Compensation and Health Insurance for City Boards and Commissions public

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					       The City apparently has the following questions:

       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:

       - Public Library and Library Board;

       - Municipal Golf Course Board;

       - Electric Power Board;
       - 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]
Te 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

       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.

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