                       TO BE PUBLISHED IN THE OFFICIAL REPORTS


                            OFFICE OF THE ATTORNEY GENERAL

                                      State of California


                                      DANIEL E. LUNGREN

                                        Attorney General


                          ______________________________________

                  OPINION            :
                                     :          No. 91-720
                  of                 :
                                     :          FEBRUARY 24, 1992
        DANIEL E. LUNGREN            :
           Attorney General          :
                                     :
       RONALD M. WEISKOPF            :
        Deputy Attorney General      :
                                     :
______________________________________________________________________________

            THE HONORABLE NEWTON R. RUSSELL, MEMBER OF THE STATE
SENATE, has requested an opinion on the following question:

               May a hospital district pay the traveling and incidental expenses incurred by the
spouse of a district director who is attending a conference on official business of the district?

                                           CONCLUSION

               A hospital district may not pay the traveling and incidental expenses incurred by the
spouse of a district director who is attending a conference on official business of the district.

                                             ANALYSIS

                 We are advised that the board of directors of a local hospital district has voted to
permit members of the public to attend conferences along with board members at district expense
to assist the directors with their official responsibilities. But we are also told that the true purpose
for the action is to allow spouses of the directors to attend the conferences with all expenses related
thereto paid by the district. We are asked whether payment of the spouses' expenses would be
lawful. Under the circumstances presented, we conclude that it would not be lawful.

               1. The Local Hospital District Law

               Local hospital districts are formed and derive their powers under the Local Hospital
District Law (Health & Saf. Code, § 32000 et seq.; hereafter "District Law"). (See 67
Ops.Cal.Atty.Gen. 492 (1984); 66 Ops.Cal.Atty.Gen. 13 (1983).)1 The powers granted to them
under the District Law are seemingly broad; a hospital district is permitted to exercise those powers

   1
    Unidentified statutory references prior to footnote 4 are to the Health and Safety Code.

                                                  1.                                            91-720

and to do those things that are expressly mentioned in the District Law or which are necessarily
implied (§ 32001), and do "any and all other acts and things necessary to carry out [the District
Law]" (§ 32121, subd. (k)). (Cf. 67 Ops.Cal.Atty.Gen. at 493; 30 Ops.Cal.Atty.Gen. 351, 353
(1957).) Needless to say, this statutory grant of authority includes a "`broad authority to contract.'
(24 Ops.Cal.Atty.Gen. 53 (1954)." (67 Ops.Cal.Atty.Gen. at 492.)

                 We presume that the payment of traveling expenses of a spouse who accompanies
a director to a convention ostensibly to assist the director in the performance of public duties would
follow upon a contract providing for the same. However, as we have pointed out before, any
particular contract that a hospital district executes must be within the authority of a hospital district
to make. (67 Ops.Cal.Atty.Gen. at 493.)

               A hospital district is authorized to maintain membership in any local, state, or
national group or association organized and operated for the promotion of public health and welfare
or the advancement of the efficiency of hospital administration, and to pay dues and fees thereto.
(§ 32131.) It would clearly be within the authority of a district to have its directors attend meetings
of such organizations, and under section 32103 they would be allowed "actual necessary traveling
and incidental expenses incurred [in connection therewith] . . . ."2

                The District Law also gives a district the power to "employ any officers and
employees, including architects and consultants, the board of directors deems necessary to carry on
properly the business of the district." (§ 32121, subd. (g); emphasis added.) Arguably, this would
provide authority to hire a consultant to accompany and assist a director at particular meetings and
to pay the consultant's necessary traveling and incidental expenses. But nothing is said in the
District Law about paying the expenses of a spouse who attends such meetings with a director, and
we conclude that such payment may not be sanctioned from a district's implied power to carry out
the District Law's purposes.3 In fact, as we shall next see, there are particular problems involving
a contract calling for payment of the spouse's expenses.

   2
    Section 32103 provides: "The board of directors shall serve without compensation except that
the board of directors, by a resolution adopted by a majority vote of the members of the board, may
authorize the payment of not to exceed one hundred dollars ($100) per meeting not to exceed five
meetings a month as compensation to each member of the board of directors. [¶] Each member of
the board of directors shall be allowed his or her actual necessary traveling and incidental expenses
incurred in the performance of official business of the district as approved by the board."
(Emphasis added.)
   3
    Section 32121, subdivision (h) does give a district the power to "establish offices as may be
appropriate and to appoint . . . employees to those offices, and to determine the number of, and
appoint, all officers and employees and to fix their compensation." However, as it has been
presented in the situation here, the "assistant" accompanying the director to a meeting would not do
so as an "employee" of the district.

