Original Author: Hemsley, Sid
Date of Material: 11/10/2009
Personnel--Compensation--Laws and regulations
Reviewed Date: 04/23/2021
MTAS analyzed questions relating to compensation for various officials and for the provision of (and elimination of) health insurance to the city's officers and employees.
1. Under what authority are the city boards and commissions compensated?
The e-mail from the city recorder to you says that the, “Mayor has appointed a committee to look into how our Boards and Commissions are set up and compensated. Some of our Boards receive $40 per month and some receive no compensation.”
2. Can the city prohibit boards and commissions, including the utility boards, from receiving health insurance?
The answer to Question 1 is that certain boards and commission are established by ordinances adopted under a city charter provision that authorizes the city's governing body to compensate those boards and commissions. In addition, there is a civil service board established by a separate private act that also allows the compensation of that city service board. I will analyze those charter provisions and ordinances below. A planning commission is also authorized to be established and compensated under a general statute. There may also be other boards and commissions, compensated and uncompensated, which do not appear in the charter, municipal code or general law, of which I am not aware.
The answer to question 2 is that the city's governing body can end the practice of providing health insurance to its members, and to the members of any boards or commissions, except the city's utility boards.
Some of the salient Tennessee cases on the compensation of public officers, including municipal governing bodies, declare that governing bodies have broad authority to modify the salaries and other forms of compensation of elected officers to the extent not limited by the Tennessee Constitution. But a close look at those cases suggests that salaries must be legislatively authorized before they can be modified. In Peay v. Nolan, 157 Tenn. 222, 7 S.W.2d 815 (1928), the Tennessee Supreme Court held that the General Assembly could authorize the payment of expenses of its members without violating Article II, Section 23, of the Tennessee Constitution, which prescribes the compensation of members of the General Assembly. The court reasoned that the constitutional limitation in Article II, Section 23, was a “salary” and not a “compensation” limitation. But in that case, compensation and salary appear to be treated the same way. One of the questions in that case was whether the per diem allowed legislators under Article II '23, of the Tennessee Constitution was salary or compensation. Article II, '23, provided that:
The sum of four dollars per day and four dollars for every twenty-five miles traveled to and from the seat of government shall be allowed to the members of each General Assembly....But no member shall be paid for more than seventy-five days of a regular session, or for more than twenty days of any extra or called session, or for any day when absent from his seat in the Legislature, unless physically unable to attend. The Senators, when sitting as a court of impeachment, shall each receive four dollars per day of actual attendance. [At 817]
The Court declared that:
The term “per diem” as used in article 2, '23 is synonymous with “salary.” The term salary imports the idea of compensation for personal service, and not the repayment of money expended in the discharge of the duties of the office. Troop,Public Officers, 441. Compensation attached to the office, whether “salary” or "per diem" (22 R.C.L., p 526, note 4) is not given to the incumbent because of any supposed legal duty resting upon the public to pay for the services. (Moore v. Stickling, 46 W.Va. 515, 33 S.E. 274, 50 L.R.A. 280), and a law creating an office without any provision for compensation carries with it the implication that the services are to be rendered gratuitously. 22 R.C.L. p. 532. [At 917] [Emphasis is mine.] The object in allowing compensation for official service is to enable public officials to give due attention to their official duties. State ex rel. v. Nashville, 15 Leas, 705, 54 Am.Rep. 427.
These principles touching the duty of the citizen in serving the state are derived from the common law and were understood when the Constitution of 1870 was promulgated, and when the provision therein was made to compensate members of the General Assembly, and the allowance for compensation was intended to cover the personal expenses of members, that is expenses incident to their personal comfort, convenience, and taste, and so as to be distinguished from official expenses arising from the performance of official duty. [Citations omitted.] [At 817]
In Blackwell v. Quarterly County Court, 622 S.W.2d 535 (1981), the Tennessee Supreme Court, in upholding the right of a county to modify a pension plan, declared that within constitutional limitations, governments at both the state and local levels have broad authority relative to salary and compensation adjustments of their elected as well as appointed officials.
But in Bayless v. Knox County, 286 S.W.2d 579 (1955), it was argued that even in the absence of statutory authority for the county to pay certain expenses of the county judge and county commissioners related to official county business the county had authority to pay those expenses. The Court rejected that argument, declaring:
Considered on principle, the decisions of this State are directly contrary, as this Court views it, to that assertion. In State ex. Rel Vance v. Dixie Portland Cement Company, 151 Tenn. 53, 60, 267, SW. 595, 597, it is said:
‘It is a well settled policy of the state, determined by statute and judicial decree, that public officers can receive no fees or costs except as expressly authorized by law.’
