172 [89 Op. Att’y

BUDGETARY ADMINISTRATION

UNEMPLOYMENT INSURANCE – APPROPRIATE USE OF FUNDS IN

THE SPECIAL ADMINISTRATIVE EXPENSE FUND

November 3, 2004

Honorable James D. Fielder, Jr., Ph.D.

Secretary of Labor, Licensing, and Regulation

Mr. Warren G. Deschenaux

Department of Legislative Services

Office of Policy Analysis

You have each asked for our opinion concerning the

appropriate use of funds from the Special Administrative Expense

Fund (“the SAEF” or “the Fund”), a special fund administered by the

Department of Labor, Licensing, and Regulation (“DLLR”).

Secretary Fielder has also posed specific questions concerning the

use of the SAEF to supplement federal funds received for the

administration of the Maryland Unemployment Insurance Law, to

pay expenses related to the occupancy, maintenance, and

improvement of space used for the administration of that law, and to

pay for “substituted operational costs incurred as a result of

consolidation of leased space.”

SAEF funds may be used for the various administrative

purposes set forth in the SAEF statute. Neither the budget bill nor

a budget amendment may expand those purposes. Among the

purposes listed in the SAEF statute is the acquisition of space used

for the administration of the Unemployment Insurance Law. While

there is no specific provision in the SAEF statute that allows for the

payment from the Fund of costs related to occupancy, such as

utilities, maintenance, and security, in some circumstances these

costs may be considered part of the cost of acquisition. Money in

the SAEF may not be devoted to a use not allowed by the SAEF

statute, such as operational expenses, unless the General Assembly

passes a law permitting that use.
Gen. 172] 173

 Title 8 of the Labor and Employment Article, otherwise known as

1

the Maryland Unemployment Insurance Law, is administered by the Office

of Unemployment Insurance and the Office of Employment Services. See

LE §8-301 et seq.

I

Background

A. Maryland Unemployment Insurance Law

Unemployment insurance is “intended to prevent economic

insecurity and to alleviate the consequences of involuntary

unemployment and economic distress.” Allen v. Core Target City

Youth Program, 275 Md. 69, 75, 338 A.2d 237 (1975). The

Maryland Unemployment Insurance Law, and related regulations,

provide a process by which an individual can claim unemployment

insurance benefits. Annotated Code of Maryland, Labor and

Employment Article (“LE”) §8-101 et seq.; COMAR 09.32.01. The

law is administered by various components of DLLR.1

Like other state unemployment insurance laws, the Maryland

statute was enacted during the Depression in response to a part of the

Social Security Act that encouraged the creation of such laws. See

Chapter 1, Dec. Spec. Sess., Laws of Maryland 1936; §302 of the

Social Security Act, 49 Stat. 626 (August 14, 1935) codified at 42

U.S.C. §502; see also 48 Opinions of the Attorney General 172

(1963) (describing origin of State statute). The Federal

Unemployment Tax Act sets minimum standards that states must

satisfy in order to participate in the federal-state unemployment

compensation scheme and receive federal funding. See 76 Am. Jur.

2d Unemployment Compensation §§4, 19-20. The Maryland

Unemployment Insurance Law is to be construed consistently with

the various federalstatutes governing unemployment compensation.

LE §8-103(a).

Federal law establishes a Federal Unemployment Trust Fund,

which collects and disburses funds related to unemployment

compensation benefits. 42 U.S.C. §1104. One of the accounts in

that fund, known as the employment security administration account,

is used to provide grants to states for the administration of

unemployment compensation programs pursuant to §302 of the

Social Security Act. See 42 U.S.C. §§502(a), 1101(a),

1101(c)(1)(A)(i); see also 20 CFR §601.6.
174 [89 Op. Att’y

 The SAEF was created in 1945. See Chapter 270, Laws of 2

Maryland 1945.

 Funds may be transferred to the SAEF temporarily from the UIAF 3

when the Secretary uses the SAEF to cover expenses for the acquisition,

repair, or maintenance of office space, and those expenses will be

reimbursed from federal funds. In those circumstances, the Secretary may

transfer UIAF moneys to the SAEF, so long as the transfer does not

exceed the amount of the federal reimbursement and equals the “fair

reasonable rental value” of the land or buildings acquired or of the

proportionate amount of space used. LE §8-422(e).

Maryland law provides for the establishment of several special

funds to carry out the State Unemployment Insurance Law. Among

those funds are the Unemployment Insurance Fund (LE §§8-401 et

seq.), which is used to pay benefits and refunds, and the

Unemployment Insurance Administration Fund (“UIAF”) (LE §8-

412 et seq.), which is used to pay various administrative costs

associated with the Unemployment Insurance Law. The UIAF

consists of money from a variety of sources, including amounts

provided under Title III of the Social Security Act ( 42 U.S.C. §501

et seq) and the federal Wagner-Peyser Act (29 U.S.C. §49 et seq.).

LE §8-414(a). Federal funds and State appropriations deposited in

the UIAF may be spent only in accordance with guidance of the

federal Secretary of Labor. LE §8-414(b)(2).

The subject of your inquiry is a third fund, known as the

Special Administrative Expense Fund. The SAEF is to be devoted

to certain administrative costs associated with the Unemployment

Insurance Law, but is not subject to the federal restrictions

governing use of funds in the UIAF. 

