Can a Mississippi university include a retention bonus in a public university president's employment contract, paid through a private foundation?

Plain-English summary

The IHL Board wanted to add retention bonuses to its four-year employment contracts with university presidents and chancellors. The structure: if the president stayed for a specified period, the president would get an additional sum at the end of the contract, with the funds coming from a university-affiliated foundation through the university to the president. The Commissioner of Higher Education asked whether this was lawful.

The AG worked through the Mississippi Constitution's two relevant prohibitions:

• Article 4, § 66: No law granting a donation or gratuity in favor of any person or object shall be enacted except by two-thirds vote.
• Article 4, § 96: The Legislature shall never grant extra compensation to a public officer, agent, servant, or contractor after service rendered or contract made.

These provisions, read together with case law (Nichols v. Patterson 1996, Golding v. Salter 1958), prohibit using public funds for bonuses paid after services have been rendered. But Mississippi AG opinions had developed a three-part test for permissible incentives:

1. Contracted for in advance of the services being performed.
2. Determined by objective standards of measurement.
3. Earned by personal services performed by the employee.

The proposed retention bonus structure could fit if the contract included the incentive provision before the work began, the metrics for earning it were objective (tenure for the specified period), and the payment was earned through actual performance of presidential/chancellor duties.

A footnote noted that the foundation's donation to the university was a separate question. Foundations are private entities, and donations from foundations to public universities can be made for purposes authorized by law. Once received by the university, the funds become public funds and must be treated like other public money. The opinion did not opine on the foundation side; it addressed only the IHL Board's contracting authority.

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.

What the opinion said for each audience, at the time

For Mississippi public university presidents and chancellors

Under the opinion, the IHL Board may include an incentive payment in a president's or chancellor's employment contract, including the retention sum described in the request (an additional amount paid if the employee stays in the position for a specified period). The payment must meet the three conditions in the AG's test: contracted for before the services are performed, determined by objective standards of measurement, and earned by personal services.

For the IHL Board and other public boards setting executive compensation

The opinion restates the AG's long-standing test: a public body "may pay employee incentives, provided that the incentives are contracted for prior to the date when services are to be performed, are determined in accordance with objective standards of measurement, and are earned by personal services performed by the employee." The AG added that "whether the proposed contract meets these requirements is a determination that must be made by the Board of Trustees."

For university-affiliated foundations

The AG expressly offered "no opinion on the donation by the foundation," which it understood to be a private entity. In footnote 1 it noted that donations to a public entity may be made and accepted for specific purposes authorized by law, and that once the funds are received by the university "they become public funds and must be treated in the same manner as other public funds" (citing Bryant and Snell). The opinion addressed only the Board's contracting authority, not the foundation side.

For higher-education attorneys

The opinion applies the three-part incentive test (from the Permenter opinion) to a retention bonus routed through a university-affiliated foundation. It is a useful citation for that scenario, but it leaves the lawfulness of the contract as a fact determination for the Board and offers no opinion on the foundation's donation.

For Mississippi taxpayers

The opinion treats a properly structured incentive as compensation for services rendered under a pre-existing contract, not as a prohibited after-the-fact bonus or donation. The constitutional concern under §§ 66 and 96 is avoided only if the three conditions are met.

Common questions

Q: What does Article 4, § 96 prohibit?
A: The opinion quotes it: the Legislature "shall never grant extra compensation, fee, or allowance, to any public officer, agent, servant, or contractor, after service rendered or contract made." The AG, citing Nichols v. Patterson and Golding v. Salter, said using public funds to grant bonuses after services have been rendered would be an unlawful donation in violation of §§ 66 and 96.

Q: How can a retention bonus be lawful if § 96 bars extra pay after service?
A: Through the AG's three-part test. If the incentive is contracted for before the services are performed, measured by objective standards, and earned by the employee's personal services, the AG treats the later payment as fulfilling a pre-existing compensation agreement rather than an after-the-fact bonus.

Q: Could a bonus be added after the work has already been done?
A: The first prong of the test requires the incentive to be "contracted for prior to the date when services are to be performed." A payment promised only after the work was already performed would not meet that requirement.

Q: What counts as an "objective standard of measurement"?
A: The opinion does not define the phrase beyond using it in the test. The structure described in the request, an additional sum paid if the employee remains in the position for a specified period of time, is the example the AG was asked about.

Q: Where does the money come from, and does that change the answer?
A: In the structure described, a university-affiliated foundation provides the sum to the university, which then pays the employee. The AG offered no opinion on the foundation's donation, but noted that once funds are received by the university they become public funds. The contracting analysis (the three-part test) is what governs the Board's side.

