Capitol News
December 2013
Capitol News was in “recess” last month while I was traveling in India and Sri Lanka. Fortunately SERA Coordinating Council Chair Bob Kopasz was able to represent us on the big November issue, SB 652.
Court of Claims Transfer
As Bob noted in last month’s Chair Talk, SB 652 (now PA 159 of 2013) was introduced and passed in just two weeks. It transfers the Court of Claims from Ingham County Circuit Court to the Michigan Court of Appeals. A total of 333 cases are expected to move; 182 current Court of Claims cases and an additional 151 expanded jurisdiction cases will join them, according to the Attorney General’s Office. That includes the transfer of Okrie v State of Michigan, et al, the class action lawsuit challenging the reduction or elimination of the tax exemption on pensions for those born after 1946.
Because Ingham County Circuit Court Judges are predominantly Democrats and the Supreme Court and Court of Appeals judges are predominantly Republicans, political motives have been attributed to the new law. This is especially true because the Court of Appeals is not designed structurally to handle trial court cases and some of the judges have never conducted a trial. It doesn't have stenographers to compile a transcript. The courtrooms don't have jury boxes or witness boxes. They have no method in which to compile a jury. A “trailer” bill to assure the right to jury trials, leaving the current juried cases in circuit court will likely have passed by the time you read this. The Supreme Court announced the day after the bill was signed that two Court of Appeals judges first appointed by Republican Governor Engler and two appointed by Democrat Governor Granholm would be on the new panel.
Pension Tax Lawsuit Update
We practically filled Ingham County Judge Aquilina’s courtroom on Wednesday, October 9 with state retirees for the first hearing concerning Tom Okrie’s challenge to the pension tax. The reason for the hearing was to consider cross motions for summary disposition of Okrie’s claims, meaning both sides think there is no genuine issue of material fact and that it is entitled to prevail as a matter of law based on the briefs or other materials submitted to the court with no trial. Before considering the motion for summary disposition, the court considered as a preliminary matter Okrie’s motion to amend his complaint with additional claims, which was granted. A request for separate hearing on those matters was denied.
At one point in the proceedings Judge Aquilina addressed the audience saying that the issues raised were very troublesome. Legislative action affected retirees but she warned that she had to rule on the law as it is, not as we might wish it to be. Because of the separation of powers, she can’t rewrite the law, she said. She stated that she wasn’t ruling that day because the issue was too important. She promised a written opinion in the required timeframe, near the beginning of December.
Because the bill transferring the Court of Claims from Ingham County Circuit Court to the Court of Appeals was introduced October 24 and moving fast, she issued an opinion and order on November 5, denying Okrie’s motion for summary disposition on the breach of contract claim, granting the State's motion for summary disposition as to the cause of action, and dismissing the class action. On that same day she testified against the court transfer bill in a legislative hearing. On November 13 the Governor signed the Court of Claims transfer bill with immediate effect. On November 14 the newly appointed chief judge of the Court of Claims issued an order staying for 30 days all matters pending before the Court of Claims.
On November 25, 2013, Okrie’s attorney, Gary Supanich, filed a Motion for Reconsideration of Judge Aquilina’s Order with the Court of Appeals acting as the Court of Claims citing numerous "palpable errors" of law. Supanich is now preparing a challenge of the constitutionality of the Act 159 also. An explanation and copies of filings are available on Attorney Supanich’s Web site, www.michigan-appeal-attorney.com.
Detroit Bankruptcy
“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.” Michigan Constitution, Article IX, Section 24.
For state employee retirees, the bankruptcy court’s interpretation of these words is the most important matter at hand, for that interpretation might be used in other contexts such as a dispute regarding state employee pensions. For Detroit retirees, bankruptcy Judge Steven Rhodes ruled on December 3 that the federal bankruptcy law can trump the Michigan Constitutional guarantee. The result may be significant reduction of Detroit retiree pensions and benefits.
Judge Rhodes said in his opinion that municipal pensions were to be treated as any other debt during bankruptcy. Rhodes said pension rights are state contract rights, and bankruptcy law allows impairment of contracts. However, he said his ruling should not be interpreted as the court endorsing pension reduction. He made it clear that he doesn't have to approve a plan that involves cutting pensions, referring to a plan of benefit reductions announced by the city. Rhodes said the plan would have to be fair and equitable. Detroit retirees have vowed to fight to save their pensions and benefits all the way to the U.S. Supreme Court if necessary.
