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Opinion No. 6788

February 15, 1994


Submission of budget to Legislature


Governor's submission of budget to Legislature

Pursuant to Const 1963, art 5, Sec. 18, the Governor is not limited to submitting to the Legislature a budget for a single fiscal year and may instead present a budget covering a two-year fiscal period.

Honorable Kirk A. Profit

State Representative

The Capitol

Lansing, Michigan 48913

You have asked whether, pursuant to Const 1963, art 5, Sec. 18, the Governor is limited to submitting to the Legislature a budget for a single fiscal year or whether he may instead present a budget covering a two-year period.

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. [ Emphasis added.]

The Legislature must pass or reject general appropriation bills covering items in the Governor's executive budget before passing any other appropriation bill, except supplemental appropriation bills for the current fiscal year, in accord with Const 1963, art 4, Sec. 31, which 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.

In setting the time frame to be covered by the executive budget and by the legislative appropriations made thereafter, both art 5, Sec. 18, and art 4, Sec. 31, explicitly refer to a "fiscal period" rather than to the more specific term "fiscal year."

It is a well-established maxim of construction that words used in the Constitution should be interpreted in the sense most obvious to the common understanding based on the circumstances surrounding the adoption of the provision and the purpose sought to be accomplished by it. Soap & Detergent Ass'n v Natural Resources Comm, 415 Mich 728, 745; 330 NW2d 346 (1982). Webster's New World Dictionary, Third College Edition (1988), defines the term "fiscal year" as "a twelve-month period between settlements of financial accounts." The term "period," in contrast, is defined as merely "the interval between certain happenings ... a portion of time, often indefinite." The use of the indefinite term "fiscal period," accordingly, must be construed as establishing a time frame that is less restrictive than the more precise term "fiscal year."

This conclusion is supported by the convention debates which preceded the adoption of the 1963 Constitution.

An examination of the convention debates pertaining to art 5, Sec. 18, reveals that some delegates used the terms "fiscal period" and "fiscal year" in an interchangeable fashion. Others were careful to distinguish between the two expressions. (1) In any event, a careful reading of the debates certainly does not indicate a general understanding among the delegates that the two terms were intended to be synonymous. Indeed, it is clear that the principle concern of the delegates was the need to assure regular review of and accountability for state revenues and expenditures. The debates do not reflect an intent on the part of the delegates to impose a particular time interval for this periodic comparison of projected revenues and expenditures as a matter of constitutional mandate. As was stated by Delegate Rajkovich:

The budgeting system that we propose in this section does clarify the responsibilities in government, whether the range of this government shall be wide or whether it shall be narrow. It makes those provisions. Also, we set up in this section very sound budgeting procedures, I believe, which state that the budget should be prepared by the executive and that he shall present this program of work for the fiscal period, whatever that might be.

1 Official Record, Constitutional Convention 1961, p 1639. (Emphasis added.)

The only timing issue raised in the debates focused on the more mechanical aspect of when the Governor had to submit the budget to the Legislature. As originally introduced by the Committee on Executive Branch, Committee Proposal 46(a), which eventually became art 5, Sec. 18, required the governor to submit the budget "not later than 21 days after the convening of each regular session, or at a time fixed by law." 1 Official Record, supra, at 1635. (Emphasis added.) The rationale offered for the inclusion of the underscored language was that the time allotted was adequate for normal preparatory and organizational activities and that a specific time frame would encourage prompt consideration of the budget. Id. at 1636. Opponents of this language advanced two arguments against its inclusion. Some delegates objected that the clause included legislative detail that did not belong in the Constitution. Others asserted that the clause was simply redundant since the Legislature retained complete authority to modify the submission date at any time.

Delegate Faxon emphasized that the purpose of the Constitution was to provide a "flexible framework" which should avoid "restrictive details." Id. at 1647. He spoke directly to the general matter of time frames in discussing a proposed amendment to delete the 21 day requirement from the first sentence of Committee Proposal 46(a):

The question is simply one of whether it is in the best interest of the state and of the executive budget that a specified time be put into the constitution. In so many other areas, fellow delegates, we have taken out detail like so many days or so many months or such trivia that we had in the old constitution. This is clearly giving to the legislature the right to prescribe whatever time is best and--lets face it--times may change and conditions may change where we need this needed flexibility.

