Title: FENT v. STATE ex rel. OFFICE OF STATE FINANCE

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

FENT v. STATE ex rel. OFFICE OF STATE FINANCE  FENT v. STATE ex rel. OFFICE OF STATE FINANCE 2008 OK 2 184 P.3d 467 Case Number: 104777 Decided: 01/22/2008 THE SUPREME COURT OF THE STATE OF OKLAHOMA JERRY R. FENT, as a resident taxpayer, citizen and voter of the State of Oklahoma, and all other similar persons, Petitioners, v. STATE OF OKLAHOMA, ex rel. Office of State Finance, and TONY HUTCHISON, as State Finance Director; STATE OF OKLAHOMA, ex rel. Office of the State Treasurer, and SCOTT MEACHUM, as State Treasurer, Respondents. ORIGINAL PROCEEDING FOR DECLARATORY RELIEF AND INJUNCTION AND/OR MANDAMUS ¶0 Petitioner filed an application to assume original jurisdiction and petition for declaratory and injunctive/mandamus relief. Petitioner alleged the Legislature violated the Oklahoma Constitution, art. V, §§ 55, 56, and 57, and art. X, § 23, when it authorized the expenditure of more than 135 Million Dollars of surplus funds in the General Revenue Fund in House Bill 1105, 2007 Okla.Sess.Laws, ch. 204. Petitioner requested a temporary stay restraining any further allocation, transfer, or expenditure of funds under House Bill 1105, an accounting of all transfers and expenditures of funds previously made under House Bill 1105, and oral argument before this Court. This Court denied the request for a temporary restraining order and scheduled oral argument before the Court en banc on the validity of House Bill 1105, the propriety of an injunction or a writ of mandamus, and the necessity of an accounting. At the conclusion of the oral argument, we assumed original jurisdiction. INJUNCTION OR WRIT OF MANDAMUS DENIED; PROSPECTIVE APPLICATION TO TAKE EFFECT ON JULY 1, 2008. Petitioner Jerry R. Fent, pro se, Oklahoma City, Oklahoma. Scott D. Boughton and Stephen J. Krise, Assistant Attorneys General, Office of the Oklahoma Attorney General, Oklahoma City, Oklahoma, for respondents State of Oklahoma ex rel. Office of State Finance, Tony Hutchison, State Finance Director, and State of Oklahoma ex rel. Office of the State Treasurer. Respondent State Treasurer, Scott Meacham, pro se, Oklahoma City, Oklahoma. TAYLOR, J. ¶1 In this original proceeding, we are asked to issue an extraordinary writ to restrain the State Finance Director, the State Treasurer, and/or heads of agencies, if necessary, from transferring, allocating, or paying out any state money pursuant to Enrolled House Bill 1105 (H.B.1105) of the First Regular Session of the Fifty-first Oklahoma Legislature, 2007 Okla.Sess.Laws, ch. 204. Having fully considered the record, the arguments, and the authorities presented, we deny the petition for injunction or writ of mandamus. I. H.B.1105 ¶2 On May 24, 2007, both houses of the Oklahoma Legislature passed H.B.1105. On May 25, 2007, the Governor received H.B.1105 and the First Regular Session of the Fifty-first Oklahoma Legislature finally adjourned sine die in accordance with the Okla. Const., art. V, § 26. ¶3 H.B.1105 contains five sections of law: one section allocates and transfers the surplus funds, two sections create and govern a revolving fund, and two sections declare an effective date for the act and an emergency. Section 1, to be codified in the Oklahoma Statutes as § 46.3 of Title 62, consists of subsections (A) and (B). Subsection 1(A) directs the transfer of more than 135 Million Dollars of surplus funds which may accrue in the General Revenue Fund for the State of Oklahoma for the fiscal year ending June 30, 2007, ¶4 In twenty-three enumerated paragraphs, subsection 1(A) of H.B.1105 transfers and allocates specific amounts of the surplus funds to state agencies or agency revolving funds. ¶5 A large part of the 135 Million Dollars of surplus funds is allocated to support public education. In three different paragraphs, subsection 1(A) of H.B.1105 allocates more than 27 Million Dollars to the State Department of Education for teacher retirement and teacher pay increases and pay incentives and, in four different paragraphs, it allocates nearly 43 Million Dollars to the State Regents Revolving Fund of the Oklahoma State Regents for Higher Education for operational expenses and capital improvements. The surplus funds are also allocated for several different and unrelated governmental purposes, including 15 Million Dollars to the Oklahoma Capitol Complex and Centennial Commemoration Commission Revolving Fund, 