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HomeMy WebLinkAbout84-012 DavisII. Factual Basis for Determination: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION June 19, 1984 Mr. Roy E. Davis 84 -012 Borough Manager /Secretary Borough of Hollidaysburg 401 Blair Street Hollidaysburg, PA 16648 RE: Borough of Hollidaysburg; Councilmen Covered by Insurance Programs Dear Mr. Davis: I. Issue: You ask the following questions: 1. Is it or is it not legal for elected officials of the Borough of Hollidaysburg to be included in the fringe benefit coverages of hospitalization, life insurance, eye glass and prescription coverage and retirement. 2. If it is legal for the elected officials of the Borough of Hollidaysburg to be included in the fringe benefits, is it legal for the Borough to pay the cost of said coverage. 3. Is it legal for the Borough to pay the costs for those fringe benefits if it exceeds the amount of compensation, as set forth in the Borough Code and as further defined under Ordinance No. 567 entitled "AN ORDINANCE PROVIDING AND FIXING COMPENSATION FOR COUNCILMEN OF THE BOROUGH OF HOLLIDAYSBURG ". 4. Is it legal for the Council to provide the above named fringe benefits to other elected officials besides themselves, such as the Mayor or any other elected officials the Council might decide from time to time to cover. You indicate that at their meeting of March 12, 1984, the Mayor and Borough Council of Hollidaysburg Borough, directed you to request an Opinion from the State Ethics Commission. You have provided us with details regarding the above questions which indicate that you became Manager of the Borough of Hollidaysburg, hereinafter, the Borough, in October, 1973. As of that time, the Borough provided hospitalization and life insurance to the employees of the Borough through a Prudential Group Plan. The members of the Borough Council also participated in the programs. This coverage had begun in 1968. The insurance provided to employees of the Borough was expanded to include eye glass and prepaid prescription coverage in February, 1976. Mr. Roy E. Davi s June 19, 1984 Page 2 Then, in January, 1977, elected officials were included in the eye glass and prescription programs. Currently, the elected members of the Borough Council and the Mayor of the Borough are covered by the life, hospitalization, eye glass and prescription coverage paid for by the Borough as follows: Name Prescription & Life Hospitalization Eye Glass Ins. Monthly Total Michael M. Strueber and wife $156.78 $20.80 $3.00 $180.58 David J. Montrella wife, family 165.87 20.80 3.00 189.67 Glenn L. Harris and wife 83.92 20.80 3.00 107.72 Fred W. Schmidhammer wife, family 165.87 20.80 3.00 189.67 Paul R. Erb 156.78 20.80 3.00 180.58 and wife James L. Shoemaker 55.56 20.80 3.00 79.36 Barbara A. Hoenstine 55.56 20.80 3.00 79.36 Charles G. Harclerode and wife (Mayor) 83.92 20.80 3.00 107.72 On February 13, 1978, the Borough Council adopted and the Mayor approved Ordinance No. 567, which fixed the compensation for persons serving as Council members of the Borough. This Ordinance stated "compensation for each of the Councilmen of Borough of Hollidaysburg for the year 1978, and each year thereafter, until amended by Ordinance, is hereby fixed at one - hundred and no /100 ($100.00) dollars per month, payable monthly ". We will assume this Ordinance remains in effect, unamended and that the Council members currently serving as listed above receive the sum of $100 as allowed and fixed by this Ordinance. In addition, you provided further information as of May 25, 1984. You state that, to your knowledge, only Councilman Glenn Harris was on Council in 1968 and 1977 when Council's decisions were made with respect to these plans and the expansion thereof. Councilmen Shoemaker and Schmidhammer were on Council in 1977 when the plans were expanded in 1977. Each member of Council Mr. Roy E. Davis June 19, 1984 Page 3 and the Mayor, since 1968 and 1977 have been added to these policies, as a matter of routine and request, and no further official action other than the payment of bills and premiums associated with these policies has been undertaken or is needed. No other Borough officials, such as the Tax Collector are covered by these policies for life, hospitalization, eye glasses and prescriptions. However, you added, in response to our inquiry, that the Borough has no Ordinance, resolution or written policy (other than the Union contract not applicable here) which defines the terms "full" or "part- time" employee or establishes eligibility for the inclusion of persons within the coverage of the four types of policies available to the Mayor and Council members and paid for by the Borough. No other less- than -full time officials or employees of the Borough receive all of these coverages. There are twelve part -time school crossing guards paid by the Borough in addition to several part -time police and dispatchers. The