Graham v. State Board of Examiners

This action is brought against the Board of Examiners of the[1] State of Montana and the members thereof. The prayer of the complaint is for a declaratory judgment of this court declaring and determining that House Bill No. 45, [Chapter 2] Session Laws of Montana, 1945, is a valid legislative enactment and declaring the duties of the defendants under said bill authorizing and requiring the defendants to employ an architect or architects for the purpose of preparing plans and specifications as in said Act provided.

House bill No. 45, as duly passed by the 29th Legislative Assembly of the State of Montana, after setting forth a declaration of policy not here pertinent, provides:

"Section 3. There is hereby appropriated out of the unexpended surplus moneys at present in the general fund of the State of Montana, the sum of thirty thousand dollars ($30,000.00) or such part thereof as may be necessary to pay said architect or architects in compliance with the provisions of this Act. It is, however, expressly declared, and this provision is mandatory, that said sum of thirty thousand dollars ($30,000.00) or such part thereof as is necessary shall be paid only out of the present surplus in the general fund of the State, and no part of said money which may be taken from the surplus in said general fund shall be replaced by any money derived from any tax levy which may hereafter be made by the Legislative Assembly.

"No part of the funds derived from any tax levy provided for by Section 12 of Article XII of the Constitution of Montana, which has been or may hereafter be levied by this Session of the Legislative Assembly shall be used to pay such appropriation or any part thereof."

The question presented is whether the Act conflicts with[2] section 12 of Article XII of the Montana Constitution, which provides as follows: "No appropriation shall be made nor any expenditures authorized by the legislative assembly whereby the expenditures of the state during any fiscal year shall exceed the total tax then provided for by law, and applicable to such appropriation or expenditure, unless the legislative assembly making such appropriation shall provide for levying a sufficient tax, not exceeding the rate allowed in section nine (9) of this Article, to pay such appropriations or expenditures * * *. This provision shall not apply to appropriations or expenditures to suppress insurrection, defend the state, or assist in defending the United States in time of war. No appropriation of public moneys shall be made for a longer term than two years."

In the construction of this section, as in other constitutional and statutory enactments, the duty of this court is to ascertain the real intention of the framers of the enactment.

This court has held in numerous cases that in considering the[3] constitutionality of an Act of the legislature the Act will be upheld unless its unconstitutionality appears beyond a reasonable doubt. Thus the rule announced in State ex rel.Tipton v. Erickson, 93 Mont. 466, 19 P.2d 227, 228: "In the determination of the question of the constitutionality of any Act, a statute, if possible, will be construed so as to render it valid. (Hale v. County Treasurer, 82 Mont. 98, 265 P. 6.) It is presumed to be constitutional, and all doubts will be resolved in favor of its validity if it is possible so to do. (State ex rel. Toomey v. Board of Examiners, 74 Mont. 1,238 P. 316, 320.) The invalidity of a statute must be shown beyond a reasonable doubt before the court will declare it to be unconstitutional. (Herrin v. Erickson, 90 Mont. 259, 2 P.2d 296.) A statute will not be held unconstitutional unless its violation of the fundamental law is clear and palpable. (Hill v. Rae, 52 Mont. 378, 158 P. 826, L.R.A. 1917A, 495, Ann. Cas. 1917E, 210;" Henderson v. City of Missoula, 106 Mont. 596,79 P.2d 547, 116 A.L.R. 1425.)

A consideration of the language used in section 12 and of the[4] other sections of Article XII which have to do with revenue and taxation, and of discussions among the members of the constitutional convention with reference to these subjects, leads to the conclusion that the purpose of this section was to prevent the legislative assembly from plunging the state into debt by the appropriation of money or the incurring of obligations for the payment of which sufficient funds are not made available. It is argued by plaintiff and at least one member of the Board of Examiners that such was the intention of the framers of the Constitution, and that it was never anticipated by them that the general fund of the state might contain a surplus, and that therefore the intention of the enactment would not be served by a ruling that a surplus accumulated by design, or otherwise, could not be spent by the legislature.

We must determine then what was intended by the constitutional convention in providing that no appropriation shall be made or expenditures authorized whereby the expenditures of the state during any fiscal year shall exceed "the total tax then provided for by law, and applicable to such appropriation or expenditure * * *."

What did the convention contemplate should be included in "the total tax then provided for by law, and applicable to such appropriation or expenditure"? It is argued that the words "total tax" must be strictly construed to mean a tax provided for by the legislative assembly and that appropriations may not be made in excess of the amount of anticipated revenue from taxation for the fiscal year regardless of any surplus in the general fund over and above the amount of anticipated revenue for that year. This court has taken judicial notice of the fact that, under the practice in effect in this state, moneys from sources other than taxes are deposited in the general fund, such as fees collected by various state agencies. It is obvious also that it is impossible for the assembly to anticipate with any accuracy the amount of such fees or in fact the amount of taxes, other thanad valorem taxes, which may be collected during any fiscal year.