Legislative Highlights
Landline Phone Service Bill Moves — Traditional landline customers in Michigan have dropped by 60 percent in the last decade, from 6.5 million in 2002 to 2.6 million in 2012, according to the Federal Communications Commission. Meanwhile, mobile phone users have more than doubled from 4.5 million to 9.3 million. About 1.4 million Michiganders have home phones that use VoiP. That's up from about 900,000 in 2008. With this changing landscape, ATT has led an effort to change Michigan law on landlines.
The Senate has approved SB 636 that would simplify the process for a telephone company to discontinue landline service. The company would still have to win approval from the Federal Communications Commission, but would no longer need front-end approval from the state's Public Service Commission.
A customer of the provider seeking to discontinue landline service or an interconnecting telecommunications provider would be able to petition the PSC to investigate the availability of reliable voice service with access to 911. After investigation, the PSC could declare an emergency in that area and conduct a request for service to find a willing provider of that can offer reliable voice service with 911 capabilities. If such a provider cannot be found, then under the bill, the PSC can compel the provider that wants to end landline service in an area to continue voice service, either through an alternative technology, or if that is not sufficiently reliable, by maintaining its landline system.
Many seniors exclusively use landline phones. AARP has opposed the bill because it gives the PSC no role in determining the existence of a competitive market or addressing issues on the front-end, instead putting control with the FCC. It also puts the burden of asking for an investigation on the consumer rather than letting the PSC initiate an investigation.
Sales Tax on Trade-Ins — Governor Snyder has signed into law a measure to eliminate the sales tax on the value of traded-in motor vehicles, boats and RVs as part of a purchase. The bill has been sought by auto and boat dealers for over 30 years. Starting December 15, the first $2,000 of a trade-in will be exempt. That number will rise by $500 annually until the total reaches $14,000, at which point the cap would end. The cost will be a decrease in revenue to the state in the 2013-14 fiscal year of $24.6 million, mostly to the School Aid Fund. The House Fiscal Agency estimates the full phase-in revenue reduction at $250 million to $450 million.
Other News
Bargaining News — The Civil Service Commission’s Impasse Panel issued its recommendations regarding employee pay and benefits on November 27. The recommendations will be submitted to the Civil Service Commission for ratification or amendment at its December 18 meeting.
Striking a middle ground between union demands and management offer, the Impasse Panel recommended a 2 percent base pay increase on October 1, 2014, and October 1, 2015, plus a .5 percent lump-sum award to employees on October 1, 2014.
Under Michigan’s new right-to-work law, workers can’t be required to financially support a union as a condition of employment, once current contracts expire. But state employee unions are arguing in a lawsuit the law doesn’t apply to them. The panel recommended keeping the status quo until the case is resolved by the state Supreme Court.
The panel agreed with the Office of the State Employer that all employees should be put into the News State Health Plan in effect since April 1, 2010 for employees hired on and after that date but with some modifications. The panel noted that the reserves for the current State Health Plan, without changes or a premium increase, would be in deficit by the end of 2014. Though the split for health insurance premiums would remain 80 percent paid by the employer and 20 percent paid by the employee, the panel called for a wide range of increases in deductibles and co-pays, along with reduced coverage. See Bob Kopasz’s Chair Talk in this issue for more information about the impact of these proposed health benefit changes on state retirees.
State’s Workforce Decreased — The number of state employees fell by more than 12,000 between 2002 and 2012, a drop of more than 20 percent, according to Civil Service Commission data released recently. There were about 61,500 state employees in 2002, which fell to 47,800 in 2012.
Affirmative Action Case in USSC — Schuette v Coalition to Defend Affirmative Action is a challenge to the 2006 constitutional amendment to ban public sector affirmative action in Michigan. It was heard in October by the U.S. Supreme Court. Those challenging the Michigan ban say that because of the ban, advocates for racial preferences in admissions may not directly lobby universities the way those seeking to employ other advantages, such as family or alumni status, can. Rather, they would have to undertake the constitutional amendment process to reverse the 2006 one. Seven other states have similar bans. A decision is expected next spring.
Abortion Insurance Coverage — The Board of State Canvassers has approved the petition signatures and sent the Right To Life of Michigan-backed initiated law banning insurance coverage of abortions to the Michigan Legislature for disposition. The Legislature by a simple majority could approve the measure and the Governor could not veto it. If they do not act, the measure would go to the ballot in November 2014. The Legislature has 40 session days to act. Governor Snyder and before him Governor Engler vetoed a similar measure.
SERA Recent News — If you are a SERA member, you are eligible to receive SERA Recent News, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. Write to michigansera@comcast.net, giving your name and chapter.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail michigansera@comcast.net.
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