The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 5266 February 9, 1978 ELECTIONS: State Campaign Fund APPROPRIATIONS: Continuing appropriations CONSTITUTION OF MICHIGAN: Art 4, Sec. 31 (balanced budget) Art 5, Sec. 18 (balanced budget) Art 9, Sec. 17 (payments from state treasury) 1976 PA 388, Sec. 61(4) contains sufficient authorization to transfer from the general fund to the state campaign fund an amount equal to the amounts designated by the taxpayers under 1976 PA 388, Sec. 61(2). 1976 PA 388, Secs. 62-69 authorize payments from the state campaign fund in accordance with the terms and conditions expressed therein. Dr. Gerald H. Miller Director Department of Management & Budget P.O. Box 30026 Lewis Cass Building Lansing, Michigan 48909 You have requested my opinion on the following questions: '1. Does Act 388 of 1976 contain sufficient authorization to transfer taxes designated on returns for the tax year 1976 identified in Sec. 61(2) to the State Campaign Fund? If so, does the Act allow for payments out of the State Campaign Fund to candidates as provided by Sec. 64 without further action by the Legislature? '2. Does Act 388 of 1976 contain sufficient authority to cause the transfer of taxes designated on returns for the tax year 1977 from the General Fund to the State Campaign Fund? If so, does the Act allow for payments out of the State Campaign Fund to candidates as provided by Sec. 64 without further action by the Legislature?' 1976 PA 388; MCLA 169.201 et seq; MSA 4.1703(1) et seq, is an act to regulate political activity and also provides for the creation of a state campaign fund to be administered by the State Treasurer. 1976 PA 388, supra, Sec. 61 provides: '(1) The state campaign fund is hereby created. The state treasurer shall administer the state campaign fund in accordance with this act. '(2) Effective with the taxable years beginning January 1, 1976, an individual whose income tax liability under Act No. 281 of the Public Acts of 1967, as amended, being sections 206.1 to 206.532 of the Michigan Compiled Laws, for a taxable year is $2.00 or more may designate that $2.00 be credited to the state campaign fund. In the case of a joint return of husband and wife having an income tax liability of $4.00 or more each spouse may designate that $2.00 shall be paid to the state campaign fund. '(4) An amount equal to the cumulative amounts designated under subsection (2) each year shall be appropriated annually from the general fund of the state to the state campaign fund to be available beginning January 1 and continuing through December 31 of each year in which a governor is elected. The amounts appropriated under this section shall not revert to the general fund but shall remain available to the state campaign fund for distribution without fiscal year limitation except that any amounts remaining in the state campaign fund on December 31 immediately following a gubernatorial general election shall revert to the general fund. There is appropriated from the general fund of the state for the fiscal year ending 1977 an amount equal to the amounts designated under subsection (2) for the tax year of 1976.' [Emphasis added] Thus, it will be noted that section 61(4) provides: (1) An annual appropriation from the general fund to the state campaign fund is established; (2) Amounts appropriated to the state campaign fund do not revert to the general fund, but remain available to the state campaign fund for distribution without fiscal year limitation; (3) An appropriation is made for the fiscal year ending 1977 of an amount equal to the amounts designated by the taxpayers for the state campaign fund. The pertinent provisions of the Michigan Constitution are Const 1963, art 5, Sec. 18; Const 1963, art 4, Sec. 31; and Const 1963, art 9, Sec. 17. These provisions and the Address to the People which explained their purpose are as follows: Const 1963, art 5, Sec. 18 provides: 'The governor shall submit to the legislature at a time fixed by law, a budget for the ensuing fiscal period setting forth in detail, for all operating funds, the proposed expenditures and estimated revenue of the state. Proposed expenditures from any fund shall not exceed the estimated revenue thereof. On the same date, the governor shall submit to the legislature general appropriation bills to embody the proposed expenditures and any necessary bill or bills to provide new or additional revenues to meet proposed expenditures. The amount of any surplus created or deficit incurred in any fund during the last preceding fiscal period shall be entered as an item in the budget and in one of the appropriation bills. The governor may submit amendments to appropriation bills to be offered in either house during consideration of the bill by that house, and shall submit bills to meet deficiencies in current appropriations.' With respect to this section the Address to the People states: 'This is a new section intended to establish a constitutional executive budget procedure for the orderly management of the state's fiscal affairs. 