Can a Mississippi school district pay students cash incentives for ACT scores, and can it pay teachers and staff for school-wide ACT improvements?

Plain-English summary

The Pascagoula-Gautier School District wanted to know whether it could offer cash incentives to students for ACT performance and to school employees for improving overall ACT scores at a particular high school. The AG drew a sharp line between the two.

Student cash incentives: not allowed under the proposed program. Section 66 of the Mississippi Constitution prohibits donations from public funds. The relationship between a public school and its students is not a contractual relationship in Mississippi (the AG cites UMMC v. Hughes, a Mississippi Supreme Court case that found a contractual student-university relationship at the university level, but reads it as inapplicable to public K-12). Without a preexisting contractual obligation, a cash payment to a student for ACT scores is a donation, and Section 66 forbids it. The district's general activity-fund authority under § 37-7-301(s) does not cover cash awards for prospective ACT performance because such awards are not "commodities, equipment, travel expenses, purchased services or school supplies."

Employee incentives: allowed if the stated conditions are met. The opinion discusses preexisting contractual obligations under Sections 66 and 96. The AG has consistently said an incentive is permissible if it is contracted for before the work is done, determined by objective standards, and earned by personal services performed by the employee. Section 37-7-301(mm) authorizes school boards to use federal No Child Left Behind funds (or other expressly designated funds) to pay salary incentives. There is a critical funding-source restriction: Mississippi Adequate Education Program (MAEP) funds and other state funds cannot be used for these salary incentives. Section 37-19-10 also provides a mechanism for performance-based incentives for both licensed and non-licensed staff.

The AG therefore permitted the proposed employee incentive program subject to those contractual, measurement, service, and funding conditions. It rejected the proposed student cash awards.

Currency note

This opinion was issued in 2020. 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.

Background and statutory framework

Two constitutional provisions govern the analysis. Section 66 prohibits a donation or gratuity in favor of any person or object without a two-thirds legislative vote. Section 96 prohibits the legislature from granting "extra compensation, fee, or allowance, to any public officer, agent, servant, or contractor, after service rendered or contract made." Together, they police public spending: payments must serve a public purpose, and they must be based on a preexisting contract.

The AG identifies the controlling distinction as "the presence or absence of a preexisting lawful contractual obligation." The line of opinions cited includes:

• Marshall (Aug. 19, 2011): a school board policy recognizing achievement awards is not by itself an enforceable contractual obligation sufficient to avoid Sections 66 and 96
• Long (Nov. 3, 2000) and Murdock (Aug. 7, 2009): early-completion construction incentives are permissible because they are part of the contract
• Robinson (Jan. 31, 1997): performance-exceeding-standards contractor incentives are permissible
• Campbell (Apr. 12, 2010): commissions in addition to salary are permissible if the agreement predates the performance
• Williams (Feb. 17, 2017): the standard rule that incentive payments must be contracted, objective, and earned through personal services

The opinion contrasts community colleges with K-12 districts. The community college board of trustees has broad authority under § 37-29-67(1) "to do all things necessary to the successful operation of the district." That breadth supported the Clark (June 15, 2012) opinion permitting community colleges to award outstanding-performance prizes to students, employees, and others. K-12 school districts do not have that same breadth.

For K-12 districts, § 37-7-301(s) authorizes activity-fund expenditures for "commodities, equipment, travel expenses, purchased services or school supplies." That list does not cover cash incentives for prospective student performance. The AG also notes the K-12 student-school relationship is not contractual in the way UMMC v. Hughes, 765 So. 2d 528 (Miss. 2000) treated the university-student relationship. (The "So. 2d" reporter is the Southern Reporter; Hughes is a Mississippi Supreme Court decision.) Without a contractual hook, student cash awards run into Section 66.

Section 37-7-301(mm) is the express authority for K-12 employee incentives, with a tight funding-source rule. The provision authorizes use of federal NCLB funds and other "expressly designated and authorized" funds to pay training, educational expenses, salary incentives, and salary supplements. But MAEP funds and other state funds cannot be used. That is a funding-source ceiling that districts have to plan around.

