REQUESTED BY: Dorothy Barlean, Member, Board of Directors Butler County Rural Public Power District.
QUESTION: May a member of the board of directors of a public power district accept from the district a salary and other benefits if the total value of the salary and the other benefits exceeds the statutory maximum compensation provided by statute?
A member of the board of directors of the Butler County Rural Public Power District expects to receive for calendar year 1992 a salary for her services as a board member. In addition, she expects to receive health insurance coverage. By current district policy up to 70% of the premium may be paid by the district. The board member is also eligible to participate in a 401-K or deferred compensation plan.
Section 70-624.02 of the State Statutes provides in part:
The boards of directors of those districts with gross revenue of less than forty million dollars may fix compensation at not to exceed $4,800 per year as to all members except the president and not exceeding $5,400 a calendar year as to the president . . . no director shall receive any other compensation from the district, except as provided by this section, during the term for which he or she was elected or appointed or in the year following the expiration of his or her term, and resignation from such board of directors shall not be construed as the termination of the term of office for which he or she was elected or appointed.
Thus it is the board of directors which fixes the compensation of its members as limited by the foregoing statute. We are informed that the requesting board member is not the board president and that the Butler County Rural Public Power District has gross revenue of less than forty million dollars.
Section 70-602 provides that public power districts are political subdivisions of the State. Section 49-1443 defines the term public official in part as meaning an official of state government or a political subdivision thereof.
Section 49-14,101(4) provides:
No public official or public employee shall use personnel, resources, property, or funds under that individual's official care and control, other than in accordance with prescribed constitutional, statutory and regulatory procedures, or use such items, other than compensation provided by law, for personal financial gain.
By this statute a public official may use public funds only in accordance with law, be that law statutory, constitutional or regulatory. In addition, a public official may use public funds for personal financial gain only to the extent that it is "compensation provided by law". What, then, is the compensation provided by section 70-624.02?
Section 49-1414 of the Act defines compensation as "Anything of monetary value received or to be received from a person, whether in the form of a fee, salary, forbearance, forgiveness, or any other form of recompense". Clearly, health insurance coverage is a thing of value. How valuable is perhaps subject to debate in the absence of a claim resulting from serious injury or illness. However, a reasonable method of determining value is to take the cost of coverage, i.e. the amount of the premium. A deferred compensation plan is a thing of value.
The Internal Revenue Code includes within the definition of gross income "compensation for services, including fees, commissions, fringe benefits, and similar items". 26 USCS 61(A) (10). A discussion of the provisions of Section 61 appears in 11 Federal Tax Coordinator 2d h-1000. It states "compensation includes bonuses and benefits (e.g. health coverage) provided to complement the regular compensation arrangement".
The Commission is without the authority to interpret statutes outside of the Nebraska Political Accountability and Disclosure Act. Reference is therefore made to an opinion of the Nebraska Attorney General which was issued on April 20, 1992. In that opinion the Attorney General states that the Nebraska Supreme Court has held that public employee retirement benefits are deferred compensation for services rendered. The opinion further refers to the Supreme Court's position that a retirement benefit is a form of compensation. The opinion goes on to conclude that "health care benefits would also be a compensation to public employees". Attorney General Opinion #92062 (1992).
The determination having been made that health care benefits constitute compensation, it should be a simple matter to conclude this analysis by stating that if the total of the health care premium paid by the district on behalf of a director and the salary paid to the director is equal to or less than the statutory maximum, the compensation package is acceptable and lawful. It isn't. This analysis is complicated by the provisions of section 70-624.03.
Section 70-624.03, pertaining to pubic power districts, provides as follows:
The board of directors may establish a plan of insurance, designated and intended for the benefit of the employees of the district and the dependents of the employees of the district, and in the discretion of the board, expend funds of the district for the payment of premiums for such employees and dependents group, franchise, or wholesale insurance policies.
It is the opinion of the Attorney General as stated in Attorney General Opinion #92062 and reiterated in Attorney General Opinion #92084 that this section limits public power districts to the establishment of and payment for plans of insurance for employees and their dependents only. It does not authorize the board to establish plans of insurance and pay premiums for directors. See Attorney General Opinion #92062 (1992) and Attorney General Opinion #92084 (1992). Based upon these opinions and a review of the statutes, we must conclude that public power districts may not establish and pay for health insurance benefits for directors at all. This would remain true even if the total of the premium paid on behalf of a director and the salary paid to the director was less than the statutory maximum. A director of a public power district accepting health insurance benefits from the district is receiving for his or her personal benefit a form of compensation which is not provided by law. Therefore, the acceptance of the health insurance benefits would be prohibited by section 49-14,101(4).
In taking this position we are mindful of the statement in Attorney General Opinion #92084 that the legal issue is one of "considerable uncertainty". We also note that portion of the opinion which states, "Only legislative clarification or a court decision will fully resolve the matter". The opinion characterizes the matter as a "close question". The matter being a close question, this Commission feels obliged not only to point out that certain activity would be contrary to law, but also to point out an alternative which appears to be within the law. This sense of obligation is heightened by our belief that public power district board members receiving insurance coverage from districts have been acting in good faith.
While a public power district may not establish a plan of insurance for directors, there appears to be no prohibition against a director participating in a plan of insurance for which he or she is eligible. That is, there may be plans of health insurance which are not established by nor contracted for by a public power district but which are available to a director of a public power district by virtue of his or her holding the position of director. Section 70-624.03 does not appear to authorize the expenditure of district funds for the payment of insurance premiums for directors. However, there is no apparent prohibition against a director using his or her own funds to pay a health insurance premium. It is, therefore, our position that a member of the board of directors of a public power district may participate in a plan of insurance as long as it is not contracted for or established by the district. The director must pay the premium out of his or her own funds. The director may authorize the district to withhold a portion of his or her salary for the payment of an insurance premium and further authorize the district to transmit that withholding to the insurance company. Of course, the salary must be within the limit established by section 70-624.02.
The rationale expressed in the two opinions of the Attorney General as to the prohibition against director health insurance benefits does not lead us to the conclusion that the participation of a public power district director in a district deferred compensation plan is also prohibited. Attorney General Opinion #92084 notes that a series of statutes relating to public power districts continually make a distinction between "employees" and "director". Included in this series is section 70-624.03 relating to health insurance which makes reference only to employees. It then invokes the legal maxim that the expression of one thing is the exclusion of another. That is, the passage by the legislature of a statute expressly authorizing health insurance for employees also implicitly prohibits the use of district money for health insurance for other categories of people. We do not see that this rationale applies to the matter of deferred compensation. It is our position, therefore, that participation in a plan of deferred compensation would not be prohibited by section 49-14,101(4) as long as the total of the salary and deferred compensation was equal to or less than the statutory maximum provided in section 70-624.02.
A director of a public power district may not accept salary plus benefits if the total is more than the statutory maximum compensation permitted by section 70-624.02. A director of a public power district may not accept health insurance benefits from the district regardless of the value of the benefits. A public power district director may participate in insurance plans for which he or she is eligible as long as the plan is not established or contracted for by the district. He or she may have the district withhold portions or his or her salary for the purpose of paying for the premium.