STATE OF NEW YORK
STATE ETHICS COMMISSION

Advisory Opinion No. 90-17: Whether the Trustees of the Savings Bank Life Insurance Fund are "state officers or employees" for the purpose of coverage under §§73, 73-a or 74 of the Public Officers Law.

INTRODUCTION

The following advisory opinion is issued in response to an inquiry by the Director of Claims and Legal Relations of the Savings Bank Life Insurance Fund (hereinafter "SBLIF") as to whether the definition of "state officer" contained in §73 of the Public Officers Law applies to the Trustees of the SBLIF for the purposes of applicability of the Ethics in Government Act of 1987 and §74 of the Public Officers Law to such Trustees.

Pursuant to the authority vested in the New York State Ethics Commission (hereinafter "Commission") by §94(15) of the Executive Law, the Commission hereby renders its opinion that the Trustees of the SBLIF are not "state officers" of a "state agency" as defined in §73 of the Public Officers Law, because they serve without compensation. The Trustees are "officers" of a State agency for purposes of coverage under §73-a if designated as serving in a policy-making position, and the Code of Ethics set forth in §74 of the Public Officers Law. If the Trustees are designated as policy-makers by their appointing authority pursuant to §73-a of the Public Officers Law, they are required to file an Annual Statement of Financial Disclosure.

BACKGROUND

The Public Officers Law, in §73, defines "state officer" in such a way as to broadly encompass most individuals who are charged with performing a function that is in the public trust. As a requirement of positing that trust in State officers, there are certain expectations which the law imposes upon those individuals in order to ensure that they will uphold it. Individuals take an Oath of Office.1 They are bound by the Code of Ethics which provides the standard for acceptable behavior for all of those who are operating in the arena of public trust.2 In addition, they are subject to residency requirements.3

Specifically, §73(1)(i) provides, in relevant part, that:

The term "state officer " shall mean:

. . . (iii) officers . . . of state departments, boards, bureaus, divisions, commissions, councils or other state agencies other than officers of such boards, commissions or councils who receive no compensation or are compensated on a per diem basis; . . .

Section 73-a(1)(c) provides the definition of "state officer" for the purposes of financial disclosure, in relevant part, as meaning:
. . . (ii) . . . officers . . . of state departments, boards, bureaus, divisions, commissions, councils or other agencies, who receive annual compensation in excess of the filing rate established by paragraph (l) of this subdivision or who hold policymaking positions, as annually determined by the appointing authority and set forth in a written instrument which shall be filed with the state ethics commission . . .4
Section 74, the Code of Ethics, provides the rule with respect to conflicts of interest which covers State officers. It states:
Rule with respect to conflicts of interest. No officer or employee of a state agency, member of the legislature or legislative employee should have any interest, financial or otherwise, direct or indirect, or engage in any business or transaction or professional activity or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties in the public interest.
The Trustees of the SBLIF are appointed by the Superintendent of the Banking Department with the consent of the Governor. The Trustees serve on the Fund board, a body corporate in the Banking Department.5

The duties of the SBLIF are prescribed in the Banking Law as regulating and underwriting the life insurance products which are specifically offered by savings banks. The regulation includes premium setting, determination of policy forms, annuity forms and other business record formats for all records kept in this kind of insurance business, and determination of standards for insurability.

Section 270 of the Banking Law provides the powers and duties of the SBLIF and its Trustees. It states, in relevant part, as follows:

There shall be in the banking department a body corporate to be known as savings banks life insurance fund with the powers specifically provided in this article and with such other general corporate powers as are necessary and appropriate to the conduct of its business and the conduct of the business of the life insurance departments of the savings and insurance banks . . . It shall be managed by a board of seven trustees who shall be appointed as provided in this section. The trustees shall receive no salary but they may be reimbursed by savings banks life insurance fund for expenses incurred in attending meetings.

There shall be three classes of trustees as follows: (1) trustees nominated by savings banks (2) trustees nominated by savings and insurance banks and (3) trustees appointed by the superintendent either without nomination or from among nominees of class (1) or (2). The term "savings banks" in the preceding sentence as well as elsewhere in this article shall be deemed to include savings and insurance banks. There shall be two trustees from class one, three trustees from class two, and two trustees from class three . . . [N]ominations shall be forwarded to the superintendent . . . Vacancies in office of the fund trustees may be filled by the superintendent with the consent of the governor for the duration of the unexpired term . . .

