STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6113

December 8, 1982

LEGISLATURE:

Time for action to reject salary increases ordered by State Officers Compensation Commission

STATE OFFICERS AND EMPLOYEES:

State Officers Compensation Commission--authority to fix salary increase to become operative in second year upon finding of fact based on an objective formula

The State Officers Compensation Commission may order fixed salary increases for elected state officers to become operative in the second year upon a finding of fact based upon an objective formula utilizing a fixed nationally recognized economic indicator that the requisite improvement in the state's economy has occurred. A second-year salary increase may not be based upon a state economic indicator.

The Legislature must act prior to February 1, 1983 to reject fixed salary increases ordered by the State Officers Compensation Commission subject to such formula made in 1982.

Dr. Edgar R. Harden

Chairperson

State Officers Compensation Commission

Lewis Cass Building

Lansing, Michigan

You have requested my opinion on three questions concerning the powers of the State Officers Compensation Commission, hereafter the Commission, as they relate to setting salaries of members of the Legislature, the Governor, the Lieutenant Governor, and Justices of the Supreme Court, and the power of the Legislature to reject them.

Your first two questions are related and will be considered together. They are:

Const 1963, art 4, Sec. 12, as last amended by the people in 1968, provides:

The Legislature has implemented this provision through enactment of 1968 PA 357, as amended; MCLA 15.211 et seq; MSA 3.255(51) et seq. Sec. 6, to require filing of the determination of salaries and expenses by the Commission after December 1 and before December 31 of each even-numbered year. In 1968 PA 357, supra, Sec. 7, the Legislature has limited its own authority to reject the determinations to prior to February 1 of the year following the determination.

In 1975 PA 213, supra, Sec. 3, the Legislature pursuant to its constitutional authority conferred by Const 1963, art 4, Sec. 12, has limited the number of meetings of the Commission to no more than 15 session days beginning after July 1 of every even-numbered year. When read together with 1975 PA 213, Sec. 6, which requires the Commission to file its determinations after December 1 and before December 31 of each even-numbered year, the Commission has no power to reconvene after December 31, of the even-numbered year. Thus, the Commission may not meet in 1983 to assess the economy of the state and order increases in salaries to be paid at the beginning of 1984. It is this limiting language which has generated the problem confronting the Commission.

In a letter opinion to Senator John T. Bowman, dated September 11, 1972, it was concluded that determinations of the Commission may, pursuant to Const 1963, art 4, Sec. 12 and 1968 PA 357, supra, provide for two different salary levels for such state officers--one effective January 1 of the year after the Commission's determinations are filed and a higher salary to become operative on January 1 of the next ensuing year. This conclusion was reaffirmed in a letter dated November 25, 1980 from Chief Assistant Attorney General Stanley D. Steinborn to former Chairman Joseph L. Hardig, Jr.

Prior to amendment of Const 1963, art 4, Sec. 12 in 1968, salaries of the members of the Legislature were set by the Legislature but changes could become effective only after a general election and at the beginning of the terms of office of its members. The salaries of the Governor and Lieutenant Governor were set by law and could not, prior to the amendment of Const 1963, art 4, Sec. 12, be changed during the term of office, Const 1963, art 5, Sec. 23, and the salaries of the justices of the Supreme Court were set by law, Const 1963, art 6, Sec. 7. Justices salaries must be uniform, may be increased but may not be decreased during a term of office, except to the extent of a general salary reduction in all other branches of government. Const 1963, art 6, Sec. 18.

The only appellate decision construing Const 1963, art 4, Sec. 12, as amended by the people in 1968, is Holmes v State Officers Compensation Commission, 57 Mich App 255; 226 NW2d 90 (1974). Even though the Commission's name includes the word 'Compensation' and the word 'compensation' is used in 1968 PA 357, Sec. 7, supra, a panel of the Michigan Court of Appeals ruled that the Commission has power to determine salaries and expense allowances only, not total compensation including fringe benefits. Holmes, supra, 57 Mich App 255, 261-262; 226 NW2d 90, 94-95. However, the court did indicate that the Commission may consider a wide range of factors in determining salaries to be established. Holmes, supra, 57 Mich App 255; 262-263; 226 NW2d 90, 95. A two-step increase in mileage allowances for members of the Legislature was also upheld. Holmes, supra, 57 Mich App 255, 271, 274; 226 NW2d 90, 99-100.

