If an Arkansas city overpaid an employee, can the city council just decide not to chase the money back?

Plain-English summary

A first-class Arkansas city had miscalculated and overpaid accumulated sick leave to several retirees. The city had asked for repayment, but the personnel committee was weighing whether to pursue the funds further. Senator Hammer asked whether the city council could simply decide not to chase the money down, even if the original payment was unlawful, and whether such a decision would defeat an illegal-exaction lawsuit by a taxpayer.

Then-Attorney General Leslie Rutledge gave a two-part answer. First, the Arkansas Code does not require a city to recover an unlawful overpayment, so the council has the discretion to walk away (ideally with its city attorney's blessing). Second, that discretion does not bind taxpayers. Article 16, section 13 of the Arkansas Constitution gives any citizen of any city the right to sue to recover funds unlawfully spent, and a court, not the city council, decides whether the payment was illegal and what the remedy should be. The council's reasons for not pursuing collection may be relevant context for the court, but they are not a defense.

Currency note

This opinion was issued in 2021. 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.

Common questions

Why was the council's decision not a defense?
Because Ark. Const. art. 16, § 13 is self-executing and creates a direct citizen right of action: "Any citizen of any county, city or town may institute suit in behalf of himself and all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever." The opinion treated that as a constitutional remedy that did not depend on permission from the political branch that made the unlawful payment in the first place.

What kinds of facts can a court consider in an illegal-exaction case?
The opinion did not lay out a checklist, but it cited Burke v. Elmore, 341 Ark. 129, 14 S.W.3d 872 (2000), where the Arkansas Supreme Court ordered the refund of health insurance benefits paid by a city for a wastewater operator under an ordinance the city had no authority to enact. The takeaway: courts look at whether the underlying expenditure was authorized by law, not at whether the city later changed its mind about pursuing recovery.

Did the AG say whether the sick-leave overpayment in this case was actually unlawful?
No. The opinion answered the legal questions about authority and procedure. It expressly noted that any application to "any specific claim or invoice" was beyond what an AG opinion would do.

Was there any prior AG guidance on the same question?
Yes. The opinion cited Op. Att'y Gen. 2000-199 for the same conclusion: there is no explicit statutory requirement that a city seek recovery of unlawfully paid city funds.

Background and statutory framework

Two threads of Arkansas law intersect when a city accidentally overpays public money. The first is the Arkansas Code's silence: nothing in the statutes requires a city to chase down a recovery. The second is the Arkansas Constitution's Article 16, section 13, the "illegal exaction" clause. The Arkansas Supreme Court has read it broadly, calling it self-executing and applicable to "almost any misuse or mishandling of public funds." Nelson v. Petroleum Co., 242 Ark. 273, 276-77, 413 S.W.2d 46, 48-49 (1967). The clause "imposes no terms or conditions upon the right of the taxpayers to institute an action to prevent or remedy the misapplication of public funds." Samples v. Grady, 207 Ark. 724, 727, 182 S.W.2d 875, 877 (1944).

The opinion's analytic move was to keep these two threads separate. The council's discretion belongs in the political branch. The illegal-exaction remedy belongs to taxpayers and ultimately to a court of competent jurisdiction. A council vote not to collect cannot extinguish the second.

Citations

Constitutional provisions:

• Ark. Const. art. 16, § 13

Cases:

• Nelson v. Petroleum Co., 242 Ark. 273, 413 S.W.2d 46 (1967)
• Samples v. Grady, 207 Ark. 724, 182 S.W.2d 875 (1944)
• Burke v. Elmore, 341 Ark. 129, 14 S.W.3d 872 (2000)

Prior AG opinions:

• Op. Att'y Gen. 2000-199

Source

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

Original opinion text

Opinion No. 2020-058
April 15, 2021
STATE OF ARKANSAS
THE ATTORNEY GENERAL
LESLIE RUTLEDGE
The Honorable Kim D. Hammer
State Senator
1201 Military Road PMB 285
Benton, AR 72015
Dear Senator Hammer:
This is in response to your request for an opinion on the following questions:
1) Does a City Council have the discretion to not legally pursue collection of a debt obligation against an individual or entity if the City Council has articulated reasons for not doing so, even if the debt arose from an unlawful payment of taxpayer funds?
2) Should a City Council determine that a debt obligation from an unlawful payment should not be pursued for collection for reasons it has articulated, is that determination a defense in an illegal exaction lawsuit brought over the City's underlying unlawful payment? In other words, who has the ultimate decision-making authority to determine whether or not the collection of a City debt matter should be pursued, the courts or the legislative branch of city government?

The factual background provided in your correspondence indicates that these questions concern a miscalculation and consequent overpayment of accumulated sick leave to several individuals at the time of their retirement from a city of the first class. The city reportedly has requested repayment of the funds, but the matter has not been resolved and the city's personnel committee is trying to determine the city's course of action regarding the overpayment.

RESPONSE
With regard to your first question, a city is not required by law to seek recovery of an overpayment of city funds such as this. The city, therefore, has "discretion" in the sense that it can decide on a course of action, ideally in consultation with its own legal counsel. However, as explained further below in response to your second question, a taxpayer has the right to seek recovery of funds wrongly expended, regardless of whether the city has decided to pursue collection. The court in that case will make a determination based upon the particular facts and circumstances and will effect appropriate remedies.

DISCUSSION
Question 1: Does a City Council have the discretion to not legally pursue collection of a debt obligation against an individual or entity if the City Council has articulated reasons for not doing so, even if the debt arose from an unlawful payment of taxpayer funds?

The Arkansas Code contains no express requirement that a city must seek recovery of an overpayment of city funds. The city, therefore, has "discretion" in the sense that it can decide on a course of action, ideally in consultation with its own legal counsel.

Question 2: Should a City Council determine that a debt obligation from an unlawful payment should not be pursued for collection for reasons it has articulated, is that determination a defense in an illegal exaction lawsuit brought over the City's underlying unlawful payment? In other words, who has the ultimate decision-making authority to determine whether or not the collection of a City debt matter should be pursued, the courts or the legislative branch of city government?

The Arkansas Constitution gives taxpayers the right to seek recovery of unlawfully-expended city funds:

Any citizen of any county, city or town may institute suit in behalf of himself and all others interested, to protect the inhabitants thereof against the enforcement of any illegal exactions whatever.

This broad constitutional provision covers almost any misuse or mishandling of public funds. It is self-executing and imposes no terms or conditions upon the right of the taxpayers to institute an action to prevent or remedy the misapplication of public funds.

Thus, in response to your particular question, the city's decision not to pursue collection will not, standing alone, be a defense to an illegal exaction action. The city's reasons for not pursuing collection may be relevant to an analysis of all the attendant circumstances. But regardless of the city's decision, a taxpayer's illegal exaction action will offer a remedy where the applicable law and relevant facts support such an action. A court of competent jurisdiction will ultimately make this determination based upon the particular facts and circumstances and will effect appropriate remedies.

Sincerely,
LESLIE RUTLEDGE
Attorney General