How does Minnesota's 95-percent-of-governor compensation cap apply to school superintendent contracts that include vacation cash-out, deferred compensation, vehicle expense reimbursements, expense allowances, and split-dollar life insurance?

Plain-English summary

In 1995, the Minnesota State Auditor reviewed superintendent contracts in the Twin Cities metropolitan area and found many in violation of the 95-percent-of-governor compensation cap in Minn. Stat. § 43A.17, subd. 9. Some districts amended their contracts; others challenged the State Auditor's reading of the statute. Robert Wedl, then Commissioner of Children, Families and Learning, asked AG Humphrey to provide guidance on nine specific questions.

The AG, through Assistant AG Kenneth Raschke, gave a long, detailed answer that addressed each compensation item the State Auditor had flagged. Here is what the AG held on each:

Cash-out of accrued vacation during employment (Q1 and Q2): School districts have the authority to cash out vacation in situations other than termination. The earlier 1980 opinion on sick-leave cash-out (Op. Atty. Gen. 161b-4, May 27, 1980) supports the proposition that districts can structure compensation in any reasonable way. But once cashed out, those payments count as salary under § 43A.17, subd. 9 because they are "lump sum payments" within the statutory definition of salary. Termination cash-out is treated as severance, not salary (Op. Atty. Gen. 469b, September 14, 1993); mid-employment cash-out is salary.

Deferred compensation contributions (Q3 and Q4): Minn. Stat. §§ 356.24 and 356.25 sharply restrict employer contributions to supplemental pension or deferred compensation plans. Section 356.24, subd. 1 outlaws employer contributions to supplemental plans except for six enumerated exceptions. The relevant exception (subd. 1(5)(ii)) permits employer matching of employee contributions up to $2,000 per year to a 403(b) tax-sheltered annuity contract. Larger contributions are not authorized as employer compensation; if permitted at all, they must be treated as deferred salary at the employee's request. 457(f) plan contributions are not generally authorized for school district employees; they are permissible only to the extent the plan operates within the severance pay authority of Minn. Stat. § 465.72. Whether the contribution counts as salary under § 43A.17: yes for 403(b) (§ 43A.17, subd. 9 explicitly includes deferred compensation and annuity-contract payroll allocations); for 457(f), inclusion depends on whether the funds have vested in the superintendent.

Vehicle expense beyond § 471.665 (Q5): Districts may pay a mileage allowance or periodic allowance under Minn. Stat. § 471.665 for use of the employee's personal vehicle on official business. Additional payments for insurance, maintenance, fuel, or other vehicle expenses are not authorized. Section 471.665 is the limit, not a starting point, and prior opinions (Ops. Atty. Gen. 359b, October 24, 1989; 104a-9, December 28, 1994) confirm the rule against publicly funding personal vehicles.

Expense allowances and reimbursement procedure (Q6 and Q7): Reimbursement of school district employee expenses must follow Minn. Stat. § 471.38: the claimant must submit an itemized written claim with a signed declaration. Standing monthly "expense allowances" that are not tied to specific incurred expenses are not reimbursements; they are salary. The earlier 1989 housing-allowance opinion (Op. Atty. Gen. 161b-4, Jan. 24, 1989) treated similar fixed monthly payments as salary on the same logic.

Split-dollar life insurance (Q8): The cost of a split-dollar life insurance arrangement counts as compensation under § 43A.17, subd. 9, because the cap covers "all other forms of compensation" and the subdivision 9(3) term-life exclusion does not extend to split-dollar arrangements. The amount included each year is the annual premium paid by the district, less any reimbursement actually received in that same year. Even where the district has a lien for ultimate reimbursement from the death benefit or cash value, the "annual cost" rather than the present-value-discounted cost controls. The district's statutory authority to insure employees under § 471.61 (group life policies) may also constrain the type of policy a district can buy in the first place (Lily v. City of Minneapolis, Minn. Ct. App. 1995).

