A state employee who flies on a state-purchased ticket accumulates frequent flier miles in the employee's personal account. The 1982 AG had said this was illegal under then-SDCL 4-3-4. SDCL 4-3-4 has been repealed and replaced by SDCL 4-3-4.2, and the airlines no longer require the original ticket to claim award travel. Can a state employee now use the frequent flier credits for personal travel?

Plain-English summary

In 1982, the South Dakota State Auditor's Office had asked AG Mark Meierhenry whether state employees could use frequent flier credits earned on state-purchased airline tickets for personal travel. At that time, the airlines required the original paper ticket to qualify for award travel; so the credits were directly tied to the state-purchased ticket. The 1982 AG had ruled this was illegal under then-SDCL 4-3-4, which required state employees to remit all "emoluments and perquisites" to the state treasury. State employees who flew on state business had to hand over any award credits to the state.

By 1990, two things had changed. First, SDCL 4-3-4 had been repealed and replaced by SDCL 4-3-4.2 in 1984 (Chapter 30 of the Session Laws). Second, the airlines had changed their procedures. Frequent flier credits now accrued automatically when the traveler gave the airline a frequent flier number at check-in, without any need to surrender the original ticket. The credits were tied to the individual flying, not to the ticket purchaser.

Mr. Larson at the State Auditor's Office asked AG Roger Tellinghuisen whether the 1982 ruling still applied. Tellinghuisen overruled the 1982 opinion. State employees could keep their frequent flier credits.

His analysis worked through several points.

First, the credits are not conferred by the state. The state pays the same price for the ticket whether or not the employee gives a frequent flier number to the airline. The state has not given the employee anything; the airline has. The employee's relationship with the airline (membership in the frequent flier program) generates the benefit, not the employee's relationship with the state.

Second, the statutory definitions of "emoluments" and "perquisites" focused on compensation for services or benefits annexed to office. Tellinghuisen quoted Black's Law Dictionary: emoluments are "the profit arising from office or employment . . . received as a compensation for services," and perquisites are "fringe benefits, or other incidental profits or benefits attaching to an office or position." Frequent flier miles do not arise from holding state office; they arise from the airline's customer loyalty program. They attach to the individual frequent flier account, not to the position.

Third, requiring employees to account for every incidental travel benefit would be absurd. Tellinghuisen made the practical argument that a state employee staying at a hotel might use the hotel pool, receive complimentary food, get a reduced room rate, and otherwise enjoy incidental benefits of business travel. The state could not reasonably demand that employees track and remit each of these. Frequent flier miles fell in the same incidental-benefit category.

Fourth, the airlines now restricted assignment of award travel to the individual member's name. The miles could not easily be transferred to the state even if the state wanted them. This factual change since 1982 reinforced the conclusion that the miles belonged to the individual member, not to the ticket purchaser.

Fifth, the purpose of the remittance statute was to discourage state employees from altering their conduct to gain personal benefits at state expense. Tellinghuisen assumed state employees travel in good faith for state business, not to accumulate personal miles. The statutory purpose was not served by treating ordinary travel-loyalty programs as remitable benefits.

The bottom line: state employees may keep their frequent flier miles. The 1982 opinion was no longer the rule. Neither SDCL 4-3-4.2 nor SDCL 4-3-9 (criminal penalty for failure to remit) required remittance of frequent flier credits.

Currency note

This opinion was issued in 1990. Subsequent ethics rules, executive orders, or statutory amendments may have changed the analysis. Treat this page as historical context, not current legal advice. State ethics rules, travel policies, and the underlying statutes may have changed since 1990. Modern state employees should verify current policy with their agency before assuming this 1990 ruling still controls.

What the opinion meant at the time

For state employees who travel on state business, the opinion clarified that they could keep frequent flier miles earned on state-paid flights and use them for personal travel.

For the State Auditor's Office, the opinion removed an administrative headache. Tracking employee frequent flier credits and processing remittance to the state was impractical. The 1990 opinion let the Auditor's Office focus on actual state-revenue items rather than airline loyalty points.

For state legislators and the State Ethics Commission, the opinion drew a conceptual line between (a) compensation and perquisites the state pays for and (b) third-party incidental benefits that happen to flow through during state-paid activity. The opinion treated frequent flier miles as falling in category (b), alongside the hotel-amenity examples it used (pool access, complimentary or reduced-price food, reduced room rates).

For audit and compliance purposes, the opinion was a sensible administrative simplification. Without the 1990 ruling, the state would have needed an entire infrastructure to track and remit airline miles, which would have cost more than the miles were worth.

Common questions

Q: How did this differ from the 1982 ruling?
A: The 1982 ruling required state employees to remit frequent flier credits earned on state-purchased tickets to the state treasury. Tellinghuisen reversed that ruling in 1990. The change reflected (a) the repeal and replacement of SDCL 4-3-4 with SDCL 4-3-4.2 in 1984, (b) airline changes in award redemption (no longer requiring the original ticket), and (c) reconsideration of whether frequent flier miles were truly "emoluments or perquisites" of state office.