This court has construed the meaning of this section as applicable to the question here involved. The case of State exrel. Toomey v. State Board of Examiners, 74 Mont. 1,238 P. 316, 321, was brought to enjoin the Board of Examiners from carrying into execution the provisions of Chapter 176, Laws of 1925, providing for the issuance and sale of state treasury notes for the purpose of refunding certain outstanding state warrants for the payment of which there was no money available in the general fund. One of the points raised by the relator was that the Act violated the section here under consideration. Mr. Justice Matthews, speaking for the Court, with reference to this objection said:

"Relator next contends that the Act violates section 12, Article XII of the Constitution, which in so far as applicable to the objection raised, reads: ``No appropriation shall be made nor any expenditures authorized by the Legislative Assembly whereby the expenditures of the state during any fiscal year shall exceed the total tax then provided for by law, and applicable to such appropriation or expenditure, unless the Legislative Assembly making such appropriation shall provide for levying a sufficient tax, not exceeding the rate allowed in section nine (9) of this Article, to pay such appropriations or expenditures within such fiscal year.'

"The contention now under consideration is that the Act challenged appropriates the sum of $3,750,000, which, with other appropriations, authorizes expenditures during the fiscal years ending June 30, 1926, and June 30, 1927, of over $1,000,000 in excess of the total tax provided by law for those fiscal years.

"While the provision above seems to limit such appropriations or expenditures to the ``total tax,' the legitimate appropriations and expenditures cover the anticipated income from all sources, subject to appropriation. In Fergus v. Brady, 277 Ill. 272,115 N.E. 393, Ann. Cas. 1918B, 220, this fact is made clear by the following statement: ``There is a very large amount of money paid into the state treasury from other sources than direct taxation, and the ordinary meaning of the word is the total income of the government, derived from all sources, subject to be applied to public purposes. It would not be reasonable to say that appropriations which are not to exceed income should be limited to moneys raised by direct taxation while there are large sums of money which may be applied to the purposes of the government not taken into account.' That this is the rule to be applied is impliedly admitted by relator in his complaint, wherein reference is made to the receipt from the ad valorem tax and from license and inheritance taxes.

"That the provision should be interpreted to refer not only to the income from all available sources, but also to anticipated income, has been declared by this court in State ex rel.Bennett v. Board of Examiners, 40 Mont. 59, 104 P. 1055, where it is said: ``The limitation is addressed to the legislature itself, the taxing body, exclusively. * * * It is compelled to act upon the facts at hand and conditions determinable from the circumstances as they exist. It cannot be required to anticipate all the conditions which may possibly arise in the interim; nor may it, in attempting to anticipate supposed contingencies, incorporate in its Acts such conditions and provisions as will render it impossible for the disbursing officers to carry forward the business of the government.'" (See also State ex rel. Rankin v. State Board ofExaminers, 59 Mont. 557, 197 P. 988.) While this case deals with a different section of the Constitution, it is persuasive of the conclusion that the constitutional convention, in limiting expenditures or indebtedness by the legislature, contemplated that such limitation should take into consideration cash on hand as well as anticipated revenue. (State v. Board of Trustees,91 Mont. 300, 7 P.2d 543; Henderson v. People ex rel.Wingate, 17 Colo. 581, 31 P. 333.)

With these rules of construction in mind, let us examine the wording of section 12 which restricts the amount of money which may be appropriated by the legislature for any fiscal year. In the first place, there appears to be no express constitutional prohibition against the appropriation of monies in the general fund, so that it must be presumed that these monies, unless otherwise appropriated, are applicable "to such appropriation or expenditure." But, in addition to being applicable to appropriation, the funds to be appropriated shall not exceed the total tax then provided for by law. We hold that the words "total tax" mean, and were intended by the framers of the Constitution to mean, not only revenue from taxes but all forms of revenue derived by the state from any source which might be used to defray the expense of the state government. To hold otherwise would be to create a situation whereby the state would have in its possession large sums of money which it could not spend; in other words, a surplus which could not be applied to payment of the expense of state government or for any other state purpose. It does not seem reasonable to assume that a state with a large surplus in its treasury would still be restricted in its appropriations for state purposes to taxes to be raised during a current fiscal year. In order to so construe the meaning of section 12, we would further have to decide that "the total tax then provided for by law" refers to taxes levied and raised during the fiscal year for which the appropriations are made. We hold that such a construction is not justified. Money collected and held in the general fund is derived from taxes, as well as from other sources provided by law, whether during the current fiscal year or not.

We think that the meaning of section 12, Article XII of the Constitution is that no appropriation shall be made nor any expenditure authorized by the legislative assembly whereby the expenditures of the state during any fiscal year shall exceed the total of funds available, and applicable to such appropriation or expenditure; and further that the funds available for such purpose include not only funds in the treasury, not otherwise appropriated, but also monies to be derived from taxes and other sources provided for by the legislative assembly for such year.

