The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5243 November 3, 1977 CONFLICT OF INTEREST: Service by a retired employee of a city on the city council. HOME RULE CITIES: Service by a retired city employee on city council as a conflict of interest. No conflict of interest prevents a retired city employee who is receiving a pension from the city from running for the office of or serving as a member of the city's council. However, if the retiree serves as a member of the city council, he or she must disclose this interest and, if a change in the retirement plan affecting retirees is before the council, the change will require approval of 2/3 of the full membership without the vote of the retiree. Honorable William L. Jowett State Representative The Capitol Lansing, Michigan 48901 You have requested my opinion as to whether a person who has retired from employment with a city and is receiving a pension therefrom is in conflict of interest if he becomes a candidate for or serves as a member of that city's council. The conflict of interest statute which applies to public servants is 1968 PA 317; MCLA 15.321 et seq; MSA 4.1700(51) et seq. (1) Section 2 of this act provides in pertinent part: '(1) No public servant shall be a party, directly or indirectly, to any contract between himself and the public entity of which he is an officer or employee, except as provided in section 3.' 1968 PA 317, supra, Sec. 3, provides: 'The provisions of section 2 hereof shall apply to all public servants who are paid for working more than an average of 25 hours per week for a public entity, but such provisions shall not apply to any other public servant: (1) if he shall promptly disclose his pecuniary interest in the contract to the official body which has power to approve the same, which disclosure shall be made a matter of record in its official proceedings; and (2) if the contract is approved by a vote of 2/3 of the full membership of such approving body without the vote of a member thereof, if any, making such disclosure.' Prior to the adoption of the 1963 Constitution, pensions granted by public authorities were not contractual obligations but gratuitous allowances which could be revoked at will by the authority, Brown v City of Highland Park, 320 Mich 108; 30 NW2d 798 (1948), at least while acting within reasonable limits, Retired Policemen & Firemen of the City of Lincoln Park, 6 Mich App 372; 149 NW2d 206 (1967). However, the first paragraph of Const 1963, art 9, Sec. 24, now provides: 'The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.' [Emphasis added] The purpose of this provision was explained by Delegate Van Dusen during the course of the constitutional convention as follows: 'MR. VAN DUSEN: Mr. Chairman and members of the committee, this proposal by the committee is designed to . . . give to the employees participating in these plans a security which they do not now enjoy, by making the accrued financial benefits of the plans contractual rights. This, you might think, would go without saying, but several judicial determinations have been made to the effect that participants in pension plans for public employees have no vested interest in the benefits which they believe they have earned; that the municipalities and the state authorities which provide these plans provide them as a gratuity, and therefore it is within the province of the municipality or the other public employer to terminate the plan at will without regard to the benefits which have been, in the judgment of the employees, earned. Now, it is the belief of the committee that the benefits of pension plans are in a sense deferred compensation for work performed. And with respect to work performed, it is the opinion of the committee that the public employee should have a contractual right to benefits of the pension plan, which should not be diminished by the employing unit after the service has been performed. Now, this does not mean that a municipality or other public employing unit could not change the benefit structure of its pension plan so far as future employment is concerned. But what it does mean is that once an employee has performed the service in reliance upon the then prescribed level of benefits, the employee has the contractual right to receive those benefits under the terms of the statute or ordinance prescribing the plan . . . It confers the contractual right. It should confer upon public employees a considerably greater degree of security with respect to the knowledge that they will receive the benefits when the time comes.' [Emphasis added; 2 Official Record, Constitutional Convention 1961, pp 770-771] Thus, the public pension plan referred to in Const 1963, art 9, Sec. 24, is a part of the compensation of public employment that is deferred until the employee terminates his employment with the public body and is a contractual obligation of the public body. See: Mt. Clemens Fire Fighters Union, Local 835, I.A.F.F. v City of Mt. Clemens, 58 Mich App 635, 643; 228 NW2d 500, 504 (1975), where the court stated that the pension and retirement plan of the city was 'a valuable part of the conditions of employment.' Nevertheless, 1968 PA 317, Sec. 3, supra, does not prohibit a person having a potential conflict of interest from running for or serving as a part-time officer on a policy-making body. However, a retiree who serves on a city council may be placed in the position of considering matters which affect his rights as a participant in the municipal pension plan. Therefore, if a question should arise before the council which affects the retiree's benefits as a retiree, the retiree must disclose his interest and refrain from voting on the matter. 1968 PA 317, Sec. 3, supra. In summary, while no conflict of interest exists which prevents a retired city employee from running for the office of or serving as a member of the city's council, the retiree must refrain from voting on matters affecting the pension or retirement benefits he or she receives from the city; in addition, a change in the pension program will require approval of 2/3 of the full membership without the vote of the retiree. Frank J. Kelley Attorney General (1)