ALBERTA STUDIER, PATRICIA M. SANOCKI, MARY A. NICHOLS, LAVIVA M. CABAY, MARY L. WOODRING, and MILDRED E. WEDELL, Plaintiffs-Appellants, v MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT BOARD, MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM, DEPARTMENT OF MANAGEMENT AND BUDGET, and TREASURER OF MICHIGAN, Defendants-Appellees. ALBERTA STUDIER, PATRICIA M. SANOCKI, MARY A. NICHOLS, LAVIVA M. CABAY, MARY L. WOODRING, and MILDRED E. WEDELL, Plaintiffs-Appellees, v MICHIGAN PUBLIC SCHOOL EMLOYEES’ RETIREMENT BOARD, MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM, DEPARTMENT OF MANAGEMENT AND BUDGET, and TREASURER OF MICHIGAN, Defendants-Appellants.
Nos. 125765, 125766
Michigan Supreme Court
FILED JUNE 28, 2005
Chief Justice: Clifford
Opinion
BEFORE THE ENTIRE BENCH
TAYLOR, C.J.
We granted leave in this case to consider two issues. The first is whether health care benefits paid to public school retirees constitute “accrued financial benefits” subject to protection from diminishment or impairment by
I. FACTUAL HISTORY AND PROCEDURAL POSTURE
The Michigan Public School Employees’ Retirement Board (board) began providing a health care plan for public school retirees in 1975 pursuant to amendments made by 1974 PA 244 to the former Public School Employees Retirement Act, 1945 PA 136, which was the predecessor of the current Public School Employees Retirement Act, 1980 PA 300,
The amendments modified the plan‘s prescription drug copayment structure and out-of-pocket maximum for prescription drugs effective April 1, 2000, and also implemented a formulary effective January 1, 2001. A formulary is a preferred list of drugs approved by the federal Food and Drug Administration that is designed to give preference to those competing drugs that offer the greatest therapeutic benefit at the most favorable cost. Existing maintenance prescriptions outside the formulary were grandfathered in and subject only to the standard copayment of twenty percent of the drug‘s cost, with a $ 4 minimum and a $ 20 maximum.
The prescription drug copayment was changed to a twenty percent copay, with a $4 minimum and $20 maximum for up to a one-month supply. The copay maximum for mail-order prescription copayment was set at $50 for a three-month supply. A $750 maximum out-of-pocket copay for each calendar year was also established. [The plan did not previously contain an annual out-of-pocket maximum.] Under the formulary, eligible persons pay an additional twenty percent of a new nonformulary drug‘s approved cost only when use of the nonformulary drug is not preapproved by the drug plan administrator.
The board also adopted a resolution to increase health insurance deductibles from $145 for an individual to $165, and from $290 to $ 330 for a family, effective January 1, 2000. The deductibles do not apply to prescription drugs.2
Plaintiffs, six public school retirees, filed suit for declaratory and injunctive relief against the board, the Michigan Public School Employees’ Retirement System (MPSERS), the Michigan Department of Management and Budget, and the Treasurer of the state of Michigan. Although plaintiffs’ complaint contained three counts, only counts I and II remain for our consideration. Count I alleged that the copay and deductible increases violate
Both sides moved for summary disposition on these counts and the trial court granted defendants’ motion pursuant to MCR 2.116(C)(10). With respect to count I, the trial court rejected plaintiffs’ claim that health care benefits are “accrued financial benefits” under
Plaintiffs appealed to the Court of Appeals, which affirmed the trial court‘s ruling entirely. Thus, the panel held that health care benefits are not “accrued financial benefits” subject to protection by
Plaintiffs applied for leave to appeal to this Court, seeking to challenge the Court of Appeals determinations that health care benefits are not “accrued financial benefits” protected by
II. STANDARD OF REVIEW
This Court reviews de novo a trial court‘s decision regarding a motion for summary disposition. Taxpayers of Michigan Against Casinos v Michigan, 471 Mich 306, 317; 685 NW2d 221 (2004). This case also involves constitutional issues, as well as issues of statutory construction. These issues are reviewed de novo by this Court. Wayne Co v Hathcock, 471 Mich 445, 455; 684 NW2d 765 (2004).
III. ANALYSIS OF CONST 1963, ART 9, § 24
The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.
Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities.