2.5 Million Dollars to the Rural Fire Equipment Grant Revolving Fund, 6.5 Million Dollars to the Research Support Revolving Fund, 6.5 Million Dollars to the Department of Public Safety Revolving Fund, 2 Million Dollars to the School for Deaf/Blind Revolving Fund, and 5 Million Dollars to the Private Prison and Halfway House Capacity Development Revolving Fund. ¶6 Section 2 of H.B.1105 creates the Private Prison and Halfway House Capacity Development Revolving Fund to be expended by the Department of Corrections. Section 3 of H.B.1105 authorizes the Department of Corrections to utilize the funds in the Private Prison and Halfway House Capacity Development Revolving Fund for payments on contracts in effect on July 1, 2007, for the purpose of funding up to five percent increase in payments to be made pursuant to such contracts. Sections 4 and 5 of H.B.1105 provide the act will be effective on July 1, 2007, and declare an emergency in accordance with the Okla. Const., art. V, § 58. II. The Proceedings ¶7 Petitioner filed an application to assume original jurisdiction and petition for declaratory relief and writs of injunction and/or mandamus and supporting brief on June 21, 2007, before H.B.1105 became effective. The petition challenged H.B.1105 under art. V, §§ 55, 56, and 57 and art. X, § 23 of the Oklahoma Constitution. Petitioner requested a temporary stay restraining allocation, transfer, or expenditure of funds under H.B.1105, an accounting of all transfers and expenditures of funds previously made under H.B.1105, and oral argument before this Court. This Court denied the request for a temporary restraining order and scheduled oral argument before the Court en banc on the validity of H.B.1105, the propriety of an injunction or a writ of mandamus, and the necessity of an accounting. At the conclusion of the oral argument on October 16, 2007, this Court assumed original jurisdiction and submitted the case for an opinion. III. The Parties' Arguments ¶8 Petitioner challenged H.B.1105 as attempting to transfer funds from the Constitutional Reserve Fund in violation of art. X, § 23(4) of the Oklahoma Constitution. He also challenged H.B.1105 as an appropriation bill that contains general law provisions contrary to the one-subject rule in art. V, § 57 and that contains multiple-agency appropriations contrary to the one-subject rule in art. V, § 56 and the necessity rule in art. V, § 55 of the Oklahoma Constitution. Petitioner argued that the appropriations in H.B.1105 constitute illegal "log rolling," citing Campbell v. White, 1993 OK, 856 P.2d 255 ; Johnson v. Walters, 1991 OK, 819 P.2d 694 ; Draper v. State, 1980 OK 117, 621 P.2d 1142 . ¶9 The State Finance Director, the Office of State Finance, and the Office of State Treasurer responded that petitioner's entire challenge is based upon the incorrect premise that H.B.1105 transfers money out of the Constitutional Reserve Fund. These respondents contended that the Legislature is authorized by art. X, § 23 of the Oklahoma Constitution to transfer the surplus cash on hand in the General Revenue Fund to other funds in the State Treasury under Calvey v. Daxon, 2000 OK 17, 997 P.2d 164 . They urged that H.B.1105 is presumed valid, citing Bethany v. Public Employees Relations Bd., 1995 OK 99, ¶14, 2 P.3d 378 , and that any constitutional limitation or restriction on the Legislature must be strictly construed, citing Tate v. Logan, 1961 OK 136, ¶19, 362 P.2d 670 . They argued that the Legislature has the authority to establish the state's fiscal policy and that this Court has no authority to consider the desirability, wisdom, or practicality of the transfers of unappropriated cash on hand from one fund to another in H.B.1105. ¶10 The State Treasurer asserted that H.B.1105 does not violate the one- subject requirement in art. V, §§ 56 and 57 because all its provisions relate to the common theme of allocation of surplus funds and the common theme of establishing and managing accounts under the Okla. Const., art. X, § 30.6 He argued that H.B.1105 does not direct money to be paid out of the State Treasury so that art. V, § 55 does not apply. He also argued that H.B.1105 merely transfers and allocates funds within state government, does not appropriate for expenses of the three branches of government, and therefore is not "other appropriations" to fund agency operations under art. V, § 56. IV. The Constitutional Provisions a. Article X, § 23 ¶11 We begin with the challenge to