Michigan Court Rejects End-Run to Cut State Employees' Negotiated Salary Increase

A three-judge panel of the Michigan Court of Appeals, Michigan's intermediate appellate court, ruled last week that the Michigan Constitution prohibited the legislature and then-Governor Granholm from requiring that 3% of state employees' salaries go to the public employee retirement health care fund.  The ruling rebuffs the attempted legislative end-run around a state constitutional delegation of power over public employees' salaries to the state Civil Service Commission.  It also deals a blow to the legislature's attempt to balance the state's books on the back of state workers.  According to the Detroit Free Press, the governor's office is considering whether to appeal.

The case, AFSCME Council 25 v. State Employees Retirement System, arose out of the legislature and governor's attempt to roll back a negotiated 3% pay raise over three years for state workers.  Public employee unions negotiated the pay increase and got it approved by the state Civil Service Commission, an independent body, with bi-partisan members appointed by the governor. 

The Commission had plenary authority over state workers' salaries until the state constitutional convention in 1961.  At that time, Michigan voters approved a new article, Article 11, Section 5, that also gave the legislature a hand--but a small one--in setting salaries.  Under Article 11, Section 5, of the 1963 Constitution, the Commission still gets to approve salaries, but the legislature can override a Commission decision by 2/3 vote in each house within 60 days of the Commission decision.

The legislature tried to override the Commission's approval of a 3% pay increase here, but it failed.  So instead it tried an end-run around the Constitution by enacting a law, by bare majority (and not 2/3), that sent 3% of state workers' salaries to the public employee retirement fund.  The move meant that employees didn't see their negotiated pay raise; that money went instead to partially make up a deficit in the fund.

The court ruled that this end-run violated Article 11, Section 5, and state constitutional separation of powers.  The court noted that the Michigan Constitution has a separation-of-powers clause that ensures that none of the three branches interferes with the work of the others, except when specifically authorized by the Constitution.  It reads:

The powers of government are divided into three branches: legislative, executive and judicial.  No person exercising powers of one branch shall exercise powers belonging to another branch except as expressly provided in this constitution.

Article 3, Section 2.  The only express provision allowing the legislature to interfere with the work of the Commission was the 2/3 override provision in Article 11, Section 5.  Thus, the action was ultra vires--unauthorized by Article 11, Section 5, and violating separation of powers.

The ball's now in the government's court.  It can appeal to the Michigan Supreme Court (which seems likely), or it can pay back state workers the $59 million it withheld from their salaries to put into the fund.

SDS