'The governor is required to prepare and present to the legislature, at such time as is fixed by law, a budget for the ensuing period which details all proposed expenditures and estimated revenues of the state. At the same time, the governor is directed to submit to the legislature bills embodying the budget plan and any proposed new revenues. The proposed expenditures are not to exceed estimated revenue, whether from existing or proposed new revenue sources. 'Surplus created or deficit incurred during the previous fiscal period must be included in the budget and appropriation bills for the next year. Any surplus is to be a credit to estimated revenues, while any deficit is to be an initial charge against expenditures. 'Since Sec. 31, Article IV, of this proposed document gives legislative priority to general appropriation bills, the procedure outlined in this new section is designed to expedite agreement on fiscal matters.' [2 Official Record, Constitutional Convention 1961, p 3381] Const 1963, art 4, Sec. 31 provides: 'The general appropriation bills for the succeeding fiscal period covering items set forth in the budget shall be passed or rejected in either house of the legislature before that house passes any appropriation bill for items not in the budget except bills supplementing appropriations for the current fiscal year's operation. Any bill requiring an appropriation to carry out its purpose shall be considered an appropriation bill. One of the general appropriation bills as passed by the legislature shall contain an itemized statement of estimated revenue by major source in each operating fund for the ensuing fiscal period, the total of which shall not be less than the total of all appropriations made from each fund in the general appropriation bills as passed.' With respect to this section the Address to the People states: 'This is a new section designed to accomplish two major purposes: '1. To focus legislative attention on the general appropriation bill or bills to the exclusion of any other appropriation bills, except those supplementing appropriations for the current year's operation. '2. To require the legislature (as well as the governor by a subsequent provision) to set forth by major item its own best estimates of revenue. 'The legislature frequently differs from executive estimates of revenue. It is proper to require that such differences as exist be specifically set forth for public understanding and future judgment as to the validity of each.' [2 Official Record, Constitutional Convention 1961, p 3375] Const 1963, art 9, Sec. 17 states: 'No money shall be paid out of the state treasury except in pursuance of appropriations made by law.' This provision is identical to Const 1908, art 10, Sec. 16. Before analyzing the constitutionality of the provisions of 1976 PA 388, Sec. 61, supra, it is helpful to refer to the general principles by which the constitutionality of a statute is tested. The first general rule to be considered is that a statute is presumed to be constitutional unless the contrary clearly appears and, in case of a doubt, every possible presumption not clearly inconsistent with the language and the subject matter is to be made in favor of constitutionality. As stated in Cady v City of Detroit, 289 Mich 499, 505; 286 NW 805 (1939), app dis 309 US 620; 60 S Ct 470; 84 L Ed 984: '. . . Every reasonable presumption or intendment must be indulged in favor of the validity of an act, and it is only when invalidity appears so clearly as to leave no room for reasonable doubt that it violates some provision of the Constitution that a court will refuse to sustain its validity. A statute is presumed to be constitutional and it will not be declared unconstitutional unless clearly so, or so beyond a reasonable doubt. Attorney General, ex rel. Barbour, v. Lindsay, 178 Mich. 524; Bowerman v. Sheehan, 242 Mich. 95 (61 A.L.R. 859).' See also People v Piasecki, 333 Mich 122; 52 NW2d 626 (1952); Thayer v Michigan Department of Agriculture, 323 Mich 403; 35 NW2d 360 (1946). Another applicable rule of law is that the legislature has the power to adopt any statutory provision unless it is prohibited from doing so by the Constitution and a statute will not be declared in conflict with the Constitution where a serious doubt exists that there is a conflict. Gratiot County v Federspiel, 312 Mich 128; 20 NW2d 131 (1945). The courts will presume that the legislature acted reasonably and intended to observe the Constitution, Kelley v Judge of Recorder's Court of Detroit, 239 Mich 204; 214 NW 316; 52 ALR 273 (1927), and that the legislature considered the constitutionality of its action and determined that it was valid, City of Ecorse v Peoples Community Hospital Authority, 336 Mich 490; 58 NW2d 159 (1953). As to the provision in the first sentence of 1976 PA 388, supra, Sec. 64(4) providing for an annual appropriation from the general fund to the state campaign fund, it is clear that this may only be viewed as an intent to appropriate since the legislature is prohibited from enacting a continuing appropriation. This issue was discussed in Advisory Opinion on Constitutionality of 1975 PA 227 (Questions 2-10), 396 Mich 465, 499; 242 NW2d 3 (1976), which also dealt with an abortive effort by the legislature to establish a state campaign fund. (1) In so ruling, the Supreme Court states: 'Irrespective of the fact that Sec. 101 (2) was violative of art 4, Sec. 31 in that it was passed before certain general appropriation bills, Sec. 101 could only serve as an appropriation for one fiscal year under the rationale of Board of Education of Oakland Schools v Superintendent of Public Instruction, 392 Mich 613, 620; 221 NW2d 345 (1974). 