WASHINGTON -- The Supreme Court is scheduled to hear arguments tommorrow in a closely watched case out of Michigan that could restrict the power of state legislatures to set a broad array of policies.

The dispute, General Motors Corp. v. Romein, challenges as unconstitutional the Michigan legislature's decision to retroactively require employers to increase workers' compensation benefits.

But the court's disposition of the case could go far beyond the immediate facts, prompting a phalanx of state and local government groups, as well as the federal government, to weigh in on the side of Michigan.

The federal and local governments fear the high court could use the case to pare back their ability to allocate power between their courts and legislatures.

"In the modern regulatory state, judicial decisions interpreting on-going regulatory programs often have policy consequences far beyond their effects on the parties before the court," local governments note in a brief filed by the State and Local Legal Center.

"On many such occasions, Congress and state legislatures have found it appropriate to reject those consequences and retroactively alter the outcomes judicial decisions have wrought," the center's brief said.

The dispute arose in the early 1980s, when the Michigan legislature approved a change in the state's workers' compensation program, which provides money to those disabled on the job.

One change in the program raised the maximum disability benefit, but was applicable only to benefits for injuries occurring after Jan. 1, 1982. The second change provided for "coordination" of workers' compensation and other employee benefits.

Under that provision, employers could reduce workers' compensation payments by the amount of other employer-financed benefits, such as those paid under pension plant. The change went into effect March 31, 1982, but the law did not specify whether coordination applied to all benefits paid after that date or only to payments for injuries that occurred after that time.

After the law became effective, General Motors and other employers in the state began coordinating payments to workers injured before March 31, 1982, as well as to those injured after that date.

The Michigan Supreme Court sanctioned the practice in 1985, ruling the law "clearly and unambigously requires coordination of workers' compensation and other specified benefits for all compensable periods subsequent to its effective date, regardless of when the injury occurred."

State lawmakers revisited the issue in 1987, passing a law that barred the future coordination of workers' compensation benefits of those injured before March 31, 1982. They also required employers to pay the benefits they had withheld, plust interest, to workers injured before March 31, 1982.

After the 1987 law went into effect, Evert Romein, an injured General Motors employee, contested the coordination of his benefits. The Michigan Bureau of Workers' Compensation sided with him, but the Michigan Workders' Compensation Appeal Board reversed.

The Michigan Couort of Appeals later ruled in favor of Mr. Romein, and the state supreme court affirmed the lower court ruling, holding that the 1987 law was a valid exercise of the state legislature's powers.

General Motors takes a contrary view, and is urging the U.S. Supreme Court to overturn the ruling in favor of workers on the grounds that the 1987 legislation is a violation of the impariment of contracts and due process clauses of the U.S. Constitution.

According to General Motors, the Michigan legislature's action in 1987 requiring employers to make back payments to injured employees upset the terms the firm had set for employment.

Governments, however, argue that if General Motors is successful, state legislatures and Congress will be unable to correct flaws in their legislation.

Generally speaking, governments in this country are divided into legislative, executive, and judicial branches. Legislatures pass laws, the executive, and judicial branch decides what they mean. But when courts interpret laws in ways the legislature did not intend or foresee, they often approve additional legislation to clarify their intent.

How the court will sort through the conflicting claims remains to be seen. But the case does provide the court an opportunity to demonstrate the dept of its commitment to state autonomy or whether it will become more sympathetic to business. As the court has become solidly conservative, it has tended to protect state power while being skeptical of protection sough by business.

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