Court Opinion

ID: 848641
Source: CourtListenerOpinion
Date Created: 2013-03-01 23:49:24.600439+00
Date Added: 2024-06-11T15:08:25.507430
License: Public Domain

Michigan Supreme Court
                                                                     Lansing, Michigan
                                        Chief Justice:	          Justices:

Opinion                                 Clifford W. Taylor 	     Michael F. Cavanagh
                                                                 Elizabeth A. Weaver
                                                                 Marilyn Kelly
                                                                 Maura D. Corrigan
                                                                 Robert P. Young, Jr.
                                                                 Stephen J. Markman

                                                 FILED JUNE 28, 2005
 ALBERTA STUDIER, PATRICIA M.
 SANOCKI, MARY A. NICHOLS, LAVIVA
 M. CABAY, MARY L. WOODRING, and
 MILDRED E. WEDELL,

      Plaintiffs-Appellants,

 v                                                              	 o. 125765
                                                                N

 MICHIGAN PUBLIC SCHOOL EMPLOYEES'
 RETIREMENT BOARD, MICHIGAN PUBLIC
 SCHOOL EMPLOYEES' RETIREMENT SYSTEM,
 DEPARTMENT OF MANAGEMENT AND BUDGET,
 and TREASURER OF MICHIGAN,

      Defendants-Appellees.
 _________________________________/

 ALBERTA STUDIER, PATRICIA M.
 SANOCKI, MARY A. NICHOLS, LAVIVA
 M. CABAY, MARY L. WOODRING, and
 MILDRED E. WEDELL,

      Plaintiffs-Appellees,

 v                                                             	 o. 125766
                                                               N

 MICHIGAN PUBLIC SCHOOL EMLOYEES’
 RETIREMENT BOARD, MICHIGAN PUBLIC
 SCHOOL EMPLOYEES’ RETIREMENT SYSTEM,
 DEPARTMENT OF MANAGEMENT AND BUDGET,
 and TREASURER OF MICHIGAN,

      Defendants-Appellants.
 ________________________________/

 BEFORE THE ENTIRE BENCH

 TAYLOR, C.J.
        We granted leave in this case to consider two issues.

The first is whether health care benefits paid to public

school        retirees      constitute     “accrued       financial    benefits”

subject to protection from diminishment or impairment by

Const 1963, art 9, § 24.                  We hold that they do not and,

accordingly, affirm the Court of Appeals determination on

this        issue.1      The   second     issue    is   whether      the   statute

establishing          the    health     care    benefits,     MCL    38.1391(1),

created a contract with the public school retirees that

could not be changed by a later legislature because to do

so would unconstitutionally impair an existing contractual

obligation in violation of US Const, art I, § 10 and Const

1963, art 1, § 10.              The Court of Appeals determined that

MCL     38.1391(1)          established     a     contract,    but     that    the

Legislature’s         subsequent       changes     were    insubstantial      and,

thus,         there      was     no     constitutionally            impermissible

impairment of contract.               The Court of Appeals erred on this

issue because MCL 38.1391(1) did not create a contract.

However, because the Court of Appeals reached the correct

result, we affirm its determination that the circuit court

properly entered summary disposition in defendants’ favor.

        1
            260 Mich. App. 460; 679 NW2d 88 (2004).

                                          2

              I.      FACTUAL HISTORY AND PROCEDURAL POSTURE 

        The Michigan Public School Employees’ Retirement Board

(board)       began     providing       a    health      care   plan     for   public

school retirees in 1975 pursuant to amendments made by 1974
PA 244 to the former Public School Employees Retirement

Act, 1945 PA 136, which was the predecessor of the current

Public School Employees Retirement Act, 1980 PA 300, MCL

38.1301 et seq.           Since that time, participants in the plan

have     been      required    to      pay    deductibles        and     copays    for

prescription drugs, and the amounts of the deductibles and

copays        have     gradually       increased         throughout      the      years

because of numerous amendments the board has made to the

plan     to    reflect     the     rising      costs      of    health     care     and

advances in medical technology.                     The present case arises

from the two most recent amendments made to the plan by the

board.        The first amendment became effective on January 1,

2000,    and       increased     the    amount      of    the   deductibles       that

retirees        are    required        to    pay.        The    second     amendment

occurred on January 21, 2000, and increased the copays and

out-of-pocket maximums that retirees are required to pay

for prescription drugs.                 The Court of Appeals succinctly

summarized those amendments as follows:

             The    amendments   modified    the   plan’s
        prescription drug copayment structure and out-of-
        pocket maximum for prescription drugs effective
        April 1, 2000, and also implemented a formulary
        effective January 1, 2001. A formulary is a
                                3
      preferred list of drugs approved by the federal
      Food and Drug Administration that is designed to
      give preference to those competing drugs that
      offer the greatest therapeutic benefit at the
      most   favorable    cost.   Existing    maintenance
      prescriptions    outside   the    formulary    were
      grandfathered in and subject only to the standard
      copayment of twenty percent of the drug's cost,
      with a $ 4 minimum and a $ 20 maximum.

            The prescription drug copayment was changed
      to a twenty percent copay, with a $4 minimum and
      $20 maximum for up to a one-month supply. The
      copay    maximum   for   mail-order   prescription
      copayment was set at $50 for a three-month
      supply.    A $750 maximum out-of-pocket copay for
      each calendar year was also established. [The
      plan did not previously contain an annual out-of-
      pocket maximum.]    Under the formulary, eligible
      persons pay an additional twenty percent of a new
      nonformulary drug’s approved cost only when use
      of the nonformulary drug is not preapproved by
      the drug plan administrator.

           The board also adopted a resolution to
      increase health insurance deductibles from $145
      for an individual to $165, and from $290 to $ 330
      for a family, effective January 1, 2000. The
      deductibles do not apply to prescription drugs.[2]

      Plaintiffs, six public school retirees, filed suit for

declaratory and injunctive relief against the board, the

Michigan      Public     School     Employees’    Retirement     System

(MPSERS), the Michigan Department of Management and Budget,

and   the    Treasurer   of   the   state   of   Michigan.     Although

plaintiffs’ complaint contained three counts, only counts I

and II remain for our consideration.             Count I alleged that

the copay and deductible increases violate Const 1963, art

      2
260 Mich. App. at 466-467.

                                     4

9,   §    24,     which       prohibits          the   state     or    a        political

subdivision       from     diminishing           or    impairing       the      “accrued

financial       benefits”       of    any        pension    plan      or     retirement

system it offers.               Count II alleged that the copay and

deductible increases violate Const 1963, art 1, § 10 and US

Const, art I, § 10, both of which prohibit the enactment of

a law that impairs an existing contractual obligation.

        Both    sides     moved      for    summary        disposition          on    these

counts    and     the     trial      court        granted      defendants’           motion

pursuant to MCR 2.116(C)(10).                    With respect to count I, the

trial    court    rejected        plaintiffs’          claim    that       health     care

benefits are “accrued financial benefits” under Const 1963,

art 9, § 24, holding that the Court of Appeals and this

Court “‘have been squarely faced with the opportunity to

rule on this question and have declined to do so . . . .’”
260 Mich. App. at 462.                With respect to count II, the trial

court,    after        noting     the      similarity       between        the       MPSERS

health     care    plan       and    those        offered      by     other       states,

concluded       that    MCL     38.1391(1)        does     establish        a    contract

with the plaintiffs but that, because the proportions of

the total costs for deductibles and copays borne by the

plaintiffs were essentially unchanged, the impairment was

too insubstantial to create an impairment the law would

recognize.

                                            5

        Plaintiffs        appealed        to   the     Court       of     Appeals,    which

affirmed       the     trial       court’s     ruling        entirely.           Thus,   the

panel       held     that    health       care      benefits        are    not     “accrued

financial benefits” subject to protection by Const 1963,

art 9, § 24, and that the Legislature’s enactment of MCL

38.1391(1) created a contract, but the impairment was too

de minimis to be recognized.

        Plaintiffs applied for leave to appeal to this Court,

seeking to challenge the Court of Appeals determinations

that        health    care     benefits          are    not        “accrued       financial

benefits” protected by Const 1963, art 9, § 24 and that the

deductible and copay increases implemented by the health

care plan amendments are not a substantial impairment of

plaintiffs’          contractual          right        to     receive       health       care

benefits.            Defendants filed an application for leave to

appeal,        seeking        to     challenge          the        Court     of    Appeals

conclusion         that     MCL     38.1391(1)         vests       plaintiffs       with    a

contractual          right.          We    granted          both     applications        and

ordered that they be submitted together.3

                             II.     STANDARD OF REVIEW

       This Court reviews de novo a trial court’s decision

regarding a motion for summary disposition.                                 Taxpayers of

Michigan Against Casinos v Michigan, 471 Mich. 306, 317; 685

        3
            471 Mich. 875 (2004).

                                               6

NW2d 221 (2004).          This case also involves constitutional

issues, as well as issues of statutory construction.                          These

issues are reviewed de novo by this Court.                         Wayne Co v

Hathcock, 471 Mich. 445, 455; 684 NW2d 765 (2004).

             III.    ANALYSIS OF CONST 1963, ART            9, § 24

      Const 1963, art 9, § 24 provides:

           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.

           Financial benefits arising on account of
      service rendered in each fiscal year shall be
      funded during that year and such funding shall
      not be used for financing unfunded accrued
      liabilities.