Commissioner's enforcement authority (Q9): The Commissioner has no statutory authority to compel school district compliance with the salary cap, either directly (by reducing a superintendent's salary) or indirectly (by withholding state aids). General school district management authority rests with the school board (Minn. Stat. §§ 123.33-123.35). The Commissioner is authorized to reduce state aids only for specific statutory violations enumerated in § 124.15; § 43A.17 violations are not on the list. Administrative agencies can exercise only the power the legislature has given them (Waller v. Powers Dept. Store).

Currency note

This opinion was issued in 1997. 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. Many of the statutes addressed by the opinion have been amended since 1997: § 43A.17 has been revised; § 356.24's exceptions have been expanded; school district reorganization has moved authorities between the Commissioner of Education and other agencies; the Department of Children, Families and Learning no longer exists under that name. The general framework (cap on total compensation, restrictive supplemental-pension rules, itemized expense reimbursement, fixed allowances as salary) remains substantially the same, but specific dollar limits and statutory cross-references should be confirmed against current law.

Historical context: what the AG concluded

The opinion is one of the most detailed Minnesota AG treatments of public-employer compensation rules. It walks through nine factual scenarios from the State Auditor's review.

The 95% cap (§ 43A.17, subd. 9). No person employed by a school district may have salary plus the value of "all other forms of compensation" exceeding 95% of the governor's salary. The statute lists what is included in salary (deferred compensation, payroll allocations for annuity contracts, all other direct and indirect compensation items not specifically excluded) and what is excluded (employee benefits also provided to the majority of full-time employees, vacation/sick leave allowances, health/dental/disability/term-life/pension benefits, dues to professional organizations, reimbursement for actual expenses).

The State Auditor's findings. The 1995 review identified five recurring compensation features in metro Twin Cities superintendent contracts that pushed total compensation above the cap when added to salary: annual cash-out of accrued vacation, deferred compensation contributions, vehicle expense reimbursements beyond mileage, fixed monthly expense allowances, and split-dollar life insurance. Districts amending their contracts after the audit accepted the State Auditor's reading; others pushed back, prompting the Commissioner's request for AG guidance.

Vacation cash-out (mid-employment). The 1980 sick-leave opinion (Op. Atty. Gen. 161b-4) supports districts' authority to cash out unused leave; it is just another form of compensating teachers for services. But § 43A.17, subd. 1 defines salary to include "lump sum payments." Termination cash-out (Op. Atty. Gen. 469b, 1993) is more like severance and is excluded; mid-employment cash-out is salary. The opinion specifically rejected the argument that mid-employment cash-out is like overtime: overtime is hours worked outside the normal schedule under employer direction; vacation cash-out is the employee electing higher salary in lieu of vacation days on regularly scheduled work days.

Deferred compensation: § 356.24 restrictions. Minnesota tightly regulates employer contributions to supplemental pension plans for governmental employees. Section 356.24, subd. 1 outlaws such contributions with six enumerated exceptions. The relevant ones for school district superintendents:
- Subd. 1(5)(ii): up to $2,000 per year employer match of employee contributions to a 403(b) tax-sheltered annuity contract, if provided for in the personnel policy.
- Subd. 1(a)(4)(ii): employer match of up to $2,000 to a section 352.96 deferred compensation plan (not applicable to school districts).
- Subd. 1(a)(4): payments to a plan that "provides solely for severance pay under section 465.72."

The third exception is the only route by which a 457(f) plan can receive employer contributions. Section 465.72 limits severance pay: generally not more than one year's pay, payable over not more than five years from retirement/termination; "highly compensated employees" (defined in § 465.722) are generally limited to six months' pay.

Deferred compensation as salary. For purposes of the cap, § 43A.17, subd. 9 explicitly includes "deferred compensation and payroll allocations to purchase an individual annuity contract." So 403(b) contributions are salary for the cap, both the employer-match portion and any larger amount funded as a salary deferral. 457(f) contributions are not salary until vested (typically at termination or retirement), because the superintendent has no vested right until then.

