Case Title: IN THE MATTER OF THE APPLICATION OF THE OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY

Citation: 

Docket Number: 101409

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2005-12-13T00:00:00Z

Document:
IN THE MATTER OF THE APPLICATION OF THE OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY  IN THE MATTER OF THE APPLICATION OF THE OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY 2005 OK 90 130 P.3d 232 Case Number: 101409 Decided: 12/13/2005 THE SUPREME COURT OF THE STATE OF OKLAHOMA IN THE MATTER OF THE APPLICATION OF THE OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY FOR APPROVAL OF $50 MILLION OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY STATE REGENTS FOR HIGHER EDUCATION ENDOWED CHAIRS FUNDING PROGRAM BONDS, TAXABLE SERIES 2004 ORIGINAL PROCEEDING TO DETERMINE VALIDITY OF PROPOSED BONDS ¶0 The Oklahoma Capitol Improvement Authority resolved to issue bonds in amounts not to exceed $50 million as authorized by APPLICATION FOR APPROVAL OF $50 MILLION OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY "STATE REGENTS FOR HIGHER EDUCATION ENDOWED CHAIRS FUNDING PROGRAM BONDS, TAXABLE SERIES 2004" APPROVED. W.A. Drew Edmondson, Attorney General for the State of Oklahoma, Lynn C. Rogers, Assistant Attorney General, Gary M. Bush, Oklahoma City, Oklahoma, for Applicant. Protestant Jerry R. Fent, pro se, Oklahoma City, Oklahoma. Protestant Edwin Kessler, pro se, Norman, Oklahoma. OPINION BY COLBERT, J. ¶1 The Oklahoma Capitol Improvement Authority (Authority) has applied for this Court's approval of proposed bonds authorized by ¶2 The proposed bonds were authorized by the Legislature to increase the state's contributions to the Oklahoma State Regents' Endowment Trust Fund (Trust Fund). The Legislature created the Trust Fund to accumulate private contributions and matching state appropriations to endow "chairs, professorships, lectureships and positions for artists-in-residence" at public institutions of higher education. 70 O.S.2001 & Supp. 2004 §§ 3951-52. At the outset, the Trust Fund's principal could not be diminished for any reason and the income from investing the principal was to be used only for the "endowed chairs, professorships, lectureships and positions for artists-in-residence." Id. The State Regents for Higher Education (Regents) are the Trust Fund trustees. Id. § 3951. ¶3 The Legislature authorized this bond issue because private contributions to the Trust Fund have exceeded matching appropriations. ¶4 The Authority adopted a Resolution to issue the bonds on September 29, 2004, and the Authority and the Regents subsequently entered into an Agreement regarding the security for the bonds and the use of the bond proceeds. The bonds will not be a general obligation of the Authority and each bond will contain a disclaimer strictly limiting the bond holders' interest. This Bond is not an indebtedness of the State of Oklahoma, nor shall it be deemed to be an obligation of the State of Oklahoma and neither the faith and credit nor the taxing power of the State of Oklahoma or any political subdivision thereof is pledged or may hereafter be pledged to the payment of the principal of or the interest on this Bond or the series of which it forms a part. This Bond is not a general obligation of the Authority nor a personal obligation of the members of the Oklahoma Capitol Improvement Authority, but is a limited obligation payable solely from revenues specifically pledged to its payment. The Regents will deposit and retain the net proceeds and any income generated by investing the proceeds in a separate account within the Trust Fund. If the Regents do not make the required payments to the Authority, the Authority can require them to disgorge the proceeds and accrued income to make the payments. DISCUSSION ¶5 This Court has exclusive jurisdiction to consider the validity of bond issues proposed by the Authority. I. THE STATUTE AUTHORIZING THE BONDS DOES NOT CREATE UNCONSTITUTIONAL DEBT. ¶6 Article 10, section 23 of the Oklahoma Constitution requires a balanced budget and prohibits the creation of any debt against the state "regardless of its form or the source of money from which it is to be paid" except as specified in sections 23 through 25, conditions