      These two clauses unambiguously prohibit the state and

its political subdivisions from diminishing or impairing

“accrued     financial     benefits,”        and     require     them    to     fund

“accrued     financial    benefits”         during    the   fiscal       year   for

which corresponding services are rendered.                     To apply this,

we   are    called     upon    to   determine        what   is    an     “accrued

financial benefit” and, in particular, whether health care

benefits are such a benefit.

      This    Court     has    twice   considered        the     issue    whether

health     care     benefits   fall    within      the   ambit     of    “accrued

financial benefits” protected by art 9, § 24.                     In the first

instance, Musselman v Governor, 448 Mich. 503; 533 NW2d 237

                                       7

(1995) (Musselman I), six members of this Court4 considered

a constitutional challenge to the state’s failure to fund

retirement health care benefits being earned by nonretired

public school employees during the 1990-1991 school year.

In     determining             whether       the        state’s       failure        to    do     so

violated the “prefunding” requirement of the second clause

of   art      9,     §       24,   a    four-member            majority       of    this    Court

determined that health care benefits are, indeed, included

within       the     term         “accrued     financial            benefits.”            Focusing

primarily          on     statements          by        some    of     the    constitutional

delegates           who       supported       art        9,     §     24    that     they       were

concerned about the future ability of governmental entities

to pay retirement benefits if the entities did not set

aside       funding          to    do   so    during           each    year     of    a     public

employee’s service,5 the majority reasoned that “because the

purpose of the provision is to prevent governmental units

from amassing bills for pension payments that they do not

have        money       to    pay,      we    hold        that       the     term    ‘financial

benefits’ must include retirement health care benefits.”

Musselman          I,     supra        at    513.         Justice          Riley,    joined      by

        4
            Justice Weaver did not participate. 448 Mich. at 503.
        5
       Musselman I, supra at 512-513, quoting 1 Official
Record, Constitutional Convention 1961, p 772 (delegate
Stafseth); Musselman I, supra at 512 n 5, quoting 1
Official Record, Constitutional Convention 1961, p 771
(delegate Van Dusen).

                                                   8

Justice       Levin,      dissented       from       this      portion      of     the

majority’s       analysis         primarily      on      the       basis    of     her

conclusion that the term “financial” is commonly understood

to    connote        monetary     obligations         and,     thus,       the    term

“financial       benefits”        does     not       encompass       health       care

benefits.       Id. at 525-532.

        This Court subsequently granted rehearing in Musselman

v    Governor    (On     Rehearing),       450 Mich. 574;    545    NW2d    346

(1996) (Musselman II), and the prior majority lost a vote

because Justice Brickley stated that he no longer believed

that interpretation of art 9, § 24 was necessary to resolve

the case.       Musselman II, supra at 576-577.                    Justice Weaver,

now participating, joined Justice Riley’s dissent on the

issue and also wrote separately, saying that the electorate

could    not     have    intended       the     phrase      “accrued       financial

benefits”       to    include     health      care    benefits        because     the

pension and retirement systems in place at the time art 9,

§ 24 was adopted consisted only of monthly stipends.                               Id.

at    579-580.           Justice       Weaver     further       concluded         that

statements by constitutional convention delegates show that

they had employed the phrase “accrued financial benefits”

for the specific purpose of limiting the contractual right

of public school employees under art 9, § 24 to deferred

compensation embodied in a pension plan.                            Musselman II,

supra    at    580,     quoting    1   Official       Record,       Constitutional
                                         9
Convention            1961,    pp    771,   773-774      (delegate        Van   Dusen).

Thus, with six justices splitting three to three on the

issue,        the      question      whether        health    care    benefits      are

included         within       the    phrase    “accrued      financial      benefits”

remained unresolved by this Court.                           However, as did the

Court       of    Appeals       in    the     present    case,6      we    agree    with

Justices Riley, Weaver, and Levin that they are not.

        As Justice Riley correctly pointed out in her dissent

in   Musselman           I,    the      majority      “misse[d]      the    mark”    by

focusing on the history behind art 9, § 24 and the intent

of the constitutional convention delegates in proposing it,

rather than on the interpretation that the people would

have given the provision when they adopted it.                              Musselman

I, supra at 526.                Indeed, we recently stated the correct

standard         to    be     applied    when       interpreting     constitutional

provisions in Hathcock, supra at 468:

             The primary objective in interpreting a
        constitutional provision is to determine the
        text’s original meaning to the ratifiers, the
        people, at the time of ratification. [People v
        Nutt, 469 Mich. 565, 573; 677 NW2d 1 (2004).]
        This rule of “common understanding” has been
        described by Justice COOLEY in this way:

             “A constitution is made for the people and
        by the people. The interpretation that should be
        given it is that which reasonable minds, the
        great mass of the people themselves, would give
        it. ‘For as the Constitution does not derive its

        6
260 Mich. App. at 473.

                                              10

        force from the convention which framed, but from
        the people who ratified it, the intent to be
        arrived at is that of the people, and it is not
        to be supposed that they have looked for any dark
        or abstruse meaning in the words employed, but
        rather that they have accepted them in the sense
        most obvious to the common understanding, and
        ratified the instrument in the belief that that
        was   the  sense   designed  to   be   conveyed.’”
        [Traverse City School Dist v Attorney General,
        384 Mich. 390, 405; 185 NW2d 9 (1971) (emphasis in
        original),   quoting   1  Cooley,   Constitutional
        Limitations (6th ed), p 81.]

        In short, the primary objective of constitutional
        interpretation is to realize the intent of the
        people by whom and for whom the constitution was
        ratified.

        In    order       to   reach   the      objective          of    discerning     the

intent        of    the    people      when         ratifying       a     constitutional

provision, we apply the plain meaning of each term used

therein at the time of ratification unless technical, legal

terms were employed.              Phillips v Mirac, Inc, 470 Mich. 415,

422;        685    NW2d    174    (2004).            In     this        case,   the     term

“benefits”          is     modified      by     the        words        “financial”      and

“accrued.”           Because     these    adjectives             are     not    technical,

legal       terms    that      would   have         been    ascribed       a    particular

meaning       by    those      learned    in        the    law     at     the    time   the

Constitution was ratified,7 we discern the intent of the

people in ratifying art 9, § 24 by according the adjectives

        7
            Id. at 425.

                                              11

their        plain      and        ordinary        meanings          at    the      time     of

ratification.8

        We first note that, despite specifically stating that

the    threshold        issue        in    determining             whether      health     care

benefits were subject to the prefunding requirement of the

second clause of art 9, § 24 is whether they constitute

“accrued         financial         benefits”           within      the    meaning    of     the

first clause of art 9, § 24,9 the majority in Musselman I

did not address the term “accrued.”                               At the time that our

1963        Constitution       was        ratified,          the    term       “accrue”     was

commonly         defined      as    “to     increase,           grow,”     “to    come     into

existence as an enforceable claim; vest as a right,” “to

come by way of increase or addition: arise as a growth or

result,” “to be periodically accumulated in the process of

time        whether     as    an     increase           or    a    decrease,”       “gather,

collect, accumulate,”                Webster’s Third New Int’l Dictionary

(1961),          p 13, or “to happen or result as a natural growth;

arise       in    due   course;           come    or     fall       as    an    addition     or

        8
       It seems apparent, but to foreclose confusion that
the dissent may engender, that the 2004 view of the
Governmental Accounting Standards Board (GASB) that the
dissent relies on to define terms is entirely irrelevant to
what ratifiers in 1963 would have understood. Furthermore,
the passage quoted from the GASB by the dissent does not
even purport to define any of these terms but merely
directs how to handle the accounting fringe benefits
entail.
        9
            Musselman I, supra at 510.

                                                 12

increment,” “to become a present and enforceable right or

demand,” Random House American College Dictionary (1964), p

9.     Thus, according to these definitions, the ratifiers of

our Constitution would have commonly understood “accrued”

benefits to be benefits of the type that increase or grow

over time—such as a pension payment or retirement allowance

that increases in amount along with the number of years of

service a public school employee has completed.10                               Health

care    benefits,      however,        are    not    benefits      of    this    sort.

Simply       stated,     they         are     not     accrued.           Under     MCL

38.1390(1),11 which the plaintiffs in this case rely on,

neither the amount of health care benefits a public school

employee       receives         nor     the       amount    of     the     premium,

subscription, or membership fee that MPSERS pays increases

in relation to the number of years of service the retiree

has performed.

       That     art    9,   §     24    only        protects     those    financial

benefits       that    increase        or    grow    over   time    is    not     only

supported but, indeed, confirmed by the interaction between

       10
            See, e.g., MCL 38.1384.
       11
       MCL 38.1391(1) provides that “[t]he retirement system
shall pay the entire monthly premium or membership or
subscription fee for hospital, medical-surgical, and sick
care benefits for the benefit of a retirant or retirement
allowance beneficiary who elects coverage in the plan
authorized by the retirement board and the department.”

                                            13

the      first        and     second        clauses        of     that         provision.

Specifically,          the     first       clause    contractually          binds        the

state and its political subdivisions to pay for retired

public       employees’       “accrued       financial      benefits        .    .   .   .”

