Can a city in Arkansas use general fund money to subsidize its firemen's pension fund, and can it raise the Amendment 31 millage rate without holding another election?

Plain-English summary

Senator Uvalde Lindsey asked whether Fayetteville could use general funds to support its firemen's pension and relief fund and raise a voter-approved fire-pension tax from 0.4 mill toward one mill without another election. Attorney General Leslie Rutledge answered yes to both questions, subject to an important qualification on the size of a levy increase.

The AG said a city may use general funds to subsidize a local firemen's relief and pension fund. She cited the fund's authority to receive appropriations and other money, and the rule that fire and police pensions serve a municipal purpose. The city's proposed subsidy would support the established fund, rather than pay benefits directly outside it.

The 1957 ballot sought approval for a tax of “not more than one mill.” The AG read Amendment 31 and its implementing law to allow later annual levies below that approved cap without a new election. She warned that Amendment 59 or another law might restrict the size of a particular increase. In the Wright v. Storey example described by the opinion, a restoration from 0.4 to one mill was prohibited by Amendment 59. The AG could not decide how much Fayetteville could raise its rate without finding facts beyond her opinion role.

Currency note

This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What this means for you

City councils and finance officers

The opinion permits general-fund support for a local fire pension fund. If voters approved a tax of “not more than one mill,” it also permits increasing a lower prevailing rate without repeating that election. Before setting the amount of an increase, account for Amendment 59 and other applicable limits; the AG expressly did not set a permissible Fayetteville increase.

Pension trustees and residents

The opinion separates a city subsidy to an established local fund from paying pension benefits directly out of general funds. It addresses the former. It also does not authorize a rate above one mill; the AG describes the cap as part of Amendment 31 and the voter-approved ballot.

Common questions

Q: Can Fayetteville use general funds to subsidize its fire pension fund? A: Yes. The AG said this is a proper municipal purpose and the fund can receive appropriations and other supplemental money.

Q: Must the city hold a new election before raising its 0.4-mill rate toward one mill? A: The AG said no, because voters had already approved a tax of “not more than one mill.” Other law may still limit the amount of a particular increase.

Q: Could another election authorize a rate above one mill under this opinion? A: The opinion does not authorize a levy above one mill. It describes Amendment 31's one-mill limit and answers only a question about raising a lower rate within that cap.

Q: Did the AG say exactly how large Fayetteville's next increase could be? A: No. She said Amendment 59's application requires facts she could not determine in an official opinion.

Background and statutory framework

Amendment 31 permits a city to levy a fire-pension tax after voter consent, capped at one mill. The implementing law describes annual levies after approval. The opinion explains that the fund may also receive other financial support. For a large levy increase, the AG points to Amendment 59 and the Wright decision as reasons to review the particular facts before acting.

