Advisory Opinion No. 2008-16 Rhode Island Ethics Commission Advisory Opinion No. 2008-16 Re: Richard Kerbel QUESTION PRESENTED: The petitioner, the Director of Administration for the City of Providence, a municipal employee position, who also serves as the Mayor of Providence's designee on a special House Commission to study the state retirement system, requests an advisory opinion regarding whether he may continue to serve on the House Commission given his vested interest in the municipal employees' pension plan administered by the state. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the petitioner, the Director of Administration for the City of Providence, a municipal employee position, may continue to serve on a special House Commission to study the state retirement system, notwithstanding his vested interest in the municipal employees' pension plan administered by the State. In the 2008 legislative session, the Rhode Island House of Representatives passed a Resolution creating a Special House Commission to Study All Aspects of the State Pension or Retirement System ("House Commission"). The stated purpose of the House Commission is "to make a comprehensive study of all aspects of the state pension or retirement system, including, but not limited to funding, investments and management, eligibility, age of retirement, benefits, contributions, vesting, disqualification, and any other matter that is related to the state pension or retirement system." 2008 R.I. Acts & Resolves 040. The petitioner states that the House Commission has no actual decision-making authority over the state pension system, but will merely offer its findings and advisory recommendations to the House of Representatives. The House Commission consists of nineteen (19) members,[1] including the Mayor of the City of Providence ("the Mayor"). The petitioner represents that the Mayor has designated the petitioner to be his designee to serve on the House Commission. The petitioner states that prior to accepting his current position as Providence's Director of Administration in January of 2008, he was employed by the Town of North Kingstown for thirteen (13) years and is therefore a vested member of the municipal employees' pension plan administered by the state. In light of his interest in the state pension system, the petitioner asks whether the Code of Ethics prohibits his service on the House Commission. As a person subject to the Code of Ethics, the petitioner is prohibited from having any interest which is in substantial conflict with the proper discharge of his duties in the public interest. See R.I. Gen. Laws § 36-14-5(a). Such a substantial conflict of interest exists if the petitioner has reason to believe or expect that he or any member of his family, his business associate, or employer, will derive a direct monetary gain or suffer a direct monetary loss by reason of his official activity. See R.I. Gen. Laws § 36-14-7(a). At the outset, we note that based on the House Commission's limited authority and stated purpose contained in House Resolution 40, it does not appear that the petitioner's mere participation as a member of this advisory body will result in a direct monetary gain or loss to himself. In an analogous situation, in A.O. 97-31 the Ethics Commission was asked whether a State Senator who made her living as a full-time farmer could simultaneously serve as Chair of the Agricultural Council Advisory Commission to the Department of Environmental Management, and/or as an appointed member of the Governor's Environmental Advisory Council, both positions of which were solely advisory. Based on the representation that both entities were exclusively advisory, we found that there was no potential conflict of interest presented and allowed her service on either body. As in A.O. 97-31, in the instant matter the appointment in question is to a body that is exclusively advisory, charged with studying Rhode Island's pension systems and offering recommendations to the House of Representatives. After findings and recommendations have been made, it is then up to the House to consider the usefulness of the House Commission's study, and to determine whether and how to implement any recommendations. For these reasons, we are not convinced that the work product of the House Commission is likely to result in a direct monetary gain or loss to the petitioner, such as would be prohibited by sections 5(a) and 7(a) of the Code of Ethics. Even if the House Commission's recommendations were deemed to have a direct financial impact on the petitioner, it appears that any such impact would be equally realized by a significant and definable group of similarly situated persons involved in the state and municipal employees' pension plans. Section 36-14-7(b) of the Code, sometimes referred to as the "class exception," states that a public official will not have an interest which is in substantial conflict with his official duties if any benefit or detriment accrues to him “as a member of a business, profession occupation or group, or of any significant and definable class of persons within the business, profession, occupation or group, to no greater or lesser extent than any other similarly situated member of the business, profession, occupation or group, or the significant and definable class of persons within the business, profession, occupation or group.” R.I. Gen. Laws 36-14-7(b). The Commission will determine whether a public official belongs to a group or class, or to a sufficiently "significant and definable" subclass, so as to justify an exception to what is otherwise a clear prohibition, by considering the totality of the circumstances. See, e.g., A.O. 2004-16. Among the important factors considered are: (1) the description of the class or subclass; (2) the size of the class; (3) the function or official action being contemplated by the public official; and (4) the nature and degree of foreseeable impact upon the class and its individual members as a result of the official action. See id. The Ethics Commission has previously considered the class exception in relation to a public official's decision-making relative to the public pension system. In A.O. 2003-57, a State Senator, who was a teacher and member of the state pension plan, asked whether the Code of Ethics permitted his participation in the Senate's consideration of legislation that would increase pension contributions by members, and would also freeze the cost of living adjustments relative to the plan. The petitioner represented that the legislation's proposed changes would impact him and approximately 30,000 other State employees and teachers equally. Given this set of facts, the Commission found application of the class exception to be warranted and appropriate, allowing his participation in the legislation. See also A.O. 95-55 (Senate Finance Chairman may participate in portion of State budget pertaining to State employees and teachers, notwithstanding that he is a school teacher who is vested in the State retirement system for teachers, given that the budget will equally impact some 30,000 to 43,000 retirees or prospective retirees). In the instant matter, it is unclear whether the affected class to which the petitioner belongs is the entire membership of the Employees' Retirement System of Rhode Island, the membership of the municipal employees' pension plan, or the members of that plan in circumstances identical to that of the petitioner, who are vested in the retirement system but not yet retired. The petitioner represents, based on a review of the FY2006 Annual Financial Report for the Employees' Retirement System of Rhode Island (ERSRI), that there are over 60,000 individuals that are part of the State and municipal employees' pension plans. Of this figure, approximately 14,000 belong to the municipal plan. Of those, over 1,800 individuals can be classified in the same category as the petitioner, namely, as terminated municipal plan members entitled to, but not yet, receiving benefits. Whether we consider the petitioner to be part of the larger class or one of the smaller subclasses, we find the group to be significant and definable. Furthermore, given the advisory nature of the House Commission, we find that the results of its work will not have an immediate and direct impact on the petitioner or other members of the class. Accordingly, based both on the advisory nature of the House Commission, and upon a finding that the petitioner we be financially impacted, if at all, to no greater or lesser extent than other similarly situated participants in the State and municipal employees' pension plan, it is the opinion of the Ethics Commission that the Code of Ethics does not prohibit the petitioner from serving as the Mayor's designee on the Rhode Island Special House Commission to Study All Aspects of the State Pension Retirement System. Code Citations : 36-14-5(a) 36-14-7(a) Related Advisory Opinions : 2003-57 97-31 95-55 Keywords : Class exception Pension benefit