Michigan Supreme Court: Return $554 Million To School Employees

LANSING (AP) - The Michigan Supreme Court on Wednesday ordered the state to return $554 million to school employees who saw a portion of their pay illegally deducted for retiree health care for about two years, ending a lengthy legal battle that stretched across two governorships.

The court, in a 6-0 ruling, said the 2010 law signed by Democratic Gov. Jennifer Granholm and defended by Republican Gov. Rick Snyder violated the contract clauses of the federal and state constitutions. The decision affirmed a 2016 judgment by the state appeals court.

"I cannot imagine a better pre-holiday gift to Michigan's school employees than getting their hard-earned money returned to them," Paula Herbart, president of the Michigan Education Association, said in a statement. It was among a number of unions that sued on behalf of K-12 and community college workers to challenge the 3 percent deductions.

[Read background on the case as provided by the court]

Because the money has been held in escrow, the refunds — including interest — will not affect the state budget, said Snyder, who replaced the faulty 2010 law with a 2012 law that has survived court challenges and who had come under criticism for trying to keep the funds despite lower court rulings.

"We will not need to raise new revenue or remove funding from other priorities to refund the money that was collected for retirement health care," he said in a statement.

His office said the Michigan Office of Retirement Services is diligently working to refund the money to school districts.

"Michigan's school employees have waited eight long years to get their hard-earned money returned to them — no further delay is necessary," AFT Michigan President David Hecker said in a statement.

In 2015, the high court upheld the 2012 law, which required public school employees to pay more toward their pension to avoid receiving less in retirement and made them either contribute 3 percent of their salary for retiree health care or opt out of the benefit. The law also ended employer-provided health coverage for new hires, instead giving them a match in their 401(k) plus a lump sum upon retirement to pay for health insurance.

Snyder, who'd wanted to keep the money, says he's "pleased that taxpayers will have resolution."

© Copyright 2017 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.