Argued October 9, 2014.
[Copyrighted Material Omitted]
AFT Michigan and numerous other labor organizations representing public school employees brought an action in the Court of Claims against the state of Michigan, the State Treasurer, the Public School Employees' Retirement System, and others, asserting various constitutional challenges to 2012 PA 300, which had amended the Public School Employees Retirement Act, MCL 38.1301 et seq. In particular, the act added MCL 38.1391a(5), which enables current public school employees to opt out of retiree healthcare and thereby avoid paying the 3% retiree healthcare contributions required by MCL 38.1343e, a statute enacted in 2010 and subsequently struck down by the Court of Appeals as violating the Takings Clauses, Contracts Clauses, and Due Process Clauses of the Michigan and United States Constitutions in AFT Mich. v Michigan, 297 Mich.App. 597; 825 N.W.2d 595 (2012). It also added MCL 38.1391a(8), which provides a separate retirement allowance for public school employees who elect to pay the 3% contributions but subsequently fail to qualify for retiree healthcare benefits. Furthermore, the act altered the manner in which public school employees accrue pension benefits. It increased the amount that all current public school employees must contribute in order to continue accruing pension benefits at the existing rate. MCL 38.1343g(1)(a) requires members of the retirement system's Basic Plan (who had not previously contributed to their pensions) to contribute 4% of their salaries to the retirement system for that purpose. MCL 38.1343g(1)(b) requires members of the retirement system's Member Investment Plan to contribute 7% of their salaries to the system. Employees who decline to make the additional contributions will accrue future pension benefits at a lower amount. Finally, MCL 38.1384b(3) and (4) allow employees to discontinue accruing future pension benefits altogether and participate in a 401(k)-style Tier 2 retirement account. The act, however, altered only the manner in which employees accrue pension benefits arising after the act's effective date. It had no effect on pension benefits previously accrued. Plaintiffs argued that the act violated the Takings Clauses, Const 1963, art 10, § 2 and U.S. Const, Ams V and XIV; that the act impaired the obligation of contracts in violation of the Contracts Clauses, Const 1963, art 1, § 10 and U.S. Const, art I, § 10, cl 1; and that the act violated the Due Process Clauses, Const 1963, art 1, § 17 and U.S. Const, Am XIV, § 1. The Court of Claims, Rosemarie E. Aquilina, J., ruled in favor of defendants on all claims, and plaintiffs appealed. The Court of Appeals, SAAD, P.J., and K. F. KELLY, J. (GLEICHER, J., concurring), affirmed, concluding that contributions to the retiree healthcare program would be made voluntarily and were therefore free of constitutional infirmity and that the act did not affect any obligation of contracts between the state and public school employees with regard to the pension modification because the state is not obligated to provide future pension benefits to public school employees. 303 Mich.App. 651; 846 N.W.2d 583 (2014). Plaintiffs sought leave to appeal, which the Supreme Court granted. 495 Mich. 1002, 846 N.W.2d 544 (2014) .
For AFT MICHIGAN, ALPENA-MONTMORENCY-ALCONA ISD PARAPROFESSIONALS/TEACHERS, ARENAC EASTERN FEDERATION, BAY ARENAC SKILLS CENTER FEDERATION, BROWN CITY EMPLOYEES FEDERATION, BROWN CITY FEDERATION OF TEACHERS, CHEBOYGAN OTSEGO PRESQUE ISLE INTERMEDIATE PARAPROFESSIONALS AND BUS PERSONNEL, Plaintiffs-Appellants: MARK H. COUSENS, SOUTHFIELD, MI.
For STATE OF MICHIGAN, Defendant-Appellee: JOSHUA O. BOOTH, LANSING, MI.
Chief Justice: Robert P. Young, Jr. Justices: Stephen J. Markman, Mary Beth Kelly, Brian K. Zahra, Bridget M. McCormack, David F. Viviano, Richard H. Bernstein. BERNSTEIN, J., took no part in the decision of this case.
[497 Mich. 201] BEFORE THE ENTIRE BENCH (except BERNSTEIN, J.)
Stephen J. Markman, J.
