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SMC files appeal in Auditor General suit

On Wednesday, Southwestern Michigan College filed in the Michigan Court of Appeals the second stage of its suit against the Michigan Auditor General’s unconstitutional conduct of a free-wheeling, unauthorized investigation of the College’s practice of not making retirement system payroll deductions and contributions for part-time student workers who will never vest in the system or collect benefits. The College’s practice was based on 2011 guidance from Michigan’s Office of Retirement Services (ORS) that non-contribution for part-time student workers was correct. Regulations published by the public school employees’ retirement system state that retirement service credit will not be given to students in a reporting unit. Moreover, the College’s biweekly payroll reports released to the ORS since 2010 clearly disclosed to the ORS that SMC was not making retirement deductions or contributions for part-time student workers.

In August 2017, SMC was forced to sue the state in response to a mandate that required the Dowagiac-based College to enroll its part-time student workers in the state teacher’s retirement system. That mandate, said SMC President Dr. David Mathews, “is the most egregious over-reach of state government” that he had ever seen. SMC objected to the mandate because not only does enrolling part-time student employees into a system designed for teachers not make sense, but doing so would violate federal laws prohibiting colleges from withholding taxes for retirement benefits from federally-funded student employees’ pay.

“We try to provide students with a way to make money on campus that will help them afford to stay in school,” Mathews said at the time. “For us to take money out of their paychecks and place it into a system they will never see benefits from is wrong and not consistent with what other institutions are doing.” He also noted that full-time student employees are not required to participate in the teachers’ system, while employees in other job classifications have additional options for retirement savings.

In January, a Michigan Court of Claims judge dismissed SMC’s challenge to the OAG’s constitutional authority to conduct an open-ended investigation under the guise of a so-called investigatory audit. In its arguments before the Court of Claims, the OAG stated it was not investigating SMC specifically, but examining an issue related to its audit of the Michigan Public School Employees Retirement System.  However, the OAG’s recently published report focused solely on SMC and neglected to include all of the facts provided to the OAG during its investigation.

“The Court of Appeals exists for this purpose – to reconcile differing opinions from separate state agencies as to jurisdiction and interpretations of state law,” Mathews said. “We certainly disagree with the OAG findings of violations, so we will continue litigation and look to the appellate courts to review the case and assess the issues.

"This case is not about depriving students of benefits (for which they will never vest).  This case is about helping part-time students to pay for their educations, not having them work to prop up a bankrupt, mismanaged retirement system at the cost of educational opportunity."