Insurance as Compensation for Public Utility District Commissioners and Manager

PUBLIC UTILITY DISTRICTS--COMMISSIONERS--DISTRICTS--OFFICES AND OFFICERS--SALARIES AND WAGES--COMPENSATION--INSURANCE--OPEN PUBLIC MEETINGS ACT--Insurance as Compensation for Public Utility  District Commissioners and Manager

1.  RCW 54.12.080(4) provides that any public utility district providing group insurance for its employees may provide its commissioners with the same insurance coverage.  In this circumstance, public utility district commissioners may receive insurance as part of their compensation.

2.  Article 2, section 25 (amend. 35) of the Washington Constitution provides that the compensation of a public officer shall not be increased during his or her term of office.  Article 30, section 1 of the Washington Constitution permits mid-term compensation increases only for public officers who do not fix their own compensation. Accordingly, public utility districts may decide to purchase life insurance policies for their commissioners, but may not actually provide the policies until the next terms of the respective commissioners' offices begin.

3.  RCW 54.16.100 provides that public utility district commissioners shall fix the compensation of the district manager.  This includes the authority to provide insurance because insurance is a form of compensation.

4.  Since a public utility district manager does not fix his or her own compensation, article 30, section 1 of the Washington Constitution permits a manager to receive an increase in compensation authorized by the public utility district commissioners.

5.  Article 2, section 25 of the Washington Constitution prohibits a public officer or employee from receiving extra compensation after the services for which the compensation is given have been rendered.  If the extra compensation is paid only on condition that the public officer or employee performs future services, there is no violation of this provision.

6.  The decision to increase the compensation of public utility district commissioners or the manager must be made at an open public meeting.  The validity of a meeting under the Open Public Meetings Act is determined by whether notice of the meeting and the opportunity to attend are provided in accordance with RCW 42.30.030 and .070.  If these requirements are met, it makes no difference whether any member of the public or the press actually attends the meeting.

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                                                               September 9, 1992

HonorableLindaSmith
State Senator, District 18
102 Institutions Building
Post Office Box 40418
Olympia, Washington  98504-0418

                                                                                                                 Cite as:  AGO 1992 No. 21

Dear Senator Smith:

            By letter previously acknowledged, you requested our opinion on several questions related to the compensation of public utility district commissioners and managers.  We have paraphrased your questions thus:

            1.  May the commissioners of a public utility district receive as compensation for their services life insurance policies?

            2.   If the answer to Question 1 is yes, what constraints pertaining to increases in compensation are imposed by article 2, section 25, article 11, section 8, and article 30, section 1 of the Washington Constitution?

            3.  May the manager of a public utility district receive as compensation for his services an individual life insurance policy?

            4.  If the answer to Question 3 is yes, what constraints pertaining to increases in compensation and to retroactive compensation are imposed by article 2, section 25, article 11, section 8, and article 30, section 1 of the Washington Constitution?

            5.  Would the decision to purchase a life insurance policy for a district manager or commissioner be null and void under the Open Public Meetings Act, if made at a public utility district commission meeting attended only by the district commissioners, employees, and a consultant hired by the district?

            We answer Questions 1 and 3 in the affirmative, Question 5 in the negative, and Questions 2 and 4 as set forth in the analysis below.

                                                                    ANALYSIS

            Question 1:

            May the commissioners of a public utility district receive as compensation for their services life insurance policies?

            Public utility districts (hereafter "PUDs" or "districts") are municipal corporations established under state law to supply utility service, including water and electricity, to the public.  RCW 54.04.020; Laws of 1931, ch. 1, § 1, p. 3.  The powers of a PUD are exercised through a commission consisting of either three or five commissioners.  RCW 54.12.010.

            Question 1 is answered by RCW 54.12.080(4), which provides:

                        Any [public utility] district providing group insurance for its employees, covering them, their immediate family and dependents, may provide insurance for its commissioner with the same coverage.