1 Official Record, supra, at 1649. (2) (Emphasis added.)

In this context, it is important to note that the delegates had the opportunity to consider the text of budget provisions contained in the constitutions of other states. C. Antieau, Constitutional Construction, Sec. 2.47 (1982), p 50. In his introductory remarks in support of Committee Proposal 46, Delegate Martin, the Chairman of the Committee on Executive Branch, noted that executive budget provisions similar to the recommended proposal had been included in three of the four most recently adopted state constitutions (Missouri, Alaska and Hawaii) and were a key feature of the model state constitution. 1 Official Record, supra, p 1635. The subsequent discussion also referenced the constitutions of New Jersey and California as further examples. Id. at 1647, 1654, and 1676. (3) The delegates were thus clearly aware that other constitutional budget provisions used more restrictive terms. This supports a conclusion that the adoption of the more general language in the Michigan Constitution regarding a "fiscal period" was a conscious decision to allow flexibility in the budget process.

The decision of the Michigan Supreme Court in Oakland Schools Bd of Ed v Superintendent of Public Instruction, 392 Mich 613; 221 NW2d 345 (1974), does not require a contrary conclusion. That case required the Court to construe a 1970 statutory provision which, on its face, appeared to appropriate a definite sum of money, not for the ensuing 1970-1971 fiscal year, but rather for the 1971-1972 fiscal year. The Court concluded, at pp 620-621, that the language regarding future appropriations must be read not as an actual appropriation but as merely the expression of an intent to appropriate:

Although the Michigan Legislature may at times place authorization provisions and appropriation provisions in the same bill, we believe 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 dynamics of the budget change from year to year on the basis of the revenues derived and the expenditures required by the people of Michigan. Responsible fiscal policy consequently also requires a yearly reassessment of revenues, spending goals, and priorities.

The Michigan Constitution of 1963 brought to this state new measures designed to require an annual review of the budget and to provide for annual fiscal accountability in both the legislative and executive branches. See, Const 1963, art 4, Sec. 31 and art 5, Sec. 18 and the "Convention Comment" accompanying each section. [ Emphasis added. Footnote omitted.]

In Oakland Schools, 392 Mich at p 620, n 5, the court stated:

We do not address herein the validity of what appellee describes as continuing appropriation--an appropriation that takes effect in the ensuing fiscal year and by its terms continues to appropriate beyond that fiscal period.

In Advisory Opinion on Constitutionality of 1975 PA 227, 396 Mich 465, 501-502; 242 NW2d 3 (1976), the court concluded:

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. [ Footnote omitted.]

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.

Despite the Court's statements on "fiscal year" and "annual fiscal accountability," its decision in Oakland Schools does not compel the conclusion that the Governor is restricted to submitting a budget for a single fiscal year. This is so for at least two reasons.

First, the issue before the Court in Oakland Schools concerned only the extent of the Legislature's authority to enact appropriations that appropriate money beyond the ensuing fiscal period. The case did not address in any fashion the authority of the Governor to propose budgets pursuant to Const 1963, art 5, Sec. 18.

Secondly, and more importantly, there is nothing in the opinion of the Court in the Oakland Schools case to suggest that the Court intended to authoritatively construe and limit the meaning of the term "fiscal period" as that term is used in Const 1963, art 5, Sec. 18, and in art 4, Sec. 31. In fact, while the Court cited both of these constitutional provisions, it did not quote either provision and made no reference at all to the term "fiscal period." Under these circumstances, it seems evident that the Court's reference to "fiscal year" was intended to be merely descriptive of the existing and long-standing practice of Michigan state government to utilize a one year "fiscal period" for its fiscal accounting. Indeed, in Oakland Schools, 392 Mich at p 618, n 4, the court quoted language in the appellants' brief describing the practice of using a one year "fiscal period" and suggesting that the ensuing "fiscal period" could be other than a fiscal year.