Citations and references

The opinion cites Ark. Const. art. 16, § 14; Ark. Code Ann. § 24-11-809; and Ark. Code Ann. § 24-11-812. It discusses McLaughlin, Trustee, v. Lovett, Adamson v. City of Little Rock, Oldner v. Villines, Wright v. Storey, and Worth v. City of Rogers.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2016-092
January 12, 2017
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
The Honorable Uvalde Lindsey
State Senator
2257 East Gentle Oaks Lane
Fayetteville, AR 72703-6142
Dear Senator Lindsey:
This is in response to your request for my opinion concerning funding of a local firemen's relief and pension fund. You submit this background information: The Fayetteville City Council unanimously passed Ordinance #1136 on May 27, 1957, submitting to the voters of Fayetteville the question of a levy of an annual tax of "not more than one mill" for the purpose of paying pensions to retired firemen, widows and dependent children. After being passed, an initial millage rate of .5 mill was established and collected as confirmed by Washington County Tax Records of 1958. The millage rate was later increased to 1.0 mill. To comply with Arkansas Amendment 59, the millage rate was reduced to .5 mill and later to .4 mill, where it has remained. According to actuaries, the Fayetteville Firemen's Pension and Relief Fund has inadequate assets to cover all future benefits. As such, all sources of revenue are essential to the sustainability of the plan. Your questions are: Question 1: Does the Fayetteville City Council have the authority to use money from "general funds" to subsidize the Fayetteville Fireman's Pension and Relief Fund? 323 CENTER STREET, SUITE 200 • LITTLE ROCK, ARKANSAS 72201 TELEPHONE (501) 682-2007 · FAX (501) 682~8084 ARKANSASAG.GOV The Honorable Uvalde Lindsey State Senator Opinion No. 2016-092 Page 2 Question 2: Does the Fayetteville City Council have the authority to increase the millage rate from its current level of .4 mill to a rate of "not more than one mill", without submitting the question, again, to Fayetteville voters? Question 2a: If not, does the vote have to be conducted in a general election as opposed to a special election? RESPONSE In my opinion, a city council may use money from the city's general funds to subsidize a local firemen's relief and pension fund. It is further my opinion that the council of a city whose voters approved an Amendment 31 tax by way of a ballot that stated that the vote was on a tax of "not more than one mill," and which is levying the tax at a rate of less than one mill, may increase the prevailing tax rate without a new election. The amount by which the millage may be increased may depend on prevailing facts and their application to one or more other constitutional amendments or laws. Accordingly, I cannot render an opinion with respect to the amount by which Fayetteville, or any other particular city, may increase an Amendment 31 millage rate without an election. Because the premise of Question 2a is not met, a response to this question is unnecessary. DISCUSSION Question 1: Does the Fayetteville City Council have the authority to use money from "genera/funds" to subsidize the Fayetteville Fireman's Pension and Relief Fund? Local firemen's relief and pension funds ("Local Firemen's Funds") were first provided for in Act 491 of 1921. The only source of money identified in Act 491 was a part of the revenues arising from the state tax on fire, tornado and marine insurance premiums.1 But Act 491 also authorized each Local Firemen's Fund board of trustees to "accept and disburse ... any and all sums which may come into their hand through appropriation, gift or devise. "2 1 See Acts 1921, No. 491, § 12 (codified as amended as Ark. Code Ann. § 24-11-809 (Rep!. 2014)). 2 Id. at § 14 (emphasis added) (codified as amended as Ark. Code Ann. § 24-l l-803(b) (Rep I. 2014)). The Honorable Uvalde Lindsey State Senator Opinion No. 2016-092 Page 3 It was not until 1940 that Amendment 31, permitting the levy of a property tax to support a Local Firemen's Fund, was adopted.3 Implementing legislation was enacted the following year.4 Nothing in Amendment 31 or the implementing legislation states or implies that a Local Firemen's Fund may receive only the proceeds of an Amendment 31 property tax. To the contrary, the implementing legislation provides that "[t]he funds provided for in this section [i.e., via the property tax] shall be supplemental to and in addition to any funds provided for by any laws in effect at the time of the passage of this section" and that the implementing legislation is intended "to provide additional money for the [Local Firemen's Fund]."5 The Arkansas Supreme Court has stated that a city has "the discretionary power to supplement the fund created" by insurance-tax revenues, with revenues under an Amendment 31 tax, and that the Amendment 31 implementing legislation "contemplates that the [Local Firemen's Fund] may be materially supplemented or increased by donations and otherwise .... "6 With respect to the propriety of a municipality devoting public money to a Local Firemen's Fund, the Court has explained: Pensions and benefits paid firemen and policemen are not gratuities or bounties, but are in the nature of increased or additional compensation. As the maintenance of police and fire departments is a municipal function, the funds of the municipality may be used for that purpose.... The city may devote so much of its funds as are available for this purpose.... If the maintenance of fire and police departments is a municipal function, it 3 According to the Court in McLaughlin, Trustee, v. Lovett, 204 Ark. 708, 163 S.W.2d 826 (1942), an act of the General Assembly, Act 30 of 1939, authorized cities to levy up to 1.5 mills to supplement Local Firemen's Funds but was held unconstitutional in Adamson v. City of Little Rock, 199 Ark. 435, 134 S.W. 2d 558 (1939). 4 Acts 1941, No. 14 (codified as amended as Ark. Code Ann. § 24-11-812 (Repl. 2014)). 5 Ark. Code Ann. § 24-11-812( e) (emphasis added). 6 McLaughlin, 204 Ark. at 714, 163 S.W.2d at 829) (emphases added). The Honorable Uvalde Lindsey State Senator Opinion No. 2016-092 Page 4 cannot be said that compensating policemen and firemen with pensions and disability benefits is not also a municipal purpose. 7 Clearly, then, providing adequate financing to a Local Firemen's Fund is a proper municipal purpose. Municipal general funds (i.e., funds not dedicated to a particular purpose) may be used for general municipal purposes. 