only less- than -full time employees who receive some type of Borough -paid insurance benefits are the janitor(s) and a fire marshall. These two persons, in lieu of a raise, were added to the Borough's hospitalization /medical plan, but do not enjoy coverage for life, eye glass and prescription coverage. You have also provided us with copies of rulings from the Borough solicitor dated February 21, 1984, and March 13, 1984, which analyze the questions you have presented to us for review. These opinions, which are incorporated herein by reference, recommend that no Council member should receive in excess of $125 per month from the Borough, whether this sum includes the value of insurance premiums paid for the councilmember's benefit when combined with the monthly sum to be paid or otherwise. The Solicitor's response to the question was somewhat different with respect to the Mayor's participation in these insurance programs and the Borough's payment of premiums for such coverage. However, this difference will be addressed more fully below. You also provided a letter dated January 10, 1984, from Michael A. Donadee, Chief Counsel, Department of Community Affairs in which he addressed the legality and propriety of the Borough's purchasing of these policies for Council members. Mr. Donadee concluded that he would be "hesitant to advise the Borough to purchase insurance for its elected officials free of any legal repercussions because it (the purchase) is not clearly authorized by law." III. Applicable Law: The law to be applied to this question is as follows: Mr. Roy E. Davis June 19, 1984 Page 4 Ethics Act Section 3. Restricted Activities. (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. 403(a). Section 1. Purpose. The Legislature hereby declares that public office is a public trust and that any effort to realize personal financial gain through public office other than compensation provided by law is a violation of that trust. In order to strengthen the faith and confidence of the people of the State in their government, the Legislature further declares that the people have a right to be assured that the financial interests of holders of or candidates for public office present neither a conflict nor the appearance of a conflict with the public trust. Because public confidence in government can best be sustained by assuring the people of the impartiality -and honesty of public officials, this act shall be liberally construed to promote complete disclosure. 65 P.S. 401. Insurance Code § 535. Group insurance authorized; state and municipal officers, employes and dependents; deductions from wages The Commonwealth of Pennsylvania, or any department or division thereof, and any county, city, borough, incorporated town, township, school district, vocational school district or institution district may and are hereby specifically authorized to make contracts of insurance with any insurance company or nonprofit hospitalization corporation or nonprofit medical service corporation authorized to transact business within the Commonwealth insuring its elected or appointed officers and employes or any class or classes thereof, or their dependents, under a policy or policies of group insurance covering life, health, hospitalization, medical service or accident insurance, and may contract with any such company granting annuities or pensions for the pensioning of such employes; Mr. Roy E. Davis June 19, 1984 Page 5 and, for such purposes, may agree to pay part or all of the premiums or charges for carrying such contracts, and may appropriate out of its treasury any money necessary to pay such premiums or charges or portions thereof. The proper officer, agency, or board or commission of any of the above political divisions or subdivisions, having authority to enter into such contracts of insurance, are hereby authorized, enabled and permitted to deduct from the officer's or employe's pay, salary or compensation, such part of the premium as is payable by the officer or employee and as may be so authorized by the officer or employe in writing. 40 P.S. 535. § 756.2. Group accident and sickness insurance. (a) Group accident and sickness insurance is hereby declared to be that form of accident and sickness insurance covering groups of persons defined in this section with or without one or more members of their families or one or more of their dependents, or covering one or more members of the families or one or more dependents of such groups or persons and issued upon the following basis: (1) Under a policy issued to an employer or trustees of a fund established by an employer, who shall be deemed the policyholder insurancing at least ten employes of such employer for the benefit of persons other than the employer. The term "employes ", as used herein, shall be deemed to include the officers, managers and employes of the employer, the individual proprietor or partnership, the officers, managers and employes of subsidiary or affiliated corporations, the individual proprietors, partners and employes of individuals and firms, if the business of the employer and such individual or firm is under common control through stock ownership, contract or otherwise. The term "employes ", as used herein, may include retired employes. A policy issued to insure employes of a public body may provide that the term "employes" shall include elected officials. 