ADOPTED - 1995/01/06

SUBJECT - Conflicts of Interest/Use of public funds.

REQUESTED BY: James E. Papik, Attorney for Butler County Rural Public Power District.

QUESTION: May a public power district use public funds to pay a claim for compensation which is made as the result of legislation enacted subsequent to the time from which the claim arises?




Prior to 1993 70-624.02 of the state statutes provided as follows with reference to public power districts:

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 year as to the president.

. . . all salaries and compensation shall be obligations against and be paid solely from the revenue of the district. No director shall receive any other compensation from the district, except as provided in 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, . . .

Section 70-624.03 permitted the board of a rural public power district to establish a plan of insurance for employees of the district and the employee's dependents. The statute did not specifically provide any authority for members of boards of directors to receive insurance benefits from the district.

On April 20, 1992 the Office of the Nebraska Attorney General issued Attorney General's Opinion #92062 which stated that 70-624.03 "does not grant authority to establish an insurance plan for the board of directors. . . . Therefore, it is our determination that public power district boards have no authority to establish plans of insurance for board members." This position was reiterated in Attorney General's Opinion #92084 issued on June 24, 1992. However, the latter opinion stated that "the legal question at issue is one of considerable uncertainty. Only legislative clarification or a court decision will fully resolve the matter."

In reliance on the two opinions issued by the Attorney General, the Nebraska Accountability and Disclosure Commission issued Advisory Opinion #139 on July 2, 1992. In that opinion the Commission stated, "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 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." During the 1993 legislative session LB 182 was passed into law. LB 182 amended 70-624.03 so as to provide that "Members of the board of directors of the district may be considered employees for the purposes of this section. The dollar amount of any health insurance premiums paid from the funds of the district for the benefit of a member of the board of directors shall not exceed the amount of compensation authorized to be paid to such director pursuant to 70-624.02."

Subsequent to the enactment of LB 182, the Nebraska Accountability and Disclosure Commission withdrew Advisory Opinion #139 as issued on July 2, 1992. On November 5, 1993 it issued Advisory Opinion #139 in a modified form which acknowledged the enactment of LB 182. It stated, "A director of a public power district may accept health insurance benefits from the district as long as the value of the benefits plus other compensation does not exceed the statutory maximum."

Prior to the enactment of LB 182, a member of the Butler County Rural Public Power District declined to accept health insurance benefits from the district during her term of office based upon her belief that the district was without the authority to provide these benefits. However, other directors of the same body did accept those benefits. The director now has pending before the district a claim for the monetary value of the benefits. The Butler County Rural Public Power District wishes to know if LB 182 is, in effect, retroactive such that the payment of this claim by the district would not violate the provisions of 49-14,101(4).


Section 49-14,101(4) provides that:

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.

Stated another way, public funds may be used only in accordance with law and may not be used for personal financial gain except to the extent it is used for compensation allowed by law.

The dilemma faced by the district is a real one. During the period of time in question both the Commission and the Office of the Attorney General took the position that the district was without the authority to provide health insurance benefits to members of its board of directors. Consequently, the Commission took the position that the use of public funds for health insurance benefits for directors would violate 49-14,101(4). Unless LB 182 has a retroactive effect, the district risks violating 49-14,101(4) by paying additional compensation for a period of time when health insurance benefits could not be provided. However, other directors received benefits during that period of time.

A standard rule of statutory construction is that "statutes are prospective, and will not be construed to have retroactive operation unless the language employed in the enactment is so clear it will admit of no other construction." Sutherland Stat Const. 41.04(5th ed.) The Nebraska Supreme Court has stated, "A legislative act operates only prospectively and not retrospectively unless the legislative intent and purpose that it should operate retrospectively is clearly disclosed." Young v. Dodge County Board of Supervisors, 242 Neb. 1, 493 N.W.2d 160 (1992). There is an additional concept which must be considered.

A recognized exception to the prospective legislation rule is the concept of curative legislation. "A curative act is a statute passed to cure defects in prior law, or to validate legal proceedings, instruments, or acts of public and private administrative authorities. . . Generally, curative acts are made necessary by inadvertence or error in the original enactment of a statute or in its administration. . . . Because of the positive policy thus served by curative legislation, to sustain the reliability of official actions and secure expectations formed in reliance thereon, they are entitled to liberal construction in order to achieve full fruition of their remedial purposes." Sutherland Stat Const 41.11 (5th ed). The Nebraska Supreme Court has acknowledged the existence of curative statutes. In Lynch v. Metropolitan Utilities District, 192 Neb. 17, 218 N.W. 2d 546 (1974) it stated, "Curative statutes, by reason of their remedial and retrospective nature, are applicable not only to past transactions generally, but also to cases pending in the trial court."

Given the foregoing, there are at least two areas which may be explored in order to determine if LB 182 has a retroactive effect. The first is the expressed intent of the legislature and the second is whether the legislation was intended to be curative in nature.

State Senator Stan Schellpeper was the sponsor of LB 182. At a public hearing on LB 182 before the Legislative Committee on Natural Resources, Senator Schellpeper submitted his statement of intent. The statement of intent included the following:

LB 182 is introduced to make it clear that public power districts have the option of paying the cost of health insurance benefits for members of their boards of directors who desire that coverage. . . .

Many rural public power districts have followed this practice for a number of years based upon their attorney's advice that this was legal.

However, in response to a request for an advisory ruling from a director of the Butler County Rural Public Power District last year, the Accountability and Disclosure Commission requested an Attorney General's Opinion on the issue. The Attorney General initially concluded that the practice was illegal because the power district statutes authorized the provision of health insurance for employees but do not specifically mention directors. However, in a second opinion the Attorney General stated, ". . . the legal question at issue is one of considerable uncertainty. Only legislative clarification or a court decision will fully resolve the matter."

A lawsuit on this matter is currently pending before the Lancaster County District Court. However, it would be preferable to resolve this issue without the expense of litigation by clearly authorizing the practice in the public power districts statutes.

Following Senator Schellpeper's statement of intent, Rex Carpenter, General Manager of the Nebraska Rural Electric Association, testified in favor of LB 182. He stated that the legislation was intended to permit that which had been occurring for more than thirty years.

The sense of Senator Schellpeper's statement of intent and Mr. Carpenter's testimony was that the intent of LB182 was to legislatively clarify the permissibility of certain activity which had been thought to be legally permissible for a long period of time. Again, Sutherland refers to the positive policy served by curative legislation "to sustain the reliability of official actions and secure expectations formed in reliance thereon." Sutherland, supra.

The foregoing provides a good basis for determining that LB 182 has a retroactive effect both because of legislative intent and because of its curative nature. We recognize that the retroactive effect of legislation is ultimately a matter for the courts to decide. However, for the purpose of determining the applicability of 49-14,101(4) to the claim of the member of the board of directors for past compensation, we take the position that LB 182 is retroactive. That is, payment of the director's claim would not violate 49-14,101(4) based upon the fact that the claim predates the enactment of LB182.

The Commission recognizes that there are a variety of other factual and legal issues surrounding this claim for compensation. The Commission takes no position as to whether the claim ought to be approved or denied. This opinion is strictly limited to examining the application of 49-14,101(4) to 70-624.03 as it existed prior to and subsequent to the enactment of LB182 in 1993.