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



CONSTITUTIONAL LAW:

EXECUTIVE ORDERS:

TREASURY, DEPARTMENT OF:

VETERANS:

Effect of Const 1963, art 9, 37, 38 and 39, and Executive Order 1995-15 upon Michigan Veterans' Trust Fund and Department of Military and Veterans Affairs



Const 1963, art 9, 37, 38 and 39, requires a majority vote of the Michigan Veterans' Trust Fund Board of Trustees to approve the transfer or expenditure of the Fund's assets, interest and earnings, provided, however, that art 9,  37, authorizes the state treasurer to invest the Fund's assets.

Subject to the constitutional authority of the Michigan Veterans' Trust Fund Board of Trustees as specified in Const 1963, art 9, 37, 38 and 39, Executive Order 1995-15 continues to govern the agency relationship between the Board and the Department of Military and Veterans Affairs. Accordingly, subject to the Board's constitutional authority, the Department possesses the Board's former statutory authority, powers, duties, functions and responsibilities except for: (1) the Board's constitutional power and duty to approve any transfer or expenditure of the Fund's assets and to adjudicate claims, and (2) the Board's former administrative and personnel functions which were transferred to the director of the Department.


Opinion No. 6971

January 29, 1998

Honorable Thomas C. Mathieu
State Representative
The Capitol
Lansing, Michigan 48909

Major General E. Gordon Stump
Adjutant General of Michigan
Department of Military and Veterans Affairs
2500 S. Washington Ave.
Lansing, MI 48913-5101

Keith King, Chairperson
Michigan Veterans' Trust Fund
Board of Trustees
611 W. Ottawa Street
Third Floor
Lansing, MI 48913


You have asked to what extent, if any, the recent addition of Const 1963, art 9, 37, 38, and 39 (Proposal C) impacts the powers and responsibilities of the Michigan Veterans' Trust Fund Board of Trustees (Board) that were transferred to the Department of Military and Veterans Affairs1 (DMVA) under Executive Order 1995-15.

The primary rule of constitutional interpretation is that the words used should be given their plain meaning as understood by the people who adopted the constitutional provision. Soap & Detergent Ass'n v Natural Resources Comm, 415 Mich 728, 745; 330 NW2d 346 (1982). Therefore, a brief historical discussion of the Michigan Veterans' Trust Fund (MVTF) and the Board is helpful in ascertaining the people's intent adding Proposal C to the Michigan Constitution.

In 1946, the Michigan Legislature enacted the Michigan veterans' trust fund act, 1946 (1st Ex Sess) PA 9, MCL 35.601 et seq; MSA 4.1064 et seq (trust fund act). Section 1 transfers the previously established postwar reserve fund to the newly established MVTF with the directive that "$50,000,000.00 shall remain in the Michigan veterans' trust fund as a trust." Section 1 further provided that "[i]ncome accruing in the trust fund in excess of the trust of $50,000,000.00 . . . shall be available, and shall be disbursed upon requisition of the board of trustees to provide for the needs of Michigan veterans . . . their wives and dependents, in the manner provided in this act." Section 1 further specifies that "[t]he fund shall be excluded in determining any surplus or deficiency in the general fund of the state."

In section 3 of the trust fund act, a board of trustees was established to be appointed by the Governor. The Board's initial function was to administer the programs established in the trust fund act, which provided emergency financial assistance to eligible veterans and their families, plus emergency loans in the form of student aid for children of eligible veterans. The Board acted by reviewing applications for emergency financial assistance requested under either statutory program and by authorizing payment out of the surplus earnings of the MVTF, based upon a showing of eligibility and emergency need.

In 1959, the Legislature added section 1a to the trust fund act which authorized a transfer of money from the corpus of the MVTF, to meet cash flow requirements of the general fund, without requiring Board approval of the transfer. In 1961, the state treasurer exercised the authority granted in section 1a by transferring $49,000,000.00 of the MVTF's $50,000,000.00 corpus to the state general fund. Thereafter, the transferred monies were used to meet state general fund obligations, rather than to fund the programs specified in the trust fund act. Between 1961 and August 1994, the MVTF corpus fluctuated from $1,000,000.00 to $49,000,000.00, depending on legislative action in response to changing fiscal conditions.