These two clauses unambiguously prohibit the state and its political subdivisions from diminishing or impairing “accrued financial benefits,” and require them to fund “accrued financial benefits” during the fiscal year for which corresponding services are rendered. To apply this, we are called upon to determine what is an “accrued financial benefit” and, in particular, whether health care benefits are such a benefit.
This Court has twice considered the issue whether health care benefits fall within the ambit of “accrued financial benefits” protected by
Justice Levin, dissented from this portion of the majority‘s analysis primarily on the basis of her conclusion that the term “financial” is commonly understood to connote monetary obligations and, thus, the term “financial benefits” does not encompass health care benefits. Id. at 525-532.
This Court subsequently granted rehearing in Musselman v Governor (On Rehearing), 450 Mich 574; 545 NW2d 346 (1996) (Musselman II), and the prior majority lost a vote because Justice Brickley stated that he no longer believed that interpretation of
As Justice Riley correctly pointed out in her dissent in Musselman I, the majority “misse[d] the mark” by focusing on the history behind
The primary objective in interpreting a constitutional provision is to determine the text‘s original meaning to the ratifiers, the people, at the time of ratification. [People v Nutt, 469 Mich 565, 573; 677 NW2d 1 (2004).] This rule of “common understanding” has been described by Justice COOLEY in this way:
“A constitution is made for the people and by the people. The interpretation that should be given it is that which reasonable minds, the great mass of the people themselves, would give it. ‘For as the Constitution does not derive its force from the convention which framed, but from the people who ratified it, the intent to be arrived at is that of the people, and it is not to be supposed that they have looked for any dark or abstruse meaning in the words employed, but rather that they have accepted them in the sense most obvious to the common understanding, and ratified the instrument in the belief that that was the sense designed to be conveyed.‘” [Traverse City School Dist v Attorney General, 384 Mich 390, 405; 185 NW2d 9 (1971) (emphasis in original), quoting 1 Cooley, Constitutional Limitations (6th ed), p 81.]
In short, the primary objective of constitutional interpretation is to realize the intent of the people by whom and for whom the constitution was ratified.
In order to reach the objective of discerning the intent of the people when ratifying a constitutional provision, we apply the plain meaning of each term used therein at the time of ratification unless technical, legal terms were employed. Phillips v Mirac, Inc, 470 Mich 415, 422; 685 NW2d 174 (2004). In this case, the term “benefits” is modified by the words “financial” and “accrued.” Because these adjectives are not technical, legal terms that would have been ascribed a particular meaning by those learned in the law at the time the Constitution was ratified,7 we discern the intent of the people in ratifying
their plain and ordinary meanings at the time of ratification.8
We first note that, despite specifically stating that the threshold issue in determining whether health care benefits were subject to the prefunding requirement of the second clause of
increment,” “to become a present and enforceable
That
the first and second clauses of that provision. Specifically, the first clause contractually binds the state and its political subdivisions to pay for retired public employees’ “accrued financial benefits . . . .” Thereafter, the second clause seeks to ensure that the state and its political subdivisions will be able to fulfill this contractual obligation by requiring them to set aside funding each year for those “[f]inancial benefits arising on account of service rendered in each fiscal year . . . .” Thus, because the second clause only requires the state and its political subdivision to set aside funding for “[f]inancial benefits arising on account of service rendered in each fiscal year” to fulfill their contractual obligation of paying for “accrued financial benefits,” it reasonably follows that “accrued” financial benefits consist only of those “[f]inancial benefits arising on account of service rendered in each fiscal year . . . .”12
Moreover, health care benefits do not qualify as “financial” benefits. At the time
was ratified, the term “financial” was commonly defined as “pertaining to monetary receipts and expenditures; pertaining or relating to money matters; pecuniary,” Random House, supra, p 453, or “relating to finance or financiers,” Webster‘s, supra, p 851, and “finance” was commonly defined as “pecuniary resources, as of . . . an individual; revenues,” Random House, supra; accord Webster‘s, supra. “Pecuniary,” in turn, was commonly defined as “consisting of or given or extracted in money,” or “of or pertaining to money.” Random House, supra, p 892; accord Webster‘s, supra, p 1663. Accordingly, the ratifiers of our Constitution would have commonly understood “financial” benefits to include only those benefits that consist of monetary payments, and not benefits of a nonmonetary nature such as health care benefits.