Vehicle expense limits. Minn. Stat. § 471.665 is the exclusive authority for paying public employees for personal-vehicle use. It permits either a mileage rate or a monthly periodic allowance. The AG read § 471.665 as the limit on the public expenditure permissible for personal vehicles, not as a base on top of which the district can pay other vehicle-related expenses (insurance, maintenance, fuel). Op. Atty. Gen. 104a-9 (1994) had said the same. The reason: paying insurance/maintenance/fuel "underwrite both business and personal use" of the vehicle and would reimburse the employee for expenses that the employee never personally incurred (the district paying them directly).

Fixed monthly allowances are salary. Minn. Stat. § 471.38 requires that expense claims be supported by itemized written claims with signed declarations. Cases like Leskinen v. Pucelj (Minn. 1962) and Yao Loh v. Waseca County (Minn. 1936) reinforce that public-employee expense reimbursement is tied to specifically-incurred and itemized expenses. A monthly $615 allowance that escalates 3% annually and requires no receipts is "simply an escalating payment of salary." The 1989 housing-allowance opinion (Op. Atty. Gen. 161b-4) reached the same conclusion.

Split-dollar life insurance. Section 43A.17, subd. 9(3) excludes "term life insurance" from compensation but does not exclude other forms of life insurance. Split-dollar policies, which build cash value, are not term insurance. So the cost is includable in compensation. The amount included annually is the premium paid minus any reimbursement received that year. The opinion rejected the netting argument: even if the district has an ultimate lien against the death benefit or cash value, the present value of that future reimbursement is not deducted in computing the annual cost. "Cost" means actual dollars paid in the year, not a netted economic value.

Insurance authority limit. Minn. Stat. § 471.61 authorizes school districts to insure or protect officers and employees under a policy "of group insurance or benefits, covering life." Lily v. City of Minneapolis (Minn. Ct. App. 1995) read this section as the limit of district authority to provide life insurance. A split-dollar policy that is not group and provides benefits beyond a death benefit may be outside § 471.61's authority entirely. The AG flagged the question without resolving it, since the district had not raised the authority issue.

Commissioner enforcement. The Commissioner of Children, Families and Learning has no statutory authority to modify superintendent contracts directly or to withhold state aid for § 43A.17 violations. Aid-reduction authority is enumerated in § 124.15, and § 43A.17 violations are not on the list. Waller v. Powers Dept. Store (Minn. 1989): administrative agencies can only exercise powers prescribed by legislative authority. The result: enforcement of the cap relies on State Auditor findings, voter accountability, board-level negotiation, and (theoretically) civil suit by interested parties.

Common questions

Q: Our superintendent gets unused vacation cashed out every June. Is that salary?
A: Under the 1997 opinion, yes. Annual mid-employment cash-out counts as salary for the § 43A.17 cap. Termination cash-out is treated differently (severance, not salary). Confirm the current statute language.

Q: Can we contribute more than $2,000 a year to our superintendent's 403(b) without exceeding the cap?
A: Section 356.24's exception caps the employer match at $2,000 per year for a 403(b). Larger amounts are unauthorized as employer compensation. If the superintendent wants to defer more, the additional amount must come from the employee's salary as a deferral, which still counts as salary for the cap. So a higher contribution does not solve the cap problem.

Q: We pay our superintendent's vehicle insurance and fuel in addition to a monthly mileage allowance. Is that allowed?
A: Under the 1997 opinion, no. Minn. Stat. § 471.665 is the exclusive authority for personal-vehicle payments. Additional insurance, fuel, or maintenance payments are unauthorized. The superintendent's compensation should include the salary or salary-equivalent value of any such additional payments, and they may run into both authority and cap issues.