In 1965, the Legislature amended the education of children of veterans act, 1935 PA 245, MCL 35.111 et seq; MSA 4.1331 et seq. Prior to this amendment, the State Board of Education administered a program providing for payment of tuition for children of certain eligible veterans who attended state tax supported institutions of higher learning (the tuition grant program). Subsequent to the amendment, administration of the tuition grant program was placed with the Board. Although this program was initially funded by appropriations from the state's general fund, general fund appropriations did not continue, and the tuition grant program became an obligation payable out of the MVTF earnings. Office of the Auditor General, Financial Audit of the Michigan Veterans' Trust Fund, Department of Management and Budget, October 1, 1988 through September 30, 1990.2

In 1971, 1976, and 1988, the Legislature added sections 1b, 1c, and 1f, respectively, to the trust fund act. In accordance with those sections, the state treasurer was again directed to transfer money from the corpus of the MVTF to meet general fund cash shortages. Again, no Board approval was statutorily required for these transfers.

Each of these legislatively authorized transfers of monies from the MVTF included a provision for repayment from the state general fund to the MVTF. Repayments, however, did not occur in the statutorily authorized years. For example, in 1976, section 1d was added to the trust fund act. In accordance with this amendment, $2,000,000.00 was appropriated from the state general fund to partially reimburse the MVTF. In 1980, however, the Legislature added section 1e which provided as follows:

(1) Of the $2,000,000.00 appropriated from the general fund in the fiscal year beginning in 1979 to reimburse the Michigan veterans' trust fund, the state treasurer is authorized by this section to transfer $1,700,000.00 to the general fund for veterans' facilities as provided in the full fiscal year appropriation bill for the department of public health for the fiscal year beginning October 1, 1980.

Concerned that appropriations to reimburse the MVTF corpus were not being made as previously authorized by statute, and that the tuition grant program was further draining available MVTF resources, the Board sought my opinion as to whether the Legislature was required to repay the MVTF with funds appropriated annually in an amount equal to the declared earnings as determined by the Department of Treasury. OAG, 1983-1984, No 6238, p 341 (August 1, 1984), concluded at p 343 as follows:

Although 1946 1st Ex Sess PA 9, 1c(2)(a), supra, as last amended by 1980 PA 353, purports to mandate the Legislature to appropriate funds in future years for a particular purpose, this seeming mandate, however, does not bind the Legislature. This provision is in the nature of an expression of an intention of the Legislature with regards to future appropriations.

It is my opinion, therefore, that the Legislature may, but is not required to, appropriate to the veterans' trust fund an amount of funds equal to the declared earnings as determined by the Department of Treasury, as provided in 1946 1st Ex Sess PA 9, 1c(2)(a) supra.

It was the inability of the Board to prevent legislatively authorized transfers of money from the MVTF to the general fund, without its approval or to compel the Legislature to appropriate money to reimburse the MVTF, or to fund the tuition grant program out of the state's general fund, that began the process which culminated in passage of Proposal C.

House Joint Resolution H, (Substitute H-2), First Analysis, February 14, 1995, describes this apparent problem and articulates the desired resolution as follows:

It has long been contended that the MVTF should be restored to, and maintained at, the full amount of the original trust [$50,000,000.00] to enable it, once again, to earn the income necessary to continue to support what many believe are vital assistance programs for Michigan's veterans and their families. Last summer, with the state's general fund showing a surplus of -- by some estimates -- over $300 million, Public Act 288 was enacted to provide for the transfer of approximately $11.5 million from the general fund to the MVTF to bring it up to its statutorily mandated base amount. What is needed now, some say, is a constitutional guarantee that the MVTF will not be used again to fund programs not authorized by the MVTF trustees.

(emphasis added).