We further point out that, even if the phrase “accrued financial benefits”
The debates must be placed in perspective. They are individual expressions of concepts as the speakers perceive them (or make an effort to explain them). Although they are sometimes illuminating, affording a sense of direction, they are not decisive as to the intent of the general convention (or of the people) in adopting the measures.
Therefore, we will turn to the committee debates only in the absence of guidance in the constitutional language . . . or when we find in the debates a recurring thread of explanation binding together the whole of a constitutional concept.
Bearing this principle in mind, the primary focus of the majority in Musselman I should not have been on the intentions of the delegates in supporting
rather, on any statements they may have made that would have shed light on why they chose to employ the particular terms they used in drafting the provision to aid in discerning what the common understanding of those terms would have been when the provision was ratified by the people.14 In this regard, it is important to note that the majority in Musselman I did, in fact, locate such evidence but chose to disregard it, stating:
The only explicit elaboration on the term “accrued financial benefits” was this remark by delegate Van Dusen:
“The words ‘accrued financial benefits’ were used designedly, so that the contractual right of the employee would be limited to the deferred compensation embodied in any pension plan, and that we hope to avoid thereby a proliferation of litigation by individual participants in retirement systems talking about the general benefits structure, or something other than his specific right to receive benefits.”
Unfortunately, he addresses which rights are contractual, and thus enforceable at law under the first clause of
Const 1963, art 9, § 24 —a question distinct from what must be prefunded
under the second clause. [Musselman I, supra at 510 n 8, quoting 1 Official Record, Constitutional Convention 1961, pp 773-774.]
This statement by delegate Van Dusen is directly relevant to discerning the common understanding of the words “accrued” and “financial” at the time of the constitutional convention and, indeed, reinforces our conclusion that the ratifiers would have commonly understood the phrase “accrued financial benefits” to be one of limitation that would restrict the scope of protection provided by
Thus, in summary, we hold that health care benefits are not protected by
IV. ANALYSIS OF CONST 1963, ART 1, § 10 AND US CONST, ART I, § 10
The plaintiffs here assert that, by enacting
or abolished by successive legislatures without violating
The retirement system18 shall pay the entire monthly premium or membership or subscription fee for hospital, medical-surgical, and sick care benefits for the benefit of a retirant or retirement allowance beneficiary who elects coverage in the plan authorized by the retirement board and the department.19
The Court of Appeals determined that this statute does create for plaintiffs a contractual right to receive health care benefits, but that the copay and deductible increases implemented by the board do not amount to a substantial impairment of that contractual right. However, we conclude that
therefore, reverse the Court of Appeals determination on that point.
Of primary importance to the viability of our republican system of government is the ability of elected representatives to act on behalf of the people through the exercise of their power to enact, amend, or repeal legislation. Therefore, a fundamental principle of the jurisprudence of both the United States and this state is that one legislature cannot bind the power of a successive legislature.20 We recently reiterated this principle at length in LeRoux v Secretary of State, 465 Mich 594, 615-616; 640 NW2d 849 (2002), quoting Atlas v Wayne Co Bd of Auditors, 281 Mich 596, 599; 275 NW 507 (1937):
“The act of one legislative body does not tie the hands of future legislatures. Cooper, Wells & Co v City of St Joseph, 232 Mich 255 [205 NW 86 (1925)]. The power to amend and repeal legislation as well as to enact it is vested in the legislature, and the legislature cannot restrict or limit its right to exercise the power of legislation by prescribing modes of procedure for the repeal or amendment of statutes; nor may one legislature restrict or limit the power of its successors . . . . [Additionally,] [o]ne legislature cannot enact irrepealable legislation or limit or restrict its own power, or the power of its successors, as to the repeal of statutes; and an act of one legislature is not binding on, and does not tie the hands of, future legislatures.”