We granted leave to appeal to address the constitutionality of 2012 PA 300, which modified the retirement benefits of current public school employees. Plaintiffs, which are various labor organizations representing such employees, raise three constitutional challenges: (1) whether the act violates the prohibitions of uncompensated takings in the Michigan and United States Constitutions, Const 1963, art 10, § 2 and U.S. Const, Ams V and XIV; (2) whether the act impairs the obligation of contracts in violation of the Michigan and United States Constitutions, Const 1963, art 1, § 10 and U.S. Const, art I, § 10, cl 1; and (3) whether the act violates the guarantee of due process in the Michigan and United States Constitutions, Const 1963, art 1, § 17 and U.S. Const, Am XIV, § 1. After considering each of these
challenges, we hold that the act does not violate any provision of either the Michigan or the United States Constitution. For the reasons stated in this opinion, we affirm the judgment of the Court of Appeals.
I. FACTS AND HISTORY
A. 2010 PA 75
Facing a budget shortfall in the state public school system in 2010, the Legislature enacted Public Act 75, which modified retirement benefits for current public [497 Mich. 202] school employees. The statute supplemented and altered the Public School Employees Retirement Act (Retirement Act), MCL 38.1301 et seq., which governs the Michigan Public School Employees' Retirement System (MPSERS). The most controversial provision of 2010 PA 75 was MCL 38.1343e, which required all current public school employees to contribute 3% of their salaries to the MPSERS to assist in funding retiree healthcare benefits for current and future public school retirees. Before the enactment of 2010 PA 75, public school employees had never been required to pay for these benefits. MCL 38.1343e directed school districts to withhold and remit this 3% amount to the state for deposit into a trust account from which current retirees' healthcare benefits would be paid.
B. AFT MICH I
Current public school employees, through their representative labor organizations, sued the state of Michigan and other state defendants in 2011, contending that MCL 38.1343e violated the aforementioned provisions of the Michigan and United States Constitutions. The Court of Claims held this provision unconstitutional as violative of the Takings Clauses of the Michigan and United States Constitutions, Const 1963, art 10, § 2 and U.S. Const, Ams V and XIV, and the guarantees of due process in the Michigan and United States Constitutions, Const 1963, art 1, § 17 and U.S. Const, Am XIV, § 1. The Court of Claims did not find any violation of the Contracts Clauses of the Michigan and United States Constitutions, Const 1963, art 1, § 10 and U.S. Const, art I, § 10, cl 1. The state appealed the Court of Claims' ruling, and in a split decision, the Court of Appeals affirmed in part. AFT Mich. v Michigan, 297 Mich.App. 597, 616, 621, 627; 825 N.W.2d 595 (2012) ( AFT Mich. I ).
[497 Mich. 203] AFT Mich. I held that MCL 38.1343e effected a taking without just compensation because the state was forcibly taking possession of a portion of the school employees' salaries without affording them just compensation in return. The Court of Appeals focused on what it viewed as the confiscatory nature of the statute-- requiring that current public school employees fund the healthcare benefits of current public school retirees absent any guarantee that the former would ever be eligible to receive healthcare benefits upon their own retirement. It concluded as a result that MCL 38.1343e violated the takings clauses of the Michigan and United States Constitutions. Id. at 621.
The Court of Appeals also held that MCL 38.1343e unconstitutionally impaired employment contracts between public school employees and employer school districts, notwithstanding the Court of Claims' conclusion to the contrary, because MCL 38.1343e effectively required the school districts to pay the employees less than their agreed-upon salaries. Although asserting that a contractual impairment does not always rise to the level of a constitutional violation, the Court concluded nonetheless that the state here had failed to demonstrate that the impairment was necessary to further its purpose in
enacting the statute, which was to ensure the fiscal stability of the MPSERS retiree healthcare program. The Court reasoned that the state could have pursued alternative means to correct the funding problem that would not have involved a diminution, or " impairment," of the salaries of current employees. Because the state had not attempted to achieve its goals through those alternatives, the Court ruled that 2010 PA 75 also violated the Contracts Clauses of the Michigan and United States Constitutions. Id. at 616.
