Request By:
Mr. Tom Denning
Personnel Committee
Board of Aldermen
City of Louisville
601 West Jefferson Street
Louisville, KY 40202
Opinion
Opinion By: Frederic J. Cowan, Attorney General; Nathan Goldman, Assistant Attorney General
You have asked for our opinion on several questions concerning the salaries of the Board of Aldermen. These questions are more specifically set out in a letter from Donald L. Cox and F. David Banks, which you have attached to your letter. Messrs. Cox and Banks pose three questions, which we paraphrase as:
(1) May salaries be adjusted pursuant to KRS 83A.075 at any time, irrespective of KRS 83A.070?
(2) May the adjustment made pursuant to KRS 83A.075 be any amount up to the newly-calculated maximum?
(3) If the salaries have not been fixed pursuant to KRS 83A.070, may they be fixed at any time.
Before we begin to answer these questions, it is important to note several relevant constitutional provisions. Section 246 of the Kentucky Constitution states, in part: "No public officer . . . shall receive as compensation per annum for official services . . . any amount in excess of the following sums: . . . the mayor of any city of the first class . . . twelve thousand dollars ($12,000); . . . all other public officers, seven thousand two hundred dollars ($7,200)." In 1962, the then Court of Appeals decided the landmark case of Matthews v. Allen, Ky., 360 S.W.2d 135. In that case the Court held the dollar amounts set forth in Section 246 must be equated with the purchasing power of the dollar in 1949 when Section 246 was adopted. In the words of the Court:
"The net result of our consideration is that the salary provisions of Section 246 of the Constitution may be interpreted and periodically applied to all constitutional officers in terms which will equate current salaries with the purchasing power of the dollar in 1949 when Section 246 was adopted."
Id. at 139.
This decision was affirmed in Commonwealth v. Hesch, Ky., 395 S.W.2d 362 (1965). The 1964 General Assembly had granted salary increases to county officials within a maximum of $9,600. The Court held that this $9,600 maximum was precisely consistent with the constitutional maximum of $7,200 based on changes in the Consumers' Price Index (CPI) since 1949.
These two cases established what has become known as the "rubber dollar doctrine" -- calculating today's dollars in relation to 1949 dollars.
Section 161 of the Kentucky Constitution states, in part: "The compensation of any city, county, town or municipal officer shall not be changed after his election or appointment, or during his term of office . . . ." See, also, Section 235 of the Kentucky Constitution.
The salaries of city and county officials are required to be set not later than the first Monday in May in the year in which the officers are elected. KRS 64.530 and 83A.070. The courts have distinguished this setting of salaries from adjustments made pursuant to the rubber dollar doctrine. Dennis v. Rich, Ky., 434 S.W.2d 632 (1968); Hasty v. Shepherd, Ky. App., 620 S.W.2d 325 (1981).
We turn now to the specific questions. It is first asked about the timing of rubber dollar adjustments. The city's rubber dollar implementing statute, KRS 83A.075, directs the Finance and Administration Cabinet to compute the annual change in the consumer price index by the second Friday in February of every year. There is no corresponding time constraint on the city in regards to implementing any adjustment. Obviously, adjustments are discretionary with the city legislative body. If the body chooses to make the adjustments, it may do so at any time following publication of that year's rubber dollar changes. This office issues an annual opinion verifying the rubber dollar calculations. See, for example, OAG 88-10.
Your second question concerns the amount of the adjustment. The controversy appears to be whether the adjustment is limited to the percentage increase in the CPI or may be any amount up to the newly-calculated maximum. We are cognizant of the fact that salaries are set at different levels and that not every local official is paid the maximum.
The cases dealing with the rubber dollar doctrine have never addressed this specific issue. Rather, the cases use general language regarding adjustments: ". . . salaries may nevertheless be adjusted during a term of office to provide adequate compensation which generally adjusts within the changes of the cost of living and the value of the dollar. " Hasty v. Shepherd, Ky. App., 620 S.W.2d 325, 327 (1981). However, in OAG 83-38 we stated:
"It must be borne in mind that the language in the statutes about an annual 'increase or decrease' in the Consumer Price Index is pragmatically academic, since the critical matter is simply the maximum compensation possible under the current indexing as arrived at under the formula established in Matthews v. Allen, above. Then the annual increase in the CPI, standing alone, can be misleading, in terms of officers' compensation being adjusted upward as a result of current indexing. "
In two previous Opinions, we specifically approved adjustments to salaries which were less than the maximum but greater than the particular yearly CPI increase. In OAG 80-171 (copy enclosed) , the Board of Aldermen of the City of Louisville increased their salaries for 1979 from $8,798 to $12,417, which was approximately a 41% increase. The 1979 rubber dollar maximum was $20,462.40 (OAG 79-189) which was approximately a 12% increase over the 1978 maximum (OAG 78-54). We approved this adjustment.
In OAG 82-348 (copy enclosed) , we addressed this specific issue theoretically and approved adjustments which were within the newly-calculated maximum but were greater than the actual percentage change in the CPI. We stated:
"In response to your question, where the magistrates' salaries on the first Monday in May in 1981 (election year) was set at $10,000 per magistrate, the judicial rubber dollar concept does not work on an isolated numerical advancement from one year to the next. It works simply by authorizing the maximum payable each year by computing it under the rubber dollar formula. "
In the hypothetical presented, the CPI increase for 1982 was 8.93%. We approved an adjustment up to $28,387 (the 1982 maximum) from $10,000, more than a 100% adjustment.
Based on our previous Opinions and their interpretation of the relevant court cases, it is our opinion that the Board of Aldermen may adjust their salaries by any percentage up to the maximum as calculated for that particular year.
The final question concerns the consequences of the Board's failure to set salaries by the first Monday in May. KRS 64.730 provides that such failure results in the salary being set as a matter of law as the same as that for the preceding term. However, following the repeal of KRS 64.580 in 1980, KRS 64.730 would appear to have no application to cities, which set salaries pursuant to KRS 83A.070. KRS 83A.070 was enacted in 1980. No statute comparable to KRS 64.730 was enacted for cities. We have opined that KRS 64.730 is still applicable to cities. OAG 83-394. However, in OAG 78-54 we stated:
"Under KRS 64.730 where the fiscal court fails to fix a salary as required by law, the salary paid in the previous "administration will govern. However, the rubber dollar theory cuts across and negates this limitational state, as aforementioned."
Thus, even if KRS 64.730 applies and the Board's salary for the new term is set at the same as the previous term, the salary may still be adjusted under the rubber dollar doctrine.
In conclusion, to the extent that Ordinance 358, Series 1989, purports to adjust the salaries of the Board of Aldermen pursuant to the rubber dollar doctrine, we find it valid.