STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6750

March 3, 1993

APPROPRIATIONS:

Lapse of a grant-in-aid appropriation

The Director of the Department of Management and Budget was authorized to lapse the unexpended balance of a grant-in-aid appropriation for the City of Westland library in 1990 PA 253, where the encumbrance of monies in the line item appropriation was not accomplished by September 15, 1991, and the appropriation was still outstanding at the close of the fiscal year.

Honorable William Faust

State Senator

The Capitol

Lansing, MI

You have asked whether the Director of the Department of Management and Budget was authorized to lapse a grant-in-aid appropriated in 1990 PA 253 for the City of Westland library where the encumbrance of monies in the line item appropriation was not accomplished by September 15, 1991, and the appropriation was still outstanding at the close of the fiscal year.

1990 PA 253 made appropriations for a capital outlay program for the fiscal year ending September 30, 1991. Among the grants-in-aid appropriations made to the Department of Management and Budget, section 101 contained the following line item appropriation from the state general fund:

DEPARTMENT OF MANAGEMENT AND BUDGET

A contract for the foregoing grant-in-aid between the city and the state was not executed until the last day of the fiscal year, on September 30, 1991, and was not paid before the close of that fiscal year.

Pursuant to the September 30, 1991, contract, the Department of Management and Budget (DMB) proceeded to encumber the appropriation. However, on or about January 3, 1992, it was notified by the Auditor General, Audit Memorandum No 11, that the encumbrance was invalid because the contract was signed after September 16, 1991. Thereafter, DMB prepared to lapse the funds. The Auditor General's position was based on section 451(2) of the Management and Budget Act, 1984 PA 431, MCL 18.1101 et seq; MSA 3.516(101) et seq, which provides that:

However, the Auditor General was asked to reconsider his position. Subsequently, in Audit Memorandum No 37, March 9, 1992, he concluded, based upon perceived legislative and executive branch intent, that the appropriation should be carried forward as a capital outlay project pursuant to section 248(3) of the Management and Budget Act, MCL 18.1248(3); MSA 3.516(248)(3).

Section 248(3) provides:

Section 111 of the same statute provides:

The Management and Budget Act does not contain a definition of "capital outlay project." However, section 115(3) of the Management and Budget Act defines a "project" as "a facility which is being planned or constructed." (Emphasis added.) Section 114(1) defines "facility," in pertinent part, as follows:

In light of these statutory definitions, the reference to "project" in the statutory provision governing the lapse of a capital outlay project, section 248(3) of the Management and Budget Act, is applicable only to capital outlay projects for the state. Conversely, the phrase "capital outlay project" in section 248(3) does not encompass grant-in-aid appropriations to local units of government.

Section 101 of 1991 PA 121, the capital outlay appropriation act for the fiscal year ending September 30, 1992, contained a grant-in-aid appropriation of $625,000 for the same library project. The Governor approved the bill making the capital outlay appropriations on October 11, 1991, but vetoed the line item appropriation for the City of Westland library project.

1991 PA 121, section 203 provided that the grant-in-aid appropriations in 1990 PA 253 and 1991 PA 121 "are capital outlay projects subject to section 248 of the management and budget act." This attempted definitional change, however, failed to prevent the lapse of the grant-in-aid appropriation for the City of Westland library for two reasons. First, the amendment came too late since 1990 PA 253 had already expired on September 30, 1991. More importantly, it is well established that the Legislature may not amend a substantive statute, such as section 248(3) of the Management and Budget Act, by means of an appropriation act, such as 1991 PA 121. See, OAG, 1991-1992, No 6745, p ____ (December 22, 1992) and authorities cited therein.

Section 451(1) of the Management and Budget Act provides that "the unencumbered balance of each appropriation shall lapse to the state fund from which it was appropriated." Since the item appropriation for the City of Westland to aid in constructing its library was not encumbered by September 15, 1991, and was still outstanding at the close of the fiscal year, the line item appropriation lapsed by operation of law as required by section 451(1) and (2) of the Management and Budget Act. ⁽¹⁾

It is my opinion, therefore, that the Director of the Department of Management and Budget was authorized to lapse the unexpended balance of a grant-in-aid appropriation for the City of Westland library in 1990 PA 253, where the encumbrance of monies in the line item appropriation was not accomplished by September 15, 1991, and the appropriation was still outstanding at the close of the fiscal year.

Frank J. Kelley

Attorney General