[497 Mich. 204] Finally, the Court of Appeals held that MCL 38.1343e violated the employees' right to " substantive" due process. It concluded that the law arbitrarily forced one discrete group of individuals-- current public school employees-- to fund the retiree healthcare of a separate discrete group-- current public school retirees. The Court recognized that, although the accrued pension benefits of public employees are expressly protected by Const 1963, art 9, § 24 as contractual obligations that can be neither diminished nor impaired, future healthcare benefits are not. Nonetheless, because the state did not prefund retiree healthcare benefits, current employees were contributing 3% of their salaries absent any guarantee that they themselves would ever receive healthcare benefits upon retirement. The Legislature could simply alter the law again and modify or even eliminate the retiree healthcare program before current employees retired. The state was thus requiring current employees to cover the state's own financial obligations, while merely undertaking an essentially empty promise that current employees would receive similar benefits when they retired. The Court believed that this scheme was unreasonable, arbitrary, and capricious, and that it violated the " substantive" due process guaranteed by the Michigan and United States Constitutions. Id. at 627.
Judge SAAD, who authored an opinion concurring in part and dissenting in part, would have reversed the judgment of the Court of Claims and held 2010 PA 75 constitutional. He began by noting that " legislative enactments are presumed to be constitutional absent a clear showing to the contrary," and then argued that an obligation merely to pay money cannot constitute a taking requiring just compensation, that 2010 PA 75 created an obligation between public school employees and the state that did not affect the employment [497 Mich. 205] contracts between the employees and their school district employers, and that the Court of Claims should not have granted relief on plaintiffs' " substantive" due process claim because it was a mislabeled claim essentially alleging an uncompensated taking, an argument that plaintiffs had separately raised. AFT Mich. I, 297 Mich.App. at 630-640 (SAAD, J., concurring in part and dissenting in part).
The state sought leave to appeal the Court of Appeals' ruling in AFT Mich. I. That application is currently pending before this Court and has been held in abeyance for the resolution of the instant case. AFT Mich. v Michigan, 846 N.W.2d 57, 58 (Mich, 2014).
C. 2012 PA 300
The instant case arises from legislation enacted in response to the Court of Appeals' decision in AFT Mich. I. On September 4, 2012, the Governor signed into law 2012 PA 300, which further modified the Retirement Act. Current public school employees, once again through their representative labor organizations, have challenged provisions of this statute. In doing so, they raise many of the same constitutional challenges that were asserted with regard to 2010 PA 75 in AFT Mich. I.
The legal challenges to 2012 PA 300 focus on two principal aspects of the new law-- the changes it makes to the retiree healthcare plan and the changes it makes to the pension benefit plans provided by the MPSERS. Regarding retiree healthcare, 2012 PA 300 maintains in place MCL 38.1343e, the statute struck down by the Court of Appeals in AFT Mich. I. However, the Legislature added two new provisions. MCL 38.1391a(5) enables current public school employees to opt out of retiree healthcare and thereby to avoid paying the 3% retiree healthcare contributions under MCL 38.1343e. [497 Mich. 206] And MCL 38.1391a(8) provides a separate retirement allowance for public school employees who elect to pay the 3% contributions but who then subsequently fail to qualify for retiree healthcare benefits. The allowance is equal to the amount that the employee contributed to the healthcare plan with the addition of certain interest and is payable in 60 equal monthly installments after the employee reaches the age of 60.
Concerning the pension benefits offered by the MPSERS, 2012 PA 300 alters the manner in which public school employees accrue these benefits. Before 2012 PA 300, public school employees generally fell into one of two groups. Those hired before January 1, 1990 belonged to what was commonly called the " Basic Plan." These employees historically made no contributions to assist in funding their pensions. Those hired on or after January 1, 1990, automatically belonged to the " Member Investment Plan" (MIP) and contributed varying percentages of their salaries in the process of accruing pension benefits. MCL 38.1343a, as amended by 2007 PA 11. Members of both plans became fully vested in their benefits after 10 years of service, MCL 38.1381(1)(b); MCL 38.1343b, and monthly benefits were calculated using identical formulas. An employee's final average salary-- that is, the mean salary of the employee's last three years of employment-- was multiplied by the number of years served, and then further multiplied by 1.5%. MCL 38.1384.
