STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6119

January 20, 1983

CONSTRUCTION LIEN ACT:

Payment of claims and expenses of Homeowner Construction Lien Recovery Fund

LEGISLATURE:

Appropriation of funds to pay claims and expenses of Homeowner Construction Lien Recovery Fund

The Legislature must appropriate annually money for payment of claims and administrative expenses of the Homeowner Construction Lien Recovery Fund.

Mrs. Elizabeth P Howe

Director

Department of Licensing and Regulation

P.O. Box 30018

Lansing, Michigan

Your predecessor requested my opinion whether the Homeowner Construction Lien Recovery Fund (hereinafter Fund) is subject to the legislative budget and appropriations process with regard to payment of claims against the Fund or administrative expenses. The Fund has been established pursuant to the Construction Lien Act, 1980 PA 497, as amended; MCLA 570.1101 et seq; MSA 26.316(101) et seq, and is administered by the Department of Licensing and Regulation. The Fund is self-supporting and is derived from assessments charged to licensed residential builders, maintenance and alteration contractors, electrical contractor and master plumber license applicants, laborers and other lien claimants who pay the $50.00 fee. 1980 PA 497, supra, Sec. 201, as last amended by 1982 PA 17.

The purpose of the Fund is remedial to provide a source of recovery for subcontractors, suppliers and laborers who are unable to collect sums due them despite the fact that they have filed construction liens on residential structures. Contractors are not covered by the Fund.

The Fund, up to a maximum of $75,000.00 per residential structure, 1980 PA 497, supra, Sec. 204, pays unsatisfied lien judgments of subcontractors, suppliers and laborers against residential builders, maintenance and alteration contractors, electrical and plumbing contractors. The administration of the Fund is set forth in 1980 PA 497, supra, Sec. 202:

Under the provisions of this section, the State Treasurer has the duty to deposit or invest money received by the Fund in the same manner and subject to all provisions of law with respect to his depositing or investing of state funds. Thus, while the responsibility for administering the Fund lies with the Department of Licensing and Regulation, the money in the Fund is under the immediate control of the State Treasurer.

Const 1963, art 9, Sec. 17, states:

Your query is whether this constitutional provision is applicable to the Fund money under the control of the State Treasurer. Stated differently, the question is whether the Department of Licensing and Regulation may disburse money from the Fund either for payment of lien claims or for payment of administrative expenses without first having obtained a legislative appropriation as mandated by Const 1963, art 9, Sec. 17.

In order to answer this question, it is necessary to consider the nature of the fund in question and the manner of its creation. Section 201 of 1980 PA 497, as last amended by 1982 PA 17, supra, provides:

It is clear from the above language that the Fund is derived from mandatory assessments charged against licensed residential builders, maintenance and alteration contractors, and plumbers and electricians, along with voluntary fee payments by suppliers and laborers who wish to contribute to, and thereby become covered by, the Fund.

Thus, the Fund consists exclusively of money paid into it by persons who are involved in residential construction. In the statutory language of the section, the Fund is 'self-supporting.'

The constitutional appropriations provision was discussed by Justice Brennan in Wayne Circuit Judges v Wayne County, 386 Mich 1, 22; 190 NW2d 228, 235 (1971):

OAG, 1975-1976, No 4952, p 337 (March 22, 1976), relied upon the constitutional mandate in Const 1963, art 9, Sec. 17, and concluded that the Department of Mental Health may spend money for the implementation of county community mental health programs only in the event that the Legislature appropriated funds to it for that purpose. This opinion was in accord with White v Department of Social Services, 20 Mich App 481; 174 NW2d 315 (1969), which held that dependent children assistance payments must be within the limits of the funds appropriated pursuant to the constitutional requirement.

OAG, 1975-1976, No. 5147, p 695 (December 7, 1976), examined the State Accident Fund and determined that although that fund is self-sustaining and has the power to make assessments against its members, the fund was nevertheless a state agency subject to the constitutional and statutory restrictions imposed on all state agencies, including the control of its authority and operations by the Legislature.

In determining the validity of the State Campaign Finance Act, OAG, 1977-1978, No 5266, p 349 (February 9, 1978), concluded that the Legislature is precluded from enacting a continuing appropriation, but must act annually under the rationale of Board of Education of Oakland Schools v Superintendent of Public Instruction, 392 Mich 613; 221 NW2d 345 (1974).

Again, OAG, 1977-1978, No 5393, pp 693-694 (November 28, 1978), relied upon Const 1963, art 9, Sec. 17, and declared that donations to the game and fish protection fund may not be expended unless appropriated by the Legislature because 'it is clear that a state agency may not expend funds not appropriated by law.'

It is my opinion, therefore, that the Legislature must appropriate annually the money for payment of claims and the administrative expenses of the Homeowner Construction Lien Recovery Fund.

Frank J. Kelley