A district's authority to "enter into contracts of group insurance for the benefit of its employees" is established in RCW 54.04.050(1).  In AGO 57-58 No. 58, this office determined that any kind of insurance could be provided to employees under a predecessor statute nearly identical to RCW 54.04.050(1).  Thus, the commissioners may purchase life insurance policies for themselves if employees of the district are provided with group life insurance coverage.

            Question 2:

            If the answer to Question 1 is yes, what constraints pertaining to increases in compensation are imposed by article 2, section 25, article 11, section 8, and article 30, section 1 of the Washington Constitution?

            If they provide themselves with coverage, the commissioners will be subject to constitutional restrictions on increasing compensation during their terms of office.  The three constitutional provisions that pertain to the compensation of public utility district commissioners read as follows:

                        The legislature shall never grant any extra compensation to any public officer, agent, employee, servant, or contractor, after the services shall have been rendered, or the contract entered into, nor shall the compensation of any public officer be increased or diminished during his term of office.  Nothing in this section shall be deemed to prevent increases in pensions after such pension shall have been granted.

Const. art. 2, § 25 (amend. 35) (emphasis added).

                        The salary of any county, city, town, or municipal officers shall not be increased except as provided in section 1 of Article XXX or diminished after his election, or during his term of office; nor shall the term of any such officer be extended beyond the period for which he is elected or appointed.

Const. art. 11, § 8 (amend. 57) (emphasis added).

                        The compensation of all elective and appointive state, county, and municipal officers who do not fix their own compensation, including judges of courts of record and the justice courts may be increased during their terms of office to the end that such officers and judges shall each severally receive compensation for their services in accordance with the law in effect at the time the services are being rendered.

                        The provisions of section 25 of Article II (Amendment 35), section 25 of Article III (Amendment 31), section 13 of Article IV, section 8 of Article XI, and section 1 of Article XXVIII (Amendment 20) insofar as they are inconsistent herewith are hereby repealed.

Const. art. 30, § 1 (amend. 54) (emphasis added).

            To answer Question 2, the terms of these three provisions must be synthesized.  We begin by noting that article 11, section 8 has no bearing on Question 2 because it applies only to increases in salary.  As this office has stated in previous opinions, "salary" is a narrower term than "compensation".

                        "Salary" is generally defined as a fixed or stated amount paid regularly or periodically to a person for his official or professional services or his regular work.  It is generally considered a specific form of compensation, although not all forms of compensation are considered salary.  SeeSt. Louis Fire Fighters Ass'n v. St. Louis, 637 S.W.2d 128, 130 (Mo. Ct. App. 1982); Oregon Ed. Ass'n v. Eugene Sch. Dist. 45, 52 Or. App. 722, 633 P.2d 28, 31 (1981); Olson v. Townsend, 148 Vt. 135, 530 A.2d 566, 568 (1987); Black's Law Dictionary.

AGO 1988 No. 29, at 4; see also AGO 1974 No. 15, at 3-4.  AGO 1988 No. 29 concluded that article 11, section 8 did not apply to health benefits because they were not "salary".  By the same reasoning, a life insurance policy is not salary.  Therefore article 11, section 8 is inapplicable to Question 2.

            The general rule prohibiting increases in compensation is stated in article 2, section 25.  An exception to this general rule is found in article 30, section 1, which provides in part that the compensation of municipal officers "who do not fix their own compensation" may be increased during their terms of office.  Thus, the answer to whether the commissioners' compensation may be increased during their terms of office hinges on whether they "fix their own compensation".