2012 PA 300 increased the amount that all current public school employees must contribute in order to continue accruing pension benefits at the existing rate. Members of the Basic Plan, who have never before been required to contribute to their pensions, must now contribute 4% of their salaries to the MPSERS for this purpose. MCL 38.1343g(1)(a). Members of the MIP [497 Mich. 207] must now contribute 7% of their salaries to the MPSERS. MCL 38.1343g(1)(b). Employees who do not wish to make the additional contributions may decline to do so, but those employees will only accrue future pension benefits calculated using a 1.25% multiplier, instead of the existing 1.5% multiplier. MCL 38.1384b. Employees may also choose to discontinue accruing future pension benefits entirely and instead participate in a 401(k)-style retirement account called a " Tier 2" account. MCL 38.1384b(3) and (4). No matter which retirement plan an employee chooses, the pension benefits that the employee has already accrued are calculated using a 1.5% multiplier. MCL 38.1384b. 2012 PA 300 alters only the manner in which employees accrue future pension benefits, i.e., those arising after the effective date of 2012 PA 300; it has no effect on pension benefits that have previously accrued.
D. AFT MICH II
Public school employees, through their representative labor organizations, asserted numerous constitutional challenges to the validity of 2012 PA 300 in the Court of Claims. However, unlike its ruling in the challenge to 2010 PA 75, the Court of Claims ruled in favor of the state on all claims, holding that the provisions of the
earlier statute deemed in AFT Mich. I to have been unconstitutional had been sufficiently ameliorated by the enactment of the more recent statute, in particular by the choice afforded employees regarding whether to pay into the retiree healthcare plan, and that several new challenges raised for the first time against the later act were equally unavailing. Regarding the only new challenge germane to the instant case, the court found that public school employees had no vested interest in future pension benefits and, as a result, that [497 Mich. 208] 2012 PA 300 did not affect any contractual obligation on the part of the state to allow employees to accrue pension benefits at any particular rate.
Plaintiffs appealed, and the Court of Appeals affirmed the Court of Claims. AFT Mich. v Michigan, 303 Mich.App. 651; 846 N.W.2d 583 (2014) ( AFT Mich. II ). As did the Court of Claims, the Court of Appeals held that contributions to the retiree healthcare program would be made voluntarily and were therefore free of constitutional infirmity. The Court also assessed plaintiffs' challenges to the pension modification and, again as did the Court of Claims, concluded that 2012 PA 300 did not affect any obligation of contracts between the state and public school employees in this regard because the state is not obligated to provide future pension benefits to public school employees. Plaintiffs sought leave to appeal in this Court, which we granted. AFT Mich. v Michigan, 495 Mich. 1002, 846 N.W.2d 544 (2014).
II. STANDARD OF REVIEW
This case is an appeal from summary disposition in favor of defendants involving issues of constitutional, statutory, and contractual interpretation. This Court reviews de novo all such issues. Nat'l Pride At Work, Inc v Governor, 481 Mich. 56, 63; 748 N.W.2d 524 (2008); Archambo v Lawyers Title Ins Corp, 466 Mich. 402, 408; 646 N.W.2d 170 (2002); Oakland Co Bd of Co Rd Comm'rs v Mich. Prop & Cas Guaranty Ass'n, 456 Mich. 590, 610; 575 N.W.2d 751 (1998).
III. PLAINTIFFS' ARGUMENTS
Plaintiffs raise three clearly articulated arguments before this Court against 2012 PA 300. First, they argue that the statute violates the Takings Clauses of the Michigan [497 Mich. 209] and United States Constitutions, Const 1963, art 10, § 2 and U.S. Const, Ams V and XIV, by allowing the state to retain a significant amount of the interest that will accrue on public school employees' retiree healthcare contributions. Second, plaintiffs argue that 2012 PA 300 violates the Takings Clauses for the additional reason that it unconstitutionally coerces public school employees into waiving their rights under those constitutional provisions. Third, they argue that 2012 PA 300 " breaches" contracts between the state and public school employees guaranteeing employees that they will continue accruing pension benefits at a specific rate.