Enrolled House Joint Resolution H was adopted by a two-thirds vote of the House on February 19, 1995, and by a two-thirds vote of the Senate on March 21, 1995. 1995 Journal of the House 383-384; 1995 Journal of the Senate 447. Joint Resolution H provided as follows:

Resolved by the Senate and House of Representatives of the state of Michigan, That the following amendment to the state constitution of 1963, to establish the Michigan veterans' trust fund and require that expenditures from that fund be made solely for purposes authorized by the trust fund's board of trustees, is proposed, agreed to, and submitted to the people of the state:

ARTICLE IX

Sec. 37. The Michigan veterans' trust fund is established within the department of treasury. All money in the fund established by Act No. 9 of the Public Acts of the First Extra Session of 1946 shall be transferred to the Michigan veterans' trust fund. The trust fund may additionally receive appropriations, money, or other things of value. The state treasurer shall direct investment of the fund, and credit interest and earnings of the fund to the fund. Except for the state treasurer's actions authorized under this section, an expenditure or transfer of a trust fund asset, interest, or earnings may be made only upon the authorization of a majority of the members of the Michigan veterans' trust fund board of trustees.

Sec. 38. The Michigan veterans' trust fund board of trustees is established and consists of veterans honorably discharged from the armed services and appointed by the governor as prescribed by law.

Sec. 39. The Michigan veterans' trust fund board of trustees shall administer the Michigan veterans' trust fund. The board of trustees shall not authorize the expenditure or transfer of a trust fund asset, interest, or earnings unless the board of trustees determines in its discretion and by a majority vote that the expenditure or transfer is for the benefit of veterans or their spouses or dependents.

Resolved further, That the foregoing amendment shall be submitted to the people of the state at the next general election in the manner provided by law.

For purposes of implementing Const 1963, art 9, 37, 38 and 39, in the event the house joint resolution was approved by the people, 1995 PA 27 was adopted, approved, and filed on May 8, 1995. The act by its terms would not take effect unless House Joint Resolution H became part of the Constitution by approval of the people. 1995 PA 27 accomplished the following:

(1) It added Section 4b to 1946 (1st Ex Sess) PA 9, supra, which provides:

The board of trustees shall administer the Michigan veteran's trust fund established under section 37 of article IX of the state constitution of 1963.

(2) It repealed Section 1 of 1946 (1st Ex Sess) PA 9, effective one year after the effective date of the amendatory act.

On August 26, 1996, the Board of Canvassers designated the Enrolled House Joint Resolution H as Proposal C and approved the following ballot language:

PROPOSAL C

A PROPOSAL TO ESTABLISH THE CURRENT MICHIGAN VETERANS' TRUST FUND IN THE STATE CONSTITUTION AND REQUIRE THAT EXPENDITURES FROM THE FUND BE MADE SOLELY FOR PURPOSES AUTHORIZED BY THE TRUST FUND'S BOARD OF TRUSTEES

The proposed constitutional amendment would:

1) Establish the current Michigan Veterans' Trust Fund and the Board of Trustees responsible for administering the fund in the state constitution.

2) Require the transfer of all funds in the existing Michigan Veterans' Trust Fund to the constitutionally established Michigan Veterans' Trust Fund.

3) Authorize the State Treasurer to direct investment of the fund.

4) Stipulate that except for the State Treasurer's investment actions, an expenditure or transfer of a fund asset, interest, or earnings could be made only upon the authorization of a majority of the fund's Board of Trustees.

Should this proposed constitutional amendment be adopted?

Proposal C was designed to protect the MVTF from expenditure or transfer without approval of the Board, with the exception of expenditures or transfers made by the state treasurer for investment purposes.

Proposal C establishes the Board as a constitutional administrative agency. The Michigan Supreme Court, however, has noted that boards and commissions created by the constitution are administrative agencies which are part of the executive branch of government. Viculin v Dep't of Civil Serv, 386 Mich 375, 385-386, n 11; 192 NW2d 449 (1971); Michigan Civil Rights Comm v Clark, 390 Mich 717; 212 NW2d 912 (1973). Judges of the 74th Judicial Dist v Bay County, 385 Mich 710, 727; 190 NW2d 219 (1971). "Administrative agencies are a part of the executive branch of government." Therefore, constitutional agencies, like other state agencies, boards and commissions are subject to the provisions of Const 1963, art 5, 2.