Thereafter,          the    second     clause      seeks    to     ensure       that     the

state        and    its     political       subdivisions         will     be    able      to

fulfill this contractual obligation by requiring them to

set aside funding each year for those “[f]inancial benefits

arising on account of service rendered in each fiscal year

. . . .”           Thus, because the second clause only requires the

state and its political subdivision to set aside funding

for   “[f]inancial           benefits       arising   on        account    of    service

rendered in each fiscal year” to fulfill their contractual

obligation of paying for “accrued financial benefits,” it

reasonably           follows        that    “accrued”           financial       benefits

consist       only     of    those     “[f]inancial        benefits        arising       on

account of service rendered in each fiscal year . . . .”12

        Moreover,          health    care     benefits      do     not     qualify        as

“financial” benefits.                At the time      Const 1963, art 9, § 24

        12
       The dissent claims that we are not defining words
with any reference to context.      This is not the case.
Indeed, we are as committed to that interpretive tool as
the dissent claims to be, and this opinion bears witness to
that.   The difference between us, however, is that we are
endeavoring to place words in the context of other words
while the dissent places words in the context of something
far more vague, apparently nothing more than its own sense
of the preferred result.

                                             14

was ratified, the term “financial” was commonly defined as

“pertaining             to     monetary        receipts          and        expenditures;

pertaining or relating to money matters; pecuniary,” Random

House,       supra,            p     453,     or   “relating           to    finance           or

financiers,”           Webster’s,       supra,       p   851,       and    “finance”       was

commonly defined as “pecuniary resources, as of . . . an

individual;             revenues,”          Random       House,           supra;      accord

Webster’s,         supra.            “Pecuniary,”        in     turn,       was    commonly

defined as “consisting of or given or extracted in money,”

or “of or pertaining to money.”                          Random House, supra, p

892; accord Webster’s, supra, p 1663.                                 Accordingly, the

ratifiers          of        our     Constitution         would           have     commonly

understood             “financial”          benefits     to     include       only       those

benefits          that       consist    of     monetary         payments,          and     not

benefits          of    a    nonmonetary       nature      such       as     health       care

benefits.

        We    further         point    out     that,      even       if     the    phrase

“accrued financial benefits” were ambiguous and, thus, it

would        be    permissible          or     necessary         to       consult        the

statements             of     delegates       during          the     constitutional

convention debates, the majority’s approach in doing so

in Musselman I was fundamentally flawed.                                  Specifically,

although          this       Court    has     continually           recognized       that

constitutional               convention       debates          are        relevant       to

determining the meaning of a particular provision, Lapeer
                            15
Co Clerk v Lapeer Circuit Court, 469 Mich. 146, 156; 665

NW2d 452 (2003); People v Nash, 418 Mich. 196, 209; 341

NW2d 439 (1983) (opinion by Brickley, J.), we take this

opportunity to clarify that, when necessary, the proper

objective in consulting constitutional convention debates

is not to discern the intent of the framers in proposing

or supporting a specific provision, but to determine the

intent of the ratifiers in adopting the provision, Nutt,

supra at 574.13   We highlighted this distinction in Univ

of Michigan Regents v Michigan, 395 Mich. 52, 59-60; 235

NW2d 1 (1975), in which we stated:

          The debates must be placed in perspective.
     They are individual expressions of concepts as
     the speakers perceive them (or make an effort to
     explain   them).  Although  they   are  sometimes
     illuminating, affording a sense of direction,
     they are not decisive as to the intent of the
     general convention (or of the people) in adopting
     the measures.

          Therefore, we will turn to the committee
     debates only in the absence of guidance in the
     constitutional language . . . or when we find in
     the debates a recurring thread of explanation
     binding together the whole of a constitutional
     concept.

     Bearing this principle in mind, the primary focus of

the majority in Musselman I should not have been on the

intentions of the delegates in supporting art 9, § 24 but,

     13
       “Constitutional Convention debates and the Address to
the People are certainly relevant as aids in determining
the intent of the ratifiers.” (Emphasis added.)

                             16

rather, on any statements they may have made that would

have shed light on why they chose to employ the particular

terms        they    used    in   drafting       the   provision   to   aid   in

discerning          what    the   common    understanding    of    those   terms

would have been when the provision was ratified by the

people.14       In this regard, it is important to note that the

majority in Musselman I did, in fact, locate such evidence

but chose to disregard it, stating:

             The only explicit elaboration on the term
        “accrued financial benefits” was this remark by
        delegate Van Dusen:

             “The words ‘accrued financial benefits’ were
        used designedly, so that the contractual right of
        the employee would be limited to the deferred
        compensation embodied in any pension plan, and
        that we hope to avoid thereby a proliferation of
        litigation    by   individual    participants  in
        retirement systems talking about the general
        benefits structure, or something other than his
        specific right to receive benefits.”

        Unfortunately, he addresses which rights are
        contractual, and thus enforceable at law under
        the first clause of Const 1963, art 9, § 24—a
        question distinct from what must be prefunded

        14
       See, generally, Beech Grove Investment Co v Civil
Rights Comm, 380 Mich. 405, 425-428; 157 NW2d 213 (1968), in
which this Court examined, among other things, the
statements of delegates to the constitutional convention
and the Address to the People in order to discern the
meaning of the term “civil rights” as used in Const 1963,
art 5, § 29, but, in doing so, expressly recognized that
“it is the Constitution, not the debates, that was finally
submitted to the people.   While the debates may assist in
an interpretation of the Constitution, neither they nor
even the Address to the People is controlling.”       Beech
Grove, supra at 427.

                                           17

        under the second clause. [Musselman I, supra at
        510    n   8,    quoting   1    Official   Record,
        Constitutional Convention 1961, pp 773-774.]

        This    statement        by     delegate   Van     Dusen    is       directly

relevant       to   discerning        the    common    understanding          of   the

words     “accrued”        and     “financial”        at   the     time      of    the

constitutional         convention           and,   indeed,       reinforces        our

conclusion          that     the      ratifiers       would      have        commonly

understood the phrase “accrued financial benefits” to be

one     of     limitation        that    would     restrict      the      scope     of

protection provided by art 9, § 24 to monetary payments for

past services.             The Musselman I majority’s stated reason

for disregarding this statement, that delegate Van Dusen

was stating why that phrase was used in the first clause of

art 9, § 24, and not why it was used in the second clause,

is illogical.         Stated simply, there is no reason to believe

that     the     ratifiers       would      have   interpreted         the    phrase

“accrued financial benefits” any differently when reading

the second clause than they would have when reading the

first.       Indeed, it would be unreasonable to assume, in the

circumstance where they were drafted together and presented

to the ratifiers at the same time, that there was any other

intent.        In discussing this concept, Justice Cooley stated,

“[a]s a general thing, it is to be supposed that the same

word is used in the same sense wherever it occurs in a

                                            18

constitution.”       1 Cooley, Constitutional Limitations (8th

ed), p 135.15

     Thus, in summary, we hold that health care benefits

are not protected by Const 1963, art 9, § 24 because they

neither    qualify    as   “accrued”     benefits    nor    “financial”

benefits as those terms were commonly               understood at the

time of the Constitution’s ratification and, thus, are not

“accrued financial benefits.”

     IV. 	 ANALYSIS OF CONST 1963, ART 1, § 10 AND US CONST,
                          ART I, § 10

     The   plaintiffs      here   assert   that,    by     enacting   MCL

38.1391(1), the Legislature created a contractual right by

public school retirees to receive health care benefits and,

further, that this contractual right could not be altered

     15
       See, also, Lockwood v Comm’r of Revenue, 357 Mich.
517, 536-537; 98 NW2d 753 (1959) (Carr, J., dissenting):

          It is incredible that the legislature in
     submitting to popular vote the proposed amendment
     [of Const 1908, art 10, § 23] at the general
     election in 1954, or that the people in voting
     thereon, intended that the term “sales tax” as
     used in the clauses of said amendment providing
     for the apportionment of sales tax funds in the
     manner stated therein, and in inhibiting the
     legislature from increasing the sales tax above
     3%, intended to use the term in question with
     different meanings. In other words, it must be
     assumed that the designation was used in the
     proviso imposing limitation on the power of the
     legislature with reference to the increase in the
     sales tax with exactly the same meaning as
     clearly intended in the so-called diversion
     clauses. [Emphasis added.]

                                   19

or abolished by successive legislatures without violating

Const 1963, art 1, § 1016 and US Const, art I, § 10,17 both

of which prohibit the state from enacting any law that

impairs existing contractual obligations.                 We disagree.

       MCL 38.1391(1) provides:

            The retirement system[18] shall pay the entire
       monthly premium or membership or subscription fee
       for hospital, medical-surgical, and sick care
       benefits for the benefit of a retirant or
       retirement   allowance  beneficiary    who   elects
       coverage in the plan authorized by the retirement
       board and the department.[19]

       The Court of Appeals determined that this statute does

create for plaintiffs a contractual right to receive health

care benefits, but that the copay and deductible increases

implemented by the board do not amount to a substantial

impairment of that contractual right.             However, we conclude

that    MCL   38.1391(1)    does    not    create     for    retirees     a

contractual    right   to   receive      health   care     benefits   and,

       16
       “No bill of attainder, ex post facto law or law
impairing the obligation of contract shall be enacted.”
       17
       “No State shall . . . pass any Bill of Attainder, ex
post facto Law, or Law impairing the Obligation of
Contracts, or grant any Title of Nobility.”
       18
        “Retirement    system”     refers    to     the    MPSERS.       MCL
38.1307(8).
       19
        “Department” refers to the Department of Management
and Budget. MCL 38.1304(4).

