Opinion Number ( 2010 )

Dear Mr. Burl,

You have requested an opinion of this office on the following question: "when does a tax dollar stop being a tax dollar?" We understand the use of the term "tax dollar" to refer to funds collected pursuant to a tax proposition that has been approved by the voters. These funds are public funds and as such become subject to certain restrictions on how they can be spent.

In La. Atty. Gen. Op. No. 77-426, the question presented was whether funds received by a private corporation in exchange for services rendered to a public agency remained subject to the limitations set forth in La.Const. art. VII, Sec. 14. The opinion concluded that when public funds are paid pursuant to a contract in exchange for work or services performed, no restrictions are placed on the contractor's use of the funds received for his services. La. Atty. Gen. Op. No. 77-426. Thus, money legally paid by the state ceases to be public money, or "tax dollars," when delivered and received by the recipient in exchange for goods or services.

The Louisiana Court of Appeal for the Third Circuit also addressed this issue in dicta in State v. Davis,539 So. 2d 803 (La.App. 3 Cir. 1989). There, the State argued that one state agency "could not transfer state funds from that agency to another and by contract change public funds into private funds." The court rejected the State's argument by stating, "this argument overlooks the fact that public funds always become private funds when they are paid in exchange for goods and services. This applies to the salary of the Governor of the State down to the least employees." Davis, 539 So.2d at 808. Thus, money legally paid by the state ceases to be public money, or "tax dollars", in the hands of private recipients in exchange for goods or services. We note also that any money collected pursuant to a tax may only be spent in accordance with the tax proposition approved by the voters.

We trust this adequately responds to your request. However, if our office can be of further assistance, please do not hesitate to contact us.

Yours very truly,

JAMES D. "BUDDY" CALDWELL Attorney General

By:__________________________ Lindsey K. Hunter Assistant Attorney General

JDC/LKH/crt