The first paragraph of Const 1963, art 5, 2, requires:

All executive and administrative offices, agencies and instrumentalities of the executive branch of state governmentand their respective functions, powers and duties, except for the office of governor and lieutenant governor and the governing bodies of institutions of higher education provided for in this constitution, shall be allocated by law among and within not more than 20 principal departments. They shall be grouped as far as practicable according to major purposes.

(emphasis added).

The second paragraph of Const 1963, art 5, 2, provides:

Subsequent to the initial allocation, the governor may make changes in the organization of the executive branch or in the assignment of functions among its units which he considers necessary for efficient administration. Where these changes require the force of law, they shall be set forth in executive orders and submitted to the legislature. Thereafter the legislature shall have 60 calendar days of a regular session, or a full regular session if of shorter duration, to disapprove each executive order. Unless disapproved in both houses by a resolution concurred in by a majority of the members elected to and serving in each house, each order shall become effective at a date thereafter to be designated by the governor.

(emphasis added).

Consistent with the first paragraph of Const 1963, art 5, 2, the Legislature enacted the Executive Organization Act of 1965, 1965 PA 380, MCL 16.101 et seq; MSA 3.29(1) et seq. Section 106 (now repealed) of the Executive Organization Act of 1965 allocated the Board, as a type I agency within the Department of Management and Budget. MCL 18.1145(g); MSA 3.516(145)(g). On July 6, 1995, the Governor exercised the constitutional executive power contained in the second paragraph of Const 1963, art 5, 2, by issuing Executive Order 1995-15. MCL 35.615; MSA 4.1064(15). Executive Order 1995-15 transferred the Board, as a type I agency, from the Department of Management and Budget to the DMVA. Therefore, in order to ascertain the impact of Proposal C on the functions transferred by Executive Order 1995-15, a review of that order is necessary.

The first three enumerated paragraphs of Executive Order 1995-15 express its spirit and intent, while the remaining paragraphs detail other Board functions executively transferred to the DMVA. The first enumerated paragraph transfers "[a]ll the statutory authority, powers, duties, functions and responsibilities of the . . . [Board], except administrative and personnel functions" to the DMVA "by a Type I transfer." The second enumerated paragraph transfers "[a]ll administrative and personnel functions" [of the Board] to the director of the DMVA. The third enumerated paragraph, by a type III transfer, transfers the position of director of the MVTF to the director of the DMVA and specifies that the Board "may request the Director of the [DMVA] to create a non-classified position of Executive Secretary." Consistent with the second enumerated paragraph, however, "[a]ll . . . personnel functions" are vested in the director of the DMVA.

OAG, 1965-1966, No 4479, p 209, 215 (March 9, 1966), reviewed section 3(a) of the Executive Organization Act of 1965 and concluded that, under a type I transfer, the statutory authority, powers, duties, and functions of a transferred agency are to be performed under the supervision and direction of the director of the department to which the agency is transferred, with the exception of those statutory functions enumerated in the third sentence of section 3(a) of the act which the transferred agency may perform independently of the head of the department to which it is transferred. The third sentence of section 3(a) provides:

Any board, commission or other agency granted a type I transfer shall exercise its prescribed statutory powers, duties and functions of rule-making, licensing and registration including the prescription of rules,
rates, regulations and standards, and adjudication independently of the head of the department.

A review of the trust fund act and the education of children of veterans act, supra, demonstrates that the Legislature had previously conferred on the Board the function of rule-making for the programs administered under each act and the function of adjudication of requests for assistance filed by veterans and their families.