While nothing in Const 1963, art 5, Sec. 18, prohibits the Governor from submitting a budget for more than one fiscal year, any such proposed budget must, of course, comply with any other pertinent constitutional or statutory requirements. For example, Const 1963, art 11, Sec. 5, requires the Legislature to "appropriate to the [civil service] commission for the ensuing fiscal year a sum not less than one percent of the aggregate payroll of the classified service for the preceding fiscal year." MCL 38.38(6); MSA 3.981(38)(6), requires fiscal year appropriations to the state employees' retirement system. Revenue sharing appropriation provisions also specify a fiscal year cycle. MCL 141.914; MSA 5.3194(414). Additionally, section 451 of 1984 PA 431, the Management and Budget Act, MCL 18.1101 et seq; MSA 3.516(101) et seq, provides for "lapsing" of unspent or unencumbered appropriations at the end of the fiscal year. Any budget proposal covering more than one fiscal year must, of course, make provision for such annual appropriations requirements. (4)

Finally, any extended budget time frame would have to comply with the fiscal year spending limitations adopted by the people in Const 1963, art 9, Secs. 25-34 (Headlee Amendment), and implemented by sections 349 through 350e and section 497 of the Management and Budget Act.

It is my opinion, therefore, that, pursuant to Const 1963, art 5, Sec. 18, the Governor is not limited to submitting to the Legislature a budget for a single fiscal year and may instead present a budget covering a two-year fiscal period. The Legislature may, of course, under Const 1963, art 5, Sec. 18, enact legislation requiring the Governor to submit a budget covering a one-year fiscal period as defined by the Legislature. However, once the Governor has submitted that budget, there is nothing in art 5, Sec. 18, that would prevent the Governor from simultaneously submitting an additional budget for the following fiscal year. Art 5, Sec. 18, by its express terms, merely sets the minimum standard that the Governor must meet in submitting the executive budget to the Legislature; he remains free to do more than that minimum.

Frank J. Kelley

Attorney General

(1 The inconsistency is understandable given the State Budget Act then in effect) 1919 PA 98, as amended, required the State Budget Director to prepare a state budget consisting of (1) estimated expenses and revenues for each year of the ensuing biennial fiscal period, and (2) a separate statement of long range capital outlay needs for at least the succeeding 5 years. Id. section 5. However, section 5a, added by 1943 PA 247, provided that: "When the legislature in the regular session of any biennium shall appropriate in the general appropriation act or acts for only 1 year of the ensuing biennium, the budget director shall prepare estimates and perform all acts authorized by this act for the second year of said biennium in the same manner as required to be performed before the meeting of the legislature in the regular session." These provisions were repealed by 1984 PA 431, section 591, MCL 18.1591; MSA 3.516(591).

(2 The amendment was defeated) However, the Committee on Style and Drafting reported the provision with the 21 day requirement stricken and the delegates adopted the committee's version. 2 Official Record, Constitutional Convention 1961, pp 2767-2769; 3300-3301.

(3 With one exception, the other executive budget provisions noted in the debates specified a particular time period) See, 1 Official Record, supra, at 1650. The model constitution along with the constitutions of Alaska and California used the fiscal year. See, 1 Official Record, supra, p 1650 (quoting the model constitution provision); Alaska Const, art IX, Sec. 12 ("next fiscal year"); and Cal Const, art IV, Sec. 12 ("ensuing fiscal year"). The Hawaii constitution specified the "ensuing fiscal biennium." Hawaii Const, art VII, Sec. 8. In contrast, the Missouri constitution mandates a budget for the "ensuing appropriations period." Mo Const, art 4, Sec. 24. The Missouri Legislature has implemented this provision by statute providing for a biennial budget submission. Mo Rev Stat Sec. 33.230 et seq (1992).

(4 Among the nineteen states that currently operate with biennial budgets, at least one legislature (Florida) appropriates annually while three others (Hawaii, Indiana, Nebraska) approve two separate one year budgets each biennium) United States General Accounting Office, Budget Issues: Current Status and Recent Trends of State Biennial and Annual Budgeting, (July 15, 1987).