H.B.1105 under art. X, § 23 of the Oklahoma Constitution. The people of Oklahoma adopted art. X, § 23 to require the Legislature to balance the state's expenditures with its revenues. Draper v. State Bd. of Equalization, 1966 OK 87, 414 P.2d 276 . Referred to as the balanced budget law, art. X, § 23 is a detailed plan to assure the State operates within its revenues. It sets forth the formula for the State Board of Equalization to estimate revenues for the next ensuing fiscal year, limits appropriations to the State Board's itemized estimate of revenues, and declares all appropriations made in excess of the certified estimate to be null and void.7 It provides for the monthly allocation of revenues to the appropriations and the reduction of appropriations upon a revenue shortfall. It also defines surplus revenues and provides for a Constitutional Reserve Fund for emergency conditions. ¶12 Petitioner argued that H.B.1105 appropriates money in the Constitutional Reserve Fund in violation of art. X, § 23(4). We find no merit in this argument. Article X, § 23(4) defines surplus funds or monies as "any amount accruing to the General Revenue Fund of the State of Oklahoma over and above the itemized estimate made by the State Board of Equalization." It requires that surplus funds or monies "shall be placed in a Constitutional Reserve Fund by the State Treasurer until such time that the amount of said Fund equals ten percent (10%) of the General Revenue Fund certification for the preceding fiscal year." The record before us shows that the amount of surplus accrued in the General Revenue Fund at the close of June 30, 2007, over and above the amount constitutionally required to be placed in the Constitutional Reserve Fund, exceeded the 135 Million Dollars of the surplus transferred from the General Revenue Fund in H.B.1105.8 H.B.1105 directs the transfer of "surplus funds which accrue to the General Revenue Fund of the State of Oklahoma for the fiscal year ending June 30, 2007, over and above that which is placed in the Constitutional Reserve Fund." Based upon the record before us, H.B.1105 does not make appropriations from the Constitutional Reserve Fund contrary to art. X, § 23(4). ¶13 Born out of the State's mounting debt in 1941, art. X, § 23 restricts appropriations of estimated revenues, but it does not restrict appropriations of actual collected surplus monies. H.B.1105 deals with actual revenues that have not been included in the estimate and that have not been appropriated. Article X, § 23 authorizes the Legislature to transfer existing revenues and the unappropriated cash on hand from the General Revenue Fund into other funds in the State Treasury and to appropriate funds not previously appropriated. Article X, § 23(2) provides in part: [T]he Legislature may at any regular session or special session, called for that purpose, enact laws to provide for additional revenues or a reduction in revenues, other than ad valorem taxes, or transferring the existing revenues or unappropriated cash on hand from one fund to another, or making provision for appropriating funds not previously appropriated directly by the Legislature. Whereupon, it shall be the duty of the State Board of Equalization to make a determination of the revenues that will accrue under such laws and ninety-five percent (95%) of the amount of any increase or decrease resulting, for any reason, from such changes in laws shall be added to or deducted from the amount previously certified available for appropriation from each respective fund, as the case may be. The State Board of Equalization shall file the amount of such adjusted certification, or additional certification for funds not previously appropriated directly by the Legislature with the Governor, with the President and President Pro Tempore of the Senate, and the Speaker of the House of Representatives, and such adjusted amount shall be the maximum amount which can be appropriated for all purposes from any such fund for the fiscal year being certified. (Bold added.) Okla. Const., art. X, § 23(2). ¶14 Although art. X, § 23 does not speak specifically to the appropriation of surplus monies, Draper v. State Bd. of Equalization, 1966 OK 87, 414 P.2d 276 , determined that the Legislature may appropriate current fiscal year surplus actually accrued in the General Revenue Fund and Wiseman v. Boren, 1976 OK 2, 545 P.2d 753 , ruled that the surplus in the General Revenue Fund was available to the Legislature for