Could Pollock pay employees a raise for months before its lease revenue arrived?

Plain-English summary

Pollock’s council included employee raises in its 2005 budget, contingent on receiving $10,000 from a lease. The money arrived in September; the town began higher monthly pay in October and asked whether it could pay the January through September difference as a lump sum. In 2006, the Attorney General said yes on those facts. It concluded that the town had approved, authorized, and budgeted the raises before the fiscal year, creating a payment obligation.

The AG distinguished an earned, previously authorized raise from a gratuitous bonus for past work. Article VII, Section 14 generally barred donations of public funds, and earlier opinions rejected retroactive pay increases that had not been earned under a prior obligation. The AG said Pollock’s pre-year council approval, budget, and lease authorization made the difference. It did not announce a general power to award back pay whenever revenue later became available.

Currency note

This opinion was issued in 2006. 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

Could Pollock pay employees the earlier months of its approved raise?

Yes. The AG said it could pay the lump-sum difference for January 1 through September 30, 2005 because the raises had been approved, authorized, and budgeted before the year began.

Why was this different from a bonus for past services?

The opinion said a gratuitous, unearned bonus would violate the constitutional donation bar. Pollock’s payment reflected compensation the town had already obligated itself to pay.

Did the lease money have to arrive before the budget year?

No. In the described facts the lease was authorized before the year, executed during 2005, and the money arrived in September. The AG still found the prior raise obligation sufficient.

Background and statutory framework

Article VII, Section 14 barred donations of public funds. The AG cited prior opinions and McElveen v. Callahan for the rule against extra pay for past services, then relied on other opinions permitting retroactive payment of earned compensation when the public body had already incurred the obligation. It found Pollock’s pre-year approval and budget supported paying the raise difference.

Citations

• La. Const. Art. VII, Sec. 14 (public-funds donation limit).
• McElveen v. Callahan, 309 So.2d 379 (La.App. 3d Cir. 1975) (future salary rather than extra pay for past work).
• Attorney General Opinion Nos. 92-866 and 95-440 (earlier obligated-pay opinions).

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/05-0371

Original opinion text

May 16, 2006
OPINION NUMBER 05-0371

90-A-2 Public Funds – Loan, Pledge or Grants La. Const. Art. VII, Sec. 14

Honorable Jerome F. Scott
Retroactive salary increase does not violate La.
Mayor, Town of Pollock
Const. Art. VII, Sec. 14. when the salary
P.O. Box 189
increases were approved, authorized and
Pollock, Louisiana 71467-0189
budgeted prior to the beginning of the fiscal
year, thus creating an obligation.
Dear Mayor Scott:

You requested an Attorney General’s opinion regarding the Town of Pollock’s plan to provide a salary increase to its employees. You indicate that when the Town’s 2005 annual budget was approved by the Pollock Town Council, an employee pay raise was included contingent upon receipt of Ten Thousand ($10,000) Dollars in lease monies. The lease was executed in, and the lease monies arrived in, September 2005. The monthly employee pay raises were put in place for the October payroll. You question whether or not the Town may pay its employees a lump sum payment representing salary increases from January 2005 through September 2005, since the salary increases for these months were budgeted in the 2005 budget.

Article VII, Section 14(a) of the Louisiana Constitution of 1974 states the following concerning the donation, loan or pledge of public credit:

Except as otherwise provided by this constitution, the funds, credit, property, or things of value of the state or of any political subdivision shall not be loaned, pledged, or donated to or for any person, association, or corporation, public or private. Neither the state nor a political subdivision shall subscribe to or purchase the stock of a corporation or association or for any private enterprise.

This office has consistently opined that the payment of a bonus, or any other gratuitous, unearned payment to public employees is prohibited, as same would be tantamount to a donation. La. Atty Gen. Op Nos. 79-1352, 80-806, 80-1095, 81-1044, 85-908, 86-88, 86-639, 88-344, 89-190 and 91-383. Within the listed opinions, we have found that retroactive pay increases for services previously rendered is a violation of Article VII, Section 14. Any salary adjustment should have prospective application only. See also, McElveen v. Callahan, 309 So.2d 379 (La.App. 3d Cir. 1975), writ denied, 313 So.2d 602 (La. 1975), wherein the court stated “[p]ayments to be legal must be in the form of salary increases for the future, not extra compensation for past services rendered.”

Page 2

Hon. Jerome F. Scott
OPINION NUMBER 05-0371
Page - 2 -

However, this office does not consider Article VII, Section 14 as prohibiting the payment of earned compensation retroactive to the time at which the state or a political subdivision obligated itself to make such a payment. Article VII, Section 14 is not violated if the state or a political subdivision is under an obligation to make a payment of public funds. See Attorney General Opinion Nos. 05-0223, 92-866 and 95-440.

In Attorney General Opinion Nos. 92-866 and 95-440, in which we determined that the retroactive salary increases at issue did not violate Article VII, 14, the salary increases were approved, authorized and budgeted prior to the beginning of the fiscal year, thus creating an obligation. Like the factual situations presented in those opinions, the salary increases for Town employees appear to have been approved, authorized and budgeted prior to the fiscal year. The raises were discussed at the December 1, 2004 Town meeting, as well as at previous meetings, and were included in the 2005 Town budget which was approved and adopted at that meeting. Also, prior to the budget year, the Town took a further step towards implementing the raises by approving the lease from which the funds to pay the raises were to be derived, and authorizing the mayor to execute the lease. Finally, the lease was executed within the 2005 budget year. Accordingly, it is the opinion of our office that the raises can be given retroactive application to January 1, 2005 and the Town may pay the Town’s employees a lump sum payment representing salary increases from January 1, 2005 through September 30, 2005

Trusting this adequately responds to your request, we remain

Yours very truly,

CHARLES C. FOTI, JR.
ATTORNEY GENERAL

BY: _________
KENNETH L. ROCHE, III
Assistant Attorney General

CCF, JR/KLR, III/jv

Page 3

OPINION NUMBER 05-0371

90-A-2 Public Funds – Loan, Pledge or Grants
La. Const. Art. VII, Sec. 14

Retroactive salary increase does not violate La. Const. Art. VII, Sec. 14. when the salary increases were approved, authorized and budgeted prior to the beginning of the fiscal year, thus creating an obligation.

Honorable Jerome F. Scott
Mayor, Town of Pollock
P.O. Box 189
Pollock, Louisiana 71467-0189

Date Received:

Date Released: May 16, 2006

KENNETH L. ROCHE, III
ASSISTANT ATTORNEY GENERAL