            Salaries for PUD commissioners are set by statute and vary according to the annual gross revenues of the district.  See RCW 54.12.080(1).  Although they do not fix this portion of their compensation, commissioners have authority to provide themselves with other forms of compensation, including, as discussed above, life insurance benefits.[1]

            In a number of opinions, this office has stated that the real question in determining whether article 30, section 1 applies to a particular increase in compensation is not whether the officers have power to increase their own compensation, but whether they exercised that power to bring about the increase at issue.  For example, in AGO 1974 No. 9, the Attorney General concluded that the members of a board of county commissioners could receive, in the middle of their terms of office, salary increases granted by the Legislature.  The Attorney General reasoned that

            [n]either the spirit nor the letter of the constitution is violated by the payment to a county commissioner of a mid-term salary increase provided for by the legislature - as distinguished from one which is granted by the commissioners themselves.  In the one case, the new salary is fixed by a state law enacted by the legislative authority of the state; in the other, it is fixed by a county ordinance or resolution requiring the approval of the commissioners themselves for passage.

Id.at 5; see also AGO 1977 No. 2, at 7 (under article 30, section 1, the only mid-term salary increases that may not be received by members of a board of county commissioners are those provided for by the board itself).  Question 2, of course, asks what constitutional restraints apply when PUD commissioners decide to purchase life insurance policies for themselves; that is, to fix their own compensation.  Since article 30, section 1 permits mid-term compensation increases only when public officers do not fix their own compensation, it does not apply under these circumstances.

            Instead, the general rule against increases in compensation governs.  Article 2, section 25 states in pertinent part that the "legislature shall never grant any extra compensation to any public officer . . . after the services shall have been rendered . . . nor shall the compensation of any public officer be increased . . . during his term of office."  Although the provision literally applies only to actions of the Legislature, the courts have construed it to apply as well to actions of any legislative body.  SeeState ex rel. Port of Seattle v. Wardall, 107 Wash. 606, 611, 183 P. 67 (1919); State ex rel. Jaspers v. West, 13 Wn.2d 514, 125 P.2d 694 (1942) (holding that article 2, section 25 applied to actions of public utility district commissioners).  Thus construed, the terms of this provision prohibit increases in the compensation of PUD commissioners during their terms of office.  As explained above, a life insurance policy constitutes compensation.[2]

            This means that a PUD may decide to purchase life insurance policies for its commissioners, but may not actually provide the policies until the next terms of the respective commissioners' offices begin.[3]  In other words, those who voted for the increase in compensation may not benefit from it during their current terms of office.  See AGO 1968 No. 36, at 8.

            Question 3:

            May the manager of a public utility district receive as compensation for his services an individual life insurance policy?

            The commissioners of a public utility district appoint a district manager, who serves as the chief administrative officer for the PUD.  RCW 54.16.100 provides as follows:

                        The commission, by resolution introduced at a regular meeting and adopted at a subsequent regular meeting, shall appoint and may remove at will a district manager, and shall, by resolution, fix his or her compensation.

(Emphasis added.)  Whether the commissioners of a PUD may provide an individual life insurance policy to the district manager depends on whether such a policy is considered "compensation" under this statute.  We believe that it is.

            AGO 1974 No. 15 answered the question whether a state agency with authority to "employ and compensate" its officers and employees could provide them with the unrestricted use of an automobile owned or leased by the agency.  After reviewing the usual and ordinary meaning of the word "compensation", the relevant case law, and previous Attorney General Opinions, that opinion concluded that an agency could do so because the power to "compensate" was broad enough to cover, as a general rule, such additional benefits as vacation time, sick leave, and possibly even insurance plans, unless the power, once delegated by express or legislative grant, is limited by some other legislative expression.  AGO 1974 No. 15, at 6.  See alsoState ex rel. Funke v. Board of Comm'rs, 48 Wash. 461, 465-66, 93 P. 920 (1908) (term "compensation" is broad enough to include any kind of remuneration from the public treasury for a public officer, whether by way of salary or otherwise); AGO 1988 No. 29, at 5 ("ordinary meaning of 'compensation' is remuneration in whatever form it may be given, whether it be salaries, wages, or benefits"); AGO 53-55 No. 355 (health and welfare plan provided to elected officials constitutes "compensation").  Although AGO 1974 No. 15 left open the possibility that some other legislative expression could dictate that "compensation" be given a narrower reading, we find no such expression with respect to RCW 54.16.100.