Although this venerable principle that a legislative body may not bind its successors can be limited in some circumstances because of its tension with the constitutional prohibitions against the impairment of contracts, thus enabling one legislature to contractually bind another, Winstar, supra at 872-874, such surrenders of legislative power are subject to strict limitations that have developed in order to protect the sovereign prerogatives of state governments, id. at 874-875. A necessary corollary of these limitations that has been developed by the United States Supreme Court, and followed by this Court, is the strong presumption that statutes do not create contractual rights. Nat‘l R Passenger Corp v Atchison, Topeka & Santa Fe R Co, 470 US 451, 465-466; 105 S Ct 1441; 84 L Ed 2d 432 (1985); In re Certified Question (Fun ‘N Sun RV, Inc v Michigan), 447 Mich 765, 777-778; 527 NW2d 468 (1994). This presumption, and its relation to the protection of the sovereign powers of a legislature, was succinctly described by the United States Supreme Court in Nat‘l R, supra at 465-466:
For many decades, this Court has maintained that absent some clear indication that the legislature intends to bind itself contractually, the presumption is that “a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.” Dodge v. Board of Education, 302 U.S. 74, 79 [58 S Ct 98; 82 L Ed 57] (1937). See also Rector of Christ Church v. County of Philadelphia, 24 How. 300, 302 [65 US 300; 16 L Ed 602] (1861) (“Such an interpretation is not to be favored“). This well-established presumption is grounded in the elementary proposition that the principal function of a legislature is not to make contracts, but to make laws that establish the policy of the state. Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 104-105 [58 S Ct 443; 82 L Ed 685] (1938). Policies, unlike contracts, are inherently subject to revision and repeal, and to construe laws as contracts when the obligation is not clearly and unequivocally expressed would be to limit drastically the essential powers of a legislative body. Indeed, “‘[t]he continued existence of a government would be of no great value, if by implications and presumptions, it was disarmed of the powers necessary to accomplish the ends of its creation.‘” Keefe v. Clark, 322 U.S. 393, 397 [64 S Ct 1072; 88 L Ed 1346] (1944) (quoting Charles River Bridge v. Warren Bridge, 11 Pet. 420, 548 [36 US 420; 9 L Ed 773] (1837)). Thus, the party asserting the creation of a contract must overcome this well-founded presumption, Dodge, supra, at 79, and we proceed cautiously both in identifying a contract within the language of a regulatory statute and in defining the contours of any contractual obligation.
The first step in this cautious procession is to examine the statutory language itself. Nat‘l R, supra at 466. In order for a statute to form the basis of a contract, the statutory language “must be ‘plain and susceptible of no other reasonable construction’ than that the Legislature intended to be bound to a contract.” In re Certified Question, supra at 778, quoting Stanislaus Co v San Joaquin & King‘s River Canal & Irrigation Co, 192 US 201, 208; 24 S Ct 241; 48 L Ed 406 (1904). If the statutory language “‘provides for the execution of a written contract on behalf of the state the case for an obligation binding upon the state is clear.‘” Nat‘l R, supra at 466, quoting Dodge, supra at 78 (emphasis supplied in Nat‘l R). But, “absent ‘an adequate expression of an actual intent’ of the State to bind itself,” courts should not construe laws declaring a scheme of public regulation as also creating private contracts to which the state is a party. Nat‘l R, supra at 466-467, quoting Wisconsin & Michigan R Co v Powers, 191 US 379, 386-387; 24 S Ct 107; 48 L Ed 229(1903). In addition to the absence of contractual language, some federal courts, when interpreting statutes involving public-employee pension benefit plans, have expressed even greater reluctance to infer a contractual obligation where a legislature has not explicitly precluded amendment of a plan. Nat‘l Ed Ass‘n-Rhode Island v Retirement Bd of the Rhode Island Employees’ Retirement System, 172 F3d 22, 27 (CA 1, 1999). This reluctance stems not only from the caution against
The plaintiffs in this case have failed to overcome the strong presumption that the Legislature did not intend to surrender its legislative powers by entering into a contractual agreement to provide retirement health care benefits to public school employees when it enacted
Although we need not do so because of the absence of clear and unequivocal language showing an intent to contract, we note that the circumstances surrounding the Legislature‘s enactment of
We further note that, as part of the 1979 Public School Employees Retirement Act, in which
Thus, because the plain language of
V. RESPONSE TO THE DISSENT
We would be remiss if we failed to point out that the ad hoc analysis employed by the dissent to determine that public school retirees possess a contractual right to
The most treasured civic possession of an American citizen is the right to self-government. It is the central pillar and animating force of our constitutions. Thus,
What this means concretely is that what one legislature has done, pursuant to the majority sentiment at that time, a later legislature responding to the then majority can modify or undo. Deprived of this right, self-government is not just hollow, it is nonexistent.