Q: Could an employee book a more expensive ticket to maximize miles?
A: That would be exactly the conduct alteration the statute was designed to prevent. Tellinghuisen flagged this concern at the end of his opinion. He "assume[d] that employees, when they travel, do so in good faith." If an employee were caught deliberately routing through a longer or more expensive trip to maximize personal miles, that would breach the assumed good-faith condition and could trigger other ethics concerns.

Q: What about hotel loyalty points?
A: The opinion's logic extends naturally to hotel points, rental car points, and other travel-loyalty benefits. They are conferred by third parties based on the individual traveler's loyalty membership, not based on who paid for the room or car. Although the opinion does not address them directly, the same reasoning would treat them as personal benefits.

Q: Does it matter who paid for the ticket?
A: Under the opinion's reasoning, the key fact is who confers the benefit (the airline, based on the frequent flier number given at boarding), not who paid for the ticket. The AG concluded the state "has no claim to the free or reduced price tickets that might incidentally arise when its employees travel on state business."

Background and statutory framework

South Dakota's general remittance statute (SDCL 4-3-4, repealed in 1984, then SDCL 4-3-4.2) requires state officers and employees to remit "all money, emoluments and perquisites other than personal salary" received in their state employment to the state treasury. SDCL 4-3-9 backs it with a theft penalty for failing to remit money received "for the performance of any duty ... connected with his office."

The 1982 application of this principle to frequent flier miles was an aggressive extension. At the time, the airlines required the original paper ticket to claim award travel, so the miles arguably traced back to the state-purchased ticket. Meierhenry's 1982 opinion treated this as a sufficient connection.

By 1990, the airlines had simplified award redemption: just give the airline your frequent flier number at boarding, and the miles accrue automatically. The original-ticket connection was gone. Tellinghuisen used this factual change as an opening to reconsider the legal analysis.

The reconsidered analysis focused on who conferred the benefit. The state did not confer the benefit; the airline did. The state was not paying for the miles (the ticket price was the same with or without a frequent flier number). The miles were not in any meaningful sense an "emolument" or "perquisite" of state office; they were an artifact of a private commercial loyalty program.

The opinion was practical, not strictly textual. The AG could have read SDCL 4-3-4.2's broad language ("all money, emoluments and perquisites") to capture frequent flier miles. He read it narrower, treating the miles as an incidental third-party benefit that the statute does not require an employee to remit, in the same category as the hotel amenities he used as an example.

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=45

Original opinion text

OFFICIAL OPINION NO. 90-04

State employees and frequent flier credits

Dear Mr. Larson:

You have requested an official opinion from this Office in regard to the following facts:

FACTS:

In January 1982, the State Auditor's Office requested a ruling from the Office of Attorney General concerning State employees qualifying for a reduced rate air ticket for personal use. Under the 1982 request, the airline ticket was purchased by the State for State travel, but credit was given to the individual for personal air travel use. At that time, the Office of Attorney General opined, based on SDCL 4-3-4, that it was illegal for a State employee to use a State purchased ticket to qualify for a reduced rate ticket for personal use. This is the policy that the State Auditor's Office has complied with since that time.

Recently, it was brought to the attention of the State Auditor that SDCL 4-3-4 was repealed. Further, the airlines have recently changed their procedures so that they no longer require the actual airline receipt to qualify for the reduced or free air fares. If a State employee flies on a State purchased ticket, the credit goes to the individual and not the State.

Based on those facts, you ask the following question:

QUESTION:

Whether a State employee who flies on a State purchased ticket can use the travel credits for personal reduced or free air fares?

IN RE QUESTION:

The answer to the question presented is partially answered by SDCL 4-3-4.2, which reads as follows:

All money, emoluments and perquisites other than personal salary received by any officer or employee of this state shall be remitted to the state treasury by the end of the working day following the day money is received or as specified by the state treasurer. The state treasurer shall establish rules and regulations to assure accountability.

SDCL 4-3-4.2 replaced SDCL 4-3-4, which was repealed in 1984. 1984 S.D. Sess. Laws ch. 30, 19 and 21. The first sentence of the present SDCL 4-3-4.2 is similar to the first sentence of the old SDCL 4-3-4, which stated that "[A]ll money, emoluments, and perquisites so paid to any officer or employee of this state shall be by him paid into the state treasury . . . ." SDCL 4-3-4 (1975).

SDCL 4-3-4.2 speaks of money, emoluments, and perquisites. No definitions for the terms emoluments or perquisites can be found in the South Dakota Code. The term emolument can be defined as follows:

The profit arising from office or employment; that which is received as a compensation for services, or which is annexed to the possession of office as salary, fees, and perquisites. Any perquisite, advantage, profit, or gain arising from the possession of an office. . . .

