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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. 6607

December 5, 1989

APPROPRIATIONS:

Reduction or elimination of legislatively mandated programs by executive department

CONSTITUTIONAL LAW:

Const 1963, art 3, Sec. 2--authority of executive department to reduce expenditures

Const 1963, art 5, Sec. 20--reduction or elimination of legislatively mandated programs by executive department

SOCIAL SERVICES, DEPARTMENT OF:

Reduction or elimination of legislatively mandated programs

The People have given the executive branch of state government the authority to spend less than the amount appropriated to the extent that it may be accomplished by implementing efficiencies and economies.

The Legislature cannot delegate to an executive branch official the Legislature's responsibility to change a law appropriating funds and providing a certain level of services.

To the extent that section 371(2) of the Management and Budget Act proposes to give to an executive branch official the authority to reduce expenditures or eliminate programs mandated by the Legislature, it is unconstitutional.

Honorable Harry Gast

State Senator

The Capitol

Lansing, Michigan

Honorable D.J. Jacobetti

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion on a number of questions relating to the recent action of the Director of the Department of Social Services taken under the Management and Budget Act, Sec. 371(2)(a), MCL 18.1371(2)(a); MSA 3.516(371)(2)(a), to reduce the amounts of certain line item appropriations contained in 1989 PA 200 (Act 200). Act 200 makes an appropriation to fund the Department of Social Services for the fiscal year ending September 30, 1990.

Your questions may be summarized and restated in the following question:

May a department director implement a reduced spending plan, pursuant to MCL 18.1371(2)(a); MSA 3.516(371)(2)(a), if that plan reduces or eliminates legislatively mandated programs?

In Const 1963, art 5, Sec. 20, the people have commanded that an appropriation is not a mandate to spend. Further, if actual revenues for a fiscal period fall below revenue estimates, reductions in appropriations for the executive branch may be ordered by the Governor with the approval of the appropriations committees of the House and Senate.

We are advised that the Director of the Department of Social Services has not acted to reduce spending below the level authorized by the Legislature because actual revenues have fallen below revenue estimates. If that were the case, the executive order process mandated by Const 1963, art 5, Sec. 20 would be operative.

Rather than a revenue shortfall, we are advised that the Director of the Department of Social Services acted to reduce the level of service below that authorized by the Legislature because the level of funding provided by the Legislature was not sufficient to pay for the prescribed level of service. Thus, the reductions in services are not intended to reduce the corresponding appropriations. Rather, the reductions are intended merely to assure that the expenditures for those services do not exceed the amounts appropriated by the Legislature. For this reason, the executive order process is not implicated.

Faced with a mandate to provide a level of service that exceeds the funds appropriated to do so, the Director of the Department of Social Services acted pursuant to the Management and Budget Act, Sec. 371(2), MCL 18.1371(2); MSA 3.516(371)(2), which provides:

"(2) Within 15 days after a bill appropriating an amount is enacted into law, the amount appropriated shall be divided into allotments by department and by state agency based on periodic requirements to represent a spending plan. The state budget director shall review the allotments. By June 1 of each year, the director shall submit a report to the appropriations committees that compares actual expenditures to the allotments made for each department and each state agency for the first 6 months of the fiscal year. When it appears that a spending plan, or sources of financing related, do not provide the level of program service assumed in the appropriation for the fiscal year, the state budget director shall pursue 1 of the following remedies:

"(a) Require from the principal department a lower level of service spending plan for the fiscal year. The state budget director shall thereafter withhold any payment which would exceed the allotment balance in the approved reduced plan. If a reduced spending or service plan is to be implemented pursuant to this subdivision, the state budget director shall notify the appropriations committees and the fiscal agencies at least 15 days before the reduction plan is to be effective.