                                   20

therefore, reverse the Court of Appeals determination on

that point.

     Of    primary     importance         to   the   viability     of   our

republican system of government is the ability of elected

representatives to act on behalf of the people through the

exercise   of    their   power       to    enact,    amend,   or    repeal

legislation.     Therefore,      a    fundamental     principle    of   the

jurisprudence of both the United States and this state is

that one legislature cannot bind the power of a successive

legislature.20       We recently reiterated this principle at

length in LeRoux v Secretary of State, 465 Mich. 594, 615-

616; 640 NW2d 849 (2002), quoting Atlas v Wayne Co Bd of

Auditors, 281 Mich. 596, 599; 275 N.W. 507 (1937):

          “The act of one legislative body does not
     tie the hands of future legislatures.     Cooper,
     Wells & Co v City of St Joseph, 232 Mich. 255 [205
N.W. 86 (1925)].    The power to amend and repeal
     legislation as well as to enact it is vested in
     the legislature, and the legislature cannot
     restrict or limit its right to exercise the power
     of legislation by prescribing modes of procedure
     for the repeal or amendment of statutes; nor may
     one legislature restrict or limit the power of
     its successors . . . . [Additionally,] [o]ne
     legislature cannot enact irrepealable legislation
     or limit or restrict its own power, or the power
     of its successors, as to the repeal of statutes;

     20
       United States v Winstar Corp, 518 U.S. 839, 873; 116 S
Ct 2432; 135 L. Ed. 2d 964 (1996) (opinion by Souter, J.);
Community-Service Broadcasting of Mid-America, Inc v Fed
Communications Comm, 192 US App DC 448, 459; 593 F2d 1102
(1978); Mirac, supra at 430; Ballard v Ypsilanti Twp, 457
Mich. 564, 569; 577 NW2d 890 (1998).

                                     21

       and an act of one legislature is not binding on,
       and   does   not  tie  the   hands  of,   future
       legislatures.”

       Although this venerable principle that a legislative

body may not bind its successors can be limited in some

circumstances        because       of        its      tension        with       the

constitutional       prohibitions        against       the        impairment    of

contracts, thus enabling one legislature to contractually

bind another, Winstar, supra at 872-874, such surrenders of

legislative power are subject to strict limitations that

have    developed      in     order      to        protect    the      sovereign

prerogatives    of    state      governments,        id.     at    874-875.       A

necessary   corollary       of   these       limitations      that     has     been

developed by the United States Supreme Court, and followed

by this Court, is the strong presumption that statutes do

not create contractual rights.                Nat’l R Passenger Corp v

Atchison, Topeka & Santa Fe R Co, 470 U.S. 451, 465-466; 105
S. Ct. 1441; 84 L. Ed. 2d 432 (1985); In re Certified Question

(Fun ‘N Sun RV, Inc v Michigan),                    447 Mich. 765, 777-778;

527 NW2d 468 (1994).        This presumption, and its relation to

the protection of the sovereign powers of a legislature,

was succinctly described by the United States Supreme Court

in Nat’l R, supra at 465-466:

            For many decades, this Court has maintained
       that absent some clear indication that the
       legislature intends to bind itself contractually,
       the presumption is that “a law is not intended to
       create private contractual or vested rights but
                                        22
       merely declares a policy to be pursued until the
       legislature shall ordain otherwise.” Dodge v.
       Board of Education, 302 U.S. 74, 79 [58 S. Ct. 98;
       82 L. Ed. 57] (1937).     See also Rector of Christ
       Church v. County of Philadelphia, 24 How. 300,
       302 [65 U.S. 300; 16 L. Ed. 602] (1861) (“Such an
       interpretation is not to be favored”). This well-
       established   presumption   is   grounded   in  the
       elementary   proposition    that    the   principal
       function of a legislature is not to make
       contracts, but to make laws that establish the
       policy of the state. Indiana ex rel. Anderson v.
       Brand, 303 U.S. 95, 104-105 [58 S. Ct. 443; 82 L. Ed.
685] (1938). Policies, unlike contracts, are
       inherently subject to revision and repeal, and to
       construe laws as contracts when the obligation is
       not clearly and unequivocally expressed would be
       to limit drastically the essential powers of a
       legislative   body.   Indeed,   “‘[t]he   continued
       existence of a government would be of no great
       value, if by implications and presumptions, it
       was   disarmed   of   the   powers   necessary   to
       accomplish the ends of its creation.’”     Keefe v.
       Clark, 322 U.S. 393, 397 [64 S. Ct. 1072; 88 L. Ed.
1346] (1944) (quoting Charles River Bridge v.
       Warren Bridge, 11 Pet. 420, 548 [36 U.S. 420; 9 L
       Ed 773] (1837)). Thus, the party asserting the
       creation of a contract must overcome this well-
       founded presumption, Dodge, supra, at 79, and we
       proceed cautiously both in identifying a contract
       within the language of a regulatory statute and
       in defining the contours of any contractual
       obligation.

       The    first    step   in    this    cautious     procession     is    to

examine the statutory language itself. Nat’l R, supra at

466.     In    order    for   a    statute   to   form    the   basis    of    a

contract,      the     statutory    language      “must    be   ‘plain       and

susceptible of no other reasonable construction’ than that

the Legislature intended to be bound to a contract.”                     In re

Certified Question, supra at 778, quoting Stanislaus Co v

San Joaquin & King’s River Canal & Irrigation Co, 192 U.S.
23

201,       208;    24    S   Ct    241;       48     L   Ed     406   (1904).        If     the

statutory         language        “‘provides             for    the    execution       of     a

written contract on behalf of the state the case for an

obligation binding upon the state is clear.’”                                    Nat’l R,

supra at 466, quoting Dodge, supra at 78 (emphasis supplied

in Nat’l R).             But, “absent ‘an adequate expression of an

actual intent’ of the State to bind itself,” courts should

not construe laws declaring a scheme of public regulation

as also creating private contracts to which the state is a

party.           Nat’l R, supra              at 466-467, quoting             Wisconsin &

Michigan R Co v Powers, 191 U.S. 379, 386-387; 24 S. Ct. 107;

48     L    Ed    229(1903).             In        addition      to    the    absence        of

contractual             language,             some        federal          courts,        when

interpreting            statutes        involving          public-employee           pension

benefit plans, have expressed even greater reluctance to

infer a contractual obligation where a legislature has not

explicitly precluded amendment of a plan.                                Nat’l Ed Ass’n-

Rhode Island v Retirement Bd of the Rhode Island Employees’

Retirement         System,        172    F3d       22,    27    (CA   1,    1999).        This

reluctance stems not only from the caution against finding

an implied surrender of legislative power, but also from

the        realization       that        legislatures            frequently      need        to

utilize          that    power          to     modify          benefit      programs        and

compensation schedules.                      Id.     Further, this reluctance is

grounded in the realization that “it is easy enough for a
                            24
statute       explicitly     to     authorize       a    contract          or   to    say

explicitly that the benefits are contractual promises, or

that any changes will not apply to a specific class of

beneficiaries (e.g., those who have retired).”                              Id. at 27-

28     (citations      omitted).            In     the        area     of       worker’s

compensation, this Court has also followed this principle

and stated that, as a general rule, a statute will not be

held     to     have     created         contractual          rights        “if      ‘the

Legislature        did       not        covenant        not     to         amend     the

legislation.’”           In re Certified Question, supra at 778,

quoting Franks v White Pine Copper Div, 422 Mich. 636, 654;

375 NW2d 715 (1985).               Finally, in addition to the absence

of     such    clear   and    unequivocal          statutory         language,        the

circumstances of a statute’s passage may “belie an intent

to contract away governmental powers.”                         Nat’l R, supra at

468.

        The plaintiffs in this case have failed to overcome

the strong presumption that the Legislature did not intend

to    surrender    its     legislative          powers    by    entering         into   a

contractual       agreement        to    provide    retirement         health        care

benefits to public school employees when it enacted MCL

38.1391(1).       Nowhere in MCL 38.1391(1), or in the rest of

the    statute,    did     the     Legislature      provide          for    a   written

contract on behalf of the state of Michigan or even use

                                          25

terms typically associated with contractual relationships,21

such as “contract,” “covenant,” or “vested rights.”22                 Had

the   Legislature     intended   to       surrender   its   legislative

powers through the creation of contractual rights, it would

have expressly done so by employing such terms.               Indeed, by

its   plain    language,   the   statute     merely   shows    a   policy

decision by the Legislature that the retirement system pay

“the entire monthly premium or membership or subscription

fee” for the listed health care benefits on behalf of a

retired public school employee who chooses to participate

in whatever plan the board and the Department of Management

and Budget authorize.       However, nowhere in the statute did

      21
           Nat’l R, supra at 467.
      22
      It is clear that the Legislature can use such
nomenclature when it wishes to.        For instance, when
enacting 1982 PA 259, which requires the state treasurer to
pay the principal of and interest on all state obligations,
the Legislature provided in MCL 12.64: “This act shall be
deemed a contract with the holders from time to time of
obligations of this state.” (Emphasis added.)    Similarly,
when enacting the State Housing Development Authority Act,
1966 PA 346, the Legislature provided in MCL 125.1434: “The
state pledges and agrees with the holders of any notes or
bonds issued under this act, that the state will not limit
or alter the rights vested in the authority to fulfill the
terms of any agreements made with the holders thereof, or
in any way impair the rights and remedies of the holders
until the notes or bonds, together with the interest
thereon, with interest on any unpaid installments of
interest, and all costs and expenses in connection with any
action or proceeding by or on behalf of such holders, are
fully met and discharged. The authority is authorized to
include this pledge and agreement of the state in any
agreement with the holders of such notes or bonds.”
(Emphasis added.)