         It should also be noted that the Legislature has prescribed the means for hospital districts to
employ assistants --i.e., by hiring consultants. (§ 32121, subd. (g).) It has long been established that
where a statute prescribes the mode by which a power may be exercised, that mode is the measure
of the power. (Cf. Wildlife Alive v. Chickering (1976) 18 Cal.3d 190, 196; Uhl v. Baderacco (1926)
199 Cal. 270, 283; Cowell v. Martin (1872) 42 Cal. 605, 613; Garson v. Juarique (1979) 99
Cal.App.3d 769, 774; 66 Ops.Cal.Atty.Gen. 17, 24 (1983); 64 Ops.Cal.Atty.Gen. 804, 808 (1981).)
But the spouse here would not be accompanying the director as a consultant contemplated by the
statute.

                                                   2.                                            91-720

                  2. Government Code Section 1090

                 "Section 1090 of the Government Code codifies the common law prohibition and the
general policy of this state against public officials having a personal interest in contracts they make
in their official capacities. [Citations]." (66 Ops.Cal.Atty.Gen. 156, 157 (1983.) In relevant part
Government Code section 10904 provides as follows:

                  "Members of the Legislature, state, county, district, judicial district, and city
          officers or employees shall not be financially interested in any contract made by
          them in their official capacity, or by any body or board of which they are members."

A director of a hospital district is covered by the section's prohibition. (Eldridge v. Sierra View
Local Hospital Dist. (1990) 224 Cal.App.3d 311, 320; cf. 66 Ops.Cal.Atty.Gen. at 14; 58
Ops.Cal.Atty.Gen. 323, 324 (1975).)

                 The test for determining whether section 1090 has been violated is whether an officer
or employee has participated in the making of a contract in his or her official capacity. (See
Millbrae Assn. for Residential Survival v. City of Millbrae (1968) 262 Cal.App.2d 222, 237; 66
Ops.Cal.Atty.Gen. at 160-161.) If an official is a member of a board that actually executes the
contract, he or she is conclusively presumed to have been involved in its making. (Thompson v. Call
(1985) 38 Cal.3d 633, 649.) Furthermore, "the statute not only strikes at situations that do involve
actual fraud and dishonesty but also at those in which such is absent but in which the possibility
exists nonetheless for personal influence of an interested [officer] to be brought to bear, either
directly or indirectly, on an official decision. [Citations.]" (66 Ops.Cal.Atty.Gen. at 160, fn. 3.)

                In this case, the district board's voting to permit a director's spouse to accompany him
or her on a business trip at district expense would involve the board and the director in the making
of a proscribed "contract." (See 69 Ops.Cal.Atty. 255, 258, fn. 5 (1986).) Even if the contract is not
formally executed by the board, its vote would sufficiently connect the director, as a member of the
board, with the prohibited conduct. That being the case, and since there would be no question that
the director would have a financial interest in the payment of the expenses called for under it (see,
e.g., Nielsen v. Richards (1925) 75 Cal.App. 680; 69 Ops.Cal.Atty.Gen. at 255, 259-260; 69
Ops.Cal.Atty.Gen. 102, 107 (1986)), section 1090 would be violated.5

              Where the section 1090 prohibition is applicable, as we find it here, it acts as an
absolute bar to a board entering into the contract (see 69 Ops.Cal.Atty.Gen. at 256; 69
Ops.Cal.Atty.Gen. at 104), and any contract authorized by the board's action would be void. (Cf.
Thomson v. Call, supra, 38 Cal.3d at 646; People v. Deysher (1934) 2 Cal.2d 141, 146; Millbrae
Assn for Residential Survival v. City of Millbrae, supra, 262 Cal.App.2d at 236; Terry v. Bender
(1956) 143 Cal.App.2d 198, 206; Schaefer v. Berinstein (1956) 140 Cal.App.2d 278, 290.) The
district may not pay the traveling and incidental expenses of the director's spouse under the
circumstances presented.


      4
       Unidentified statutory references hereafter are in the Government Code.
  5
   Section 1090 would not be violated where the "contract" was for reimbursement of the director's
own actual and necessary expenses. An exception to the section 1090 prohibition exists for "an
officer in being reimbursed for his or her actual and necessary expenses incurred in the performance
of official duty." (§ 1091.5, subd. (a)(2); see Citizen Advocates, Inc. v. Board of Supervisors (1983)
146 Cal.App.3d 171, 176-178.)