"(b) Reflect the deficiency in projecting and reporting the status of the state budget. The state budget director shall then approve the spending plan as submitted by the department and within 45 days after the enacted appropriation, recommend to the legislature a supplemental appropriation to provide the necessary level of program service." (Emphasis added)

The first sentence of section Sec. 371(2)(a) authorizes the Director of the Department of Social Services to adopt a lower level of service spending plan if the spending plan or the sources of financing do not provide the level of services assumed in the appropriation. Subsection 2(b) provides, as an alternate remedy, that the state budget director may recommend a supplemental appropriation to provide the necessary level of service.

I have previously addressed the issue of executive branch efforts to reduce legislative appropriations when actual revenues have fallen below revenue estimates. Those opinions concluded that the people have seen fit to severely limit the executive branch's prerogatives. In 1966, for example, Governor George Romney directed the Department of Social Services to withhold full implementation of Phases II and III of the Medicaid program for which appropriations had been made by the Legislature for reasons, in part, of financial problems. OAG, 1967-1968, No 4576, p 17 (February 3, 1967), addressed the validity of Governor Romney's action and concluded that he did not have the authority to limit or delay benefits under a program established by law and for which legislative appropriations had been made. The opinion noted that approval of the appropriations committees of the Legislature was neither sought nor capable of being validly obtained in the absence of any showing that actual state revenues would fall below estimated revenues as required by Const 1963, art 5, Sec. 20.

In that opinion I concluded:

"I am advised that the Governor in taking this action was responding to an urgent plea in a report from the Director of Social Services which stated that implementation of the program is much more expensive than had been originally anticipated and that its cost may exceed the current appropriation.

"Under these circumstances, if it be deemed appropriate, these facts may be brought to the attention of the legislature, which does have the constitutional authority to take necessary action." OAG, 1967-1968, No 4576, supra, p 23.

In 1979, the Director of the Department of Management and Budget ordered principal departments to make reductions in line item appropriations by "lapsing" funds appropriated by the Legislature. OAG, 1979-1980, No 5585, p 445, 447 (October 17, 1989), concluded that an order to lapse funds was not valid and that only an executive order issued by Governor William Milliken, after approval by the appropriations committees of the House and Senate, could require departments to reduce appropriations if actual state revenues fell below estimated revenues.

In a 1987 opinion to Senator David S. Holmes, Jr., I discussed the two aforementioned opinions and several other opinions and I summarized the law in this area as follows:

"... While an appropriation is not a mandate to spend, and state departments may reduce spending by implementing efficiencies and economies, state departments lack authority to reduce the gross amounts appropriated for specific programs. DMB is without authority to either directly order reductions in specific programs by other state departments or to indirectly impose such reductions on other state departments." Letter opinion of the Attorney General [Senator Holmes (December 23, 1987) ].

The reference to "efficiencies and economies" relates to the first sentence of Const 1963, art 5, Sec. 20 which states that "no appropriation shall be a mandate to spend." In discussing that sentence, the Constitutional Convention delegates in the Address to the People commented:

"The first sentence is intended to cover situations in which unforeseen efficiencies and economies might become possible." 2 Official Record, Constitutional Convention 1961, p 3381.

While the Constitution does not define the terms "economies" and "efficiencies," the concept embodied in that first sentence was discussed briefly in the course of the convention. Delegate Shackleton commented:

"[T]he first sentence, 'No appropriation shall be deemed a mandate to spend' coincides with the commonly accepted thinking in the field of government finance. It conveys the idea later expressed that there should be authority to reduce or eliminate expenditures if unforeseen efficiencies or economies can be accomplished...." 1 Official Record, Constitutional Convention 1961, p 1658.

Also discussing that sentence was Delegate Bentley, who said:

"There is no mandate, as we have said in this original sentence of the section, that every penny that is appropriated by the legislature and signed into law by the governor has got to be spent in the present fiscal or the current fiscal year.

"I respectfully submit, Mr. Chairman, that it is not a question, necessarily, of eliminating this expenditure or that program; it is a matter which has been practiced before and can be practiced again very easily, of the so called 'stretch out.' In other words, for example, if a building program is involved, it is very possible to spread that building program from one fiscal year into the next fiscal year and thereby endeavor to make the expenditures conform more closely to the revenues. That is all we are suggesting...."