                                    26

the Legislature require the board and the department to

authorize a particular plan containing a specific monthly

premium, membership, or subscription fee or, alternatively,

explicitly        preclude    the    board        and    the    department        from

amending      whatever    plan      they        authorize.23        Additionally,

nowhere      in   the   statute     did     the       Legislature     require     the

board and the department to authorize a plan containing

specified deductibles and copays.                     In fact, nowhere in the

statute did the Legislature even mention deductibles and

copays.            Further,      nowhere         in     the    statute     did     the

Legislature covenant that it would not amend the statute to

remove or diminish the obligation of the MPSERS to                          pay the

monthly premium, membership, or subscription fee; nor did

it covenant that any changes to the plan by the board and

the     department,      or   amendments          to     the    statute     by     the

Legislature, would apply only to a specific class or group

of public school retirees.24                    Again, had the Legislature

intended to surrender its power to make such changes, it

would have done so explicitly.

      Although we need not do so because of the absence of

clear      and    unequivocal       language          showing    an      intent     to

      23
           Nat’l Ed Ass’n-Rhode Island, supra at 27. 

      24
           Id. at 27-28; In re Certified Question, supra at 778. 

                                          27

contract, we note that the circumstances surrounding the

Legislature’s enactment of MCL 38.1391(1) provide further

evidence that the Legislature did not intend to contract

away its legislative powers.25                   As was discussed by the

Court of Appeals, initially the Legislature required the

MPSERS to pay a portion of the premium for health care

benefits for public school retirees through the enactment

of the predecessor of MCL 38.1391, former MCL 38.325b of

the Public School Employees Retirement Act, 1945 PA 136,

and subsequent legislatures have exercised their powers to

amend the statute many times throughout the years to change

the   type         of   plans   that   the     board   could   authorize,   the

criteria for the beneficiaries on whose behalf the MPSERS

could        pay    the   premiums     for     various   benefits,   and    the

amounts of those premiums that the MPSERS was required to

pay.26        Thus, there is no indication that the Legislature

that enacted MCL 38.1391(1) in 1980 intended to do anything

beyond what its predecessors had done—set forth a policy to

be pursued until one of its successor legislatures ordained

a new policy.27            Additionally, as was also analyzed by the

Court of Appeals, the health care plan itself has been

        25
             Nat’l R, supra at 468.
        26
260 Mich. App. at 463-465.
        27
             Nat’l R, supra at 466.

                                         28

amended and modified by the MPSERS numerous times since

1975, not only to increase the benefits available but also

to increase the amounts of the copays and deductibles that

participants were required to pay.28                   In their appeal to

this Court, plaintiffs have not only conceded that these

statutory amendments and changes to the plan have occurred,

but also expressly conceded during oral argument that the

Legislature and the board have the authority to make such

changes.          Thus,    plaintiffs    themselves,       by   the   positions

they    have      taken,    have    effectively      recognized       that    MCL

38.1391(1)        merely    established       a   legislative    policy      that

could be changed by a successor legislature rather than

providing for a surrender of such legislative power through

the creation of a contractual relationship.

       28
            The   Court     of   Appeals,     260   Mich   App   at    465-466,
stated:

            The MPSERS provides a health care plan for
       retirees. Cost-sharing features have been a part
       of the health plan since its inception in 1975.
       The individual and family deductible component of
       the health care plan has gradually increased from
       1982 to 1999, beginning with a deductible of $50
       for each person and $100 for each family in 1982,
       and gradually rising to a deductible of $145 for
       each person and $290 for each family in 1999.
       Cost sharing for the prescription drug program
       also had gradual increases, ranging from a copay
       of ten percent in 1975 to a copay of $4 for
       generic drugs and $8 for brand name drugs in 1997
       through March 31, 2000. There is no dispute that
       the MPSERS health care plan also gradually
       increased the benefits available under the plan.

                                        29

          We     further    note       that,       as    part    of       the    1979    Public

School Employees Retirement Act, in which MCL 38.1391(1) is

included,          the    Legislature          also       enacted         MCL    38.1303a(1),

which defines “compensation” for public school employees as

“the remuneration earned by a member for service performed

as    a        public    school       employee.”           Thus,      by        enacting    this

statute, the Legislature recognized that an implied-in-law

contractual             relationship          can       arise    between          the     school

system and public school employees.                             Specifically, a public

school          employee        can    become           contractually            entitled        to

“compensation”             by    first    performing             services.              However,

payment of health care premiums by the MPSERS under MCL

38.1391(1)          is     not    among        the       list    of       items     that        the

Legislature             specifically      set       forth       as    being       part     of    an

employee’s          “compensation”            in     MCL    38.1303a(2)(a)               through

(h).           Additionally, and more importantly, MCL 38.1303a(3)

expressly          lists    items       that    are       not    included          within       the

definition          of     compensation             and     includes,            among     other

things, “[p]ayments for hospitalization insurance and life

insurance premiums,”29 and “[o]ther fringe benefits paid by

and       from      the     funds        of     employers            of     public        school

employees.”30             This causes us to conclude that surely the

          29
               MCL 38.1303a(3)(c) (emphasis added).
          30
               MCL 38.1303a(3)(d).

                                               30

Legislature would not specifically exclude the payment of

health care benefits from the list of items that a public

school       employee    could,    potentially,       become    contractually

entitled to by having performed services but, at the same

time, intend to vest plaintiffs with a contractual right to

receive such benefits through the simultaneous enactment of

MCL 38.1391(1).          Accordingly, it seems evident that the way

to   understand       these      enactments    is    that     the    Legislature

intended for payment of health care benefits by the MPSERS

under MCL 38.1391(1) to simply be a “fringe benefit” to

which        public     school     employees        would     never     have   a

contractual entitlement.31

        Thus,    because    the    plain     language   of     MCL    38.1391(1)

does not clearly indicate that the Legislature intended to

surrender       its     legislative    powers       through    the    statute’s

enactment, we hold that MCL 38.1391(1) does not create for

public school employees a contractual right to health care

        31
       This fact not only belies plaintiffs’ claim that MCL
38.1391(1) shows a legislative intent to vest public school
retirees with a contractual right to health care benefits,
but also renders erroneous the Court of Appeals statement
that “[h]ealth insurance is part of an employee’s benefit
package   and   the  whole   package   is   an  element  of
consideration that the state contracts to tender in
exchange for services rendered by the employee.” 260 Mich
App at 476. Indeed, MCL 38.1303a makes clear that payment
of health care benefits by the MPSERS is not an element of
the consideration that the state contracts to tender as
remuneration for a public school employee’s services.

                                       31

benefits.      We    therefore    reverse      the   Court   of     Appeals

conclusion to the contrary.         However, because the Court of

Appeals ultimately reached the correct result, we affirm

its ultimate conclusion to uphold the circuit court’s entry

of summary disposition in favor of defendants.32

                       V.    RESPONSE TO THE DISSENT

     We would be remiss if we failed to point out that the

ad hoc analysis employed by the dissent to determine that

public    school    retirees    possess    a   contractual        right   to

health care benefits, rendering the Legislature powerless

to alter or do away with them, is particularly disturbing

and, taken to its logical conclusion, would undermine this

state’s    constitutionally      guaranteed     republican    system      of

government.

     The    most    treasured    civic   possession    of    an    American

citizen is the right to self-government.             It is the central

pillar and animating force of our constitutions.                  Thus, US

Const, art IV, § 4 provides that “[t]he United States shall

guarantee to every State in this Union a Republican Form of

Government . . . .”         The Michigan Constitution, Const 1963,

art 1, § 1 states similarly that “[a]ll political power is

     32
       Having concluded that MCL 38.1391(1) does not create
a contract, we need not address plaintiffs’ argument
challenging the Court of Appeals determination that the
copay and deductible increases do not operate as a
substantial impairment of a contractual relationship.

                                   32

inherent in the people,” and the importance the founding

generation gave to this can be seen by its reiteration

repeatedly in the documents preceding, coinciding with, and

following the adoption of the United States Constitution in

1789.     Thus, Congress provided in the Northwest Ordinance

that the constitutions and governments of the states to be

formed in the territory, of which states Michigan is one,

“shall be republican . . . .”             Northwest Ordinance of 1787,

art V.         This requirement was carried forward by Congress

when it severed Michigan from the Northwest Territory in

1800 and made it part of the Indiana Territory, 2 US Stat,

Ch XLI, § 2, and again in 1805 when it likewise severed

Michigan       from   the    Indiana    Territory     and   established     the

Michigan Territory, 2 US Stat, Ch V, § 2, by requiring both

times that the government established in those territories

was to be “in all respects similar” to that provided in the

Northwest Ordinance of 1787.

        What     this       means   concretely      is      that    what    one

legislature has done, pursuant to the majority sentiment at

that    time,     a   later     legislature   responding       to   the    then

majority can modify or undo.             Deprived of this right, self-

government is not just hollow, it is nonexistent.