Black's Law Dictionary 470 (5th ed. 1979). The term perquisites can be defined as follows:

Emoluments, fringe benefits, or other incidental profits or benefits attaching to an office or position. Shortened term "Perks" is used with reference to such extraordinary benefits afforded to business executives (e.g. free cars, club memberships, insurance, etc.).

Black's Law Dictionary 1027 (5th ed. 1979).

Under the facts presented, the State officer or employee, while on State business, with a State purchased ticket, would be accumulating airline credits for reduced or free air fares. These airline credits are based on the fact that an individual is flying with the airline, and are not based upon who the individual is or who purchased the airplane ticket.

Under SDCL 4-3-4.2, the State officer or employee would have to account to the state treasury for all emoluments and perquisites received by that officer or employee. The question in this context, however, is whether the frequent flier miles, which accrue to the employee for flying on the airline, are emoluments or perquisites of employment with the State. It is my view that they are not, for several reasons.

First, the frequent flier miles are not conferred upon the state business traveler by the State. The above-referenced definitions are based upon an employee receiving compensation for services rendered, or other benefits annexed to the position of the office, such as salary, fees, free cars, club memberships, insurance, and other benefits accruing to the state employee because of his employment. In the case of frequent flier miles, the State pays nothing extra for the airline ticket because of the benefit of frequent flier miles. Indeed, the miles accrue only because the state employee gives a frequent flier number to the airline ticket agent at the time of boarding. The State cannot obtain a discount if the business flier does not give this number. The State has conferred nothing upon the employee who gives his frequent flier number to the airline at the time of boarding. This situation is to be distinguished from the facts set forth in the 1982 opinion, where the actual tickets were needed in order to obtain a frequent flier ticket, and the free tickets thus arose directly from presentation to the airline of a state purchased ticket.

Second, it is not reasonable for the employee to be expected to account for all incidental benefits that might accrue by virtue of the fact that the employee is travelling on state business, or indeed, fulfilling any other duty of employment. For example, various incidental benefits accrue to a state employee staying at a given hotel while travelling on state business. The state employee might be permitted free use of the hotel swimming pool; certain items of free or reduced price food might be given to the state employee; a reduced room rate might be granted to a state employee; and other possible benefits might accrue to the state employee while travelling at state expense on state business. The mere fact that travelling on state business has caused certain incidental benefits to be conferred by third parties does not require that the employee account for them to the State.

Third, the airline confers the benefit upon the individual involved. This is more clear under the present system than it was in 1982, since the benefit at that time was conferred based only upon possession of the original airline ticket. Many airlines do not permit an employee to assign the individual rights to a free or reduced price airline ticket obtained in frequent flier programs. See U.S. News and World Report, November 13, 1989, at 77-82. In my view, this fact supports the rationale that the benefit is being conferred upon the individual who boards the plane and flies, and not upon any other person who may have paid the price of the ticket. The State thus has no claim to the free or reduced price tickets that might incidentally arise when its employees travel on state business.

Fourth, SDCL 4-3-9 sets forth the duty of a state officer or employee to account to the State Treasury:

Any salaried state officer or employee who shall fail or refuse to pay into the state treasury any and all money, emoluments, fees, perquisites, or other property received by him for the performance of any duty or duties connected with his office or in any manner paid to him as such officer or employee by reason of his holding such office or employment as is provided in this chapter, and within the time provided therein is guilty of theft.

This statute requires the state employee to turn over money, etc., received by him for the performance of any duty or duties connected with his office. The state employee has, in this instance, received nothing for the performance of duties connected with his or her office. The employee quite simply is not being given additional money or perquisites by virtue of being as a state officer or by reason of his holding the office or employment. Rather, the employee has travelled, as required by his employer. In the course of so travelling, a third party has chosen to confer an incidental benefit. This incidental benefit has not been paid to the employee in return for the employee doing her or his job. This benefit cannot be differentiated from other incidental travel amenities. The statute does not, therefore, require that it be turned over to the State.

For these reasons, I am of the opinion that neither SDCL 4-3-4.2 nor SDCL 4-3-9 requires a state officer or employee to account to the State for frequent flier miles that an airline chooses to confer upon the employee. Such frequent flier miles are simply an amenity that the airline industry chooses to confer upon those individuals using its services. There is no indication that this benefit is conferred on the person who or entity which purchased the ticket.

Finally, it is my opinion that one of the central purposes of the statute is to dissuade employees from altering their conduct as state employees to gain a benefit. I assume that employees, when they travel, do so in good faith. Thus, the purpose of the statute is not disserved by allowing the employee to retain the airline credit.

Respectfully submitted,

ROGER A. TELLINGHUISEN

ATTORNEY GENERAL

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