But your opinion request raises another issue: May the Legislature delegate to a department director the authority to actually reduce or eliminate legislatively mandated services or programs because the amount appropriated for a service or services is insufficient to carry out the program mandated by the Legislature? The answer to that question is clearly no.

It is a basic principle of constitutional law that the legislative branch may not delegate its lawmaking function.

"The functions of legislation may not be delegated by the legislative to the executive department or to any executive or administrative officer, board, or commission except as such delegation may be expressly authorized by a constitutional provision, ..." 16 CJS, Constitutional Law, Sec. 142, pp 459-460.

"In order for a delegation of authority by the legislature to the executive department or to any executive or administrative officer, board, or commission to be constitutional, the legislature must ordinarily prescribe a policy, standard, or rule for their guidance and must not vest them with an arbitrary or uncontrolled discretion with regard thereto, or with respect to the matters or persons to which the statutes shall be applied. So, the legislature cannot vest in executive officers or bodies an uncontrolled power to vary, change, or suspend a statute unless the constitution so provides." 16 CJS, Constitutional Law, Sec. 143, pp 463-465.

Michigan's appellate courts have repeatedly stated their agreement with these principles. The questions was dealt with at length in Westervelt v Natural Resources Commission, 402 Mich 412, 263 NW2d 564 (1978). In that case, the Supreme Court agreed that the delegation doctrine is grounded in the constitutional separation of powers mandated by Const 1963, art 3, Sec. 2. In Westervelt, Justice Williams, in an opinion concurred in fully by three justices and concurred in part by three other justices, held:

"[L]egislation which contains a delegation of power to an administrative agency must contain either explicitly or by reference ... 'standards prescribed for guidance as reasonably precise as the subject matter requires or permits,' ..." 402 Mich, at 437-438.

Justice Williams noted that earlier Supreme Court cases had quoted with approval from Justice Cooley's Constitutional Limitations in support of the "well settled principle" that the Legislature may not delegate to an administrative agency the power to make a law.

" 'One of the settled maxims in constitutional law is that the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority. Where the sovereign power of the State has located the authority, there it must remain; ... Cooley, Constitutional Limitations (6th ed), p 137." 402 Mich at 427-428.

Justice Williams went on to discuss with approval the Court's prior decision in Osius v St Clair Shores, 344 Mich 693, 698; 75 NW2d 25 (1956), which held:

"There is no doubt that a legislative body may not delegate to another its lawmaking powers. It must promulgate, not abdicate." (Emphasis added.)

It is clear that MCL 18.371(2)(a); MSA 3.516(371)(2)(a), contains absolutely no standards to guide the executive branch in reducing either spending or services. The people have placed the power to legislate in the legislative branch. Const 1963, art 4, Sec. 1. They have also provided in Const 1963, art 3, Sec. 2 that:

"The powers of government are divided into three branches; legislative, executive and judicial. No person exercising powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in this constitution."

Based on the foregoing, it is clear that the Legislature cannot delegate to an executive branch official the Legislature's responsibility to change a law appropriating funds and providing a certain level of services. Only the Legislature can amend laws. Const 1963, art 4, Sec. 1. Thus, to the extent that section 371(2) of the Management and Budget Act proposes to give to an executive branch official the authority to reduce expenditures or eliminate programs mandated by the Legislature, it is unconstitutional.

It is my opinion, therefore, that the People have given the executive branch of state government the authority to spend less than the amount appropriated if efficiencies and economies can be implemented. However, the Legislature may not constitutionally delegate to the executive branch the authority and responsibility to reduce or eliminate services or programs mandated by the Legislature, if the amounts appropriated for such services or programs prove insufficient. If that occurs, the Legislature must act to either provide an additional appropriation or to reduce or eliminate programs and services.

Frank J. Kelley

Attorney General

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