        Yet, as the United States Supreme Court has held and

we have discussed in this opinion, when the Legislature

enters    into    a     contract,   a    subsequent      legislature   cannot
                                        33
repudiate that contract.            It seems obvious that to read

what is a contract too broadly swallows the right of the

people to change the course of their governance.                     This is

the   tension     that     we    have      attempted    to    address       and

thoroughly analyze, whereas the dissent has just blithely

assumed that any benefit once conferred is a contract and

cannot be altered.         This is an ill-considered notion that

in cases yet to be seen, but surely to be seen if this were

to become the majority position, means that, for example,

general assistance welfare benefits could not be altered,

Medicaid would be frozen in its first enacted form, and, in

short, any financial benefit would be unalterable.

      This is not and surely cannot be our law.                     Yet, the

dissent claims that the recipients of the benefits will be

surprised   it    is    not.      Will     they?       No   one   should    be

surprised   that       benefit   battles      are   fought    out    in    the

Legislature.       On     the    contrary,     those    who   could       claim

legitimate surprise would be our citizens who, were there

two more votes on this Court to join the dissent and make

it a majority, would have lost, in the fog of a baffling

contract analysis, the right to change the course of their

government.      Indeed, that would be more than surprising, it

would be revolutionary.

                                     34

                              VI.    CONCLUSION 

     We hold that health care benefits are not “accrued

financial benefits” and, thus, are not protected by Const

1963, art 9, § 24.            Accordingly, we affirm the Court of

Appeals     on   this    issue.         We        further     hold    that   the

Legislature      did    not    intend        to     create     a     contractual

relationship with public school employees by enacting MCL

38.1391(1) and, thus, payment of health care benefits by

the MPSERS is not a contractual right subject to protection

by Const 1963, art 1, § 10 and US Const, art I, § 10.                         We

therefore    reverse    the    Court    of    Appeals        determination    on

this issue.      However, because the Court of Appeals reached

the correct result, we affirm its determination that the

circuit     court   properly        entered       summary     disposition     in

defendants’ favor.

                                       Clifford W. Taylor
                                       Maura D. Corrigan
                                       Robert P. Young, Jr.
                                       Stephen J. Markman

                                      35

               S T A T E        O F   M I C H I G A N 

                           SUPREME COURT 

ALBERTA STUDIER, PATRICIA M.
SANOCKI, MARY A. NICHOLS, LAVIVA
M. CABAY, MARY L. WOODRING, and
MILDRED E. WEDELL,

      Plaintiffs-Appellants,

v                                                            No. 125765

MICHIGAN PUBLIC SCHOOL EMPLOYEES'
RETIREMENT BOARD, MICHIGAN PUBLIC
SCHOOL EMPLOYEES' RETIREMENT SYSTEM,
DEPARTMENT OF MANAGEMENT AND BUDGET,
and TREASURER OF MICHIGAN,

     Defendants-Appellees.
_________________________________/

ALBERTA STUDIER, PATRICIA M.
SANOCKI, MARY A. NICHOLS, LAVIVA
M. CABAY, MARY L. WOODRING, and
MILDRED E. WEDELL,

      Plaintiffs-Appellees,

V                                                            No. 125766

MICHIGAN PUBLIC SCHOOL EMLOYEES’
RETIREMENT BOARD, MICHIGAN PUBLIC
SCHOOL EMPLOYEES’ RETIREMENT SYSTEM,
DEPARTMENT OF MANAGEMENT AND BUDGET,
and TREASURER OF MICHIGAN,

     Defendants-Appellants.
________________________________/

WEAVER, J. (concurring).

      I concur in the majority conclusion and reasoning that

the   Legislature   did   not    intend   to   create   a   contractual
right subject to Const 1963, art 1, § 10 and US Const, art

I,   §    10   when      it    provided        for    payment     of   health       care

benefits to public school employees through the enactment

of MCL 38.1391(1).

         Regarding whether health care benefits paid to public

school     retirees        are     “accrued        financial      benefits”        under

Const     1963,      art      9,   §    24,    I   concur     with     the   majority

conclusion that they are not.                      I agree with the majority

that “the ratifiers of our Constitution would have commonly

understood          ‘financial’         benefits      to    include     only       those

benefits       that      consist        of     monetary      payments,       and     not

benefits       of    a     nonmonetary         nature      such   as   health       care

benefits.”          Ante at 15.             As noted by Justice Riley in her

partial concurrence and partial dissent regarding art 9, §

24 in Musselman v Governor, 448 Mich. 503, 526; 533 NW2d 237

(1995) (Musselman I), “when interpreting the language of

the constitution, unambiguous terms are given their plain

meaning.”       Justice Riley concluded that the “normal usage

of the word ‘financial’ connotes money and ‘money’ connotes

some form of hard currency that can be ‘spent.’”                               Id. at

527.       When the Court granted rehearing in                         Musselman, I

concurred with Justice Riley’s Musselman I analysis of the

common      understanding              of    the     term    “accrued        financial

benefits” and I continue to agree with her analysis today.

In Musselman v Governor (On Rehearing), 450 Mich. 574; 545
                            2

NW2d 346 (1996)(Musselman II), I wrote further to note that

Justice Riley’s conclusion was supported by the fact that

health care benefits did not exist when the people ratified

the   1963   Michigan   Constitution.   Because   health   care

benefits did not exist at that time, the people would not

have anticipated that the pension and retirement systems

established by Const 1963, art 9, § 24 included health care

benefits.    Mussleman II at 579.

                                Elizabeth A. Weaver

                                3

              S T A T E     O F   M I C H I G A N 

                          SUPREME COURT 

ALBERTA STUDIER, PATRICIA M.
SANOCKI, MARY A. NICHOLS, LAVIVA
M. CABAY, MARY L. WOODRING, and
MILDRED E. WEDELL,

     Plaintiffs-Appellants,

v                                                     No. 125765

MICHIGAN PUBLIC SCHOOL EMPLOYEES'
RETIREMENT BOARD, MICHIGAN PUBLIC
SCHOOL EMPLOYEES' RETIREMENT SYSTEM,
DEPARTMENT OF MANAGEMENT AND BUDGET,
AND TREASURER OF MICHIGAN,

     Defendants-Appellees.
_______________________________/

ALBERTA STUDIER, PATRICIA M.
SANOCKI, MARY A. NICHOLS, LAVIVA
M. CABAY, MARY L. WOODRING, and
MILDRED E. WEDELL,

     Plaintiffs-Appellants,

v                                                     No. 125766

MICHIGAN PUBLIC SCHOOL EMPLOYEES'
RETIREMENT BOARD, MICHIGAN PUBLIC
SCHOOL EMPLOYEES' RETIREMENT SYSTEM,
DEPARTMENT OF MANAGEMENT AND BUDGET,
AND TREASURER OF MICHIGAN,

     Defendants-Appellees.

_______________________________/

CAVANAGH, J. (dissenting).

     I believe that retirement health care benefits earned

by public school employees constitute “accrued financial
benefits” that are protected by our Michigan Constitution

from diminishment or impairment.                   I also believe that the

statute that provides retirement health care benefits for

public school employees, MCL 38.1391, creates a contract

with public school employees and retirees that cannot be

substantially         impaired.        Because      there    are    significant

questions about the accuracy of the record used by the

lower    courts       to   determine    if     a    substantial      impairment

indeed     occurred,       I   would     remand      for     further    review.

Accordingly,      I    respectfully      dissent      from    the    majority’s

position    that      public   school        employees      and    retirees   are

without protection from the prospect that their retirement

health care benefits may be drastically decreased or even

eliminated.

  I. HEALTH CARE BENEFITS ARE “ACCRUED FINANCIAL BENEFITS” 

        WITHIN THE MEANING OF MICHIGAN’S CONSTITUTION 

        Const 1963, art 9, § 24 provides the following:

             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.

             Financial benefits arising on account of
        service rendered in each fiscal year shall be
        funded during that year and such funding shall
        not be used for financing unfunded accrued
        liabilities.

                                        2

       Whether health care benefits are “accrued financial

benefits”     has    already          been    addressed      by    this    Court    in

Musselman     v    Governor,          448 Mich. 503,    510;    533    NW2d    237

(1995)      (Musselman          I),    and     Musselman      v     Governor       (On

Rehearing), 450 Mich. 574; 545 NW2d 346 (1996) (Musselman

II).       In Musselman I, this Court examined whether health

care benefits are indeed “financial” benefits.                              We held

that because the purpose of the constitutional provision is

to   prevent       the    state       from    amassing      bills    for     pension

payments,     including         health       care   benefits,      for    which    the

state does not have the money to pay, the term “financial

benefits” includes retirement health care benefits.

       Reflecting on the analysis in Musselman I, I fail to

see its flaws.            This Court reasonably concluded that the

goal of the constitutional provision is to ensure that the

state can pay for the commitments it has made.                            Regardless

of whether the commitment is for a straightforward monthly

cash allowance to a retiree or for payment of health care

benefits for a retiree, the state must still pay for its

obligations.         If    the    state       has   failed    to    set    aside    an

appropriate amount of money, the situation is still the

same, meaning the state still has a financial consequence.

       I   believe       this    interpretation        is    the    one    that    the

people      gave    the    constitutional           provision       when    it     was

adopted because it best reflects the common understanding
                            3
of   the    people.        See    Soap    &     Detergent      Ass’n   v    Natural

Resources Comm, 415 Mich. 728, 745; 330 NW2d 346 (1982).