40 P.S. 756.2. Mr. Roy E. Davis June 19, 1984 Page 6 Group Life Insurance. § 532.2. Policies issued to employers or trustees of employer funds. A policy issued to an employer, or to the trustees of a fund established by an employer, to insure employes of the employer for the benefit of persons other than the employer shall be subject to the following requirements. (1) The employes eligible for insurance under the policy shall be all of the employes of the employer, or all of any class or classes thereof determined by conditions pertaining to their employment. The policy may provide that the term "employes" shall include the employes of one or more subsidiary corporations, and the employes, individual proprietors, and partners of one or more affiliated corporations, proprietors or partnerships if the business of the employer and of such affiliated control through stock ownership or contract. The policy may provide that the term "employes" shall include the individual proprietor or partners if the employer is an individual proprietor or a partnership. The policy may provide that the term "employes" shall include elected or appointed official. 40 P.S. 532.2. Borough Code, in pertinent part. § 46001 Organization of Council; quorum, compensation; eligibility. Councilmenmay receive compensation to be fixed by ordinance at any time and from time to time as follows: In boroughs whose population is less than fifteen hundred, a maximum of thirty -five dollars ($35) a month; in boroughs whose population is fifteen hundred or more but less than three thousand, a maximum of fifty dollars ($50) a month; in boroughs whose population is three thousand or more but less than five thousand, a maximum of seventy -five dollars ($75) a month; in boroughs whose population is five thousand or more but less than ten thousand, a maximum of one hundred twenty -five dollars ($125) a month; in boroughs whose population is ten thousand or more but less than fifteen thousand, maximum of two hundred fifty dollars ($250) a month. Mr. Roy E. Davis June 19, 1984 Page 7 The population shall be determined by the latest available official census figures. In no case shall the compensation for any councilman exceed that of the mayor in any given borough: Provided, however, that wherever the mayor's compensation exceeds that authorized by this section for councilmen, the president of council may receive compensation not to exceed that of the office of the mayor. 53 P.S. 46001. 46025. Salary of mayor limited. The salary of the mayor shall not exceed, per annum, four hundred fifty dollars ($450) for the first one thousand population or fraction thereof, the population to be determined by the latest official census figures. In any borough with population in excess of one thousand the salary of the mayor shall not exceed three hundred dollars ($300) per annum per thousand population or fraction thereof, the population to be determined by the latest official census figures. 53 P.S. 46025. § 46202. Specific powers. (37) Other insurance. To appropriate such amount as may be necessary to secure insurance or compensation for volunteer firemen of companies duly recognized by the borough, by motion or resolution, killed or injured while going to, returning from, or attending fires, or while performing their duties as special fire police. To make contracts of insurance with any company, association or exchange, authorized to transact business in the Commonwealth, insuring borough employes, or any class, or classes thereof, or their dependents, under a policy or policies of insurance covering life, health, hospitalization, medical and surgical service and/or accident insurance, and to contract with any such company, granting annuities or pensions, for the pensioning of borough employes, or any class, or classes thereof, and to agree to pay part or all of the premiums or charges for carrying such contracts, and to appropriate money from the borough treasury for such purposes. To make contracts with any insurance company, association or exchange, authorized to transact business in the Commonwealth, insuring any public liability of the borough, and to appropriate moneys from the borough treasury for such purpose. 