Kosa v. Treasurer of State of Mich., Docket Nos. 60701
| Decision Date | 27 May 1980 |
| Docket Number | 12,Docket Nos. 60701,60712,Nos. 11,s. 11 |
| Citation | 408 Mich. 356,292 N.W.2d 452 |
| Parties | Mary Kay KOSA, Raymond Ascenzo, Forrest Averill, Robert Secrist, Carl Brablec, Edwin Skrabucha, David McMahon and the Retirement Coordinating Council, Plaintiffs-Appellants, v. TREASURER OF the STATE OF MICHIGAN, Director of the Department of Management and Budget, Auditor General, Governor, Superintendent of Public Instruction, Michigan Public School Employees' Retirement Board and the Legislature of the State of Michigan, Defendants-Appellees. Mary Kay KOSA, Raymond Ascenzo, Forrest Averill, Robert Secrist, Carl Brablec, Edward Skrabucha, David McMahon and the Retirement Coordinating Council, Plaintiffs-Appellees, v. TREASURER OF the STATE OF MICHIGAN, Director of the Department of Management and Budget, Auditor General, Governor, Superintendent of Public Instruction, Michigan Public School Employees' Retirement Board and the Legislature of the State of Michigan, Defendants-Appellants. Calendar |
| Court | Michigan Supreme Court |
Karen Bush Schneider, Peter F. McNenly, Lansing, for plaintiffs-appellants.
Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Gerald F. Young, Asst. Atty. Gen., Lansing, for defendants Treasurer of the State of Michigan, et al.
James A. White, Foster, Swift, Collins & Coey, Lansing, for plaintiffs Kosa, et al.
This case presents a political problem seeking judicial resolution. To gainprotection The background is complex and confusing. However, the following encapsulates the significant factors:
of their pension rights, Michigan teachers effectively lobbied for a constitutional amendment granting contractual status to retirement benefits. When it appeared that the constitutional guarantee might be impaired, the teachers turned to the courts for assistance. That litigation, culminating in a Court of Appeals decision, led to a legislative effort for a political solution. We are called upon to review this action.
(1) For years teachers' pensions were inadequate because they were based on unconscionably low salaries and employee contributions premised thereon. Retirement security has been further eroded because of the rise in the cost of living due to inflation.
(2) Even after the Legislature began assuming responsibility for contributions to the teachers' retirement fund, pension security was jeopardized because the Legislature did not always make adequate appropriations to fund the reserves to pay pension benefits. By the time of the 1961 Constitutional Convention, this underfunding amounted to about 600 million dollars. 1
(3) Provision was made in the 1963 Constitution to make pension benefit payments contractual obligations and to require adequate annual appropriations to the pension fund. Const.1963, art. 9, § 24.
(4) In each fiscal year from 1963 until 1974, the Legislature appropriated adequate sums to meet anticipated post-constitution (hereinafter "post-con") retirement reserve requirements. The Legislature failed, however, to make adequate appropriation for the pre-constitution (hereinafter "pre-con") accrued retirement liabilities. 2
(5) In each fiscal year from 1963 until 1974, the reserves collected under the "pre-con" retirement system were sufficient to pay "pre-con" retirement benefits.
(6) In 1972 and 1974, the Legislature increased benefits for both "pre-con" and "post-con" retirants. 3
(7) From fiscal 1974-1975 to 1976-1977, when the "pre-con" reserves were exhausted, the Michigan Public School Employees' Retirement System (hereinafter MPSERS) "borrowed" from the "post-con" reserves to pay "pre-con" liabilities.
(8) On February 2, 1976, "pre-con" and "post-con" retirees and current MPSERS members sought equitable relief from this "borrowing" of "post-con" reserves to meet "pre-con" liabilities, filing a Complaint for Mandamus in the Court of Appeals. 4
(9) The Court of Appeals ruled that the MPSERS' "borrowing" was illegal and subject to mandamus. The Court additionally ruled, however, that mandamus would not lie against the Legislature to compel compensating appropriations. 5
(10) Thereafter, the Legislature belatedly sought to correct prior funding deficiencies through enactment of 1977 P.A. 275, 6 which The foregoing facts raise five issues:
retroactively substituted the "entry age normal" system of accounting for the previous "attained age" system. 7 Since the new system required a lower level of initial reserves than the former system, an excess of funds was created, approximately 475 million dollars, more than sufficient to restore the 460 million dollars "borrowed" from the "post-con" reserves. 8
I. Did the MPSERS Board violate Const.1963, art. 9, § 24 by "borrowing" from "post-con" funded reserves to pay "pre-con" retiree benefits? Further, did the Court of Appeals correctly rule that a rule of writ of mandamus might issue to terminate that "borrowing"? The answer to both questions is yes.
II. Did the Legislature violate the Constitution by underfunding the "pre-con" reserves? The answer to this question is no.
III. Did the Legislature, through its passage of 1977 P.A. 275, violate the constitutional proscription against impairment of contracts, Const.1963, art. 9, § 24 and art. 1, § 10? The answer to this question is no.