immediate appropriation. In so ruling, Wiseman adhered to our established principles of constitutional law. Even if our Constitution does not specifically authorize the immediate appropriation of the surplus funds by the 1976 Legislature, such funds are presently available unless our Constitution prohibits it. The Legislature exercises the sovereign will unless restrained by the Constitution[,] Draper v. State Board of Equalization, Okl., 414 P.2d 276 (1966), and we look to the Constitution to determine whether the Legislature is prohibited from doing an act rather than to see if it is authorized. If there is any doubt as to the Legislature's power to act in a given situation, the doubt should be resolved in favor of the validity of the action taken by the Legislature. Restrictions and limitations upon Legislative power are to be construed strictly, and are not to be extended to include matters not covered or implied by the language used. Tate v. Logan, supra. Any Legislative enactment (in this case the proposed appropriation of part or all of the 1975 surplus funds by the 1976 Legislature) will be presumed constitutional unless its unconstitutionality is shown beyond a reasonable doubt. Schmidt v. Hunt, Okl., 359 P.2d 198 (1961).1976 OK 2 at ¶3, 545 P.2d at 760-761 (Supplemental Opinion on Rehearing). ¶15 Guided by these constitutional law principles, we conclude that art. X, § 23 does not prohibit the Legislature from appropriating the surplus accrued in the General Revenue Fund for the current fiscal year over and above the amount required to be placed in the Constitutional Reserve Fund, nor does it prohibit the Legislature from appropriating surplus that will accrue in the General Revenue Fund by the end of the current fiscal year even if the Legislature must finally adjourn sine die before the amount of the actual surplus can be determined. We further conclude that art. X, § 23(2) requires the State Board of Equalization to make an additional certification of the appropriated accrued surplus upon the enactment of a law appropriating the current fiscal year surplus in the General Revenue Fund and to file the certification with the Governor, President and President Pro Tempore of the Senate, and the Speaker of the House of Representatives. Additionally, art. X, § 23(1) requires the State Board of Equalization to adjust the limitation on appropriations for these accrued surplus funds when necessary.9 b. Article V, § 55 ¶16 In this case, the State Finance Director and the State Treasurer contend that H.B.1105 transfers the surplus moneys from one fund to another in the State Treasury for expenditure without making an appropriation. As we read H.B.1105, it does more than merely transfer the surplus moneys from the General Revenue Fund to other funds in the State Treasury for future appropriation to the designated agencies and purposes. Unambiguous language in H.B.1105 leaves no doubt that the Legislature authorized the Department of Corrections to "utilize the monies in the Private Prison and Halfway House Capacity Development Revolving Fund to make payments pursuant to contracts . . . in effect on July 1, 2007." 2007 Okla.Sess.Laws, ch. 204, § 3. This language clearly contemplates that the 5 Million Dollars transferred and allocated to the Private Prison and Halfway House Capacity Development Revolving Fund may be paid out of the State Treasury during the 2008 fiscal year.10 Money can only be paid out of the State Treasury pursuant to a legislative appropriation act. No money shall ever be paid out of the treasury (Bold added.) Okla. Const., art. V, § 55. ¶17 Even though drafted in terms of "transferring" and "allocating," H.B.1105 unmistakably appropriates nearly 135 Million Dollars from the General Revenue Fund. It is an appropriation bill, and it must satisfy the requirements of an appropriation law set out in art. V, §§ 55 and 56 of the Oklahoma Constitution. ¶18 As required by art. V, § 55, the provisions in H.B.1105 distinctly specify the amount appropriated to each agency or revolving fund. The provisions do not distinctly specify the object to which the money is to be applied for each and every specific amount appropriated to a revolving fund, but the object can be determined by reference to other statutes creating or relating to the revolving fund. For instance, the object to which money in the State Emergency Fund is to be applied can be determined by reference to the statutes governing the revolving fund