53 P.S. 46202. Mr. Roy E. Davis June 19, 1984 Page 8 § 48501. Acts of Assembly repealed; saving clause. All other acts or parts of acts of Assembly supplied by, inconsistent with, or appertaining to, the subject matter covered by this act are hereby repealed. It is the intention that this act shall furnish a complete and exclusive system for the government and regulation of boroughs, except as to the several matters anumerated in section 102 of article 1 of this act. 53 P.S. 48501. § 46404. Penalty for personal interest in contracts or purchases. Except as otherwise provided in this act, no borough official either elected or appointed, Who knows or who by the exercise of reasonble diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough or relating to the business of the borough, involving the expenditure by the borough of more than one thousand dollars ($1000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and which he cannot be possibly benefitted thereby either financially or otherwise. But in the case of a councilman or mayor, if he knows that his is within the exception just mentioned he shall so inform council and shall refrain from voting on the expenditure or any ordinance relating thereto, and shall in no manner participate therein. Any official or appointee who knowingly violates the provisions of this section shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the borough and to ouster from office, and shall be guilty of a misdemeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding one thousand dollars ($1000), or not exceeding one hundred eighty days imprisonment, or both. 53 P.S. 46404. Mr. Roy E. Davis June 19, 1984 Page 9 IV. Discussion: There is no doubt that as elected officials the members of Council and the Mayor are "public officials" as that term is defined in the Ethics Act. 65 P.S. 402. As such, their conduct must conform to the requirements of the Ethics Act. Section 3(a) of the Ethics Act prohibits a public official from using his public office to acquire "financial gain other than compensation provided by law." In reviewing this question and interpreting the Ethics Act we must be guided by the concept that the object of all interpretations and construction of statutes is to ascertain and effectuate the intention of the General Assembly. 1 Pa. C.S.A. 1921(a). We must construe words and phrases according to their common and approved usage unless we are dealing with technical words and phrases and such others as have acquired a particular meaning. See 1 Pa. C.S.A. 1903(a). The words and phrases to be construed and reviewed here have to be reviewed in the light of their common and approved usage. We can, thus, ask whether: 1. the inclusion of these officials on this Borough -paid benefit program constitutes "financial gain" to them; and 2. this inclusion constitutes a use of public office of these persons to obtain "financial gain" of something that is other than "compensation" and which is not "provided by law ". It is clear, as we stated in Krane, 84 -001 that the receipt of the benefit of these insurance coverages paid for by the Borough is a "financial gain" to the persons covered. As in Krane, we must proceed to analyze the remaining question of whether or not these persons can use their position as Councilmen /Mayor to secure or obtain this gain., If these benefits and coverages are "compensation" and "provided by law ", the Ethics Act would not preclude such officials from using their office to obtain same. If these benefits and coverages paid for by the Borough are not compensation and are not provided by law, then these persons could not use their public office to obtain same. Thus, in order to avoid the restrictions set forth in Section 3(a), an official must be able to "fit" his conduct into the exception of the Section 3(a) in that he is using his office to obtain something that is not financial gain (a point discussed above), something that is not compensation and something that is allowed by law. Your solicitor has provided us with a well - developed analysis to answer the question of whether these insurance coverages should be considered "compensation ". This analysis confirms the conclusion inherent in our ruling in Krane, supra that the term "compensation" can and should read to include the benefit of the payment of premiums for the coverages at issue here. As your solicitor noted, compensation is defined generally as encompassing more than "mere wages ". See McCutcheon v. State Ethics Commission, 466 A.2d 283, at 286 (1982); definition of "compensation" in Balentine's Law Dictionary, Mr. Roy E. Davi s June 19, 1984 Page 10 cited by your solicitor; 63 Am. Jur. 2d 844 relating to compensation for public officials; definition of "perquisites" for a public official in 63 Am. Jur. 2d 860; Township of Ross v. McDonald, Pa. Cmwith. , 431 A.2d 385 (1981) which defines "emolument" at page 387 thereof and Opinion of the Attorney General, No. 43 (1974) holding that a prescription medicine program constituted an "emolument ". Indeed, even if these Borough -paid benefits could not be fitted neatly into some narrow and technical definition of "compensation" such as within the Internal Revenue Code, for example, we