The most reasonable interpretation of the phrase “accrued

financial benefits” includes health care benefits.                           Health

care benefits are given in lieu of additional compensation

to public school employees.                    A health care benefit is a

financial benefit because it clearly costs the state money

and has an economic value to the employee.                          Notably, our

Constitution was not written to include every conceivable

aspect of a pension plan.                It was certainly not beyond the

understanding of the ratifiers that health care benefits,

which      cost    the    state    money,        would    be     offered     as    a

retirement benefit.          As such, these benefits would need to

be protected, just as monthly cash allowances to retirees

must be protected.

        As we stated in Musselman I, supra at 516 n 12, “Many

delegates to the 1961 Constitutional Convention perceived

as   unfair       the     rule    that     pensions       granted      by   public

authorities were not contractual obligations, but rather

gratuitous allowances that could be revoked at will.”                          See,

e.g., 1 Official Record, Constitutional Convention 1961, pp

770-774.          It    should   not     come    as   a   surprise      that      the

ratifiers would believe this to be true about health care

benefits that mean as much, if not more, to many retirees.

                                          4

      Moreover, even if the ratifiers did not imagine every

conceivable pension plan benefit that would be offered, the

“idea behind formulating a general rule, as opposed to a

set   of     specific    commands,         is   that    a   rule     governs

possibilities that could not have been anticipated at the

time.”      Musselman I, supra at 514.1                The constitutional

provision     was    meant     to     address    all     public     employee

retirement    systems;    it    is    entirely    reasonable       that   the

ratifiers would not be aware of every possible retirement

benefit being offered to every public employee.                   See, e.g.,

1 Official Record, Constitutional Convention 1961, p 771.

In response to a question whether the state could increase

benefits and whether an increase in benefits would be a

gratuity or an obligation that the state must fulfill, a

constitutional      convention       delegate   responded    as     follows:

“Certainly there’s nothing here to prohibit the employer

from increasing the benefit structure.”                Id. at 774.     “Once

the employee, by working pursuant to an understanding that

      1
           We believe that this constitution must be a
      forward looking document; that it must take
      cognizance of the problem; that it must spell out
      for the future the manner in which these funds
      should be managed, so that our children will not,
      50 years hence, suffer from the fact that we
      failed to put in enough money to take care of the
      benefits attendant upon the service currently
      performed by public employees.        [1 Official
      Record, Constitutional Convention 1961, p 771.]

                                      5

this       is   the     benefit    structure     presently        provided,   has

worked in reliance thereon, he has the contractual right to

those benefits which may not be diminished or impaired.”

Id.

       The constitutional principle declared is that accrued

financial benefits, including health care benefits, will be

protected        for    retirees.        Simply,    “once    an    employee   has

performed the service in reliance upon the then prescribed

level of benefits, the employee has the contractual right

to receive those benefits under the terms of the statute or

ordinance prescribing the plan.”                 Id. at 771.

       In attempting to define the term “accrued financial

benefits,” the majority cites numerous definitions for the

word “accrue,” and I do not quarrel with those definitions.2

Indeed,         as     the   majority     states,     “accrue”       means    “to

increase,        grow”       and   “to    come     into     existence    as    an

enforceable claim; vest as a right.”                  Ante at 12 (citation

       2
      While I do not quarrel with the definitions used, I
must note that the majority yet again insists on relying
solely on dictionary definitions to the illogical exclusion
of context.   “There is no more irritating fellow than the
man who tries to settle an argument about communism, or
justice, or liberty, by quoting from Webster.” Pflug, ed,
The Ways of Language (New York:     The Odyssey Press, Inc,
1967), ch 4, How to Read a Dictionary, p 62.          While
dictionary definitions are certainly useful, they must be
examined in context.      See also Hayakawa, Language in
Thought and Action (New York:      Harcourt, Brace and Co,
1949), ch 4, p 62 (“Interpretation must be based,
therefore, on the totality of contexts.”).

                                          6

and internal quotation marks omitted).        However, I disagree

with the majority’s assertion that the ratifiers of our

Constitution would have commonly understood “accrued” to

mean that an individual’s benefits must increase or grow

over time.         The majority seems to believe that to be an

accrued financial benefit, an employee’s retirement health

care benefits must gradually increase on the basis of the

number of years that the person is employed, yet this is

not accurate.         The term “accrued financial benefits” was

used to denote benefits that were contractual obligations

on the part of the state.            The term “accrued financial

benefits” was meant to include benefits that an employee

had worked in reliance on and continued to work in reliance

on.     This is in contrast to the term “financial benefits,”

which was used in the second clause of the constitutional

provision to denote a system in which the benefits earned

for the year were funded annually.            Because the second

clause only specifically dealt with how to fund benefits

earned in a given year, retirement systems would eventually

need to address the funding for benefits that had been

earned in prior years but had not been properly funded.         1

Official Record, Constitutional Convention 1961, pp 773-

774.3

        3
            The constitutional provision does two things:
                                                      (continued…)
                                   7
     When     a   public   school    employee     has    fulfilled     his

commitment    and   is   then   entitled    to   receive   health      care

benefits once he retires, the employee has an enforceable

claim to receive the benefits upon retirement.                  “Accrued”

does not mean that the amount of benefits the employee will

receive during retirement must grow in conjunction with the

employee’s years of service.             For an employee to have an

accrued financial benefit, he must fulfill the obligations

set forth by the state.           For plaintiffs, all the events

that are necessary for them to receive their benefits have

come into existence.        Simply, plaintiffs went to work and

did their jobs for the required number of years.                  As our

Constitution states, accrued financial benefits “shall be a

contractual       obligation    thereof      which      shall    not     be

(…continued)

          [I]n the first paragraph, it provides that
     the relationship between the employing unit and
     the employee shall be a contractual relationship
     so that the municipality may not change the
     relationship at its will. The benefits that have
     accrued up to a given time are contractual and
     must be carried out by the municipality or by the
     state.   The second paragraph provides that each
     year the system shall pay in enough money to fund
     the liability arising in that year. It does not
     require that the system catch up with all of its
     past liability, which would be an impossibility
     in connection with some of the state systems, but
     it does require that they shall not go any
     further     behind.     [2    Official    Record,
     Constitutional Convention 1961, p 2659.]

                                    8

diminished or impaired thereby.”                              Const 1963, art 9, § 24.

Once an employee has fulfilled his obligation, the state

must           fulfill       its        obligation          and    be     prepared    to     pay

retirement health care benefits when necessary.

           Additionally,            even     if       the     term       “accrued    financial

benefits”             were    viewed       as     a    term       more    commonly    used    by

accountants and actuaries than by laypersons, its meaning

would still encompass retirement health care benefits.                                       As

stated           by    the      Governmental               Accounting      Standards       Board

(GASB), cash payments and other retirement benefits, such

as     health            care       benefits,              “are    conceptually        similar

transactions-both involve deferred compensation offered in

exchange for current services—and should be accounted for

in     a        similar      way.”          Governmental            Accounting       Standards

Board, Accounting and Financial Reporting by Employers for

Postemployment Benefits Other Than Pensions, Statement No.

45, June 2004, p 73 (emphasis added).4                                     As noted by the

majority, “‘“[t]he words ‘accrued financial benefits’ were

used           designedly,         so    that     the       contractual       right    of    the

employee          would       be    limited           to    the    deferred    compensation

           4
       The GASB also states that retirement health care
benefits, like monthly cash allowances, arise “from an
exchange of salaries and benefits for employee services
rendered and constitute[] part of the compensation for
those services.”   Id. at 1.   Retirement benefits “are an
exchange of promised benefits for employee services.”  Id.
at 77.

                                                      9

embodied in any pension plan . . . .”’”                                       Ante at 17,

quoting Musselman I, supra at 510 n 8, quoting 1 Official

Record,        Constitutional               Convention           1961,        pp     773-774

(emphasis added).                 By any standard employed, the meaning of

the         term       “accrued        financial           benefits”           encompasses

retirement             health       care        benefits     for         public       school

employees.

       II. HEALTH CARE BENEFITS ARE CONTRACTUAL OBLIGATIONS

        The United States Constitution provides in relevant

part, “No State shall . . . pass any Bill of Attainder, ex

post        facto      Law,       or   Law      impairing        the     Obligation         of

Contracts          .    .    .    .”       US   Const,     art     I,     §    10,    cl   1.

Michigan’s Constitution provides, “No bill of attainder, ex

post facto law or law impairing the obligation of contract

shall be enacted.”                Const 1963, art 1, § 10.

        Information about retirement health care benefits for

Michigan’s          public        school     employees      is    set     forth      in    MCL

38.1391.               MCL       38.1391(1)       states     that        the       state    is

responsible for paying the monthly premiums for plaintiffs’

health care benefits.5                 In Musselman I, supra at 516, this

Court stated that the obligation to pay retirement health

        5
       MCL 38.1391(1) provides, “The retirement system shall
pay   the   entire   monthly   premium  or   membership   or
subscription fee for hospital, medical-surgical, and sick
care benefits for the benefit of a retirant or retirement
allowance beneficiary who elects coverage in the plan
authorized by the retirement board and the department.”