Section 37-19-10 provides another mechanism for performance-based incentives, which the AG cites as also applicable. Hill (Oct. 27, 2017) is the cross-reference for that statutory pathway.

Common questions

Q: Why are student cash incentives a "donation"?
A: Section 66 forbids donations of public funds. The opinion treats a cash payment without a preexisting contractual obligation as a donation. Public school students do not have a contract with the district for their work product, so any cash payment to them based on test scores is, legally, a gift. The constitutional ban applies.

Q: Does the opinion approve noncash awards to students?
A: It does not decide that question. The quoted activity-fund statute lists items that may be purchased, including trophies. The AG rejects the proposed monetary ACT awards and cites Marshall for the point that an awards policy alone does not create the contract needed to avoid a constitutional violation.

Q: Does the opinion address ACT gift cards?
A: No. It addresses monetary incentives for students and does not analyze gift cards.

Q: What must an employee incentive agreement provide?
A: The opinion requires an agreement made before the services, objective standards for measuring the incentive, and payment earned by the employee's own services. It does not discuss collective bargaining.

Q: Which funds may pay employee salary incentives?
A: The quoted § 37-7-301(mm) permits federal No Child Left Behind Act funds and other available funds expressly designated and authorized for that use. It excludes MAEP and other state funds for the salary incentives or supplements covered by that paragraph. The opinion does not name activity funds, athletic revenues, or donations as approved sources.

Q: Can the district tie employee incentives to ACT improvement at one high school?
A: Yes, subject to the opinion's conditions. That was the employee program the district asked about. The AG required advance contracts, objective measures, and incentives earned by employees' services.

Citations and references

Constitutional provisions:

• Mississippi Constitution, Section 66 (no donations of public funds)
• Mississippi Constitution, Section 96 (no extra compensation after services rendered)

Statutes:

• Miss. Code Ann. § 37-7-301(s) (school district activity-fund authority)
• Miss. Code Ann. § 37-7-301(mm) (employee training, salary incentives, and supplements; non-state funding required)
• Miss. Code Ann. § 37-19-7(1) (local supplement)
• Miss. Code Ann. § 37-19-10 (performance-based incentives for school employees)
• Miss. Code Ann. § 37-29-67(1) (community college board authority, contrast for K-12)
• Miss. Code Ann. § 37-151-5(o) (local supplement definition)
• No Child Left Behind Act (federal funding source)

Cases:

• UMMC v. Hughes, 765 So. 2d 528 (Miss. 2000), Mississippi Supreme Court decision treating the university-student relationship as contractual; the AG distinguishes the K-12 context

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2020/08/W.Rodolfich_July-31-2020-ACT-Incentives.pdf

Original opinion text

July 31, 2020

Superintendent Wayne Rodolfich
Pascagoula-Gautier School District
Post Office Box 250
Pascagoula, Mississippi 39568-0250

Re: ACT Incentives

Dear Mr. Rodolfich:

The Office of the Attorney General is in receipt of your request for the issuance of an official opinion.

Questions Presented

May the Pascagoula-Gautier School District ("the District") offer monetary incentives to students based upon their performance on the ACT?

May the District award monetary incentives to its employees based upon improvements in overall ACT scores at a particular high school?

Brief Response

The District may not offer monetary incentives to students based upon their performance on the ACT as such incentives would constitute an unlawful donation in violation of Section 66 of the Mississippi Constitution.

A school district may provide monetary incentives to its employees based upon improvements in overall ACT Test scores at a particular high school if the incentives are contracted for prior to performance of the services, determined by objective standards, and earned by services performed by the employee.

Applicable Law and Discussion

Section 66 of the Mississippi Constitution provides:

> No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use.

Section 96 of the Mississippi Constitution provides:

> The Legislature shall never grant extra compensation, fee, or allowance, to any public officer, agent, servant, or contractor, after service rendered or contract made, nor authorize payment, or part payment, of any claim under any contract not authorized by law; but appropriations may be made for expenditures in repelling invasion, preventing or suppressing insurrections.

The key distinction under Section 66 and Section 96 between permissible expenditures and impermissible expenditures rests on the presence or absence of a preexisting lawful contractual obligation.

