Michigan Supreme Court reverses it previous holding and rules payroll deduction system for employees’ contribution to teachers union PAC violates Michigan Campaign Finance Act

Michigan Educ. Ass’n v. Secretary of State, No. 137451 (Mich. Jun. 30, 2011)

Abstract: After granting the state’s motion for a rehearing, the Michigan Supreme Court, in a 4-3 decision, reversed its December 2010 ruling that a school district, pursuant to the collective bargaining agreement (CBA) with its local teachers’ union, is permitted under the Michigan Campaign Finance Act (MCFA) to administer a payroll deduction system for purposes of remitting employee contributions to the state teachers’ union’s political action committee.

This time around, the court’s majority concluded, “a public school district’s administration of a payroll deduction plan that collects and remits political contributions from its employees to the Michigan Education Association’s political action committee (MEAPAC) runs afoul of § 57 of MCFA.” The court determined that by administrating a payroll deduction plan that remits funds to a partisan political action committee, a school district makes a “contribution,” as contemplated by MCFA, “because public resources are being used to advance the political objectives of the committee, and an expenditure, because public services and facilities in assistance of these same political objectives are being provided.”

Facts/Issues: The Michigan Education Association (MEA) is a labor organization that represents employees of public schools, colleges and universities in Michigan. Its political action committee (MEAPAC) is a separate segregated fund under § 55 of MCFA, which is funded in part by MEA member payroll deductions. The MEA (or its affiliates) has entered into collective bargaining agreements with various public school districts throughout the state that require the school district employer to administer a payroll deduction plan for contributions to the MEAPAC. One of those school districts requested MEA to obtain a declaratory ruling from the  Michigan Secretary of State (MSS) regarding the validity of the payroll deduction system.

The MSS ruled that school districts “could not make and transmit payroll deductions requested by MEA members to the MEAPAC because § 57 of the MCFA prohibits a public body from making expenditures or collecting contributions for a political action committee.” The MSS relied on previous rulings from the Michigan Department of State and Attorney General that concluded that a public body is prohibited from collecting and remitting contributions to a committee through its administration of a payroll deduction plan.

MEA appealed MSS’s ruling in state court. The trial court held that a public body may administer payroll deductions as long as all the costs of making deductions are paid in advance. However, the Michigan Court of Appeals reversed the trial court’s opinion, holding that regardless of advance payment for the associated costs, a public school’s administration of a payroll deduction system is still an “expenditure” under the MCFA and thus prohibited.

In its first look at the case, the Michigan Supreme Court reversed the decision of the Court of Appeals. It concluded: ”A public school may administer payroll deductions for its employees who remit funds to the MEA-PAC, because MCL 169.257(1) only prohibits a public body from using public resources to do three things: (1) make an expenditure, (2) make a contribution, and (3) provide volunteer personal services that are excluded from the definition of ‘contribution’ under MCL 169.204(3)(a).”  The state filed a motion asking the supreme court to rehear the case.

Ruling/Rationale: Having vacated its previous decision in the case, a majority of the court’s seven justices affirmed the Michigan Court of Appeals’ decision that held that the payroll deduction system at issue ran afoul of MCFA. The majority stated the issue as “whether by administering a payroll deduction plan that remits funds to a political action committee, a school district makes a “contribution or expenditure” within the meaning of the same provision.”

The majority held that the school district used its public resources “to make a contribution” in a variety of ways. First, the school district employed public resources to administer the plan that allows MEA members “to make a contribution.” Second, the school district itself makes a prohibited “contribution” to the MEAPAC because its administration of the payroll deduction plan constitutes something of “ascertainable monetary value.” Third, the administration of the payroll deduction plan constitutes an “in-kind contribution,” i.e., “contribution . . . other than money.”

The majority also concluded: “The school district’s administration of the payroll deduction plan on behalf of the MEAPAC constitutes a prohibited expenditure because the school district directly provides services and facilities in assistance of the MEA-PAC.” Because the purpose of the MEA-PAC is to facilitate and coordinate the involvement of the MEA in politics, by electing candidates favored by the MEA and by enacting MEA legislative and policy initiatives, “the school district’s administration of the payroll deduction plan constitutes an expenditure as that term is defined by MCL 169.206(1) and is specifically prohibited.”

The majority found that the the statutory exclusion relied on by Justice Hathaway’s dissent was inapplicable to the facts of the present case because Justice Hathaway’s analysis had overlooked “the fact that a public body, such as a school district, is not authorized to establish a separate segregated fund under MCFA and, therefore, may not rely on the § 6(2)(c) exclusion.”

The majority, like the court of appeals, rejected MEA’s argument that reimbursement by the union of the school district’s cost of administering the plan would remedy a violation of MCFA. It found that the terms of the statute itself belied such an interpretation.

Finally, the majority justified its rehearing of the case. It took issue with the dissenting justices opinions that the previous majority opinion had “followed the language of the law. The majority found that the dissent in the previous decision made its justification for vacating the previous decision compelling because “the previous dissent was in accordance with the language and intent of MCFA, while the previous majority opinion was not, and as between an analysis of the law that is in accordance with its language and intent and one that is not, we prefer the former.”

The majority further justified its rehearing on the grounds that the issue before the supreme court was “one of considerable importance to the people of this state and to the integrity of the state’s political and public processes.” Lastly, it stated: “[W]e believe that the former majority’s remarkable treatment of this case itself constitutes grounds for granting rehearing” because the case was  “… alternately subject to unprecedentedly dilatory treatment and unprecedentedly accelerated treatment.”

Michigan Educ. Ass’n v. Secretary of State, No. 137451 (Mich. Jun. 30, 2011)

[Editor’s Note: Justice Hathaway’s dissent attacked the majority’s decision to rehear the case, stating: “Instead of preserving precedent, this newly comprised majority reverses this Court’s previously issued opinion and issues its own opinion for no reason other than that it disagrees with the outcome of the prior opinion.”

Justice Cavanagh’ dissent stated: “The majority fails to realize that my interpretation of the MCFA is consistent with the true purpose of MCL 169.257 as determined from the language of that provision because the school district’s administration of the payroll deduction plan at issue in this case is neither a contribution nor an expenditure.”

In January 2011, Legal Clips provided a summary of the now vacated opinion in Michigan Education Association v. Secretary of State.The majority opinion was written by Justice Hathaway, with Justice Cavanagh joining the four justice majority.]

Tags: ,