would not be precluded from deciding whether this "financial gain" can be acquired by the use of one's public office. We would not be effecting the intent of the Legislature by narrowing our vision and concluding that if an item does not constitute compensation it can be obtained with impunity by an official. Surely, for example, an official could not use his office to secure for himself a beneficial zoning change with impunity under Section 3(a) simply because a zoning change cannot be classified as "compensation ". In order to allow the activity or acquistion of these benefits we must be able to say these are compensation and allowed by law. Having concluded that these coverages can reasonably and properly be considered within the scope of "compensation" we move to an analysis of whether -these benefits are "provided by law ". In this analysis, we again refer to the ruling of your own solicitor. In that ruling various provisions of the Borough Code and the Insurance Codes, outlined in Part III above were reviewed. The most compelling of these provisions is that which established the Borough Code as the exclusive system for the governance of a borough and repeals all acts or parts of acts which are "inconsistent with or appertaining to, the subject matter covered by" this Code. See 53 P.S. 48501. This concept is consistent with the premise that a municipality and its officers derive their authority and compensation from the Code under which they operate. Basically, an official as we stated in Krane can no more enlarge the compensation than the authority set by statutes for his office. See Krane, p.5 and cases cited therein; Coltar v. Warminster Township, 8 Pa. Cmwlth. 163, 302 A.d 859, 862 (1973); Accord, Commonwealth v. Hanzlick, 400 Pa. 134 161 A.2d 340 (1960) to the effect that a Township has only those powers expressly granted by the Legislature. The Borough Code did not "save" the subject of insurance or the Insurance Code as applied to boroughs from repeal by inclusion of a reference to same in Section 102 of the Borough Code, 53 P.S. 45102. Thus, we agree with your Solicitor's conclusion that the Insurance Code, having not been saved from repeal by the Borough Code, cannot be effective as to boroughs. This is especially true with respect to that provision of the Insurance Code (40 P.S. 535) which purported to grant boroughs, among other municipal entities, the power to purchase and pay for insurance coverage(s) for elected and appointed Mr. Roy E. Davis June 19, 1984 Page 11 -C officers. It cannot be successfully argued that subsequent amendments to 40 P.S. 535 in 1970 revived this provision with respect to boroughs. See 1 Pa. C.S.A. 1957. The provisions of 40 P.S. 535 were repealed and therefore ineffective as to boroughs, not subsequently revived and cannot be viewed as authorizing Borough -paid insurance coverages for elected and appointed officials in any event. Thus, some other source in law must be found if it is to be said that such benefits are provided by law to be paid for by the Borough. Again, we refer to the Borough Code as the exclusive source of the authority of the Borough officials. The Borough Code contains two sections pertinent to this review. The first, 53 P.S. 46001 specifies that Councilmen shall receive compensation fixed by ordinance, but not more than certain maximums set in reference to the Borough's population. The second is 53 P.S. 46202, which grants the Borough the specific power to make and pay for contracts of insurance. We must, if possible, construe all of these provisions to be effective. 1 Pa. C.S.A. 1921(a). We must give effect to the obvious intent of the Legislature in setting maximums for the compensation allowable to Councilmen to limit such compensation. We cannot construe the grant of authority to the Borough to purchase insurance as authorization to purchase policies or plans at Borough expense for these Councilmen thereby negating the legislatively designated maximum on the compensation to be paid to such officials. Likewise, we cannot logically construe subsequent amendments to the Insurance Code with respect to group life and accident and sickness insurance as authorization for the purchase and Borough payment of such policies for these councilmen. See 40 P.S. 756.2 adopted in 1955 and 40 P.S. 532.2 amended in 1959. To assume that these 1955 and 1959 amendments to the Insurance Code permitted elected officials, who do not serve the Borough in any capacity other than as officials to be included at Borough expense within group accident and life insurance policies would be to assume the legislature, through amendments to the Insurance Code, repealed the limitations on compensation for Councilmen and the procedures tor approving additional compensation established in the Borough Code. Repealers by implication cannot be presumed. 