                                                10

care benefits “is a contractual right arising from the fact

that employees have worked in reliance on the statutory

promise that the board will pay earned health care benefits

of    any    member     receiving      a     retirement          allowance.”           In

Musselman       I,     supra   at    519     n     19,    the     defendants       even

conceded        “that     retirement         health        care        benefits        are

contractual benefits subject to Const 1963, art 1, § 10.”

Further,        “the    defendants      conceded          that    these     statutes

create a right to receive health benefits that may not be

impaired.”       Musselman I, supra at 505 n 1.

       The      statute’s      intent        is     clear-in           exchange        for

receiving years of an employee’s services, the state will

pay      for     retirement         health         care     benefits.              This

unconditional          guarantee      is         what     many     public        school

employees and retirees have relied on throughout the years,

and the state has benefited from that reliance.                            As stated

at the constitutional convention, “[T]here is no question

that     when     an    employee     today        takes     employment          with    a

governmental unit, he does so with the idea that there is a

pension plan or retirement system involved.”                              1 Official

Record,        Constitutional       Convention           1961,     p     773.          The

majority’s position now allows the state to choose, at its

whim, not to fulfill its obligation under the contract even

though          employees       have             already         performed             the

                                           11

responsibilities       necessary     to    fulfill      their    obligations

under the contract.

     The    state     did      not   offer    retirement        health      care

benefits to public school employees to be charitable; it

did so to remain competitive in the marketplace.                           See 1

Official    Record,      Constitutional       Convention       1961,   p    773.

And public school employees do not “receive” these benefits

for free.        Because retirement health care benefits cost

money,     the    monetary       compensation      for     public        school

employees had to have been factored into the equation.                        It

is unreasonable to now claim that public school employees,

who received less compensation because of the benefits they

believed they would receive when they retired, are now no

longer entitled to the health care benefits they worked to

receive.     Stability in retirement benefits is likely at

least part of the reasons why many people chose to accept a

position with the public schools or stay in that position,

and it is untenable to tell these employees and retirees

that it was for naught.

     The    majority      attempts    to     buttress    its    argument      by

noting the definition for “compensation” provided by MCL

38.1303a(1).      However, the definition of “compensation” in

MCL 38.1303a does not indicate that retirement health care

benefits    are    not    to    be   considered      “accrued      financial

benefits” or are not contractual obligations that the state
                             12
must fulfill.      The items listed in MCL 38.1303a are used to

determine a retiree’s monthly cash allowance.                     See, e.g.,

MCL 38.1309; MCL 38.1379; MCL 38.1384.                However, this does

not mean that the state is absolved of its responsibility

to fulfill its obligations.             The majority even states the

fundamental concept that is critical to the analysis of

this issue:       “Specifically, a public school employee can

become contractually entitled to ‘compensation’ by first

performing      services.”      Ante       at   30.   Because     retirement

health   care     benefits     for     public     school    employees      are

deferred compensation, see ante at 17, I fail to comprehend

how the majority can justify its misapplication of a basic

contract principle. I am quite certain that it comes as a

surprise to the over 140,000 public school employees that

their retirement health care benefits are nothing more than

a   “policy   decision”      that    the    Legislature     can   choose    to

alter or eliminate at its whim.                   To many retirees, the

health   care    benefits    they    receive      through   their    pension

plan are every bit as important, if not more so, than the

monthly cash allowance they receive through their pension

plan.    Public school employees surely did not envision that

they were afforded no protection against their retirement

health care benefits being capriciously eliminated.                        The

                                      13

provision of health care benefits for retirees is not a

gratuitous undertaking by defendants.6               It is a benefit that

is provided to plaintiffs in exchange for years of service.

Defendants are not altruistically giving plaintiffs these

benefits, plaintiffs earned them through years of hard work

and dedication.          Plaintiffs fulfilled their obligations,

and the state should fulfill its obligation.

       Finally,      contrary   to   the     majority’s      panic-stricken

response to the dissent, the Constitution and our system of

government are not under attack merely because I disagree

with the majority over the interpretation of the words of

the Constitution and the applicable statute.                 Regardless of

the    majority’s     attempt   to   distract       the   reader     from   the

issues at hand, reading the plain words of the statute to

indicate      that   a   contract    was     made    with    public    school

employees and retirees does not mean that no legislative

action can ever be amended or repealed.                   It does not mean

that       welfare   benefits   could      never    be    altered,    as    the

majority’s rhetoric proclaims.              It merely means that when

       6
      In Ramey v Pub Service Comm, 296 Mich. 449, 462; 296
N.W. 323 (1941), this Court held that vacation with pay is
not a gratuity—it is compensation for services rendered.
If paid vacation time is not considered a gratuity, then I
cannot fathom how retirement health care benefits can be
considered   a  gratuity   when   they are  part   of  the
consideration that was exchanged for the years of service
provided by public school employees.

                                     14

reading this statute, it is clear that the words chosen by

the Legislature were meant to oblige the state to provide

the retirement health care benefits that were promised to

public school employees.

         While       the    majority       accurately         states       that    benefit

battles        are    fought       in    the     Legislature,         it    inaccurately

states that benefits “won” can then be changed at the whim

of   a    subsequent            legislature.           Once    benefits       have   been

guaranteed to workers and the workers have served the state

in       reliance          on      them,        it     is     unconstitutional            to

substantially impair the receipt of these earned benefits.

         The   dissent          states     a    concept     that   is       really   quite

unremarkable.              The government, just like any other party to

a contract, must fulfill its obligation.                                When a public

school     employee          has    worked       for   years     in    reliance      on    a

promise of retirement health care benefits, our system of

government is not challenged by the simple notion that the

state must provide these benefits.

 III. ADDITIONAL DISCOVERY IS NECESSARY TO PROPERLY ASSESS
WHETHER DEFENDANTS’ ACTIONS CREATE A SUBSTANTIAL IMPAIRMENT
             OF PLAINTIFFS’ CONTRACTUAL RIGHTS

         Because      plaintiffs’          retirement         health       care   benefits

are a contractual right, the next step is to determine

whether        the     increases           in    plaintiffs’           copayments     and

deductibles substantially impaired plaintiffs’ contractual

rights. 	 Romein v Gen Motors Corp, 436 Mich. 515, 534; 462
                             15
NW2d 555 (1990).              If plaintiffs’ contractual rights are

impaired, the impairment must be the result of a legitimate

public purpose.           Id. at 535.        Finally, the means chosen to

carry out the public purpose must be reasonable.

       I    must     first   address      defendants’         argument    that   the

legitimate public purpose of the increases is to ensure

that       there    are     sufficient      school      funds      available     for

children.          I believe that ensuring high quality education

for    our    children       is     a    valuable      and    worthwhile     public

purpose       that     should       be    one    of     our     state’s     highest

priorities.         However, defendants’ argument essentially pits

the    quality       of     education      for     school      children     against

providing adequate health care benefits for retirees.                            Yet

meeting the needs of school children and meeting the needs

of retirees are not mutually exclusive.                         While it may be

challenging, to say the least, to determine the best way to

meet the needs of children and retirees, it does not mean

that the commitment made to our state’s retirees can be

ignored.       Merely because meeting our responsibilities is

difficult does not mean that our responsibilities can be

abandoned.

       Plaintiffs’           legitimate          expectations         are        that

retirement         health    care       benefits      will    be   continued     and

plaintiffs’ portion of the costs for these benefits will

not be significantly altered.                    It is not sufficient for
                           16
defendants       to      pay       the     “entire      monthly        premium”        if

defendants       disproportionately                increase    the        amount   that

plaintiffs must pay for their deductibles and copayments.

Moreover, increasing the amount that plaintiffs must pay

over time can certainly amount to a substantial impairment

if    defendants       do    in    increments        what     they    would    not    be

allowed to do in one large adjustment.

       The amount of copayments and deductibles is linked to

the    amount     of        the    monthly         premiums.         By     increasing

copayments and deductibles to extremely high proportions,

the defendants could essentially avoid paying any monthly

premium.     That would not fulfill the terms of the contract.

While the statute does not specifically state the amount

that the state must pay, like any contract, the words used

by    the   Legislature           must    be   construed       to     ascertain      the

intent of the parties.                   See Sobczak v Kotwicki, 347 Mich.
242, 249; 79 NW2d 471 (1956).

       Whether    there        has    been     a    substantial       impairment       is

largely a factual question that is better resolved after

additional discovery, especially because there have been

claimed inaccuracies in some of the documents submitted by

defendants.           It      is     reasonable        that    the     amount        that

plaintiffs must pay will increase in logical proportion to

the amount they have historically paid.                         However, because

plaintiffs       raise       valid       concerns     about     the       accuracy    of
                                            17
reports submitted by defendants, I believe it is imprudent

to determine on the basis of what may amount to be an

inadequate record whether the increases pose a substantial

impairment.

                             IV. CONCLUSION

       The years of dedication that public school employees

and retirees have committed to educating and caring for the

children of our state are worth more than empty promises

provided to them by the majority’s approach.                      I believe

that   retirement       health   care      benefits    earned     by   public

school    employees     constitute      “accrued      financial   benefits”

that     are   protected    by    our      Michigan    Constitution     from

diminishment      or    impairment.          I   further     believe    that

retirement     health    care    benefits     earned    by   public    school

employees are a contractual right created by statute, and

whether this contractual right was substantially impaired

cannot be determined without further review by the lower

courts.    Accordingly, I respectfully dissent.

                                        Michael F. Cavanagh
                                        Marilyn Kelly

                                     18