            RCW 54.16.100 was amended in 1990, apparently to accomplish two purposes:  to make the statute gender-neutral, and to replace the words "salary", "salaries" and "wages" with the word "compensation".  See Laws of 1990, ch. 16, § 1, p. 138.  The Legislature is presumed to be aware of court decisions construing its enactments.  In re Marriage of Gimlett, 95 Wn.2d 699, 701-02, 629 P.2d 450 (1981).  When the Legislature amended the statute in 1990, therefore, it did so with State ex rel. Funke in mind.  This means that it substituted "compensation" for the narrower terms previously used in the statute with the intent that "compensation" have the meaning described in that case.

            To the extent that the meaning of "compensation" is ambiguous, the remarks made by the sponsors of the bill that amended this statute may be considered in determining the legislative intent behind the amendment.  SeeEmwright v. King Cy., 96 Wn.2d 538, 544-45, 637 P.2d 656 (1981); Prante v. Kent Sch. Dist. No. 415, 27 Wn. App. 375, 382-83, 618 P.2d 521 (1980), review denied (1981).  In this case, those remarks support the conclusion we reach here.  During debate on the floor of the Senate, it was confirmed that the bill would permit a public utility district to negotiate "competitive 'fair market' terms of employment between the district and its general manager, just as any school district or port district or, for that matter, any competing private utility may do".  Senate Journal, 51st Legislature (1990), at 408-09.  Authority to offer terms of employment that are competitive with those offered by private utilities certainly includes the authority to provide a life insurance policy.[4]

            Question 4:

            If the answer to Question 3 is yes, what constraints pertaining to increases in compensation and to retroactive compensation are imposed by article 2, section 25, article 11, section 8, and article 30, section 1 of the Washington Constitution?

            As explained above in response to Question 2, article 11, section 8 of the Washington Constitution applies only to increases in salary, not to increases in compensation such as life insurance benefits, and thus is irrelevant to Question 4.

            That leaves article 2, section 25, and article 30, section 1 for consideration.  Article 2, section 25 provides in part that the compensation of any public officer may not be increased or decreased during his term of office.  As explained above, article 30, section 1 creates an exception to this general rule, providing that the compensation of public officers who do not fix their own compensation may be increased during their terms of office.  The exception applies in this case.

            Even if the manager is a public officer, under article 30, section 1, his compensation may be increased during his term of office because the manager does not fix his or her own compensation.

            RCW 54.16.100 makes it clear that the district commissioners fix the compensation of the manager.  Therefore, we conclude that no applicable part of the state constitution prevents the district commissioners from increasing the manager's compensation.

            However, one portion of article 2, section 25 remains applicable to the district manager's compensation.  The first clause of that provision states that no "extra compensation" may be granted to any public officer, agent, employee, servant, or contractor after the services for which the compensation is given have been rendered.  Public officers or employees may not, in other words, receive additional compensation for services already performed.

            This clause clearly prohibits the payment of retroactive compensation described in the following situation:

            Workmen say to their employer:  Our wages are unfairly low and have been for many months.  We will strike on June 1st unless you not only raise our wages twenty cents an hour from then on, but also pay us an additional ten cents for each hour we have worked since January 1st.

Christie v. Port of Olympia, 27 Wn.2d 534, 544, 179 P.2d 294 (1947).  The court stated that the payment of the additional 10  cents an hour for work done from January 1 to June 1, would constitute extra compensation after the service was rendered, and thus would contravene the extra compensation clause of article 2, section 25.   Id.

            If, however, the "extra" compensation were paid only on the condition that the public officer or employee performed future services, then no violation of this clause of article 2, section 25 would occur.  The state courts have decided some cases that illustrate this point.