such as 62 O.S.Supp.2006, § 139.47. Article V, § 55 provides that it is insufficient to refer to another law to determine the specific amount of the appropriation, but it does not extend the restriction against referring to another law to determine the object to which the appropriated amount shall be applied. The restriction against referring to another law to determine the amount appropriated will be strictly construed and will not be extended to other matters not covered by the restriction. Tate v. Logan, 1961 OK 136, ¶19, 362 P.2d 670 , 674-675. Accordingly, H.B.1105 is consistent with the provisions to make an appropriation by law in art. V, § 55 even though reference to other statutes is necessary to determine the objects or purposes of some of the appropriations. c. Article V, § 56 ¶19 To be a valid appropriation law, the appropriation bill must also comply with the limitations in art. V, § 56 of the Oklahoma Constitution. Article V, § 56 reads: The general appropriation bill shall embrace nothing but appropriations for the expenses of the executive, legislative, and judicial departments of the State, and for interest on the public debt. (Bold added.) ¶20 The above-quoted section restricts appropriation bills to two kinds. The first is a general appropriation bill which "shall embrace nothing but appropriations." In other words, a general appropriation bill may only make appropriations to the exclusion of any substantive law provisions. Johnson v. Walters, 1991 OK 107, ¶¶20-21, 819 P.2d 694 , 698. A general appropriation bill's object or purpose is appropriations for the expenses of state government, and it must provide for the expenses of the executive, the legislative, and the judicial departments and for interest on the public debt. H.B.1105 is not a general appropriation bill because it makes appropriations to some agencies in the executive department only and has substantive law provisions that are not appropriations. ¶21 The second kind of appropriation bill is a special appropriation bill which makes special appropriations to fund a particular aspect of state government. A special appropriation bill makes appropriations to fund only one agency or to support only one state governmental purpose. Campbell v. White, 1993 OK 89, ¶14, 856 P.2d 255 , 260. Unlike a general appropriation bill, a special appropriation bill is not restricted to making appropriations only. If a special appropriation bill contains multiple provisions, all of the provisions must readily manifest a common, closely akin theme or purpose as opposed to a broad and expansive theme or purpose. Id. If the multiple provisions in a special appropriation bill include substantive law as well as the appropriation law, each and every provision must be closely related to a single subject. Because every appropriation bill must specify the object of the appropriation under art. V, § 55, the subject of a special appropriation bill is necessarily limited to the object to which the appropriated money is to be applied, and the object of the appropriation is limited by the one-subject requirement in art. V, § 56.11 ¶22 The purpose of the one-subject requirement is to prevent "log rolling," the practice of including unpopular causes with popular causes on an entirely different subject in the same legislative measure. Campbell v. White at ¶7, 856 P.2d at 258. Petitioner argued that H.B.1105 violates the one-subject requirement and constitutes "log rolling" in that it makes multiple special appropriations to several different subjects or objects of state government. The State Treasurer responded that the one-subject rule is satisfied because all the provisions of H.B.1105 relate to common themes of allocating surplus funds and establishing and managing accounts. The gist of the State Treasurer's argument is that the subject of the legislation should be tested by the broad, expansive themes of "allocating surplus" or "managing accounts," rather than a narrow, strict theme such as the "Department of Corrections" or "higher education operating expenses." ¶23 Campbell v. White rejected the broad, expansive theme approach to the one-subject requirement. ¶24 Campbell v. White involved a challenge to an appropriation bill relating to cultural entities. The bill challenged in Campbell made an appropriation to Oklahoma Tourism and Recreation to provide state matching funds to federal Bureau of Reclamation Fund Program funds, reappropriated funds for the development