that do not apply in this situation. In the decades since the adoption of these provisions, this Court has recognized that some forms of deficit financing do not offend their intent because the financing is either: (1) not debt in the constitutional sense, or (2) fits within a judicially-defined exception. We have approved self-liquidating bonds where the revenues generated by the funded project provide the mechanism for total repayment. See, e.g., Baker, ¶7 The bonds we consider today, however, are unique and need not satisfy any of the exceptions described above. Because these bonds are payable only by the Regents, they cannot become debts of the state as a matter of law. The Regents have the sole constitutional authority to disburse funds appropriated to them in a lump sum by the Legislature. Okla. Const. art. 13-A, § 3; see also Bd. of Regents of Univ. of Okla. v. Childers, ¶8 We first recognized the special nature of such bonds in 1945. In re Bd. of Regents of Univ. of Okla., ¶9 Board of Regents adopted in full the analysis in Kerr, where the Court concentrated on the special status of the Grand River Dam Authority, an agency that received no state revenue. Kerr, ¶10 Board of Regents extended Kerr's reasoning to bonds issued by the Regents. Oklahoma is not alone in this analysis. This reasoning has been adopted in other states where the regents of higher education are created by the constitution as a unique governmental entity: [I]t has been generally held that if the institution is a distinct . . . entity, the resulting liabilities [from bonds proposed by that institution] could not be treated as a debt of the state within the meaning of constitutional prohibitions or limitations in reference to state indebtedness. State v. Regents of Univ. Sys. of Georgia, ¶11 Finally, the Legislature has provided an alternate repayment source. It has amended section 3951(C) to allow the Regents to use the principal of the Trust Fund to repay the bonds. The proceeds from the bonds and the income on those proceeds will accumulate untouched in the Trust Fund. This is the rare case where the borrowed funds will never be expended and will remain available to retire the bonds in full if a future Legislature fails to appropriate sufficient new funds to the Regents. We conclude, therefore, that the proposed bonds will never become a state debt and thus do not violate article 10, sections 23 through 25 of the Oklahoma Constitution. II. THE STATUTE AUTHORIZING THE BONDS DOES NOT CONFLICT WITH THE AUTHORITY'S OR THE REGENTS' STATUTORY POWER. ¶12 Protestant Fent also contends that neither the Authority nor the Regents are authorized to issue bonds for wages and salaries. The statutes establishing the Authority empower it to do certain things. 73 O.S.2001 & Supp. 2004 §§ 151-332. While they generally empower it to issue bonds for the construction of highways or buildings, they do not limit the Authority's power to those purposes. Moreover, while 70 O.S.2001 & Supp. 2004 §§ 4001-4019 provide only limited bond issuing authority to the Regents, it is not the Regents who will issue the bonds and section 4019 expressly empowers the Authority to issue bonds for the Trust Fund-a fund created precisely for paying wages and salaries. ¶13 Finally, section 4019 does not conflict with the Regents' other duties and authority. Section 3951 appoints the Regents trustees for the Trust Fund. Section 4019 authorizes the Regents to enter into agreements with the Authority to issue the proposed bonds for the Trust Fund, a power that only enhances the Regents' ability to fulfill their duty as trustees. CONCLUSION ¶14 The statute authorizing the proposed bonds does not run afoul of Oklahoma's constitutional prohibitions against debt because the bonds will not be a debt of the state. It also does not otherwise exceed or conflict with the Authority's statutory power or duties. APPLICATION FOR APPROVAL OF $50 MILLION OKLAHOMA CAPITOL IMPROVEMENT AUTHORITY "STATE REGENTS FOR HIGHER EDUCATION ENDOWED CHAIRS FUNDING PROGRAM BONDS, TAXABLE SERIES 2004" APPROVED. WATT, C.J., WINCHESTER, V.C.J., HARGRAVE, EDMONDSON and COLBERT, JJ., concur. KAUGER, J., concurring specially. LAVENDER and OPALA, JJ., concur in part, dissent in part. TAYLOR, J., not participating. FOOT