Although plaintiffs frame their third argument as a " breach of contract" claim, we understand them essentially to be raising a constitutional challenge to the pension modifications under Const 1963, art 1, § 10 and U.S. Const, art I, § 10, cl 1, which prohibit laws impairing the obligation of contracts. An action for breach of a contract and an action alleging that a law impairs the obligation of a contract are distinct claims. Thompson v Auditor General, 261 Mich. 624, 634; 247 N.W. 360 (1933). A refusal to perform in compliance with a valid contract amounts to a breach of a contract and may entitle the other party to damages or other forms of relief; however, a breach does not affect the contract's fundamental validity. Id. In contrast, a contract is " impaired" when a
law undermines a party's ability to legally enforce that contract; a contractual impairment is typically remedied through invalidation of the impairing law. Id. at 634-635. Plaintiffs here are not, in fact, seeking remedies for breach of contract, but rather are seeking the invalidation of 2012 PA 300 because, they allege, it impairs an asserted contract between public school employees and the state. Consequently, [497 Mich. 210] we analyze plaintiffs' objection to the pension modifications instituted by 2012 PA 300 as a claim of unconstitutional impairment of contractual obligations under the Contract Clauses of the Michigan and United States Constitutions.
Plaintiffs also make a broad and unsupported argument that " 2012 PA 300 does not repair the defect found in 2010 PA 75. [The act] is still unconstitutional because it permits an extraction with no guarantee of benefit and provides for a refund of contributions which itself is unconstitutional." Plaintiffs elaborate that " [the retiree healthcare contributions] now made still lack any certainty that the individual paying in MPSERS will actually receive post employment retiree health care. Further, the provision for a refund of payments is so unreasonable as to be itself a violation of the individual's right to substantive due process."
By arguing that 2012 PA 300 is " still" unconstitutional, plaintiffs appear to be reasserting the arguments that prevailed with respect to 2010 PA 75 in AFT Mich. I. But to the extent that plaintiffs expressly raise these same arguments, they do so in an inconsistent and ambiguous manner. Plaintiffs' brief on appeal, for example, states: " [MCL 38.1343e] is a deprivation of the right of substantive due process for the same reasons expressed to this Court, and the Court of Appeals, in [ AFT Mich. I ]." Contradictorily, however, plaintiffs' reply brief states: " Defendant incorrectly asserts that Plaintiffs have somehow argued that 2012 PA 300 [497 Mich. 211] deprives members of their right to substantive due process." We are therefore left somewhat confused about the appropriate manner by which to evaluate these arguments.
In the interest of a thorough and complete adjudication for the numerous persons whom plaintiffs represent, we believe that the most appropriate solution is to conclude that by arguing that " 2012 PA 300 does not repair the defect found in 2010 PA 75," plaintiffs are essentially arguing that 2012 PA 300 is unconstitutional for the same reasons that the Court of Appeals deemed 2010 PA 75 to be unconstitutional. In other words, we believe plaintiffs continue to argue that 2012 PA 300 violates the Contract Clauses and any " substantive" due process guarantees of the Michigan and United States Constitutions for the same reasons that the Court of Appeals deemed these provisions to have been violated by 2010 PA 75.
Defendants, not entirely without basis, contend that plaintiffs have abandoned these arguments by failing to properly rearticulate them; nonetheless, we believe it appropriate to address them. Although we are troubled that plaintiffs have not clearly reasserted their original arguments (or clearly articulated new arguments, if it was their intention to do so), we choose to address these arguments for several reasons. First, plaintiffs have framed their broad and unsupported arguments by at least referring to the Court of Appeals' decision in AFT [497 Mich. 212] Mich. I. Those references suggest, in our judgment, that plaintiffs did not intend to abandon arguments that they asserted in that case. Second, these same arguments were all properly raised before the Court of Appeals in AFT Mich. II, and that Court specifically addressed each of the constitutional arguments that were at the heart of the decision in AFT Mich. I. Third, defendants themselves thoroughly addressed each of these arguments before the Court of Appeals in AFT Mich. II, and have now thoroughly addressed the " substantive" due process argument raised before this Court. For these reasons, in evaluating the range of objections to 2012 PA 300, we have chosen to consider the arguments alleging impairment of contracts and " substantive" due process violations that prevailed in AFT Mich. I, but have been presented to this Court in what can only be described as an indirect and obscure manner. In addition, we consider the alleged violations of the Takings Clauses that plaintiffs clearly raise before this Court, as well as the breach of contract claim that we analyze as a distinct claim of contractual impairment separate from the contractual impairment claim that prevailed in AFT Mich. I.
