Aft Michigan v. State of Michigan
497 Mich. 197
| Mich. | 2015Background
- 2010 PA 75 required current Michigan public school employees to pay 3% of salary into MPSERS retiree-health trust; Court of Appeals (AFT Mich I) held that provision unconstitutional (takings, contracts, substantive due process) for mandatory contributions.
- Legislature enacted 2012 PA 300 to respond: it left the 3% contribution statute but added (a) an opt‑out (MCL 38.1391a(5)) allowing employees to avoid the 3% by switching to a Tier 2 account, and (b) a refund-style separate retirement allowance (MCL 38.1391a(8)) for contributors who later fail to qualify for retiree health benefits.
- 2012 PA 300 also changed pension accruals prospectively: required Basic Plan members to contribute 4% and MIP members 7% to keep a 1.5% accrual multiplier; those who decline accrue future service at 1.25% or may elect a Tier 2 401(k)-style account; accrued benefits before the act were untouched.
- Labor organizations representing public school employees sued in Court of Claims challenging 2012 PA 300 under Takings Clauses, Contracts Clauses, and Due Process Clauses; Court of Claims upheld the statute; Court of Appeals affirmed (AFT Mich II).
- Michigan Supreme Court granted leave and affirmed: held 2012 PA 300 does not violate federal or state Takings, Contracts, or substantive Due Process doctrines given voluntariness of contributions, lack of enforceable contractual right to future pension accrual rates, and rational relation to legitimate governmental interests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Takings (uncompensated taking of contributions/interest) | Mandatory retention of contributions/interest (or retention after contributors fail to qualify) is a taking of private property without just compensation. | Contributions are voluntary under 2012 PA 300 (opt‑out available); even if funds held, employees consented to terms including the separate allowance. No compensable taking. | No taking: contributions are voluntary and part of a conditional benefit; retention/allowance terms are part of the voluntary bargain. |
| Unconstitutional conditions (coercion to waive Takings rights) | Offering retiree health as a benefit conditions receipt on surrendering right to compensation if benefit later not received — effectively coercive. | No coercion: the nexus between contribution and healthcare is direct; employees may decline and obtain other options; burden is proportionate. | No unconstitutional condition: no coercion shown; nexus and proportionality to legitimate government interest satisfied. |
| Contracts Clause (impairment of accrued or promised pension rights) | 2012 PA 300 impairs contractual rights by changing how employees accrue future pension benefits and by diminishing bargained compensation. | Employees have no contractual right to future pension accrual rates from the state; informational brochures disclaim statutory supremacy; changes are prospective and do not diminish accrued financial benefits. | No impairment: no enforceable contract guaranteeing future accrual rate exists; statute does not impair accrued (already earned) pension benefits. |
| Substantive Due Process | Forcing current employees to fund others’ healthcare without guarantee they will receive comparable benefits is arbitrary and denies substantive due process. | Law furthers legitimate fiscal interest (maintain retiree healthcare funding); measures (voluntary contributions, opt‑out, refund allowance) are rationally related to that interest. | No violation: no fundamental right implicated; statute is reasonably related to legitimate governmental interest and thus passes rational‑basis review. |
Key Cases Cited
- Ruckelshaus v. Monsanto Co., 467 U.S. 986 (governmental interference may affect intangible property rights)
- Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (government control over discrete fund may raise takings concerns)
- Dolan v. City of Tigard, 512 U.S. 374 (nexus and rough proportionality in unconstitutional‑conditions takings context)
- Nollan v. California Coastal Comm’n, 483 U.S. 825 (essential nexus requirement for land‑use condition takings)
- Koontz v. St. Johns River Water Management Dist., 570 U.S. 595 (application of unconstitutional‑conditions doctrine and nexus/proportionality principles)
- Eastern Enterprises v. Apfel, 524 U.S. 498 (distinguishing general fiscal burdens from takings)
- Studier v. Michigan Pub. Sch. Employees’ Retirement Bd., 472 Mich. 642 (Mich. Const. art. 9, § 24 protects only accrued financial pension benefits)
- AFT Michigan v. Michigan, 297 Mich. App. 597 (Court of Appeals decision invalidating 2010 PA 75 on multiple grounds)
- AFT Michigan v. Michigan, 303 Mich. App. 651 (Court of Appeals decision upholding 2012 PA 300)