Court Puts Hold on Pay Collections from School Employees

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Three lawsuits have been filed by the three unions representing the bulk of the state’s school employees challenging the constitutionality of the increased health care benefit contribution, but the one filed by the Michigan Education Association (MEA) has achieved the first victory. In that case, Ingham County Circuit Court Judge James Giddings has ruled the monies could be collected by the local districts but they cannot be deposited in the state fund designated to house them. The rationale for the ruling stems from the MEA’s argument the 3 percent fee—projected to collect some $300 million annually—may not go to cover the future health care benefits of current and future employees but may be used to cover current costs. That, the unions argue, means school employees will be paying for a benefit they may not receive when needed in the future. In issuing his injunction against depositing the monies in the state fund, Judge Giddings ruled school employees would suffer substantial harm if the monies are collected and spent and then the court finds the money should not have been collected in the first place. The judge also noted the Legislature would have the right not to appropriate the monies needed to repay the school employees if the courts find in their favor. Conversely, the judge ruled there was little harm in making the state wait to use the money until a final verdict on the case is rendered.

The increased health benefit contribution was part of the legislation approved earlier this year that was designed to encourage veteran teachers to retire early in exchange for a slightly enhanced pension. The legislation also required remaining employees to pay 3 percent of their annual wages toward their health benefits, but the unions have battled the requirement since Day One on the grounds there is no guarantee those employees will have the benefits in the future. As the legal proceedings were being conducted, state officials announced that a total of 17,063 school employees—roughly 10,000 fewer than predicted when the legislation was being considered—accepted the enhanced retirement package, with 1,295 of those individuals staying on the job for another year because their respective school district had applied for an extension on their retirement date. State officials estimate the known retirements will save local districts some $515 million in the coming school year.