Section 16, Art. 10 of the Colorado Constitution contains a provision practically identical with our section 12, which has been several times construed by the supreme court of that state. While the questions before the court were not identical with that now under consideration, we feel that they furnish support for our conclusion. In the early case of In re Appropriations byGeneral Assembly, 13 Colo. 316, 22 P. 464, 466, that court said in construing that section: "By said section 16, each and every general assembly is inhibited in absolute and unqualified terms, from making appropriations or authorizing expenditures of the former class in excess of the total tax then provided by law and applicable for such appropriation or expenditure, unless such general assembly shall provide for levying a sufficient tax, within constitutional limits, to pay the same within such fiscal year. This language needs no construction. It is plain, simple, and unambiguous. It need not be misunderstood. It cannot be evaded. It means that the state cannot be plunged into debt by unauthorized legislation. If the general assembly pass Acts making such appropriations or authorizing expenditures in excess of constitutional limits, such Acts are void."

We find it unnecessary to consider whether the project contemplated by House Bill No. 45 comes within the war clause contained in section 12 of Article XII, for the reason that the surplus funds of the state may be appropriated and expended by the legislature for any purpose it sees fit. The war clause would be involved only if the appropriations exceeded the funds available from all actual and anticipated monies. The contention, too, that it may not be used for current expenses of the state government cannot be sustained, for nothing in the Constitution differentiates between those and any other expenditures.

It has been suggested that even though the surplus is subject[5] to appropriation, it could not be used for the purpose contemplated by House Bill No. 45 without having the approval of the people, if the whole project exceeded $100,000. Reliance is placed upon that part of section 2 of Article XIII of the Constitution, reading: "but no debt or liability shall be created which shall singly, or in the aggregate with any existing debt or liability, exceed the sum of one hundred thousand dollars ($100,000) except in case of war, to repel invasion or suppress insurrection, unless the law authorizing the same shall have been submitted to the people at a general election and shall have received a majority of the votes cast for and against it at such election."

The fallacy of this argument proceeds upon the erroneous premise that a "debt or liability" is created. It has repeatedly been held by this court that there is no debt or liability created when there is cash on hand or revenue provided by the legislature for the biennium to meet the appropriation. (Stateex rel. Rankin v. Board of Examiners, supra; State ex relToomey v. State Board of Examiners, supra; State ex rel.Veeder v. State Board of Education, 97 Mont. 121,33 P.2d 516; State ex rel. Blume v. State Board of Education,97 Mont. 371, 34 P.2d 515; Willett v. State Board ofExaminers, 112 Mont. 317, 115 P.2d 287.) Other courts take the same view. (Coos County v. Oddy, 156 Or. 546, 68 P.2d 1064; Veterans' Welfare Board v. Riley, 188 Cal. 607,206 P. 631; Bryan v. Menefee, 21 Okla. 1, 95 P. 471;Crick v. Rash, 190 Ky. 820, 229 S.W. 63; State ex relBranch v. Leaphart, 11 S.C. 458.) It is obvious that to write a check against one's funds in a bank is not to incur a debt or liability.

It is fundamental that our Constitution is but a limitation of[6] powers. The legislature may do anything it wishes except and unless it is prohibited from so doing by the Constitution. The appropriation of surplus funds does not create a "debt or liability" and, hence, the question of appropriating more than $100,000 of such surplus need not be submitted to a vote of the people under section 2 of Article XIII. There is no other constitutional provision requiring approval of the people.

Whatever may be said in favor of the right of the people to be heard directly on what a surplus should be expended for, is a subject that addresses itself to the need of a constitutional amendment. There is nothing in the Constitution now that requires it. If that contention should be upheld then it would be necessary to hold that an expenditure of more than $100,000 by the state for the purchase of whiskey for resale to the public would have to be submitted for approval to the vote of the people. Certainly such an expenditure is not for ordinary and current expenses for running the state government. No one has had the hardihood to contend that an expenditure of more than $100,000 for whiskey requires the consent of the people. The reason is obvious. It is purchased with funds on hand and no debt or liability is created. The case of State ex rel. Diederichs v. State Highway Comm., 89 Mont. 205, 296 P. 1033, so strongly stressed in the dissenting opinion, has nothing to do with the question here being considered. The law involved in that case created a debt or liability in the sum of $6,000,000 and attempted to mortgage the revenues to be anticipated from the gasoline license tax for a period of many years to pay the debt or liability. We agree with everything said in the opinion in that case as applied to the facts under consideration, but those facts have no similarity to those involved in this case.

We hold that the present legislature may legally appropriate from monies in the general fund amounts which in the aggregate will not exceed the amount therein not otherwise appropriated, increased by the amount of revenue anticipated to become available during the fiscal year for which the appropriations are made. We therefore hold that House Bill No. 45, in so far as it appropriates funds in excess of revenue anticipated for the fiscal years 1945-1946 and 1946-1947, is not objectionable as contravening the Constitution, if there are sufficient funds in the state treasury, not otherwise appropriated, to cover such appropriation.

The plaintiff is therefore entitled to a judgment as prayed for, adjudging that the enactment in question is valid and that it is the duty of the defendants to give full effect thereto. Accordingly it is so adjudged.