As school districts are organizing for the year, questions have come up recently about whether board members may be paid or not. For members of ISD boards, Section 621 of the Revised School Code specifically states that ISD board members “shall receive a per diem allowance for attendance at meetings convened in accordance with the bylaws of the intermediate school board or held pursuant to law.” The law goes further to state that per diem must be approved by the board by resolution, must be no more than 30 dollars per meeting, subcommittee meeting, or authorized duty related to the board members responsibility.  Additionally, the law limits the number of times an ISD board member can collect the stipend to 52 times per year, unless the ISD board votes to remove that limitation.

There is not language in the Revised School Code about stipends for local school districts. However, as local school districts are general powers districts, they have the ability to establish stipend payments to their board members as they feel is appropriate. Member compensation may be set by approving or amending a by-law by a majority vote that establishes the stipend amount, which may be based on attendance of meetings, or on a monthly or annual basis.

If a district is providing stipends to its board members, the question of how to address them for tax purposes has also been challenging. IRS guidance has stated, “In most cases, individuals who serve as public officials are government employees. Therefore, the government entity is responsible for withholding and paying Federal income tax, social security and Medicare taxes. They must also issue a Form W-2, Wage and Tax Statement, to a public official. Members of a board of education are listed as an example of a public officer who are not subject to self-employment tax.

While districts should comply with the IRS guidance, and consider the board members who receive stipends as employees for tax purposes, it is important to note that they do not count for purposes of the Michigan Public School Employees Retirement System. The Office of Retirement Services has specifically states in its Reporting Instruction Manual that “A person who is not regularly employed by a reporting unit and who is serving as a reporting unit board member is not a member of this retirement system and must not be reported for retirement purposes.”

For question on this, or other legal matters please contact MASB legal staff.