Yet, as the United States Supreme Court has held and we have discussed in this opinion, when the Legislature enters into a contract, a subsequent legislature cannot repudiate that contract. It seems obvious that to read what is a contract too broadly swallows the right of the people to change the course of their governance. This is the tension that we have attempted to address and thoroughly analyze, whereas the dissent has just blithely assumed that any benefit once conferred is a contract and cannot be altered. This is an ill-considered notion that in cases yet to be seen, but surely to be seen if this were to become the majority position, means that, for example, general assistance welfare benefits could not be altered, Medicaid would be frozen in its first enacted form, and, in short, any financial benefit would be unalterable.
This is not and surely cannot be our law. Yet, the dissent claims that the recipients of the benefits will be surprised it is not. Will they? No one should be surprised that benefit battles are fought out in the Legislature. On the contrary, those who could claim legitimate surprise would be our citizens who, were there two more votes on this Court to join the dissent and make it a majority, would have lost, in the fog of a baffling contract analysis, the right to change the course of their government. Indeed, that would be more than surprising, it would be revolutionary.
VI. CONCLUSION
We hold that health care benefits are not “accrued financial benefits” and, thus, are not protected by Clifford W. Taylor Maura D. Corrigan Robert P. Young, Jr. Stephen J. Markman ALBERTA STUDIER, PATRICIA M. SANOCKI, MARY A. NICHOLS, LAVIVA M. CABAY, MARY L. WOODRING, and MILDRED E. WEDELL, Plaintiffs-Appellants, v MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT BOARD, MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM, DEPARTMENT OF MANAGEMENT AND BUDGET, and TREASURER OF MICHIGAN, Defendants-Appellees. ALBERTA STUDIER, PATRICIA M. SANOCKI, MARY A. NICHOLS, LAVIVA M. CABAY, MARY L. WOODRING, and MILDRED E. WEDELL, Plaintiffs-Appellees, V MICHIGAN PUBLIC SCHOOL EMLOYEES’ RETIREMENT BOARD, MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM, DEPARTMENT OF MANAGEMENT AND BUDGET, and TREASURER OF MICHIGAN, Defendants-Appellants. SUPREME COURT OF MICHIGAN WEAVER, J. (concurring). I concur in the majority conclusion and reasoning that the Legislature did not intend to create a contractual right subject to Regarding whether health care benefits paid to public school retirees are “accrued financial benefits” under Elizabeth A. Weaver ALBERTA STUDIER, PATRICIA M. SANOCKI, MARY A. NICHOLS, LAVIVA M. CABAY, MARY L. WOODRING, and MILDRED E. WEDELL, Plaintiffs-Appellants, v MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT BOARD, MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM, DEPARTMENT OF MANAGEMENT AND BUDGET, AND TREASURER OF MICHIGAN, Defendants-Appellees. ALBERTA STUDIER, PATRICIA M. SANOCKI, MARY A. NICHOLS, LAVIVA M. CABAY, MARY L. WOODRING, and MILDRED E. WEDELL, Plaintiffs-Appellants, v MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT BOARD, MICHIGAN PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM, DEPARTMENT OF MANAGEMENT AND BUDGET, AND TREASURER OF MICHIGAN, Defendants-Appellees. SUPREME COURT OF MICHIGAN CAVANAGH, J. (dissenting). I believe that retirement health care benefits earned by public school employees constitute “accrued financial benefits” that are protected by our Michigan Constitution from diminishment or impairment. I also believe that the statute that provides retirement health care benefits for public school employees, Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities. Whether health care benefits are “accrued financial benefits” has already been addressed by this Court in Musselman v Governor, 448 Mich 503, 510; 533 NW2d 237 (1995) (Musselman I), and Musselman v Governor (On Rehearing), 450 Mich 574; 545 NW2d 346 (1996) (Musselman II). In Musselman I, this Court examined whether health care benefits are indeed “financial” benefits. We held that because the purpose of the constitutional provision is to prevent the state from amassing bills for pension payments, including health care benefits, for which the state does not have the money to pay, the term “financial benefits” includes retirement health care benefits. Reflecting on the analysis in Musselman I, I fail to see its flaws. This Court reasonably concluded that the goal of the constitutional provision is to ensure that the state can pay for the commitments it has made. Regardless of whether the commitment is for a straightforward monthly cash allowance to a retiree or for payment of health care benefits for a retiree, the state must still pay for its obligations. If the state has failed to set aside an appropriate amount of money, the situation is still the same, meaning the state still has a financial consequence. I believe this interpretation is the one that the people gave the constitutional provision when it was adopted because it best reflects the common understanding of the people. See Soap & Detergent Ass‘n v Natural Resources Comm, 415 Mich 728, 745; 330 NW2d 346 (1982). The most reasonable interpretation of the phrase “accrued financial benefits” includes health care benefits. Health care