            In Aldrich v. State Employees' Retirement Sys., 49 Wn.2d 831, 307 P.2d 270 (1957), the Supreme Court considered whether a pension law allowing prior service credit for state employees rendering services antedating the law violated the terms of article 2, section 25.  Citing Bakenhus v. Seattle, 48 Wn.2d 695, 296 P.2d 536 (1956), the court held that prior service credit alone would not entitle the retiree to a pension.  As the court said:

            There must be, in addition thereto, some service rendered after the effective date of the act, so that the act will constitute a part of the contract governing the subsequent employment.  Then the pensions provided for under the act constitute deferred compensation for the subsequent service and are not gratuities predicated merely upon the prior service.

Aldrich, at 834.

            Similarly, the Court of Appeals has held that a municipal ordinance granting employees the right to cash out sick leave at retirement did not violate article 2, section 25, even though it allowed credit for sick leave accumulated prior to enactment of the ordinance.  Johnson v. Aberdeen, 14 Wn. App. 545, 544 P.2d 93 (1975).  As the court described, "the retirement benefit contemplated, as compensation for future employment, a termination pay based, in part, upon prior service credit under specified conditions."  Id. at 547.

            These two cases indicate that compensation may be given for past services as long as the beneficiary must render future services to collect the benefit.  Thus, a PUD would not violate article 2, section 25 by providing a life insurance policy for its manager if the manager were obligated to continue in the PUD's employ to benefit from the policy.

            Question 5:

            Would the decision to purchase a life insurance policy for a district manager or commissioner be null and void under the Open Public Meetings Act, if made at a public utility district commission meeting attended only by the district commissioners, employees, and a consultant hired by the district?

            Public utility districts, as "public agencies", are subject to the requirements of the Open Public Meetings Act (Act), chapter 42.30 RCW.  RCW 42.30.020(1)(b).  The Act requires that meetings at which "action" is taken be open to the public.  RCW 42.30.030.  More specifically, the Act provides that

            [n]o governing body of a public agency shall adopt any ordinance, resolution, rule, regulation, order, or directive, except in a meeting open to the public and then only at a meeting, the date of which is fixed by law or rule, or at a meeting of which notice has been given according to the provisions of this chapter.

RCW 42.30.060(1).  Action taken at a meeting in violation of this provision is deemed null and void.[5]  Id.

            The definition of "action" is key to understanding the scope of these provisions.  The term is broadly defined as:

            [T]he transaction of the official business of a public agency by a governing body including but not limited to receipt of public testimony, deliberations, discussions, considerations, reviews, evaluations, and final actions.  "Final action" means a collective positive or negative decision, or an actual vote by a majority of the members of a governing body when sitting as a body or entity, upon a motion, proposal, resolution, order, or ordinance.

RCW 42.30.020(3).

            The business of a public utility district is conducted at meetings of the district's commissioners.  RCW 54.12.090.  Official acts of the PUD take the form of motions or resolutions.  Id.

            Read together, the provisions of these statutes require that a public utility district's decision to purchase life insurance policies for its manager or its commissioners be made at a meeting that complies with the dictates of the Act.  If not made in such a meeting, the decision would have no effect.

            Question 5 asks whether a regular meeting of the PUD attended only by persons connected with the district violates the terms of the Act.  The validity of a meeting is determined not by who actually attended, but by whether notice of its occurrence and an opportunity to attend were provided in accordance with the requirements of RCW 42.30.030 and .070.

            As explained above, RCW 42.30.030 requires that meetings be open and public, and that "all persons shall be permitted to attend".  RCW 42.30.070 requires that the governing body of a public agency -- in this case, the commissioners of the PUD -- "shall provide the time for holding regular meetings by ordinance, resolution, bylaws, or by whatever other rule is required for the conduct of business by that body."

            If the PUD fulfilled these requirements with respect to the meeting or meetings at which it decided to purchase life insurance policies for its manager and commissioners, then it complied with the pertinent provisions of the Act.  It would make no difference whether any members of the press or public actually attended the meeting or meetings.  The Act requires only notice to,[6]  not attendance of, these persons.

            We trust that the foregoing will assist you.

                                    Very truly yours,

                                    KENNETH O. EIKENBERRY
                                    Attorney General

                                    TANYA BARNETT
                                    Assistant Attorney General

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