Q: We give our superintendent a $500/month "general business expense" allowance with no receipts required. Is that an expense reimbursement?
A: No. The 1997 opinion treated similar fixed monthly allowances as salary. Section 471.38 requires itemized written claims with signed declarations for genuine reimbursements. A fixed monthly allowance without those formalities is not a reimbursement and is counted as salary for the cap.

Q: Our superintendent contract includes a $300,000 split-dollar life insurance policy. How does that affect the cap calculation?
A: The annual premium paid by the district (minus any same-year reimbursement) counts as compensation under § 43A.17, subd. 9. The future lien on death benefit or cash value does not net against annual cost. Also confirm that the district has statutory authority to provide non-group, non-term life insurance under § 471.61 (Lily v. City of Minneapolis is the relevant case).

Q: The Commissioner found us in violation. Can the state cut our aid?
A: Under the 1997 opinion, no. The Commissioner has no statutory authority to reduce state aids for § 43A.17 violations. The State Auditor can publish findings, the public can react, and the school board can negotiate compliance, but the Commissioner cannot administratively enforce the cap.

Q: Can the school district just amend the contract to call payments something different and avoid the cap?
A: The 1997 opinion shows that labels do not control. The State Auditor and AG looked through contract labels to the underlying economic substance of payments. Calling salary "expense allowance" or labeling deferred salary "deferred comp" does not change the cap analysis.

Background and statutory framework

Minnesota Statute § 43A.17, the public-employee compensation cap, was enacted to limit total compensation of state and local government employees to a percentage of the governor's salary. The 95-percent cap applies to most local government employees, including school district superintendents. The cap is calibrated to the governor's salary under Minn. Stat. § 15A.082, so it adjusts as the governor's salary adjusts.

The cap is supplemented by several other statutes that govern specific compensation features:
- Minn. Stat. § 471.665 limits personal-vehicle payments to mileage or periodic allowance.
- Minn. Stat. § 471.38 sets the procedural requirements for expense reimbursements.
- Minn. Stat. § 471.61 authorizes employee group insurance, including life insurance.
- Minn. Stat. § 356.24-356.25 restrict supplemental pension and deferred compensation plan contributions for public employees.
- Minn. Stat. § 465.72 governs severance pay; § 465.722 defines highly compensated employees for severance limits.
- Minn. Stat. §§ 123.33-123.35 give the school board general authority to manage the district, including setting compensation.
- Minn. Stat. § 124.15 lists violations for which the Commissioner can reduce state aids; § 43A.17 is not among them.

The opinion stitches these together to give the State Auditor and the Department of Children, Families and Learning a unified reading of the statutory framework. The audit, the opinion, and subsequent negotiations between districts and the State Auditor produced widespread contract amendments and a consistent post-1997 practice.

Hubert H. Humphrey III was Minnesota AG from 1983 through January 1999. Kenneth E. Raschke, Jr. signed as Assistant AG. The opinion bore the file note AG:20063 v1.

Citations and references

Statutes:
- Minn. Stat. § 15A.082 (governor's salary)
- Minn. Stat. § 43A.17, subd. 1 (1996) (salary defined)
- Minn. Stat. § 43A.17, subd. 9 (1996) (95% compensation cap)
- Minn. Stat. § 43A.17, subd. 11 (1996) (severance pay)
- Minn. Stat. § 43A.18 (compensation plans)
- Minn. Stat. § 123.33 (school board management)
- Minn. Stat. § 123.35 (school board specific powers)
- Minn. Stat. § 123.35, subd. 12 (1996) (compensation authority)
- Minn. Stat. § 124.15 (state aid reduction authority)
- Minn. Stat. § 177.25 (overtime definition)
- Minn. Stat. § 352.96 (state deferred compensation plan)
- Minn. Stat. § 353.01, subd. 10 (1996) (PERA salary definition; unused leave excluded)
- Minn. Stat. § 354.05, subd. 35 (1996) (TRA salary definition; unused leave excluded)
- Minn. Stat. § 356.24 (supplemental pension restrictions)
- Minn. Stat. § 356.24, subd. 1 (1996) (six enumerated exceptions)
- Minn. Stat. § 356.25 (1996) (local pension plan prohibition)
- Minn. Stat. § 465.72 (severance pay authority)
- Minn. Stat. § 465.722 (highly compensated employee severance limit)
- Minn. Stat. § 471.38 (expense reimbursement procedure)
- Minn. Stat. § 471.391 (related expense procedure)
- Minn. Stat. § 471.61 (employee group insurance authority)
- Minn. Stat. § 471.665 (personal-vehicle allowance)