benefits are given in lieu of additional compensation to public school employees. A health care benefit is a financial benefit because it clearly costs the state money and has an economic value to the employee. Notably, our Constitution was not written to include every conceivable aspect of a pension plan. It was certainly not beyond the understanding of the ratifiers that health care benefits, which cost the state money, would be offered as a retirement benefit. As such, these benefits would need to be protected, just as monthly cash allowances to retirees must be protected. As we stated in Musselman I, supra at 516 n 12, “Many delegates to the 1961 Constitutional Convention perceived as unfair the rule that pensions granted by public authorities were not contractual obligations, but rather gratuitous allowances that could be revoked at will.” See, e.g., 1 Official Record, Constitutional Convention 1961, pp 770-774. It should not come as a surprise that the ratifiers would believe this to be true Moreover, even if the ratifiers did not imagine every conceivable pension plan benefit that would be offered, the “idea behind formulating a general rule, as opposed to a set of specific commands, is that a rule governs possibilities that could not have been anticipated at the time.” Musselman I, supra at 514.1 The constitutional provision was meant to address all public employee retirement systems; it is entirely reasonable that the ratifiers would not be aware of every possible retirement benefit being offered to every public employee. See, e.g., 1 Official Record, Constitutional Convention 1961, p 771. In response to a question whether the state could increase benefits and whether an increase in benefits would be a gratuity or an obligation that the state must fulfill, a constitutional convention delegate responded as follows: “Certainly there‘s nothing here to prohibit the employer from increasing the benefit structure.” Id. at 774. “Once the employee, by working pursuant to an understanding that this is the benefit structure presently provided, has worked in reliance thereon, he has the contractual right to those benefits which may not be diminished or impaired.” Id. The constitutional principle declared is that accrued financial benefits, including health care benefits, will be protected for retirees. Simply, “once an employee has performed the service in reliance upon the then prescribed level of benefits, the employee has the contractual right to receive those benefits under the terms of the statute or ordinance prescribing the plan.” Id. at 771. In attempting to define the term “accrued financial benefits,” the majority cites numerous definitions for the word “accrue,” and I do not quarrel with those definitions.2 Indeed, as the majority states, “accrue” means “to increase, grow” and “to come into existence as an enforceable claim; vest as a right.” Ante at 12 (citation and internal quotation marks omitted). However, I disagree with the majority‘s assertion that the ratifiers of our Constitution would have commonly understood “accrued” to mean that an individual‘s benefits must increase or grow over time. The majority seems to believe that to be an accrued financial benefit, an employee‘s retirement health care benefits must gradually increase on the basis of the number of years that the person is employed, yet this is not accurate. The term “accrued financial benefits” was used to denote benefits that were contractual obligations on the part of the state. The term “accrued financial benefits” was meant to include benefits that an employee had worked in reliance on and continued to work in reliance on. This is in contrast to the term “financial benefits,” which was used in the second clause of the constitutional provision to denote a system in which the benefits earned for the year were funded annually. Because the second clause only specifically dealt with how to fund benefits earned in a given year, retirement systems would eventually need to address the funding for benefits that had been earned in prior years but had not been properly funded. 1 Official Record, When a public school employee has fulfilled his commitment and is then entitled to receive health care benefits once he retires, the employee has an enforceable claim to receive the benefits upon retirement. “Accrued” does not mean that the amount of benefits the employee will receive during retirement must grow in conjunction with the employee‘s years of service. For an employee to have an accrued financial benefit, he must fulfill the obligations set forth by the state. For plaintiffs, all the events that are necessary for them to receive their benefits have come into existence. Simply, plaintiffs went to work and did their jobs for the required number of years. As our Constitution states, accrued financial benefits “shall be a contractual obligation thereof which shall not be diminished or impaired thereby.” Additionally, even if the term “accrued financial benefits” were viewed as a term more commonly used by accountants and actuaries than by laypersons, its meaning would still encompass retirement health care benefits. As stated by the Governmental Accounting Standards Board (GASB), cash payments and other retirement benefits, such as health care benefits, “are conceptually similar transactions-both involve deferred compensation offered in exchange for current services—and should be accounted for in a similar way.” Governmental Accounting Standards Board, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, Statement No. 45, June 2004, p 73 (emphasis added).4 As noted by the majority, “‘“[t]he words ‘accrued financial benefits’ were used designedly, so that the contractual right of the employee would be limited to the deferred compensation embodied in any pension plan . . . .