of an industrial airpark economic study, restricted the closing of state parks, and provided for the establishment of an intern program for the State Regents of Higher Education. Campbell ruled that the bill did not satisfy the germaneness test for the one-subject requirement. Here, H.B.1105 makes multiple appropriations for a variety of unrelated purposes or objects, and it can not withstand scrutiny under the germaneness standard in Campbell v. White. ¶25 The State of Oklahoma enjoyed a surplus during the 2007 fiscal year, and the Legislature chose to appropriate the surplus accruing in the General Revenue Fund for fiscal year 2007 over and above the required transfers to the Constitutional Reserve Fund. The appropriations had to be enacted before the actual amount of the surplus could be determined at the close of fiscal year on June 30, 2007. Faced with a unique challenge of prioritizing the appropriations to avoid deficit spending, the Legislature included appropriations to support several different and unrelated objects or purposes in a single bill contrary to the one-subject requirement. H.B.1105 violates the Okla. Const., art. V, § 56. Without considering the desirability, wisdom, or practicality of the appropriations in H.B.1105, Calvey v. Daxon, V. Extraordinary Relief from the Provisions of H.B.1105 ¶26 Petitioner argued that the Legislature will continue its practice of "log rolling" unpopular appropriations with popular appropriations unless this Court issues an injunction or a writ of mandamus, citing Campbell v. White, ¶27 Extraordinary writs are issued and withheld in the sound discretion of the court even if a petitioner may have a clear legal right for which a writ of mandamus is an appropriate remedy. State ex rel. Nesbitt v. Ford, ¶28 In enacting H.B.1105, the Legislature was not dealing with the more familiar revenue shortfall, nor was it dealing with mounting indebtedness. It was dealing with an actual surplus in revenues, and unlike Campbell v. White, it faced a dilemma - how to appropriate the accrued surplus when required to adjourn sine die before the amount is fixed. The Legislature attempted to make the appropriations in a single special appropriation bill. As we previously recognized, the Legislature did not know the amount of the actual surplus that would in fact accrue at the close of fiscal year on June 30, 2007; so, faced with the constitutional time constraint for adjournment, it included the appropriations to support several different and unrelated objects or purposes in a single bill to prioritize the appropriations and avoid deficit spending. ¶29 We find the equities in this case do not justify the issuance of an injunction or a writ of mandamus in this proceeding. Rather, the equities in this case favor prospective application of this opinion to avoid confusion in the current state budgets. We withhold any extraordinary relief and give prospective application to this opinion. In so doing, we reiterate the caution in Campbell v. White: Our consideration for the practical operations of government should not be understood to be a shield for the continued enactment of unconstitutional laws. Although we are sympathetic with the time constraints the Legislature faces in session, this Court is bound to uphold the Constitution - we are prepared to do so. 1993 OK 89, ¶20, 856 P.2d at 263. VI. Conclusion ¶30 We conclude H.B.1105 makes appropriations to support several different and unrelated objects or purposes contrary to the one-subject requirement in the Okla. Const., art. V, § 56. Our ruling that H.B.1105 violates art. V, § 56 would create confusion in the state's fiscal affairs if applied to the current fiscal year. The equities require prospective application of this opinion to take effect on July 1, 2008. However, the Legislature should stand advised that the prospective effect given to this opinion should not be read as a signal that the one-subject requirement will not be judicially enforced. Rather, the Legislature is hereby notified that in future log-rolling challenges this Court will not hesitate to exercise its writ power. Prospective application renders petitioner's request for an accounting moot. INJUNCTION OR WRIT OF MANDAMUS DENIED; PROSPECTIVE APPLICATION TO TAKE EFFECT ON JULY 1, 2008. WINCHESTER, C.J., EDMONDSON, V.C.J., and HARGRAVE, OPALA, KAUGER, and TAYLOR, JJ., concur. WATT, J., concurs specially. COLBERT, J., concurs in result. REIF, J., not participating. FOOT