Federal statutes referenced:
- 26 U.S.C. § 457(f) (ineligible deferred compensation plans of state/local government employers)

Cases:
- Leskinen v. Pucelj, 262 Minn. 461, 115 N.W.2d 346 (1962) (town officer expense claims must show specific expenses)
- Yao Loh v. Waseca County, 265 N.W. 298 (Minn. 1936) (county school superintendent expense claims must be itemized)
- Waller v. Powers Dept. Store, 343 N.W.2d 655 (Minn. 1989) (administrative agency exercises power only as prescribed by statute)
- Lilly v. City of Minneapolis, 527 N.W.2d 107 (Minn. Ct. App. 1995) (statutory authority limits municipal insurance)

Related AG opinions:
- Op. Atty. Gen. 161b-4, May 27, 1980 (sick leave cash-out is compensation)
- Op. Atty. Gen. 161b-4, January 24, 1989 (housing allowance is salary)
- Op. Atty. Gen. 359b, October 24, 1989 (vehicle authority limits)
- Op. Atty. Gen. 59a-41, February 22, 1984 (deferred compensation)
- Op. Atty. Gen. 469b, September 14, 1993 (vacation cash-out at termination is severance)
- Op. Atty. Gen. 104a-9, December 28, 1994 (county car allowance/vacation leave)
- Op. Atty. Gen. 397 (cross-reference; school district employee compensation)

Source

• Landing page: https://www.ag.state.mn.us/Office/Opinions/
• Original PDF: https://www.ag.state.mn.us/Office/Opinions/161b12-19970804.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

School Board Powers: Superintendent: Salary and Benefits: School district powers regarding salary and benefits for superintendent discussed. Authority of Commissioner of Children, Families and Learning discussed. Minn. Stat. §§ 43A.17, 123.33-123.35, 356.24, 356.25, 471.38, 471.665

161b-12
(Cr. Ref. 161b-4, 397)
August 4, 1997

Robert J. Wedl, Commissioner
Minnesota Department of Children, Families and Learning
550 Cedar Street
St. Paul, MN 55101-2273

Dear Commissioner Wedl:

In a letter to Attorney General Hubert H. Humphrey III, your office noted that "during 1995, the Office of the State Auditor reviewed school superintendent contracts in the metropolitan area. The OSA found in many of the contracts, violations of Minnesota Statutes including violations of the 95 percent compensation cap set forth in Minn. Stat. § 43A.17, subd. 9. Although some of the school districts have amended their contracts to comply with the findings of the OSA, others have challenged the OSA's application of Minnesota law to their particular contracts."

In order to provide guidance to the educational community, our opinion was sought as to whether school districts are authorized to provide certain benefits to superintendents and whether the value of such benefits must be included in determining whether the superintendent's compensation is within the compensation permitted by Minn. Stat. § 43A.17, subd. 9 which provides in pertinent part:

Subd. 9. Political subdivision compensation limit. The salary and the value of all other forms of compensation of a person employed by a statutory or home rule charter city, county, town, school district, metropolitan or regional agency, or other political subdivision of this state, or employed under section 422A.03, may not exceed 95 percent of the salary of the governor as set under section 15A.082, except as provided in this subdivision. Deferred compensation and payroll allocations to purchase an individual annuity contract for an employee are included in determining the employee's salary. Other forms of compensation which shall be included to determine an employee's total compensation are all other direct and indirect items of compensation which are not specifically excluded by this subdivision. Other forms of compensation which shall not be included in a determination of an employee's total compensation for the purposes of this subdivision are:

(1) employee benefits that are also provided for the majority of all other full-time employees of the political subdivision, vacation and sick leave allowances, health and dental insurance, disability insurance, term life insurance, and pension benefits or like benefits the cost of which is borne by the employee or which is not subject to tax as income under the Internal Revenue Code of 1986;
(2) dues paid to organizations that are of a civic, professional, educational, or governmental nature; and
(3) reimbursement for actual expenses incurred by the employee which the governing body determines to be directly related to the performance of job responsibilities, including any relocation expenses paid during the initial year of employment.

The value of other forms of compensation shall be the annual cost to the political subdivision for the provision of the compensation.

[The opinion then sets out nine specific factual scenarios with corresponding questions and answers. The full text is reproduced from the PDF at https://www.ag.state.mn.us/Office/Opinions/161b12-19970804.pdf.]

FACTS

The superintendents of several school districts receive, on an annual basis, all or a part of their accrued vacation in the form of cash payments. For example, the superintendent of one School District has the following provisions in his contract: Basic Work Year: The work year shall be for twelve (12) months, including twenty-eight (28) days of paid vacation annually. All vacation time must be taken within 19 months of the start of the contract year in which it is received or be forfeited. At the Superintendent's option, sixteen (16) of the twenty-eight (28) vacation days may be work days and the Superintendent shall be additionally compensated at the rate of 1/223 for each vacation day worked.

During 1993 and 1994, the superintendent was paid $5,851 and $6,848 respectively in lieu of taking vacation. If these amounts of cashed out vacation were included in the superintendent's salary for the purposes of Minn. Stat. § 43A.17, his salary for these years would have exceeded the 95 percent cap.

The school district believes they have authority to cash out vacation and these amounts are excluded from the "salary" calculation. The school district claims these payments are similar to overtime amounts which are excluded from the calculation under the terms of Minn. Stat. § 43A.17.

Based upon these facts you ask substantially the following questions:

QUESTION ONE

Does a school district have the statutory authority to convert vacation benefits to cash in situations other than termination of employment?

OPINION

We answer this question in the affirmative. The situation described is analogous to that addressed in Op. Atty. Gen. 161b-4, May 27, 1980. In that Opinion we concluded that a school district had authority to include in contracts with teachers a provision for a payment based upon unused sick leave and personal business days at the end of the year. We observed there:

Such a plan is simply a method of providing compensation to teachers for services rendered during the contract period. The fact that the compensation is calculated on the basis of accumulated sick leave and unused business days does not alter its essential character. Accordingly, since a school district may agree to compensate its teachers, it may, in the exercise of its discretion, agree to do so in this manner.

The same reasoning would seem applicable to the situation you present. Thus it is our opinion that districts subject to limits such as that discussed below do possess authority to provide compensation to superintendents for unused vacation days.

QUESTION TWO

If a school district cashes out accrued vacation in situations other than termination of employment, are such amounts included as salary and the value of all other forms of compensation under the compensation limitation found in Minn. Stat. § 43A.17?

OPINION

We answer this question in the affirmative. Minn. Stat. § 43A.17, subd. 1 defines "salary" as: hourly, monthly, or annual rate of pay including any lump-sum payments and cost-of-living adjustment increases but excluding payments due to overtime worked, shift or equipment differentials, work out of class as required by collective bargaining agreements or plans established under section 43A.18, and back pay on reallocation or other payments related to the hours or conditions under which work is performed rather than to the salary range or rate to which a class is assigned.