1 Pa. C.S.A. 1971. Indeed, the Borough Code unlike the Second Class Township Code, does not authorize officials to serve the Borough in any capacity other than as officials. In the final analysis we agree once again with your solicitor that the Insurance Code and Borough Code can be given effect only by recognizing the limitations and authority to be attributed to both statutes. Specifically, while the Insurance Code may be given effect, at least with respect to life and sickness and accident policies,1 by construing it to authorize these elected officials to participate in these programs, it cannot be construed to Mr. Roy E. Davis June 19, 1984 Page 12 supercede the limitation on compensation provided in the Borough Code. The compensation for councilmen as limited by the Borough Code and duly fixed by Ordinance cannot be exceeded. Absent a clear provision of law authorizing these coverages to be paid for by the Borough in excess of these compensation limits for these council members, we must conclude that such payments are compensation and are not authorized by law. You also ask whether these coverages can be provided for the the Mayor who may also be in a position to use his office to secure these coverages paid for at Borough expense. We note initially we limit our reponse to the question as applicable to the Mayor for two reasons: first, it is difficult to perceive how an official other than the members of Council or the Mayor would have the power and authority to order, vote for or otherwise secure the Borough's payment of the premiums for these insurance coverages and thus the potential for violation of Section 3(a) is not apparent with respect to other officials; and second, there is no indication that you have been authorized to seek and secure an opinion from this Commission on behalf of officials other than the Council members and the Mayor. With respect to the Mayor, the opinion of your solicitor also questioned his inclusion and the Borough's payment of premiums for these insurance plans. The solicitor drew some distinction as to the concept of the "salary" of the Mayor not being limited as is the "compensation" of the Council members. Compare 53 P.S. 46001 and 53 P.S. 46025. The solicitor proposes that the lack of a limitation on the compensation of the Mayor indicates that this insurance benefit is allowable as to the Mayor. However, we note that as with the Council members we are primarily concerned with the authority of the Borough to purchase and pay for these benefits for the Mayor. We find no more support for providing Borough paid -for benefits to the Mayor than for the Council members. We decline to enter the semantic jungle or to split hairs as to the potential differences intended by the Legislature by designating that the councilmembers' "compensation" is limited while a Mayor's "salary" is limited by 53 P.S. 46025. We believe these terms were intended to be used interchangeably and their usage should not result in a different determination with respect to the Mayor in this matter. See usage of "compensation" and "salary" in 53 P.S. 46030, for example. We add that in analyzing each of these situations we are impressed by the fact that no other less than full -time employee receive the same insurance benefits paid for by the Borough. We are likewise, impressed with the reasoning of your own solicitor, and concur in the conclusions he reached. These conclusions are consistent with our ruling and reasoning in Krane, the requirements ennunciated by the Courts regarding voting in one's own interest, and the prohibitions in the Borough Code itself prohibiting interest in contracts. See 53 P.S. 46404, cited in Part III, above. Mr. Roy E. Davis June 19, 1984 Page 13 V. Conclusion: The mayor and members of Council cannot receive or secure for themselves, through the use of their office, compensation -- whether considered monthly payments, salary, or the value of insurance premiums paid for by the Borough or any combination of these -- in excess of the compensation allowed and limited to each by law and duly enacted ordinance. Section 3(a) of the Ethics Act, prohibits the use of these public offices to secure this financial gain beyond this limit because it is compensation and not provided by law. Pursuant to Section 7(9)(i), this opinion is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any civil or criminal proceeding, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance of the advice given. This letter is a public record and will be made available as such. Finally, any person may request within 15 days of service of the opinion that the Commission reconsider its opinion. The person requesting reconsideration should present a detailed explanation setting forth the reasons why the opinion requires reconsideration. SSC /rdp By the Commission, HER:'s'? CONNER Chair an 1 We note that it is our understanding that eyeglass and pre -paid prescription coverage is written under the provisions of 40 P.S. 756.2 relating to group accident and sickness policies.