To the same effect is State v. True, 116 Tenn. 294, 311, 95 SW. 1028; Shelby County v. Memphis Abstract Co., 140 Tenn. 74, 84, 203 SW. 339, L.R.A. 1918E, 939; Henry v. Grainger County, 154 Tenn. 576, 578, 200 SW. 2; Stone v. Town of Crossville, 187 Tenn. 19, 24, 213 S.W.2d 678; and many others which might be cited. There are no decisions to the contrary. [At 587]
Both Peay and Blackwell explain that absent constitutional limitations, the legislative body is entitled to legislate with respect to salaries and compensation. But in both those cases, there was legislative authority supporting the contested payments to the public officials.
There is legislative authority to pay boards and commissions compensation in Article VI , Section 1 of the City Charter, which provides that:
The Council shall by ordinance provide for the administrative organization of the City, not provided for in this charter. In addition to the offices provided for in this charter, the Council may create such offices and positions of employment as deemed necessary for the efficient operation of the city, and shall fix the compensation for offices and positions created.
Apparently, under that provision of the charter, Title 2 of the Municipal Code provides for four boards and commissions:
o Public Library and Library Board;
o Municipal Golf Course Board;
o Electric Power Board;
o Board of Waterworks, Sewerage, and Natural Gas Commissioners.
I note also that Private Acts 1997, Chapter 32, creates a civil service board, for which compensation, at the rate of $50 per month is also authorized. Under Section 2 of that Act, appointed members of boards and commissions do not fall under the civil service board.
The Public Library and Library Board is established under Title 2, Chapter 1 of the Municipal Code. That chapter provides that the library board shall be compensated at the rate of $50 per month. [Section 2-102] The Municipal Golf Course Board is established under Title 2, Chapter 2 of the Municipal Code. That chapter provides that the Municipal Golf Course Board shall be compensated at the rate of $50 per month. [Section 2-202]
The Electric Power Board is established under Title 2, Chapter 3 of the Municipal Code. That chapter provides that the Electric Power Board shall be compensated at the rate of $50 per month, the chairman at an additional $50 per month; plus “any excesses actually incurred while engaged in the business of the board.” [Section 2-304]. The Board of Waterworks, Sewerage and Natural Gas Commissioners is established under Title 2, Chapter 4 of the Municipal Code. Chapter 4 provides that members of that board will be compensated at the rate of $50 per month, plus "expenses actually incurred while engaged in the business of the board."
Tennessee Code Annotated, '13-4-101(a) also authorizes municipalities to establish planning commissions, and "to determine whether and in what amount to compensate members of the planning commission." Section 14-101 establishes a planning commission and authorizes it to be paid at the rate of $50 per month.
It appears that at least with respect to the boards and commissions provided for in the Municipal Code, including the planning commission, which is established under general state law, all of their members are authorized to receive compensation at the rate of $50 per month, except for the chairman of the Electric Board, who receives an additional $50 per month. What the city's actual practices are as to a particular board or boards, I do not know. As I said above, there may be other boards and commissions of which I am not aware that are not in the Municipal Code or the Municipal Charter.
Analysis of Question 2
Tennessee Code Annotated, Title 26, chapter 6, authorizes municipalities to provide health (and other kinds) of insurance to their employees. However, Tennessee Code Annotated, '8-27-606 also authorizes municipalities to discontinue such programs, by resolution of their governing bodies. But under that statute, the municipal employees must be given at least three months notice of the termination of the insurance. It was held in Davis v. Wilson County, 70 S.W.3d 724 (Tenn. 2002), that an insurance program for retired county employees under Tennessee Code Annotated, '8-27-51(a) could be terminated. The Court, citing Hamilton v. Gibson County Utility District, 845 S.W.2d 218 (Tenn. Ct. App. 1992), reasoned that:
Insurance coverage provided to employees under a group health insurance plan are classified as “welfare benefit” plans as opposed to pension benefit plans, whereby retirement income is provided for employees. The law is clear that there is no legal requirement on the part of a governmental entity to provide a welfare benefit plan to its employees and if it chooses to do so, the plan may be modified or terminated at any time. [At 727]
There is no reason that the same reasoning does not apply to health insurance plans provided to municipal employees generally, especially considering that Tennessee Code Annotated, '8-27-606 expressly provides that such plans may be terminated with three months notice.
But Tennessee Code Annotated, '6-27-607 provides that:
The authority conferred by this part is in addition and supplemental to, and is not in substitution for, the power or authority conferred by any other general or special law, or any other implied power or authority of municipal corporations and special school districts, and does not affect insurance plans heretofore adopted.
It appears to me that the City's utility entities have the implied powers to provide health insurance independently of the city. In my memorandum to your MTAS municipal management consultant of August 11, 2009, I showed that those two utility boards were authorized by statute and charter to employ forces to carry out the functions of their respective utilities, and to set the compensation of their employees. I am confident that the “compensation” includes insurance, unless the operation of the city's utilities are returned to the city's governing body.
Memorandum of August 11%2C 2009.doc