In Op. Atty. Gen. 469b, September 14, 1993 we concluded that, while the statute was somewhat ambiguous on this issue, compensation paid for unused vacation at the time of termination should not be considered salary for purposes of the salary cap. We then indicated that such a liquidation of vacation at separation was more analogous to a continuation of salary at the regular rate than to an addition to salary. See also Minn. Stat. § 43A.17, subd. 11 which implies that vacation conversion at termination is more in the nature of severance pay than salary.

Such reasoning would not apply, however, to payment for unused vacation in circumstances of continued employment. Such payments would seem rather to constitute "lump sum payments" included within the above definitions of salary.

It has been suggested that such payments might be considered "overtime" pay, and thus are excluded from salary. However, the concept of overtime in its normal usage relates to hours worked outside of or in addition to, an employee's normal scheduled days or hours of work. See, e.g., Minn. Stat. § 177.25 (work time in excess of 48 hours per week); the American Heritage Dictionary (Second College Edition, 1995) 887 (working hours in addition to those of the regular schedule). That concept would not apply to additional pay received for working on regularly scheduled work days in lieu of taking vacation. For example, unlike a normal overtime situation, it would be impossible to determine which of the superintendent's normal work days could be considered "overtime" when unused vacation is cashed in. Furthermore, it appears that the conversion of vacation to pay is entirely within the discretion of the superintendent, unlike most overtime arrangements which depend upon the specific direction or request of the employer or supervisor. In effect the superintendent here has been given the option of receiving a higher annual salary in exchange for less paid vacation. Thus we believe that the vacation cash-out payments described should be considered salary for purposes of section 43A.17. This conclusion is further supported by the fact that other statutes expressly exclude vacation cash-out payments in defining "salary" for other purposes. Cf., Minn. Stat. §§ 353.01, subd. 10 and 354.05, subd. 35 (1996) which, in defining "salary" for purposes of public employees and teacher retirement, expressly exclude "unused annual leave" payments and "lump sum annual leave" payments.

Even if liquidated vacation were not considered "salary," however, it would seem clearly to fall within the ambit of "all other forms of compensation" as defined in section 43A.17, subd. 9. That subdivision excludes "vacation and sick leave allowances." However, it does not exclude cash payments received during employment for unused vacation or sick leave. Cf. Minn. Stat. § 43A.17, subd. 11 which excludes from severance pay limitations "payments for accumulated vacation ...."

Thus it is our opinion that payments for unused vacation days in the circumstances described would be included in computing compensation for purposes of the salary cap.

[Questions Three through Eight, on deferred compensation, vehicle expense, expense allowances, and split-dollar life insurance, follow in the original PDF. Question Nine addresses the Commissioner's enforcement authority.]

QUESTION NINE

Does the Commissioner of Children, Families and Learning have the authority to compel school districts' compliance with the compensation cap set forth in Minn. Stat. § 43A.17, subd. 9 either directly, by reducing a superintendent's salary, or indirectly, by withholding state school aids from a school district which is not in compliance with the compensation cap statute?

OPINION

We answer in the negative. The general authority and responsibility for managing the affairs of a school district and for fixing the compensation lies in the school board. See, e.g., Minn. Stat. §§ 123.33-123.35. We are aware of no statutory authority for the Commissioner to modify, administratively, compensation fixed by the school board.

Likewise, we are not aware of any authority for the Commissioner to reduce state aids to districts for violations of the section 43A.17 limitations. There are a number of statutory violations for which the Commissioner is expressly directed to reduce aids. See, e.g., Minn. Stat. § 124.15. Transgressions of the salary cap, however, are not included.

Absent any such statutory authority, it is our opinion that the Commissioner is not empowered either to modify a superintendent's contract or to withhold state aids to which a district is otherwise entitled, pursuant to statute. See, e.g., Waller v. Powers Dept. Store, 343 N.W.2d 655, 657 (Minn. 1989) (administrative agency can only exercise power in manner prescribed by legislative authority).

Very truly yours,

HUBERT H. HUMPHREY III
Attorney General

KENNETH E. RASCHKE, JR.
Assistant Attorney General

AG:20063 v1