8 It is accordingly my opinion that a city council may use money from the city's general funds to subsidize a Local Firemen's Fund.9 Question 2: Does the Fayetteville City Council have the authority to increase the millage rate from its current level of .4 mill to a rate of "not more than one mill," without submitting the question, again, to Fayetteville voters? In my opinion, the council of a city whose voters approved an Amendment 31 tax by way of a ballot that stated that the vote was on a tax of "not more than one mill," and which is levying the tax at a rate of less than one mill, may increase the prevailing tax rate without a new election. Amendment 31 provides that "[a]fter consent of the majority of those voting on the question at any general or special election in cities of the first or second class, the cities may thereafter, levy a tax ... not to exceed [one mill] on the dollar [for Local Firemen's Funds]." (Emphasis added.) In my view, the word "any" implies a single election. The implementing legislation provides that "[a ]fter once being approved ... , a tax not to exceed one (1) mill on the dollar ... shall be levied annually .... "10 It also 7 Adamson, 199 Ark. at 438-439, 134 S.W. 2d at 560. 8 See, e.g., Oldner v. Villines, 328 Ark. 296, 943 S.W.2d 574 (1997). 9 My opinion on this question is consistent with my earlier conclusion that a Local Fund's liabilities are liabilities of the municipality, not just of the Local Fund's board. See Op. Att'y Gen. 2015-127. Additionally, this question is distinguishable from the issue addressed in a previous Attorney General opinion involving a city's payment of pension benefits. In Op. Att'y Gen. 96-043, a city was paying benefits directly from its general fund. Because the establishment and governance of pension systems--even for local employees-is a state affair, it was deemed beyond the city's power to, in essence, pay retirement benefits wholly outside the state- established system of Local Plans. Here, it is proposed that the city subsidize the Local Plan with general fund monies, not pay pension benefits directly with such monies. The Honorable Uvalde Lindsey State Senator Opinion No. 2016-092 Page 5 provides that "[t]he levy shall be made by the city council ... on or before the time fixed by law for levying county taxes, and the city council ... shall make out and certify to the county clerk the rate of taxation levied .... " 11 The "time fixed by law for levying county taxes" occurs annually.12 In my view, the implementing legislation contemplates a single election, followed by annual levies of the tax, at rates that may vary so long as they do not exceed one mill.13 It is accordingly my opinion that the council of a city whose voters approved an Amendment 31 tax by way of a ballot that stated that the vote was on a tax of "not more than one mill," and which is levying the tax at a rate of less than one mill, may increase the prevailing tax rate without a new election. A question remains as to the magnitude of the increase allowed in any one year. In my view, neither Amendment 31 nor the implementing legislation would prohibit a city from increasing the rate by any amount, provided the new rate does not exceed one mill. A city contemplating such action should, however, consider the extent, if any, to which other applicable law may limit its ability to increase the millage rate. In Wright v. Storey, 14 a city's electors had approved, in 1941, an Amendment 31 tax of "up to one mill" for a Local Firemen's Fund, and the city had levied the full mill. The rate was rolled back to 0.4 mills sometime in early 1980 in compliance 10 Ark. Code Ann.§ 24-l l-812(a)(l) (emphases added). 11 Ark. Code Ann.§ 24-l 1-812(a)(2). 12 See Ark. Code Ann.§ 14-14-904(b) (Supp. 2015). 13 As originally enacted, the Amendment 31 implementing legislation explicitly provided for annual adjustment, as necessary, of the millage rate: "On or before October 1 of each year the Board of Trustees of the [Local Firemen's Fund] shall make out and certify to the city an estimate of the amount of money necessary ... for the following year, and the city shall make its levy ... sufficient to raise [that amount]." Acts 1941, No. 14, § 3. While this provision was repealed, it was not replaced with a provision stating or implying that adjustments to the millage rate as often as each year have been prohibited. 14 298 Ark. 508, 769 S.W.2d 16 (1989). The Honorable Uvalde Lindsey State Senator Opinion No. 2016-092 Page 6 with Amendment 59 to the Arkansas Constitution.15 In 1987, without another election, the city once again certified the levy of a full mill. The Arkansas Supreme Court held that the city's action in increasing its millage from 0.4 mills to one mill was prohibited by the operation of Amendment 59, "even though [the restoration] might have seemed permitted, literally, by
[Amendment] 31."16
The applicability of Amendment 5917 and the extent to which it may restrain a city from a large percentage increase in a millage rate are questions that require fact finding, in addition to the application of legal principles to those facts. Because I am neither charged nor equipped to act as a finder of fact in issuing official opinions, I am unable to render an opinion with respect to the amount by which Fayetteville, or any other particular city, may increase an Amendment 31 millage rate without an election. Question 2a: If not, does the vote have to be conducted in a general election as opposed to a special election? Because my answer to your second question is a qualified "yes," the premise of this question is not met. Sincerely,
~~
Attorney General
15 See Ark. Const. art. 16, § 14 (added by Ark. Const. amend. 59). Amendment 59 requires the adjustment or "roll back" of taxes whenever the assessed value of property increases by more than 10% following a countywide reappraisal. See Worth v. City of Rogers, 341 Ark. 12, 14 S.W.3d 471 (2000). 16 Wright, 298 Ark. at 509, 769 S.W.2d at 17. The Court also disclaimed any consideration of whether an election was required to permit the limited millage increase the Court regarded as permitted by Amendment 59. Id. at 510, 18. A predecessor in this office opined that a city's proposed millage increase from 0.4 mills to one mill, without an election, was factually indistinguishable from Wright and therefore controlled by it. See Op. Att'y Gen. 2004-179. 17 See note 15, supra.