‘“‘” Ante at 17, quoting Musselman I, supra at 510 n 8, quoting 1 Official Record, Constitutional Convention 1961, pp 773-774 (emphasis added). By any standard employed, the meaning of the term “accrued financial benefits” encompasses retirement health care benefits for public school employees. The United States Constitution provides in relevant part, “No State shall . . . pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts . . . .” Information about retirement health care benefits for Michigan‘s public school employees is set forth in care benefits “is a contractual right arising from the fact that employees have worked in reliance on the statutory promise that the board will pay earned health care benefits of any member receiving a retirement allowance.” In Musselman I, supra at 519 n 19, the defendants even conceded “that retirement health care benefits are contractual benefits subject to The statute‘s intent is clear-in exchange for receiving years of an employee‘s services, the state will pay for retirement health care benefits. This unconditional guarantee is what many public school employees and retirees have relied on throughout the years, and the state has benefited from that reliance. As stated at the constitutional convention, “[T]here is no question that when an employee today takes employment with a governmental unit, he does so with the idea that there is a pension plan or retirement system involved.” 1 Official Record, Constitutional Convention 1961, p 773. The majority‘s position now allows the state to choose, at its whim, not to fulfill its obligation under the contract even though employees have already performed the responsibilities necessary to fulfill their obligations under the contract. The state did not offer retirement health care benefits to public school employees to be charitable; it did so to remain competitive in the marketplace. See 1 Official Record, Constitutional Convention 1961, p 773. And public school employees do not “receive” these benefits for free. Because retirement health care benefits cost money, the monetary compensation for public school employees had to have been factored into the equation. It is unreasonable to now claim that public school employees, who received less compensation because of the benefits they believed they would receive when they retired, are now no longer entitled to the health care benefits they worked to receive. Stability in retirement benefits is likely at least part of the reasons why many people chose to accept a position with the public schools or stay in that position, and it is untenable to tell these employees and retirees that it was for naught. The majority attempts to buttress its argument by noting the definition for “compensation” provided by must fulfill. The items listed in provision of health care benefits for retirees is not a gratuitous undertaking by defendants.6 It is a benefit that is provided to plaintiffs in exchange for years of service. Defendants are not altruistically giving plaintiffs these benefits, plaintiffs earned them through years of hard work and dedication. Plaintiffs fulfilled their obligations, and the state should fulfill its obligation. Finally, contrary to the majority‘s panic-stricken response to the dissent, the Constitution and our system of government are not under attack merely because I disagree with the majority over the interpretation of the words of the Constitution and the applicable statute. Regardless of the majority‘s attempt to distract the reader from the issues at hand, reading the plain words of the statute to indicate that a contract was made with public school employees and retirees does not mean that no legislative action can ever be amended or repealed. It does not mean that welfare benefits could never be altered, as the majority‘s rhetoric proclaims. It merely means that when reading this statute, it is clear that the words chosen by the Legislature were meant to oblige the state to provide the retirement health care benefits that were promised to public school employees. While the majority accurately states that benefit battles are fought in the Legislature, it inaccurately states that benefits “won” can then be changed at the whim of a subsequent legislature. Once benefits have been guaranteed to workers and the workers have served the state in reliance on them, it is unconstitutional to substantially impair the receipt of these earned benefits. The dissent states a concept that is really quite unremarkable. The government, just like any other party to a contract, must fulfill its obligation. When a public school employee has worked for years in reliance on a promise of retirement health care benefits, our system of government is not challenged by the simple notion that the state must provide these