Under a typical type I transfer, the functions which the Board would have been authorized to perform, independently of the head of the DMVA, would have included rule-making and adjudication, since they were previously statutorily conferred. OAG, 1965-1966, No 4479, p 213, supra. The fourth enumerated paragraph of Executive Order 1995-15, however, provides as follows:

The functions of rule-making, allocation of trust fund moneys, data collection and reporting shall be administered under the direction and supervision of the Director of the [DMVA].

(emphasis added).

The Michigan Supreme Court has upheld the Governor's authority to transfer rule-making authority. Soap & Detergent Ass'n v Natural Resources Comm, supra; House Speaker v Governor, 443 Mich 560, 595; 506 NW2d 1990 (1993). In that case, the court reaffirmed its earlier ruling concerning the Governor's power to executively transfer rule-making authority, concluding "that art 5, 2 authorizes the Governor to make relatively broad changes, as long as those changes are made within the executive branch." Id. at 587. Therefore, subsequent to the effective date of Executive Order 1995-15, the Board retained, independently of the DMVA, the function of adjudicating claims for assistance filed by veterans and their families under the programs administered by the Board.

The purpose of Proposal C is to protect the integrity of the MVTF from expenditure or transfer without approval of the Board, with the exception of transfers or expenditures made by the state treasurer for investment purposes. This constitutional authority requiring that the expenditure of allocated MVTF appropriations be approved by majority vote of the Board and used for programs benefiting veterans and their families is not in conflict with the personnel, budgeting, procurement, and related management functions of the type I agency that were transferred to the DMVA by Executive Order 1995-15. Executive orders not overturned by the Legislature have the force and effect of law. House Speaker, supra, at 579; Morris v Governor (On Remand), 214 Mich App 604, 609; 543 NW2d 363 (1995), lv den 557 NW2d 311 (1996). Of course, the Governor's executive power may not be implemented in a manner which prevents a constitutionally created agency from exercising its constitutional power. Michigan Civil Rights Comm v Clark, supra.

By virtue of Const 1963, art 9, 37, 38 and 39, the people have brought the Board within the constitution and constitutionally required the Board's approval of any expenditure of the Fund's principal or income. In addition, the people have prevented the Legislature and the Governor from abolishing the Board or limiting the Board in its constitutionally assigned power and duty to approve Fund expenditures. That said, neither the Legislature by public act nor the Governor by executive order is precluded from otherwise assigning or reassigning the Board's statutorily assigned authority, powers, duties, functions and responsibilities. So long as deference is made to the Board's constitutional prerogative to approve Fund expenditures, the provisions of Const 1963, art 9, 37, 38 and 39, the Michigan Veteran's Trust Fund Act, and Executive Order 1995-15 are reconcilable, and Executive Order 1995-15 continues to govern the agency relationship between the Board and the DMVA.

It is my opinion, therefore, that Const 1963, art 9, 37, 38 and 39, requires a majority vote of the Michigan Veterans' Trust Fund Board of Trustees to approve the transfer or expenditure of the Fund's assets, interest and earnings, provided, however, that art 9,  37, authorizes the state treasurer to invest the Fund's assets.

It is my further opinion that subject to the constitutional authority of the Michigan Veterans' Trust Fund Board of Trustees as specified in Const 1963, art 9, 37, 38 and 39, Executive Order 1995-15 continues to govern the agency relationship between the Board and the Department of Military and Veterans Affairs. Accordingly, subject to the Board's constitutional authority, the Department possesses the Board's former statutory authority, powers, duties, functions and
responsibilities except for: (1) the Board's constitutional power and duty to approve any transfer or expenditure of the Fund's assets and to adjudicate claims, and (2) the Board's former administrative and personnel functions which were transferred to the director of the Department.


FRANK J. KELLEY
Attorney General

1 The Department of Military Affairs was renamed the Department of Military and Veterans Affairs (DMVA) by Executive Order 1997-7, effective June 17, 1997.

2 Prior to Executive Order 1995-15, transferring the Board, as a type I state agency, to the then Department of Military Affairs, the Board was a type I agency within the Department of Management and Budget. MCL 18.1145(g); MSA 3.516(145)(g).