All of the fund trustees must be trustees of savings banks, and not more than one member of the board of trustees of any savings bank shall serve as a fund trustee at the same time . . .

The fund trustees shall adopt a code of by-laws and elect a chairman and a vice-chairman and may employ such other officers and employees including a medical director and an actuarial director as may be necessary to carry out the provisions of this article. (Emphasis added.)

It is the position of the Director of Claims and Legal Relations for the SBLIF that the Trustees are not covered under §§73, 73-a and 74 of the Public Officers Law. She stated the following in her letter to the Commission:
Pursuant to B.L. Sec. 270, SBLIF is a body corporate in the banking department but it is not subject to the provisions of the New York State Finance Law. SBLIF monies are not public funds or subject to state control or state comptroller's audit.

SBLIF trustees must be trustees of savings banks. Following due nomination by savings banks, the SBLIF trustee is approved by the Superintendent of Banking with the consent of the Governor. SBLIF trustees serve without compensation. Sec. 270.

SBLIF trustees, as trustees of the savings bank, must meet the eligibility requirements of B.L. 246, not the Public Officers Law. It is the SBLIF trustees who employ the SBLIF officers and staff. SBLIF officers and staff were removed from Civil Service status upon enactment of Article 6A (Laws of 1942, Chapter 434). SBLIF trustees invest as savings banks and may invest and have no subpoena powers.

SBLIF trustees are charged with the duties attendant to the business of savings banks life insurance, not public duties. Pursuant to the Laws of 1948, Chapter 296, the legislature decreed that SBLIF,

. . . so far as reasonably practicable and possible, be governed and administered in accordance with the same insurance laws and regulations that apply to domestic legal reserve life insurance companies.
Even the New York State Court of Appeals has held savings banks life insurance to be sui generis. O'Connell v. Eastern Savings Bank, 51 N.Y. 2d 524 (1980).

DISCUSSION

In order to address the question posed, the Commission has looked to other applicable precedent. In 1946, the Attorney General of the State of New York was asked to determine whether the Trustees of the SBLIF should be compelled to file oaths of office with the Secretary of State. The Attorney General stated the following in that regard:
This responds to your inquiry of August 8, as to whether trustees of the Savings Bank Life Insurance Fund should file their oaths of office with the Secretary of State.

In my opinion they should. Public Officers Law §10 and Civil Service Law §30 provide that the oath of office of every state officer shall be so filed. These trustees, under authority of Banking Law §270, are appointed by you with consent of the Governor. Doubtless they receive certificates of appointment. Their term of office, with certain exceptions for original appointees, is four years. Their official functions are defined by statute and extend throughout the State. They receive no salaries, but may be reimbursed by the Fund for expenses incurred in attending meetings. They are "state officers" within the definition in Public Officers Law §2.6, 7

There have been no statutory changes of this definition of "state officer" or of the requirements of holding "state office" since the opinion of the Attorney General in 1946. The Ethics in Government Act of 1987 and the Code of Ethics, contained in §74 of the Public Officers Law, did not specifically exempt Trustees of the SBLIF. In 1954, and effective on January 1, 1955, §§73 and 74 of the Public Officers Law were enacted into law and covered officers of State agencies, with no specific exclusion for SBLIF Trustees. The term "state agency," then, was defined to include the "[b]oard . . . of any state department."8 There is no question that the Banking Department was, then, a State department under the Public Officers Law. Today's sections of the Public Officers Law, §§73, 73-a and 74, define State agency, as regards the Banking Department and the SBLIF board, in no different a manner. All these factors support a finding that the Trustees are "state officers" under the definition of §2 of the Public Officers Law, and, if qualified, under §§73, 73-a and 74.