The court in Holmes, supra, also ruled that the Commission 'is authorized to determine salaries which this court holds means a sum certain without provision for adjustment.' Holmes, supra, 57 Mich App 255, 273; 226 NW2d 90, 100. The adjustments referred to and invalidated in Holmes, supra, were reductions in salaries based upon equivalent increases in the value of fringe benefits available to certain state officers.

The 'adjustment' set out in your question is with respect to the proposed increases in salaries based upon an objective formula involving certain designated economic indicators. The proposed salary increases would become operative on a fixed day beginning in the second year subsequent to a finding of fact that the requisite improvement in the state's fiscal condition as delineated in such formula had occurred. The making of the finding of fact would involve no discretion. If the requisite fact has occurred as found by the fact finder in accordance with the formula on the date set by the Commission, then and only then, will the increases in salaries for the elected state officers ordered by the Commission be payable.

The objective formula herein referred to would enumerate the fixed nationally recognized economic indicator or indicators to be employed would, measured against such indicator, delineate the precise degree of improvement in the state's economy required to trigger the payment of any increases in salaries ordered, designate the disinterested state officer to make the finding of fact, the date upon which the finding of fact is to be made, the precise amount of the increase in salaries to be paid, and the date the increases in salaries would be payable.

It is imperative that the Commission utilize a fixed nationally recognized economic indicator or indicators. It must be emphasized that the power to fix salaries for such elected state officers is no longer reposed by the people in the Legislature subject to consideration and approval or veto by the Governor, and in his absence the Lieutenant Governor. All of these state officers are impacted by the salary fixing authority of the Commission as transferred by Const 1963, art 4, Sec. 12. The Commission may not permit any of the affected state officers, indirectly, to exercise this authority by utilizing a Michigan economic indicator or indicators, such as a possible increase in state revenues which such elected state officers affected may influence through enactment of appropriate legislation raising taxes or possibly increasing Michigan automobile sales, for example, by reducing or eliminating sales taxes which may be due thereon or reducing financing rates for purchase of automobiles. See, Attorney General, ex rel Eaves v State Bridge Commission, 277 Mich 373; 269 NW 388 (1936). Therefore, the use of such Michigan economic indicators by the Commission is impermissible.

The 'adjustment' to which you refer and the 'adjustments' disallowed in Holmes, supra, are essentially different. The adjustments struck down in Holmes, supra, were such reductions as might take effect at any time within the two year period and could occur more than once. Contrariwise, the adjustment which your question contemplates is a fixed dollar increase in salary to be paid on a fixed date for the second year of the period conditioned upon the required finding of fact.

It is noted that the court identified three factors which supported the invalidation of the 'salary adjustment policies pertaining to changes in fringe benefit values':

None of these three factors is presented by the proposed salary increases which you have under consideration. The event triggering the increases--the finding of fact based upon an established national economic indicator or indicators--applies equally to all of the elected state officers whose salaries would be affected. Further, although the required indicator or indicators triggering the increases may or may not occur, the fixed nationally recognized economic indicator or indicators are not within the control of any of the said elected state officers, and the Commission would be required to designate how, when, and by whom the factual determination is to be made that the specified criteria in the formula are met, thus effectuating the increases in salaries.

The proposed salary increases contemplated by your question are not the same as the adjustments struck down in Holmes, supra. Neither are the three factors surrounding the Holmes adjustments which compelled the court of appeals to invalidate the adjustments present in your proposal. Thus, it must be concluded that the Holmes decision does not preclude a finding of validity of the proposed salary increases fixed by the Commission in accordance with such objective formula adopted by the Commission.

As stated earlier, prior to the 1968 amendment of Const 1963, art 4, Sec. 12, it was the responsibility of the Legislature to fix the salaries of its members, the Governor and Lieutenant Governor, and the Justices of the Supreme Court. In amending Const 1963, art 4, Sec. 12, the people of the state chose to transfer part of the salary determining responsibility from the Legilature to an independent compensation commission.

Neither Const 1963, art 4, Sec. 12 nor 1968 PA 357, supra, mandates the use of a particular formula for setting the amount of the increases in salaries of such elected state officers. Const 1963, art 4, Sec. 12 and 1968 PA 357, supra, neither authorize nor prohibit such a method of salary increase determination. Therefore, it must be decided whether salary determinations based on formulas were within the contemplation of the language of Const 1963, art 4, Sec. 12.

