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Lansing — More than 200,000 Michigan public school employees were unconstitutionally docked 3 percent of their pay from 2010 to 2012 for retirement health care benefits they were not guaranteed to receive, the Michigan Court of Appeals ruled Tuesday.

Public school workers could receive a refund from the $550 million the state has held in escrow since starting the 3 percent reduction six years ago in an attempt to pay down a multibillion-dollar unfunded liability.

In a 2-1 decision, Appeals Court Judges Douglas B. Shapiro and Jane M. Beckering said “compulsory collection” of the paycheck reduction was unconstitutional and ordered the state to return the funds to employees, plus interest.

“The wages withheld during the mandatory period were taken without any legally enforceable guarantee that the contributors would receive the retirement health benefits provided to present retirees,” wrote Shapiro and Beckering, both appointees of Democratic former Gov. Jennifer Granholm.

Appeals Court Judge Henry W. Saad dissented in part, disagreeing that the mandatory contributions to the retirement fund were unconstitutional.

Saad argued the mandatory employee contribution was fiscally necessary in 2010 when the Michigan Public School Employees Retirement System was shelling out $920 million annually for “unsustainable” health care benefits for retirees and their dependents.

“That the state chose a paycheck deduction method simply does not convert a permissible legislatively mandated contribution into an unconstitutional impairment of contract,” wrote Saad, a 1994 appointee of GOP ex-Gov. John Engler.

The ruling represents a victory for teachers unions that have been waging a five-year battle against the mandatory payroll reductions, which were imposed under Granholm and passed by a Democratic-controlled House and Republican-dominated Senate.

A Republican-controlled Legislature amended the law in 2012 to stave off a continued legal challenge, but the teacher unions continued to fight in the courts for a refund of money deducted from employee checks over a two-year period. The funds have been held in escrow while the legal battle played out.

“Today the legal system delivered that justice to school employees who had money taken illegally from their paychecks,” Michigan Education Association President Steven Cook said in a statement.

Republican Gov. Rick Snyder’s administration could still appeal the decision to the Michigan Supreme Court.

“We are currently reviewing the decision and will be in consultation with the Attorney General’s office to determine next steps,” said Kurt Weiss, spokesman for the Michigan Department of Technology, Management and Budget.

David Hecker, president of the American Federation of Teachers Michigan, called the Court of Appeals ruling “a bit of justice” for school employees who “sacrifice each and every day for their students.”

“We ask the state to honor and respect the incredible work performed by our educators and not appeal this decision,” Hecker said in a statement.

clivengood@detroitnews.com

(517) 371-3661

Twitter: @ChadLivengood

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