benefits. Because plaintiffs’ retirement health care benefits are a contractual right, the NW2d 555 (1990). If plaintiffs’ contractual rights are impaired, the impairment must be the result of a legitimate public purpose. Id. at 535. Finally, the means chosen to carry out the public purpose must be reasonable. I must first address defendants’ argument that the legitimate public purpose of the increases is to ensure that there are sufficient school funds available for children. I believe that ensuring high quality education for our children is a valuable and worthwhile public purpose that should be one of our state‘s highest priorities. However, defendants’ argument essentially pits the quality of education for school children against providing adequate health care benefits for retirees. Yet meeting the needs of school children and meeting the needs of retirees are not mutually exclusive. While it may be challenging, to say the least, to determine the best way to meet the needs of children and retirees, it does not mean that the commitment made to our state‘s retirees can be ignored. Merely because meeting our responsibilities is difficult does not mean that our responsibilities can be abandoned. Plaintiffs’ legitimate expectations are that retirement health care benefits will be continued and plaintiffs’ portion of the costs for these benefits will not be significantly altered. It is not sufficient for defendants to pay the “entire monthly premium” if defendants disproportionately increase the amount that plaintiffs must pay for their deductibles and copayments. Moreover, increasing the amount that plaintiffs must pay over time can certainly amount to a substantial impairment if defendants do in increments what they would not be allowed to do in one large adjustment. The amount of copayments and deductibles is linked to the amount of the monthly premiums. By increasing copayments and deductibles to extremely high proportions, the defendants could essentially avoid paying any monthly premium. That would not fulfill the terms of the contract. While the statute does not specifically state the amount that the state must pay, like any contract, the words used by the Legislature must be construed to ascertain the intent of the parties. See Sobczak v Kotwicki, 347 Mich 242, 249; 79 NW2d 471 (1956). Whether there has been a substantial impairment is largely a factual question that is better resolved after additional discovery, especially because there have been claimed inaccuracies in some of the documents submitted by defendants. It is reasonable that the amount that plaintiffs must pay will increase in logical proportion to the amount they have historically paid. However, because plaintiffs raise valid concerns about the accuracy of reports submitted by defendants, I believe it is imprudent to determine on the basis of what may amount to be an inadequate record whether the increases pose a substantial impairment. The years of dedication that public school employees and retirees have committed to educating and caring for the children of our state are worth more than empty promises provided to them by the majority‘s approach. I believe that retirement health care benefits earned by public school employees constitute “accrued financial benefits” that are protected by our Michigan Constitution from diminishment or impairment. I further believe that retirement health care benefits earned by Michael F. Cavanagh Marilyn KellyI. HEALTH CARE BENEFITS ARE “ACCRUED FINANCIAL BENEFITS” WITHIN THE MEANING OF MICHIGAN‘S CONSTITUTION
II. HEALTH CARE BENEFITS ARE CONTRACTUAL OBLIGATIONS
III. ADDITIONAL DISCOVERY IS NECESSARY TO PROPERLY ASSESS WHETHER DEFENDANTS’ ACTIONS CREATE A SUBSTANTIAL IMPAIRMENT OF PLAINTIFFS’ CONTRACTUAL RIGHTS
IV. CONCLUSION
Notes
It is incredible that the legislature in submitting to popular vote the proposed amendment [of
Const 1908, art 10, § 23 ] at the general election in 1954, or that the people in voting thereon, intended that the term “sales tax” as used in the clauses of said amendment providing for the apportionment of sales tax funds in the manner stated therein, and in inhibiting the legislature from increasing the sales tax above 3%, intended to use the term in question with different meanings. In other words, it must be assumed that the designation was used in the proviso imposing limitation on the power of the legislature with reference to the increase in the sales tax with exactly the same meaning as clearly intended in the so-called diversion clauses. [Emphasis added.]
The MPSERS provides a health care plan for retirees. Cost-sharing features have been a part of the health plan since its inception in 1975. The individual and family deductible component of the health care plan has gradually increased from 1982 to 1999, beginning with a deductible of $50 for each person and $100 for each family in 1982, and gradually rising to a deductible of $145 for each person and $290 for each family in 1999. Cost sharing for the prescription drug program also had gradual increases, ranging from a copay of ten percent in 1975 to a copay of $4 for generic drugs and $8 for brand name drugs in 1997 through March 31, 2000. There is no dispute that the MPSERS health care plan also gradually increased the benefits available under the plan.