'In Oakland, dealing with a statute which purported to be an appropriation bill, but which did not take effect during the ensuing fiscal year, we held that 'any provision that does not take initial effect during the ensuing fiscal year is intended to function only as an authorization--an intention to appropriate'. 'The Court felt that such construction avoided conflict with art 4, Sec. 31, for if such a provision were to be effective as an appropriation, the Legislature would be unable to match revenues with appropriations as is required under the Constitution. 'Section 101(4) presents a very similar situation. That section reads as follows: "(4) An amount equal to the amounts designated under subsection (2) each year is appropriated from the general fund of the state to the state campaign fund. The amounts appropriated under this section shall not revert to the general fund but shall remain available to the state campaign fund for distribution without fiscal year limitation except that any amounts remaining in the state campaign fund on December 31 immediately following a gubernatorial general election shall revert to the general fund.' 'This provision is a continuing appropriation, i.e., an appropriation that does take effect in the ensuing fiscal year, but which by its terms continues to appropriate beyond that fiscal period. 'After the ensuing fiscal year, in which revenues can be matched with the appropriation, the conflict with art 4, Sec. 31 created by such a statute is identical with that created by the type of provision found in Oakland; in both situations, the budgetary procedure required by the constitutional provision becomes impossible. 'Therefore under the rationale of Oakland, there can be an appropriation to the state campaign fund, only for the ensuing fiscal year but not thereafter, appropriations necessarily being made on a year-to-year basis.' [Emphasis added; footnotes omitted] 396 Mich at 501-502; 242 NW2d at 18 However, the fact that the legislature may only make an appropriation for the ensuing fiscal year does not prohibit it from making an appropriation to a fund from which expenditures may be made subsequent to the ensuing fiscal year in accordance with a statutory formula. It will be noted that in Boards of County Road Commissioners v Board of State Canvassers, 391 Mich 666; 218 NE2d 144 (1974), the court observed at page 673, footnote 8, that the monies in the general transportation fund and the motor vehicle highway fund could be disbursed and expended without further legislative action stating: 'It appears that the bulk of the appropriations made by PA 326 and PA 327 are complete. Money can be spent without additional legislative directive. See MCLA 247.661(a-c), 247.661b, 247.662, 247.663; MSA 9.1097(11)(a-c), 9.1097(11b), 9.1097(12), 9.1097(13).' Although the balanced budget concept embodied in Const 1963, art 4, Sec. 31 and art 5, Sec. 18 prohibits the legislature from appropriating funds which exceed estimated income for the ensuing fiscal year, there is no constitutional prohibition against enactment of an appropriation during a fiscal year to establish a fund from which expenditures may be made after the termination of the fiscal year for which the appropriation is made. The Constitution does not specifically authorize the establishment of a fund for a particular use during a fiscal year from which future appropriations may be made in accordance with legislative guidelines, although the Constitution does recognize and provide for the establishment of at least one fund. Const 1963, art 9, Sec. 11, provides: 'There shall be established a state school aid fund which shall be used exclusively for aid to school districts, higher education and school employees' retirement systems, as provided by law. . . . Payments from this fund shall be made in full on a scheduled basis, as provided by law.' In summary, the Michigan Supreme Court has not held that a fund may not be established during one fiscal year from which expenditures may be made during an ensuing fiscal year. On the contrary, in Boards of County Road Commissioners, supra, the court recognized that expenditures may be made during fiscal years following the appropriation establishing a fund. The reason for this is quite logical and does not frustrate the intent of the framers of the Constitution that a balanced budget be established for each fiscal year. The framers recognized the need for establishment of funds from which expenditures may be made on a regular basis for an indefinite period. The appropriations to the fund during a fiscal year in which the budget is balanced serves the purpose of setting aside available funds and allows the expenditure in the future for needs that arise in the future. Since the framers of the Constitution were familiar with the process of