IV. Did the Legislature, through its passage of 1977 P.A. 275, violate the constitutional prohibition that "post-con" current service "funding shall not be used for financing unfunded accrued liabilities", i. e., "pre-con" retirement benefits, Const.1963, art. 9, § 24? Can this Court by mandamus require the Legislature to refund the "post-con" current service monies used to defray "pre-con" unfunded accrued liabilities? The answer to the first question is no. The second question is moot.
V. Did 1977 P.A. 275 satisfy (a) constitutional funding and (b) the prayers in plaintiffs' complaint? If not, what can this Court do to give relief? The answer to both questions is that there is insufficient data in the record to resolve these questions and that this Court is remanding the matter to the Court of Appeals to establish the necessary data.
This action for mandamus was initially commenced in the Court of Appeals on February 2, 1976. 78 Mich.App. 316, 259 N.W.2d 463 (1977), reh. den. 9 Plaintiffs alleged, inter alia, that defendants were misapplying "post-con" funded reserves 10 to pay "pre-con" unfunded accrued liabilities, 11 contrary to Const.1963, art. 9, § 24, which provides:
More specifically, plaintiffs contended that these "post-con" monies were appropriated by the Legislature only to cover the annual contributions, or "current service" 12 monies, made to MPSERS on behalf of currently employed MPSERS members. The "post-con" monies could not legally be utilized to meet MPSERS "pre-con" unfunded accrued liabilities. 13
In years prior to the Constitution of 1963, the Legislature did not always make adequate appropriations to maintain the MPSERS on an actuarially sound basis. At the time of the 1961 Constitutional Convention, the unfunded accrued liabilities of the MPSERS exceeded reserves by approximately 600 million dollars. 14 The practical effect of this underfunding was that many pensioners had accumulated years of service for which insufficient money had been set aside in the pension reserve funds to pay the benefits to which their years of service entitled them. 15 These pensioners sought relief in the 1961 Constitutional Convention and achieved Const.1963, art. 9, § 24.
Following the adoption of the 1963 Constitution, the MPSERS Board commenced using the "attained age" method of valuation to determine the amount of the state's contribution to MPSERS.
The Legislature has, in recent years, supplemented the retirement income for previously retired members of the MPSERS. 1972 P.A. 258, § 172; M.C.L. § 388.1272; M.S.A. § 15.1919(672) set, with restrictions, a $3,000 yearly minimum retirement benefit for pre-1956 retirants. In 1972 the Legislature increased the retirement allowances for members who had retired between 1956 and 1971 by between 1% and 15%, depending upon how long ago the member retired. 1972 P.A. 258, § 174; M.C.L. § 388.1274; M.S.A. § 15.1919(674). The Legislature further increased retirement allowances for members who retired between 1956 and 1973 by between 1% and 17% in M.C.L. § 38.227d; M.S.A. § 15.893(27d). 1974 P.A. 244.
Until 1974, deficiencies in appropriations for "pre-con" retirees were met through disbursement of funds which had been accumulated in the retirement system prior to the effective date of the 1963 Constitution. These "pre-con" reserves were exhausted in Under these circumstances, plaintiffs, both "pre-con" and "post-con" retirees and presently working MPSERS members, brought this suit. On September 12, 1977, the Court of Appeals held that a writ of mandamus would issue, requiring the defendant MPSERS Board to cease, as unconstitutional, the use of MPSERS "post-con" funded reserves to defray "pre-con" unfunded accrued liabilities. It declined, however, to order the Legislature to appropriate compensating funds to the MPSERS. 78 Mich.App. 316, 259 N.W.2d 463 (1977), reh. den.
the 1974-1975 fiscal year. The MPSERS Board was therefore without adequate funds to pay the benefits due approximately 45,000 retirees and beneficiaries with "pre-con" service. 16 Rather than making partial benefit payments to retirees with only "pre-con" benefit entitlement, the MPSERS Board in effect extra-legally "borrowed"
...To continue reading
Request your trial
- Pub. Sch. Ret. System of Mo. v. State St. Bank & Trust Co.
-
Dadisman v. Moore
... ... Pt. 2, State ex rel. Cooke v. Jarrell, 154 W.Va. 542, 177 ... Vol.), and its members, Governor Moore, Treasurer Manchin, and Auditor Gainer, are Respondents ... They cite a Michigan Supreme Court case, Kosa v. Treasurer of the State of Michigan, 408 Mich ... ...
-
In re Request for Advisory Opinion Regarding Constitutionality of 2011 Pa 38.
... 490 Mich. 295 806 N.W.2d 683 In re REQUEST FOR ADVISORY ... Docket No. 143157. Supreme Court of Michigan. Nov. 18, ... Cohen for amicus curiae the Michigan State Employee Retirees Association Coordinating ... See Shivel v. Kent Co. Treasurer, 295 Mich. 10, 15, 294 N.W. 78 (1940) (“The ... Justice Williams for the unanimous Court in Kosa v. State Treasurer, 408 Mich. 356, 372 n. 22; ... ...
-
Kaho`Ohanohano v. State
... ... [389 Mich. 659,] 209 N.W.2d 200 (1973) (legislature can ... not be diminished or impaired thereby." In Kosa v. Treasurer of the State of Michigan, 408 Mich ... ...