STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6643

June 14, 1990

CONSTITUTIONAL LAW:

Const 1963, art 11, Sec. 3

PUBLIC OFFICERS & EMPLOYEES:

Retroactive salary increases

Const 1963, art 11, Sec. 3, permits the Legislature to authorize a transfer of funds to pay retroactive salary increases midway through a fiscal year to public officers who received binding commitments from their appointing authorities for such increases prior to the time they performed the services in question.

Const 1963, art 11, Sec. 3 prohibits the payment of retroactive salary increases to public officers who did not receive binding commitments for a specific salary increase prior to the performance of the services in question.

Honorable Harry Gast

State Senator

The Capitol

Lansing, MI

You have requested my opinion on a question with regard to Const 1963, art 11, Sec. 3, which provides:

You state that the Senate Appropriations Committee is considering a transfer package to provide funding for salary increases for unclassified state officers and employees for the current fiscal year. The amounts to be transferred have been calculated to provide a 3.5% increase over the salaries paid at the end of the 1988-89 fiscal year. You ask whether the proposed transfer, coming midway through the fiscal year, is a retroactive salary increase, and if so, whether the appropriations committee has the authority to grant retroactive salary increases.

It is clear that, pursuant to art 11, Sec. 3, the Legislature may not grant a retroactive pay increase to a public officer. OAG, 1979-1980, No 5731, p 848 (July 1, 1980). This prohibition, however, does not extend to employees. In OAG, 1985-1986, No 6329, p 188 (December 20, 1985), it was noted that the framers of the 1963 Michigan Constitution deleted the word "employee"' which appeared in the predecessor provision to art 11, Sec. 3, and that the clear intent was to exempt government employees from the prohibition against retroactive pay increases.

It is my understanding, however, that the majority of the individuals whose salaries are subject to the transfer package are department heads, members of state boards and commissions, and the like. These individuals are public officers rather than employees and are subject to the provisions of Const 1963, art 11, Sec. 3.

The effect of Const 1963, art 11, Sec. 3, was addressed in OAG No 5731, supra. There, a board of education had entered into a three year contract with its superintendent in which the salary was specified for the first year, and would remain the same for the second and third years unless a supplemental salary agreement was executed. Midway through the second year, an agreement was executed raising the superintendent's salary retroactive to the beginning of the second year. Under these circumstances it was held that the increase in compensation could be prospective only, since, until the supplemental agreement was reached, the superintendent's salary was fixed at the same rate as the first year. It was stated that:

OAG No 5731, at 850. See also, Attorney General v Detroit Board of Education, 225 Mich 237; 196 NW 417 (1923), in which it was held that a board of education could, by mutual agreement, cancel teachers' contracts midway through the school year and enter into new contracts for the remainder of the year at a higher rate of pay.

It is clear that, while a transfer of money may provide funding for increased salaries, the transfer itself is not a salary increase. OAG, 1985-1986, No 6329, p 188 (December 20, 1985) held that the action of a township board in authorizing and setting aside $200,000 for salary increases without apportionment of the amounts to be paid to individuals did not actually authorize the salary increases of the various township officials. It was not until binding commitments were made on individual salary increases that the increases were permitted. Therefore, the mere setting aside of funds, although occurring prior to the start of the fiscal year, did not allow for retroactive increases when the money was later apportioned between officials after the start of the fiscal year. Thus, because authorization of funding merely makes the funds available for salaries and is not itself a salary increase, the Legislature may transfer the funds in question without offending art 11, Sec. 3.

However, whether the increase may then be paid retroactively by the employing department for services already performed will depend upon whether the salary increase had in fact been authorized prior to the provision of those services. As was stated in OAG No 5731, supra at 852:

Thus, if there existed, prior to the commencement of the current fiscal year, an actual binding commitment by the appointing authority for a 3.5% increase in pay to a state officer which was to be effective at the start of the current fiscal year, a mere delay in the appropriation or transfer of funds by the Legislature to pay that increase would not render it constitutionally invalid under art 11, Sec. 3. However, if a binding commitment was not made prior to the time the services were actually performed, an increase in the salary of a state officer may be paid only prospectively in accord with Const 1963, art 11, Sec. 3.

It is my opinion, therefore, that Const 1963, art 11, Sec. 3, does not prohibit the Legislature from authorizing a transfer of funds to pay salary increases midway through a fiscal year. However, such salary increases may be paid only to employees or to officers who received binding commitments from their appointing authorities for such increases prior to the time they had performed the services in question; public officers may not receive salary increases after their services have been performed unless they received binding commitments for a specific salary increase prior to the performance of the services in question.

Frank J. Kelley

Attorney General