establishing funds and providing for expenditures from those funds beyond the ensuing fiscal year, it would seem logical that, if they wished to discontinue this device, they would specifically have included a provision in the Constitution prohibiting this practice. But they did not do so. It should be noted that the State Employees' Retirement System, (3), the Public School Employees' Retirement System, (4), the Municipal Employees' Retirement System, (5), the Judges' Retirement System, (6) the Probate Judges' Retirement System, (7) and the Legislative Retirement System (8) have all adopted the same method of distribution to retirees who were members of the respective systems that is followed with respect to the distribution of funds from the state campaign fund. That is, a fund is established to which contributions and appropriations are made but the legislature does not make an annual item appropriation from the fund. Instead, the act provides a formula whereby the board determines the precise amount to which each retiree is entitled upon retirement. Thus, for example, the formula by which a retiree from the State Employees Retirement System is paid is set forth in 1943 PA 240, supra, Sec. 20. This formula serves as an appropriation so that it cannot be said that there is no appropriation although it can and must be said that there is no annual appropriation since the legislature has never made an annual appropriation for any of these retirement funds. It therefore appears that all elements of the constitutional requirements of Const 1963, art 5, Sec. 18 and Const 1963, art 4, Sec. 31 are complied with, these being: (1) There is a balanced budget because the estimated revenue meets estimated expenditures; and (2) There is an appropriation, albeit, not an annual appropriation. The requirement that there be an appropriation is contained in Const 1963, art 9, Sec. 17, which says: 'No money shall be paid out of the state treasury except in pursuance of appropriations made by law.' It will be noted that this provision which is carried over intact from Const 1908, art 10, Sec. 6 contains no requirement that there be an annual appropriation; it only requires that there be an appropriation and this requirement may be fulfilled by language contained in a substantive act as well as language contained in an appropriation act. In fact, Const 1963, art 4, Sec. 31 specifically states that: '. . . Any bill requiring an appropriation to carry out its purpose shall be considered an appropriation bill. . . .' In 1 OAG, 1955-1956, No 1916, p 39, 40 (February 1, 1955), the attorney general was asked whether a statutorily authorized refund may be made by the Corporation and Securities Commission in view of the prohibition of Const 1908, art 10, Sec. 6 (now Const 1963, art 9, Sec. 17). The response was: '. . . the Attorney General is of the opinion that the statutory provisions authorizing the refunds are themselves a sufficient appropriation of the money to be refunded to satisfy the requirements of the Constitution. . . .' Having concluded that the legislature has validly created the state campaign fund and may appropriate money during the ensuing fiscal year which may be expended in subsequent years, it is additionally necessary to review the method employed by the legislature for making this appropriation. 1976 PA 388, Sec. 61(2), supra, is a method for determining the amount to be appropriated by the legislature; it is not and does not purport to be an appropriation itself. It only provides a method by which the taxpayers indicate their desire that a sum of money be appropriated to the state campaign fund by the legislature. However, although section 61(2) is not an appropriation, the last sentence of section 61(4) does provide for an appropriation from the general fund for the fiscal year ending 1977 of an amount equal to that designated by the taxpayers for the tax year 1976. Thus, if during the 1976 tax year the taxpayers have designated $2,600,000 to be paid to the state campaign fund, the last sentence of section 61(4) constitutes an appropriation of $2,600,000 to the state campaign fund to be distributed in accordance with provisions contained in 1976 PA 388, Secs. 64-69, supra. In summary, in my opinion: (1) 1976 PA 388, Sec. 61(4) contains sufficient authorization to transfer from the general fund to the state campaign fund an amount equal to the amounts designated by the taxpayers under 1976 PA 388, Sec. 61(2), supra. (2) 1976 PA 388, Secs. 62-69 authorize payments from the state campaign fund in accordance with the terms and conditions expressed therein. Frank J. Kelley Attorney General (1)
(2)
1975 PA 227, Sec. 101; MCLA 169.101; MSA 1701(101), provided in part:'(1) The state campaign fund is hereby created. The state treasurer shall administer the state campaign fund in accordance with this act.'
(3)
1943 PA 240; MCLA 38.1 et seq; MSA 3.981(1) et seq.(4)
1945 PA 136; MCLA 38.201 et seq; MSA 15.893(1) et seq.(5)
1945 PA 135; MCLA 38.601 et seq; MSA 5.4001 et seq.(6)
1951 PA 198; MCLA 38.801 et seq; MSA 27.125(1) et seq.(7)
1954 PA 165; MCLA 38.901 et seq; MSA 27.3178(60.1) et seq.(8)
1957 PA 261; MCLA 38.1001 et seq; MSA 2.169(1) et seq.