Background and statutory framework

Two provisions of Article 4 of the Mississippi Constitution frame the question. Section 66 bars any law "granting a donation or gratuity in favor of any person or object" except by a two-thirds vote of each branch of the Legislature. Section 96 provides that the Legislature "shall never grant extra compensation, fee, or allowance, to any public officer, agent, servant, or contractor, after service rendered or contract made." The AG, citing Nichols v. Patterson (1996) and Golding v. Salter (1958), said using public funds to grant bonuses after services have been rendered would be an unlawful donation in violation of §§ 66 and 96.

To avoid that result, the AG has "consistently opined" that a public body may pay employee incentives provided the incentives are (1) contracted for before the date services are to be performed, (2) determined by objective standards of measurement, and (3) earned by personal services performed by the employee. The opinion cites Permenter (2015) for that test and concludes the proposed retention payment may be included in the contract if it meets those conditions, leaving that determination to the Board of Trustees.

On funding, the structure in the request had a university-affiliated foundation provide the sum to the university, which would then pay the employee. The AG offered no opinion on the foundation's donation, observing only that the foundation is a private entity, that donations to a public entity may be accepted for purposes authorized by law, and that once received by the university the funds become public funds (citing Bryant, 1998, and Snell, 2018).

Citations and references

Constitutional provisions:

• Miss. Const. art. 4, § 66, prohibition on donations or gratuities (legislative two-thirds vote required)
• Miss. Const. art. 4, § 96, prohibition on extra compensation after service rendered

Cases cited:

• Nichols v. Patterson, 678 So. 2d 673 (Miss. 1996), application of constitutional anti-bonus provisions
• Golding v. Salter, 107 So. 2d 348 (Miss. 1958), same

Prior AG opinions cited:

• MS AG Op., Permenter (Oct. 30, 2015), three-part test for permissible employee incentives
• MS AG Op., Bryant (Nov. 6, 1998), university foundations are not state political subdivisions; foundation funds become public when paid to universities
• MS AG Op., Snell (Aug. 17, 2018), same

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/07/A.RankinsJr._July-23-2021-Incentive-Pay-in-Employment-Contracts.pdf

Original opinion text

July 23, 2021

Alfred Rankins, Jr., Ph.D.
Commissioner of Higher Education
Mississippi Institutions of Higher Learning
3825 Ridgewood Road
Jackson, Mississippi 39211

Re: Incentive Pay in Employment Contracts

Dear Dr. Rankins:

The Office of the Attorney General has received your request for an official opinion.

Background

According to your request, the Mississippi Board of Trustees of State Institutions of Higher Learning ("Board of Trustees") enters into four-year employment contracts with the public university presidents/chancellors ("employees"). The Board of Trustees is interested in including in the employment contract an additional provision that would provide that an employee would be paid an additional sum at the end of the four-year contract period if the employee remains in the position of president/chancellor for a specified period of time. If the employee remains employed for the required period of time, the additional sum would be provided by a university affiliated foundation to the university, to then be paid to the employee by the university.[1] You state that the purpose of this additional sum would be to retain the employee for the full period of the contract and avoid losing the employee to another university thereby promoting stability in leadership within the current administration.

Issue Presented

May the Board of Trustees include a provision in its employment contracts that provides an additional sum to be paid if the employee remains employed for a specified period of time?

Brief Response

Incentive payments may be included within contracts. A public body may pay employee incentives, provided that the incentives are contracted for prior to the date when services are to be performed, are determined in accordance with objective standards of measurement, and are earned by personal services performed by the employee.

Legal Analysis

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.

Using public funds to grant bonuses after services have been rendered would be an unlawful donation in violation of Sections 66 and 96 of the Mississippi Constitution. Nichols v. Patterson, 678 So. 2d 673 (Miss. 1996); Golding v. Salter, 107 So. 2d 348 (Miss. 1958). This office has consistently opined that to avoid such a violation, a public body may pay employee incentives provided that the incentives: (1) are contracted for prior to the date services are to be performed, (2) are determined in accordance with objective standards of measurement, and (3) are earned by personal services performed by the employees. MS AG Op., Permenter at *1 (Oct. 30, 2015).

Whether the proposed contract meets these requirements is a determination that must be made by the Board of Trustees.

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

[1] We offer no opinion on the donation by the foundation, which we understand to be a private entity. However, we note that donations to a public entity may be made and accepted for specific purposes authorized by law. Once the funds are received by the university, they become public funds and must be treated in the same manner as other public funds. MS AG Op., Bryant at 3 (Nov. 6, 1998) ("The foundations are not agencies or political subdivisions of the State of Mississippi, and the funds raised and collected by them are not public funds as defined by the statute until such time as they are paid over to the universities."); MS AG Op., Snell at 1 (August 17, 2018).