                                                     3.                                               91-720

                3. The California Constitution

               Article XVI, section 6 of the California Constitution prohibits the making of "gifts"
of public funds. The section provides in pertinent part as follows:

              "The Legislature shall have no . . . power to make any gift, or authorize the
        making of any gift, of any public money or thing of value to any individual . . .
        whatever . . . ."

Under this constitutional prohibition, the Legislature may not authorize the making of any gift of
public money to any individual. The statutory grant of authority to local hospital districts contained
in the District Law must be read against this constitutional prohibition.

                 Payment of a spouse's traveling and incidental expenses out of district funds would
constitute a direct payment of public money to an individual. However, "[i]t is well settled . . . that
expenditures of public funds or property which involve a benefit to private persons are not gifts
within the meaning of [section 6 of article XVI] . . . if those funds are expended for a public purpose
. . . ." (California Emp. etc. Com v. Payne (1947) 31Cal.2d 210, 216; see also County of Alameda
v. Janssen (1940) 16 Cal.2d 276, 281; Johnston v. Rapp (1951) 103 Cal.App.2d 202, 207.) In other
words,

                "It has been held that public credit may be extended and public funds
        disbursed if a direct and substantial public purpose is served and nonstate entities are
        benefitted only as an incident to the public purpose. (California Housing Finance
        Agency v. Elliott (1976) 17 Cal.3d 575, 583; Winkelman v. City of Tiburon (1973)
        32 Cal.App.3d 834, 845.) The benefit to the state from an expenditure for a public
        purpose is in the nature of consideration and the funds expended are therefore not a
        gift even though private persons are benefitted therefrom. (County of Alameda v.
        Carleson (1971) 5 Cal.3d 730, 745-746; 47 Ops.Cal.Atty.Gen. 171, 181 (1966).)"
        (67 Ops.Cal.Atty.Gen. 32, 34 (1984).)

The question thus becomes whether "the consideration [i.e., the benefit to the public] is plainly
substantial and whether the private [individual] is benefitted only as an incident to the promotion
of such purposes." (Id. at p. 35.)

                 Whether a particular program serves a public purpose is primarily a legislative
determination that will not be disturbed by the courts so long as it has a reasonable basis.
(California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575, 583.) For example, in 66
Ops.Cal.Atty.Gen. 13, we said that no "gift of public funds" would occur with respect to a hospital
district providing family health insurance for the members of its board of directors "since the
providing of [the] insurance serves a public purpose in compensating the directors for their services
performed. [Citations.]" (Id. at p. 15, fn. 4.) In other opinions we have found the provision of
employee health benefit coverage as serving a direct and substantial public purpose. (See, e.g., 74
Ops.Cal.Atty.Gen. 159, 162 (1991); 73 Ops.Cal.Atty.Gen. 296, 304 (1990).) But while we have said
that providing incentives for the retention of employees and increasing their efficiency would serve
a public purpose (73 Ops.Cal.Atty.Gen. at 304; 39 Ops.Cal.Atty.Gen. 200, 201 (1962)), that
justification is not without bounds under the Constitution. (Cf. 73 Ops.Cal.Atty.Gen. at 304).

                Surely the public benefit here, if it exists at all, is more attenuated and not as plainly
substantial as in the situations which we and the courts have considered before, and surely the
benefit to the private individual is more than merely incidental to any public benefit. First of all, it
is one thing to provide health and other benefits to a wide class of public employees from which a

                                                   4.                                              91-720

substantial public benefit might be perceived; it is quite another to provide additional compensation
to a particular individual, i.e., a district director.6 But also, the nature of the benefit here is different.
Health insurance coverage for a group of public employees has been authorized by the Legislature
in a number of cases in order to address a major societal concern. But the need to take one's spouse
on a business trip does not rise to that level of concern, and the Legislature has not provided any
express statutory basis to expend public funds for that purpose.

               We find no direct and substantial public purpose to be served in paying the traveling
and incidental expenses of a director's spouse so as to justify an expenditure of public funds under
Article XVI, section 6 of the Constitution. The payment would be unconstitutional.

              Accordingly, we conclude that under the circumstances presented, a hospital district
may not pay the traveling and incidental expenses of a spouse of a district director who is attending
a conference on official business.


                                                   *****




   6
    We note that even there, it is not the director who would directly receive the benefit; it would
be his or her spouse, who is not a public employee.

                                                     5.                                              91-720