It is true that the SBLIF is not subject to the State Finance Law, and as a consequence, the funds of the SBLIF are not subject to State control or State Comptroller's audit. Although most of the entities which fall within the definition of State agency are subject to such financial control, the definition of "state officer" does not demand that such persons be paid by, or that they administer, funds which are under State control or subject to audit by the comptroller. It is also true, however, that there are numerous other "state agencies" which enjoy a considerable amount of autonomy from the State department under which they were created.9

The Commission finds it unpersuasive that, because the SBLIF trustees must also be trustees of savings banks, they cannot be "state officers." Many of the boards, commissions or councils of State agencies require that their officers hold posts or positions because expertise necessary in certain private professions requires such exposure, experience or similar contact.10

Trustees must meet the eligibility requirements of §246 of the Banking Law in order to be trustees of savings banks, not to be a board member of the SBLIF. It is true that the Trustees must also be trustees of savings banks or savings and insurance banks. But, that is the qualification in order to be appointed to the SBLIF board. To be considered for the SBLIF board, one must already be a §246 trustee.

The question of §§73, 73-a or 74 coverage is an issue after appointment to the position of Trustee; the requirements of §246 of the Banking Law are conditions precedent to such appointment. Some State departments require that an individual qualify in another profession before appointment to a public position such as this one. The fact, for example, that a physician must be certified to practice medicine by the State Department of Education does not foreclose his or her status as a "state officer," after appointment to a policy-making position in a State agency. The same conclusion applies to lawyers, accountants, nurses and other licensed professionals. Statutory requirements must be met to hold the license, which, then, may be a prerequisite to hold a position which is that of a State officer.

The removal of the SBLIF from State Civil Service status, accomplished in Chapter 434 of the Laws of 1942, does not remove the SBLIF from the Banking Department or have any effect on the status of the Trustees as "state officers." There are "state officers or employees" not covered under Civil Service Law in the service of the public authorities. For example, the officers and employees of Battery Park City Authority do not have State Civil Service status, and are not hired through the State Civil Service system. All of the officers and employees of the Authority are, however, considered "state officers or employees" for the purpose of application of the Ethics in Government Act and the Code of Conduct.

The Commission views the powers and duties of the SBLIF differently than has been presented in the letter from the SBLIF counsel's office. The argument made that the trustees are charged with the business of savings banks life insurance, and not "public duties", has no merit. Although the letter did not define "public duties," the Commission views the mission of the SBLIF as a public duty of great importance. As the Attorney General, in discussing the matter of banking regulation, stated: "[t]here are few things which government can do of greater material moment than the regulation of the industries under scrutiny by this (Banking) Commission. These industries touch the lives and fortunes of every citizen, and their just oversight by government is a keystone of any public strategy for economic justice."11 It is the opinion of the Commission that the Trustees of the Fund are clearly performing public duties in their regulation and control over the savings banks life insurance industry in the State of New York. One need only look at current events to recognize the influence and impact which the regulation of banking services has on the public.12

The Director's reference to the O'Connell13 case is not on point. The case, specifically, is limited to the determination of the New York Court of Appeals that there was not an agency relationship between a bank to which an application for a savings bank life insurance policy was submitted and the SBLIF. The only observations by the court, concerning the SBLIF, were directed at recognizing its separateness from the private bank in question and its important role as a regulatory body and underwriter in protection of the public as opposed to a partner in the profit-making business of banking. This argument bolsters the position of the Commission rather than supporting the point made on behalf of the SBLIF Trustees.

The conclusion that the SBLIF is a board in the Banking Department is important to the determination of "state officer" status of the Trustees under §73 of the Public Officers Law. The Public Officers Law, in §73(1)(g), states that the term "state agency" includes "[a]ny state department, or division, board, commission, or bureau of any state department . . ." The SBLIF is a "body corporate" in the Banking Department which is managed by a board of Trustees. The Superintendent of Banking has oversight functions relating to the SBLIF. The SBLIF Trustees must submit an annual report to the Banking Department.14 The Superintendent of Banking has authority to control the amounts payable or receivable by the SBLIF by approving the interest rate charged to participating banks.15 The Commission finds that the statutory language clearly places the SBLIF and its Board of Trustees in the Banking Department and was intended to remove doubt as to whether the SBLIF and its Board of Trustees should be considered a part of the Banking Department. Thus, the Commission has determined that the SBLIF is considered a "state agency" under §73(1)(g) of the Public Officers Law.