In instances in which there is no preexisting contractual obligation, an expenditure of public funds to benefit a private party may result in a violation of Section 66 and Section 96. See, MS AG Op., Marshall (August 19, 2011) (while the adoption of a policy recognizing "athletic/instructional team achievement through the granting of reasonable awards for significant achievement" was within the statutory power of the board of trustees, the policy itself was not sufficient to create an enforceable contractual obligation and thus would not be sufficient to avoid a violation of Section 66 and Section 96 of the Mississippi Constitution).

In instances in which there is a lawful preexisting contractual obligation and payment is made for services performed after the contractual obligation becomes effective, there is no violation of Section 66 and Section 96. See, MS AG Ops., Long (November 3, 2000) and Murdock (August 7, 2009) (incentives are permissible for early completion of construction projects); MS AG Op., Robinson (January 31, 1997) (incentives are permissible for contractors who exceed specified standards of performance); MS AG Op., Campbell (April 12, 2010) (commissions in addition to salary are permissible to an employee when the agreement authorizing same is made prior to performance).

In this context, we must determine whether there is authority for the school district to create valid contractual obligations to expend the funds and whether the proposed actions will have that effect.

In MS AG Op., Clark (June 15, 2012), this office opined that community colleges were authorized to expend funds to provide awards for outstanding performance by students, employees and others based upon the community colleges' broad authority granted pursuant to Miss. Code Ann. Section 37-29-67(1), which states, in relevant part:

> Subject to the provisions of Sections 37-29-1 through 37-29-273, the board shall have full power to do all things necessary to the successful operation of the district and the college or colleges or attendance centers located therein to insure educational advantages and opportunities to all the enrollees within the district.

(Emphasis added.)

By contrast to the broad authority granted community colleges pursuant to Section 37-29-67(1), Miss. Code Ann. Section 37-7-301(s) grants school districts the following authority to expend funds:

> ...Activity funds may only be expended for any necessary expenses or travel costs, including advances, incurred by students and their chaperons in attending any in-state or out-of-state school-related programs, conventions or seminars and/or any commodities, equipment, travel expenses, purchased services or school supplies which the local school governing board, in its discretion, shall deem beneficial to the official or extracurricular programs of the district, including items which may subsequently become the personal property of individuals, including yearbooks, athletic apparel, book covers and trophies...

It is the opinion of this office that monetary awards for prospective ACT Test performance do not constitute "commodities, equipment, travel expenses, purchased services or school supplies" as contemplated by Section 37-7-301(s). Nor is there any other statutory authority which would authorize a school district to offer monetary incentives to students based upon their prospective performance on the ACT. Thus, the proposed incentive program for students would constitute an unlawful donation in violation of Section 66 of the Mississippi Constitution.

Section 37-7-301(mm) grants school boards the authority:

> [t]o expend federal No Child Left Behind Act funds, or any other available funds that are expressly designated and authorized for that use, to pay training, educational expenses, salary incentives and salary supplements to employees of local school districts; except that incentives shall not be considered part of the local supplement as defined in Section 37-151-5(o), nor shall incentives be considered part of the local supplement paid to an individual teacher for the purposes of Section 37-19-7(1). Mississippi Adequate Education Program funds or any other state funds may not be used for salary incentives or salary supplements as provided in this paragraph (mm);

Our office has consistently opined that "incentive payments are permissible when the incentive payment is contracted for by the employer and employee prior to the date when the services are performed, is determined in accordance with objective standards of measurement and is earned by personal services performed by the employee." MS AG Op., Williams (February 17, 2017).

Pursuant to the above cited authority, the school district may provide monetary incentives to its employees based upon improvements in overall ACT scores.

(Footnote 1: Furthermore, the relationship between a public school and its students is not akin to the contractual student-university relationship found by the Mississippi Supreme Court in UMMC v. Hughes, 765 So. 2d 528 (Miss. 2000). Thus, there can be no underlying legal obligation to provide monetary incentives to public school students as described in your request.)

(Footnote 2: Miss. Code Ann. Section 37-19-10 may also be applicable as it provides a means by which to award performance-based incentives to both licensed and non-licensed school district employees. See, MS AG Op., Hill (October 27, 2017).)

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General