In construing a constitutional provision, effect must be given to the intent of the people, for the Const 1963 derives its force from the people. Traverse City School Dist v Attorney General, 384 Mich 390, 405; 185 NW2d 9, 14 (1971). The people clearly intended the Commission to have the same scope of salary increase-setting authority as the Legislature possessed prior to the 1968 amendment. This is evidenced by the use of the language 'shall determine the salaries and expense allowances' of the various elected officers, without any limitations upon the Commission, subject only to rejection by the Legislature.

In resolving the validity of such proposed second year salary increases, it must be borne in mind that until the amendment to Const 1963, art 4, Sec. 12 was approved by the people in 1968, there was no authority to make a salary-increase determination during a consecutive two-year period for members of the Legislature, the Governor and the Lieutenant Governor.

Research reveals no pertinent Michigan authority with respect to the issue here involved.

That majority rule in other states is that

This rule has been followed in Stiftel v Malarkey, 384 A2d 9, 16 (Del 1977); Brissenden v Howlett, 30 Ill 2d 247; 195 NE2d 625 (1964); Kleindienst v Jordan, 93 Ariz 188; 379 P2d 463 (1963); Puterbaugh v Wadham, 162 Cal 611; 123 P 804 (1912); and Crowe v Board of Commissioners of St. Joseph County, 210 Ind 404; 3 NE2d 76 (1936). See generally, Annotation: 'Operation of statute fixing public officer's salary on basis of population or of the valuation of the taxable property, as contravening a constitutional provision that the salary of a public officer shall not be increased or diminished during his term,' 139 ALR 737. Thus, so long as the salary increase determination made prior to a period during which a salary may not be changed is based upon an objective formula which is fixed, certain and unchangeable during the term, it is valid.

In a letter opinion, dated September 20, 1974 to Mr. C. J. Hess, Acting State Personnel Director, the Attorney General concluded that cost-of-living salary increases for state employees determined by the Civil Service Commission prior to the start of a fiscal year based upon a formula employing a fixed nationally established economic indicator by which increases in salaries subject to a maximum budgeted amount would be paid, were valid. This opinion is in harmony with the general rule explicated above.

It must be concluded that any formula which the Commission adopts must be fixed, certain and unchangeable.

Because the people of the state in their wisdom have reposed the responsibility for determining certain elected state officers' salaries in the Commission, it is the Commission which must ultimately fix the amount of the salaries. Whatever the terms of the fixed, certain and unchangeable formula adopted by the Commission may be, the Commission must determine the precise salary increases to be provided, affording no discretion whatsoever in calculating the amount to any other public officer.

In answer to your first and second questions, it is my opinion that the Commission may adopt a suitable objective formula employing a fixed nationally recognized economic indicator or indicators and order that a finding of fact be made on a date certain based upon such recognized economic indicator or indicators that the state's economy has or has not improved. Upon a finding that the requisite improvement has occurred, it is my further opinion that the precise salary increases determined by the Commission for such elected state officers are payable on the date fixed by the Commission. In adopting such an objective formula delineating such requisite improvement in the state's economy, the Commission should designate the State Treasurer, being the officer charged to disburse salary payments to state officers, to make the required finding of fact pursuant to the aforesaid delineated objective formula.

Your third question is:

1963, art 4, Sec. 12 grants the Legislature power to reject the Commission's determinations. Constitutional provisions must be construed in a way that is consistent with common understanding of the people ratifying the amendment. Council No. 11, AFSCME, v Civil Service Commission, 408 Mich 385, 405; 292 NW2d 442, 450 (1980); Traverse City School Dist, supra. The time within which the Legislature may exercise its power to reject has been reposed in the Legislature.

1968 PA 357, Sec. 7, supra, limits the time period for the Legislature to reject the determinations of the Commission of the increases in the salaries of such elected state officers to a period extending from the second Wednesday of January when the Legislature convenes, Const 1963, art 4, Sec. 13, to and including the last day in January of the year following the filing of the determinations of the Commission. This represents a reasonable period of time during which the Legislature may exercise its power of rejection. While the Legislature might have provided further time for consideration, it did not do so. There is no constitutional infirmity in such statutory time limitation.

In answer to your third question, it is my opinion that under 1968 PA 357, Sec. 7, supra, the Legislature must act prior to February 1, 1983 in order to reject the Commission's determinations made in 1982.

Frank J. Kelley