We have received several calls from school districts who have not approved compensation plans because they are waiting on additional guidance on how HB2 will be implemented.

The question on everyone’s mind: If compensation plans are adopted after teachers start their contracts, can districts adjust teacher salaries retroactively without violating the constitutional prohibition on gifts of public funds? 

Short Answer: Yes. The constitutional restrictions that prohibit gifts of public funds do not prohibit the practice of setting teacher pay after the first duty day of the school year.

Analysis:  The Texas Constitution prohibits school districts and other governmental authorities from granting extra compensation to someone after service has been rendered or a contract has been entered into (i.e., no retroactive increases and no prospective increases in compensation after a contract has been entered into).  Tex. Const. art. III, §§ 44, 53. These restrictions prohibit a district from paying an employee more than the employee has already agreed to be paid. Teachers, however, sign their contracts and agree to be paid “according to the compensation plan adopted by the board.”  Therefore, by virtue of their contract, teachers agree to work under the salary annually approved by the district.  For many districts, the board adopts the compensation plan as part of the budget process after work has begun for the school year, and any increases apply retroactively to the beginning of the duty year. These after-the-fact salary increases for public employees are generally permissible at the beginning of the school year, when salaries are first set because the district is setting the rate for the school year, not increasing an already set rate.

If the board has already approved salaries, however, and later decides to increase those salaries, the gift of public funds analysis applies, and the question then becomes whether the “gift” or salary increase serves a public purpose. A similar analysis applies, for example, when a school board decides to compensate staff for days missed due to inclement weather. In this circumstance, the best practice for giving additional pay or retroactive pay adjustments, the best practice is for the Board  to adopt a resolution setting out the public purpose of the additional pay. Public purposes might include staff retention and recruitment, for example. 

In summary, the constitutional restrictions prohibiting gifts of public funds or retroactive salary adjustments do not prohibit the practice of setting teacher pay after the first duty day of the school year.  If, however, salaries have already been set for the year and employees have agreed to work for that rate, additional pay cannot be given to those employees unless the board finds there is a public purpose for doing so, which can be done through a board resolution. Language for such resolutions is specific to each district’s circumstances. Should your district need a resolution to adjust salaries after the board has approved a compensation plan, please contact us.

‍