The only question remaining is whether the SBLIF Trustees are covered by §§73, 73-a or 74 of the Public Officers Law. It is clear that the SBLIF board is a State agency under the Ethics in Government Act of 1987. However, §73(1)(i)(iii) of the Public Officers Law was amended in 1989 to exclude coverage of State officers who receive no compensation or are compensated on a per diem basis. Since the SBLIF Trustees are not compensated, they are not subject to §73, except in the instance where they are determined to serve in a policy-making position and are required to file an Annual Statement of Financial Disclosure. If so required, the Trustees would be subject to §73(3), which prohibits receipt of any compensation for an appearance or the performance of services against the interest of the SBLIF in relation to any matter before the State Court of Claims.

The Trustees will be subject to §73-a of the Public Officers Law if the Banking Superintendent, their appointing authority, designates their positions as policy-making. Such designation requires the filing of an Annual Statement of Financial Disclosure, even though the Trustees are not compensated.

The SBLIF Trustees, as State officers, are subject to §74 of the Public Officers Law. They meet the definition of State officer, as earlier indicated, and serve in a position with a State agency.

CONCLUSION

Based upon the information discussed above, the Commission concludes that the SBLIF trustees are not "state officers" as defined in §73 of the Public Officers Law because they serve without compensation; the trustees are subject to coverage under §74 of the Public Officers Law. In addition, the requirement to file an Annual Statement of Financial Disclosure falls upon those who are designated as policy-making by the appointing authority, or who have an annual State salary equivalent to or in excess of the job rate of a SG-24 ($53,171 for the filing year 1989). The Trustees are not salaried; they do not fall above this threshold.

Therefore, it is the decision of the Superintendent of Banking as to whether the Trustees are designated policy-makers for the purpose of requiring the filing of the financial disclosure statement.

This Opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion.

All concur:

Elizabeth D. Moore, Chair

Angelo A. Costanza
Norman Lamm, Members

Dated: August 16, 1990


ENDNOTES

1. Public Officers Law, §10.

2. Public Officers Law, §74.

3. Public Officers Law, §30. The statute provides that a State office becomes vacant upon ceasing to be an inhabitant of the State of New York in the case of offices with statewide exercise of sovereign powers. (See Public Officers Law, §30(1)(d).)

4. The term "filing rate" means, pursuant to §73-a(1)(l), ". . . the job rate of SG-24 as set forth in paragraph a of subdivision one of section one hundred thirty of the civil service law as of April first of the year in which an annual statement of financial disclosure shall be filed." For the filing year 1989, the filing rate was $53,171.

5. Banking Law, §270, provides in part that "[t]here shall be in the banking department a body corporate to be known as savings banks life insurance fund with all the general corporate powers incidental thereto, including, but not limited to, those provided in this article . . . " (Emphasis added.) This section was added to the Banking Law in 1940, by Chapter 449 of the Laws of 1940.

6. Public Officers Law, §2, provides the definition of "state officer." It states, in relevant part:

"The term 'state officer' includes every officer . . . appointed by one or more state officers, or by the legislature, and authorized to exercise his official functions throughout the entire state, or without limitation to any political subdivision . . ."

7. 1946 Op. Atty. Gen 148.

8. L. 1954, ch. 696.

9. For example, the State Athletic Commission and the State Ethics Commission under the Department of State both operate outside the direction and control of the Department. The State Labor Relations Board created under the Department of Labor functions virtually free from influence or control by the Department of Labor. The Public Employment Relations Board, created within the Department of Civil Service, is also independent of its department's authority. Despite the autonomy of these entities, they are still considered "state agencies" for the purposes of §73, 73-a and 74 coverage.

10. For example, the New York State Advisory Council on Physician's Assistants and Specialist's Assistants, (Public Health Law, Art. 37) was created to advise the Commissioner of Health on matters pertaining to the promulgation of regulations defining and restricting the duties which may be assigned to physician's assistants and specialist's assistants by their supervising physicians, the degree of supervision required, the manner in which such duties may be performed and such other matters as are deemed pertinent. The Council's 12 private members must include at least 5 physicians, 1 registered nurse, 1 physician's assistant, 1 specialist's assistant, 1 hospital administrator, 1 public representative and 2 persons licensed as allied health professionals.

11. Op. Atty. Gen. No. 83-F20.

12. Section 271 of the Banking Law provides that the SBLIF is responsible to set the legal reserves to be held under insurance and annuity contracts, a not insubstantial power for the protection of the public.

13. O'Connell v. Eastern Savings Bank, 51 N.Y.2d 524 (1980).

14. Banking Law, §278.

15. Banking Law, §271-a(5).