STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6329

December 20, 1985

CONSTITUTIONAL LAW:

Const 1963, art 11, s 3--increase in salaries of township officers after services rendered

OFFICERS AND EMPLOYEES:

Increase in salaries paid to township officers after services rendered

TOWNSHIP:

Retroactive payment of salary increase for township officers

The action of a township board authorizing retroactive payment of salary increases for certain township officers based upon the completion of an independent wage study violates Const 1963, art 11, s 3.

Honorable Rudy J. Nichols

State Senator

The Capitol

Lansing, MI 48909

Honorable Claude A. Trim

State Representative

The Capitol

Lansing, MI 48909

You have requested my opinion with respect to the following question regarding the setting of salaries for township officials:

'Was the action of the Waterford Township Board in approving a budget which included compensation increases for the Township Supervisor, Clerk and Treasurer respectively, but not fixing the wage rate for the three elected officials until completion of the independent wage study, then as a result of this study fixing the exact amount of the pay raise for these three elected officials and the four Township Trustees retroactively, lawful in light of Article XI, Section 3 of the Michigan Constitution of 1963?'

As background to your question, you provide this chronology:

'1. In October, 1984, Waterford Township contracted with the accounting firm of Plante and Moran to perform a compensation study for the management and administrative staff of Waterford Township.

'2. On October 29, 1984, the Waterford Township Board approved a budget for fiscal year 1985 (1-1-85 through 12-31-85) which included, as a specific line item, a contingency sum in the amount of $200,000.00 for wage adjustments for Township A.F.S.C.M.E. employees and Township Management employees, which was considered by past practices to include the Township Supervisor, Clerk and Treasurer. The last wage increase for all these employees was January 1, 1982.

'3. In February, 1985, Plante and Moran submitted their compensation study, and by March 6, their final study was completed. It included a review of the compensation for the full time positions of Township Supervisor, Clerk and Treasurer.

'4. Based upon the Plante and Moran study for the three elected officials and the other administrative and management employees and the completion of collective bargaining for the A.F.S.C.M.E. employees, on March 25, 1985 the Waterford Township Board fixed the amount of compensation increases for the three Elected Officials, the four Township Trustees, and the other administrative and management employees, (all retroactive to 1-1-85 and the A.F.S.C.M.E. employees retroactive to 1-1-83).'

Const 1963, art 11, s 3, provides:

'Neither the legislature nor any political subdivision of this state shall grant or authorize extra compensation to any public officer, agent or contractor after the service has been rendered or the contract entered into.'

It is noted that the first sentence of the predecessor provision of Const 1908, art 16, s 3, was identical to const 1963, art 11, s 3, except for the deletion of the word 'employee' after agent. OAG, 1973-1974, No 4818, p 155, 158 (June 11, 1974), considered the deletion of the word 'employee' and observed that the 'clear intent of the Constitution's framers was to exempt all government employees from the 'extra compensation' prohibition of Const 1963, art 11, s 3.' A similar provision set forth in Const 1850, art 4, s 21, was interpreted in Attorney General, ex rel Zacharias v Bd of Educ of Detroit, 154 Mich 584, 590; 118 NW 606 (1908), as not prohibiting the board of education from granting prospective salary raises for a superintendent of education, provided such increases in salary looked to the future not to the past.

OAG, 1979-1980, No 5731, p 848 (July 1, 1980), which held that where a school district enters into a three-year contract with the superintendent of schools and specifies the annual compensation therefor subject to reopening for the second and third years, any increase in compensation agreed upon by the parties for the second year must be prospective only. The opinion went on to conclude that payment of an increase in compensation for that period between the beginning of the second year of the contract and the date of the agreement providing for increased compensation would violate Const 1963, art 11, s 3. In reaching these conclusions, OAG, No 5731, reviewed the existing precedent at pp 849-850.

'In Attorney General v Board of Education of the City of Detroit, 225 Mich 237; 196 NW 417 (1923), after the Board had entered into contracts with its teachers and during the school year, by mutual agreement, the existing contracts were cancelled and new contracts were entered providing for additional compensation for the remainder of the school year. The original contracts which were cancelled provided for termination, by either party, upon 30 days notice. The new contracts were challenged on the basis that they provided 'extra compensation', contrary to the first sentence of 1908 Const, art 16, s 3, supra. The Court concluded that the Board could not lawfully grant or authorize extra compensation to any teacher after service had been rendered. However, as to services that had not been rendered, the Court stated:

'. . . There could be no additional compensation allowed for services performed under the original contracts, but there is no constitutional obstacle in the way of cancelling the contracts or changing them at any time, and allowing an increase in salary for the balance of the term. The only thing the board may not do is to grant additional compensation after the services have been rendered . . .. As the additional compensation was for services to be performed under new contracts for the balance of the school year, we think it does not violate the provision of the Constitution. . . .' 225 Mich 237, 242. (Emphasis supplied.)

'OAG, 1928-1930, p 321, 325-326 (April 12, 1929) held invalid a legislative resolution purporting to grant retroactive pay increases to certain state employees. In support of the conclusion that any pay increase must take effect on the effective date of the act fixing such compensation, and that the legislature may not, by concurrent resolution, or otherwise, provide for retroactive compensation contrary to 1908 Const, art 16, s 3, supra, the Attorney General stated:

'Cases in point are not plentiful, but the few cases which have turned on analogous situations seems (sic) to indicate that, as long as changes in compensation by way of increase are made to operate prospectively and not retrospectively, they are valid and not in conflict with Constitutional inhibitions against the granting of extra compensation after the services have been performed. . . .'

'See OAG, 1952-1954, No 1609, p 79 (December 2, 1952); OAG, 1973-1974, No 4772, p 50 (June 12, 1973); OAG, 1979-1980, No 5655, p ___ (February 15, 1980).

. . ..

'Under the reasoning of Attorney General v Board of Education of the City of Detroit, supra, and the respective Attorney General opinions discussed above construing the similar provisions of predecessor 1908 Const, art 16, s 3, supra, it may be concluded that there is no prohibited 'extra compensation' within the meaning of Const 1963, art 11, s 3, supra, where (1) an increase in compensation is paid prospectively, and not retroactively, pursuant to agreement and (2) an incremental salary contract for a public official, entered into prior to the performance of services, and providing for additional compensation at set intervals during the contractual period, is valid.'

In the situation which you describe, the township board increased the salaries of township officers retroactive to January 1, 1985. Such increases would be for services already rendered during the period from January 1, 1985 to March 25, 1985. See, MCL 41.95; MSA 5.82, generally for procedures relating to salary adjustments for township officials. In Deshler v Grigg, 90 Mich App 49; 282 NW2d 237, lv den, 407 Mich 875 (1979), the Court of Appeals upheld a form of so-called 'retroactive' salary resolution where the resolution was construed as confirming a previous action of the township board increasing salaries for township officials and where the raises were included in line items budgeted on a departmental basis. Since the previous action of the township board described in the chronology in your letter merely set aside funds for future increased salaries and did not actually authorize the salary increases of the various township officials prior to their rendering services during the period between January 1, 1985 and March 25, 1985, the Deshler case is not applicable.

It is noted that under MCL 141.431; MSA 5.3228(31), provision is made for the recovery of public moneys which are disclosed to have been illegally expended:

'The attorney general or the prosecuting attorney shall institute civil action in any court of competent jurisdiction for the recovery of any public moneys, disclosed by any examination to have been illegally expended. . . .'

It is my opinion, therefore, that the action of a township board authorizing retroactive payment of salary increases for certain township officers based upon the completion of an independent wage study violates Const 1963, art 11, s 3.

Frank J. Kelley

Attorney General