[497 Mich. 213] Finally, we note that although plaintiffs raise challenges under both the Michigan and United States Constitutions, they have not argued with any specificity, or by reference to, the decisions of the courts of this state that a particular provision of the Michigan Constitution affords greater or distinct protections than its federal counterpart. Rather, plaintiffs have simply left it to this Court to identify such differences in meaning if and where these exist. Although this Court on numerous occasions has interpreted a Michigan constitutional provision differently than its federal counterpart, " [i]t is not enough for
an appellant in his brief simply to announce a position or assert an error and then leave it up to this Court to discover and rationalize the basis for his claims, or unravel and elaborate for him his arguments . . . ." Mudge v Macomb Co, 458 Mich. 87, 105; [497 Mich. 214] 580 N.W.2d 845 (1998) (quotation marks and citation omitted). We will therefore not seek to discover whether the Michigan Constitution might afford protections greater than, or distinct from, those of the United States Constitution when plaintiffs have not supplied us with arguments or guidance in support of this proposition. Rather, we will assume for the purposes of this case that similarly worded provisions of the Michigan and United States Constitutions are intended to be coextensive in their meaning, although we emphasize strongly that we are never bound to such an interpretation of the former. Harvey v Michigan, 469 Mich. 1, 6 n 3; 664 N.W.2d 767 (2003).
We have sought to examine closely plaintiffs' constitutional arguments, and for the reasons set forth we conclude that they do not warrant the invalidation of 2012 PA 300. We preface our analysis leading to this conclusion, however, by noting that this Court is obligated to uphold all laws that do not infringe the state or federal Constitutions and invalidate only those laws that do so infringe. We do not render judgments on the wisdom, fairness, or prudence of legislative enactments. See Mayor of Lansing v Mich. PSC, 470 Mich. 154, 161; 680 N.W.2d 840 (2004). Legislation is presumed to be constitutional absent a clear showing to the contrary. Caterpillar, Inc v Dep't of Treasury, 440 Mich. 400, 413; 488 N.W.2d 182 (1992). In the present case, this Court is not oblivious to the fact, as reflected by the sheer breadth of the class of plaintiffs, that many public school employees intensely dislike the policies instituted by 2012 PA 300 and believe that the healthcare and pension choices imposed on them are unfair and unsatisfactory. However, decisions concerning the allocation [497 Mich. 215] of public resources will often leave some parties disappointed. Recourse and correction must be pursued through those bodies authorized by our Constitution to undertake such decisions-- typically the legislative branch-- and not through bodies, such as this Court, that are charged only with comparing the provisions of the law with the prohibitions of our Constitution and deciding whether they are compatible. Const 1963, art 3, § 2.
We also note at the outset that all public employees must contend with a variety of future uncertainties, of which they are, or should be, aware at the time that they pursue and accept public employment. The terms, conditions, and even continued existence of public employment positions may be influenced by the changing fiscal conditions of the state, the evolving policy priorities of governmental bodies, constitutional modifications and other initiatives of the people, and the ebb and flow of state,
national, and global economies. The future is not easily predictable, and public employees, along with individuals working in the private sector, must contend with these realities. When changing circumstances require that the state undertake what may be difficult or unpopular decisions regarding its own work force, it will often be unavailing for dissatisfied public employees to file constitutional lawsuits insisting on an unreasonable level of fixedness or immutability. See LeRoux v Secretary of State, 465 Mich. 594, 616; 640 N.W.2d 849 (2002) (" '[T]he Legislature, in enacting a law, cannot bind ...