PA 300 – either consenting to pay 3 percent of their wages into a health care fund to guarantee a benefit or opting out of both – was made prospectively, attorney Cousens said.
He compared the argument to having a thief steal his wallet at gunpoint and then return two weeks later to apologize and give it back. At that point, perhaps it’s possible to forgive the theft but certainly not to consent to it, he said.
The lawyers for the unions presented a great case, said MEA member Kim Jones, an attorney and professor of English and law at Washtenaw Community College who attended the hearing. Jones pointed to a comment made by Justice Bridget McCormack, who asked the attorney for the state if he believed public employees’ rights fluctuated with the state’s budget woes.
“I was excited, because a bunch of the justices seemed to be on our side,” Jones said. “I’m hopeful the Supreme Court will do the right thing.”
However, MEA General Counsel Mike Shoudy cautioned against reading too much into the justices’ behavior during the hearing. “It’s hard to predict what will happen based on the questions they ask, but it was a good dialogue,” he said. “Our attorneys strongly represented our positions.”
The Supreme Court will rule on the case by the end of this court session in summer 2018, Shoudy said. “We certainly hope for an answer sooner… For now, we simply need to wait for a ruling, and we’ll keep MEA’s members updated on anything we hear.”
RELATED STORY: Hundreds of MEA members held flashlight vigils around the state to call attention to the 3 percent case and demand the return of their money. In Lansing, participants finished the night by singing All I Want for Christmas is my 3 Percent.