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. 6771 October 8, 1993 APPROPRIATIONS: Transfer of appropriated funds within a department The discretionary fund provision of the fiscal 1992-1993 appropriation for the Department of Mental Health, section 304 of 1992 PA 167, does not conflict with the transfer authority granted to the State Budget Director in section 393 of the Management and Budget Act. Honorable Harry Gast State Senator The Capitol Lansing, MI 48913 You have asked whether the discretionary fund provision of the fiscal 1992-1993 appropriation for the Department of Mental Health, section 304 of 1992 PA 167, conflicts with the transfer authority granted to the State Budget Director in section 393 of the Management and Budget Act, 1984 PA 431, MCL 18.1393; MSA 3.516(393). The appropriation statute authorizes establishment of a discretionary fund at the option of the Director of the Department of Mental Health with the approval of the Department of Management and Budget and the Senate and House Appropriations Subcommittees on Mental Health. The discretionary fund established pursuant to section 304 allows the Director of the Department of Mental Health to reallocate a percentage of funds appropriated under certain budget categories to specific line items within the Department's appropriation. This provision reads as follows: (1) With the approval of the department of management and budget and senate and house appropriations subcommittees on mental health, the director of the department may establish a discretionary fund not to exceed 5% of the sum of the amounts of funds appropriated in section 101 for the operation and support of executive programs, community mental health, institutional operations, residential services, revenue and expenditure reduction adjustments, and community mental health medicaid revenues. (2) The director of the department may allocate expenditure authorization amounts from the discretionary fund to departmental institutions, community mental health boards, or for family support subsidy payments. These funds may be used to achieve or maintain certification for federal title XIX benefits, to equalize and maximize staffing needs assessment project ratios, to expedite the transition of responsibility for services to community mental health boards, and to minimize the utilization of state inpatient services. (3) The director of the department may also allocate revenue amounts from the discretionary fund for the revenue and expenditure adjustment section including HHS-HCFA, Title XIX, DAG-(S, national school lunch program, first/third party revenues, miscellaneous revenues, and local county match revenues into another revenue account listed in this section, and into community mental health medicaid revenue accounts) Discretionary fund provisions similar to the above have been a regular feature of budgets for the Department of Mental Health since 1982. 1982 PA 273, Sec. 53; 1983 PA 131, Sec. 10; 1984 PA 242, Sec. 9; 1985 PA 126, Sec. 9; 1986 PA 211, Sec. 9; 1987 PA 132, Sec. 10; 1988 PA 321, Sec. 304; 1989 PA 172, Sec. 304; 1990 PA 203 Sec. 304; 1991 PA 122 Sec. 304. Prior to 1982, the Legislature directly appropriated a separate line item labeled the "mental health discretionary fund," and specified the purposes for which it could be used. 1981 PA 39, sections 1 and 46. Section 393 of the Management and Budget Act contains a provision for the transfer of appropriated moneys within departments as follows: (1) Administrative transfers of appropriations within any department to adjust for current cost and price variations from the enacted budget items, or to adjust amounts between federal sources of financing, may be made by the state budget director not less than 30 days after notifying the senate and house appropriations committees. Administrative transfers shall not include adjustments that have policy implications or that have the effect of creating, expanding, or reducing programs within that department. Those transfers may be disapproved by either appropriations committee within the 30 days and, if disapproved within that time, shall not be effective. (2) A transfer of appropriations within any department for reasons other than cost and price variances from those appropriations as enacted into law shall not be made by the state budget director unless approved by both appropriations committees. If the budget director does not approve transfers adopted by both appropriations committees under this subsection, the budget director shall notify the appropriations committees of his or her action within 15 days. [ Emphasis added.] The above section grants the state budget director the authority to make "administrative transfers" of items of appropriations within a state department subject to legislative committee approvals. In contrast, section 304 allows the Director of the Department of Mental Health to combine a percentage of funds from several budget categories and redistribute this money to various items of appropriation based on specific criteria. (1) Additionally, unlike the transfer authority of the budget director, the discretionary fund authority accorded the Mental Health Director expires at the close of the fiscal year. It is a basic rule of statutory construction that statutes which may appear to conflict are to be read together and reconciled, if possible. Detroit Police Officers Ass'n v Detroit, 391 Mich 44, 65, n 13; 214 NW2d 803 (1974). It must be presumed that the Legislature acts with knowledge of, and in harmony with, existing legislation. Endykiewicz State Hwy Comm, 414 Mich 377, 385; 324 NW2d 755 (1982). In this regard, it is especially noteworthy that the same Legislature that enacted section 393 in 1984 also included a discretionary fund provision in the budget for the Department of Mental Health. 1984 PA 242, Sec. 9. Since the Legislature has seen fit to include these provisions in annual mental health appropriations statutes both before and after enactment of the section 393 transfer provisions, it is apparent that the Legislature does not perceive a conflict between these sections. The absence of a conflict becomes even more apparent upon consideration of the nature and scope of section 393. Though section 393 is applicable to the operating funds of state agencies generally, it concerns only the authority of the state budget director to make transfers between items of appropriation. By its terms, therefore, the limited authority of the budget director under section 393 does not preclude legislative authorization of other adjustment mechanisms. The mechanism for reallocation of funds set forth in section 304 of 1992 PA 167 contains limitations in terms of amounts, budget categories and objectives not found in section 393. Moreover, the Michigan Supreme Court has recently held that the fund transfer authority granted the budget director in section 393 is not exclusive. House Speaker v State Administrative Bd, 441 Mich 547, 568-572; 495 NW2d 539 (1993) (authority of State Administrative Board to transfer funds within a department under 1921 PA 2, MCL 17.3; MSA 3.263 does not conflict with authority of the budget director under section 393 of the Management and Budget Act). OAG, 1989-1990, No 6557, p 1 (January 12, 1989), concluded that the discretionary reduction provisions in certain appropriation statutes, which allowed department directors to reduce legislative appropriations without any legislative standards to guide their conduct, violated the separation of powers provisions of Const 1963, art 3, Sec. 2. Here, in contrast, the Legislature has imposed sufficient statutory standards by specifying the amount of the reduction, the appropriation items that may be reduced and the purposes for which the discretionary fund created by the reductions may be expended. It is my opinion, therefore, that the discretionary fund provision of the fiscal 1992-1993 appropriation for the Department of Mental Health, section 304 of 1992 PA 167, does not conflict with the transfer authority granted to the State Budget Director in section 393 of the Management and Budget Act. Frank J. Kelley Attorney General (1 I have been advised that application of a provision identical to section 304 to the fiscal 1991-92 budget for the Department of Mental Health made $64,584,035 available for reallocation based on a total amount of $1,290,960,700)