B. Special Administrative Expense Fund

The SAEF is governed by LE §8-419 through §8-422. The 2

Fund consists of money appropriated in the State budget from fines,

interest, and other penalties collected under the Maryland

Unemployment Insurance Law, money transferred from the UIAF,3

and any voluntary contributions to the Fund. LE §8-421(a).

Expenditures from the SAEF are subject to constitutional and

statutory budgetary and appropriation procedures. LE §8-422(b).

Following the end of each fiscal year, the Secretary is to direct the

State Treasurer to transfer to the General Fund any balance in excess

of $250,000 in the Fund that the Secretary has not been allocated in
Gen. 172] 175

accordance with the statute. LE §8-422(f). The statute also

provides for transfers to the UIAF in certain circumstances. LE §§8-

415(d), 8-422(d). However, money in the SAEF may not otherwise

be transferred to any other fund. LE §8-420(b)(2).

The statute specifies several purposes of the SAEF. First, it

may be used as a revolving account to cover costs “that are proper

under the law” for the administration of the Unemployment

Insurance Law, pending federal reimbursement of those costs. LE

§8-421(b)(1). 

Second, the SAEF may also be used to make payments to

adjust for certain types of errors. For example, it may be used for:

(1) reimbursement of interest on

contributions collected erroneously. LE §8-

421(b)(2)(i). 

(2) costs of administration of the

Unemployment Insurance Law that have been

improperly charged against federal funds

credited to the UIAF. LE §8-421(b)(2)(ii). 

(3) replacement within a reasonable time

of money that the State receives under §302 of

the Social Security Act and that “because of

an action or contingency has been lost or has

been used for purposes other than or in

amounts exceeding those necessary” for

proper administration of the Unemployment

Insurance Law. LE §8-421(b)(2)(iii)1. 

Finally, the Fund may be used to acquire office space “suitable

for effective administration” of the Unemployment Insurance Law.

LE §§8-421(b)(2)(iii)2, (c). 

The General Assembly has placed a limitation on all these

permissible uses of the Fund: the Fund should not displace federal

funds that would otherwise be available to pay for the administration

of the Unemployment Insurance Law. LE §8-421(d).

On occasion, the Legislature has also conditioned the use of the

SAEF in the annual budget bill. For example, the budget bill for

Fiscal Year 1998 provided that:
176 [89 Op. Att’y

 The Auditor also suggested that DLLR discuss with various control 4

entities whether $4.7 million should be reimbursed to the General Fund.

We understand that, after review of the circumstances of the expenditures,

the control entities recommended against reimbursement of the General

Fund.

No funds derived from the Special

Administrative Expense Fund (SAEF) shall be

added to the budget through budget

amendment, except as required to offset

reductions in federal revenues below the level

estimated in this budget, to address increased

levels of unemployment, or to make critical

repairs to eligible facilities. Unexpended

funds in excess of $250,000 shall be

transferred to the general fund as provided by

law. 

 Chapter 3, Laws of Maryland 1997 at p. 170. See also Chapter 8,

Laws of Maryland 1994 (conditioning use of Fund for local office

acquisition or construction on submission of plans and cost estimates

to legislative budget committees for review and comment). Such

provisions are effective only during the fiscal year to which the bill

applies.

C. Legislative Audit

In 2002, the Legislative Auditor found that DLLR had made

improper use of the SAEF Fund for routine operating expenses, such

as telecommunications. The Auditor recommended that DLLR

strictly comply with law governing the SAEF in the future. Audit 4

Report concerning the Department of Labor, Licensing, and

Regulation (June 2002), p.13. DLLR objected to this finding on the

basis that it relied on legal advice that SAEF funds could be used for

any purpose authorized by the General Assembly. It stated that the

amounts in question had been identified in budget bill

documentation or were included in budget amendments that resulted

from shortages of federal funding. Id., Appendix, pp.3-4. 
Gen. 172] 177

 Prior to 1986, the funds in the SAEF were treated as “unbudgeted 5

funds” and were spent under an agency resolution without a legislative

appropriation. After a legislative audit questioned that process, an opinion

by Attorney General Sachs concluded that fundsin the SAEF are “moneys

of the State” for purposes of the Maryland Constitution and therefore

subject to budget and appropriation procedures. See Opinion No. 86-014

(March 10, 1986) (unpublished). The General Assembly also amended the

statute to clarify that those procedures applied. Chapter 399, Laws of

Maryland 1986, now codified at LE §8-422(b). See Floor Report for

Senate Bill 1040 (1986) (explaining that the legislation arose out of the

legislative audit and was designed to ensure that SAEF funds were

appropriated through the budget process).

II

Analysis

We address first whether the budget or budget amendment

process may be used to spend SAEF funds for a purpose other than

one identified in the SAEF statute. We then address several specific

questions that relate to the operation and use of the SAEF.

A. Transfer of SAEF Funds for Other Purposes by Budget

Process

Secretary Fielder noted that attorneys in this Office have given

varying interpretations about the effect of the budget process on the

use of SAEF funds and requested clarification as to whether the

budget process would permit DLLR to use SAEF funds for purposes

in addition to those explicitly listed in the SAEF statute. 

1. Use of SAEF Funds for Other Purposes under Budget

Appropriation

LE §8-422(b) states that money in the SAEF “shall be spent in

accordance with appropriations in the State budget.” On its face, it

might appear that this provision allows SAEF funds to be spent for

any purpose authorized by the General Assembly in the annual

budget bill. However, the legislative history of LE §8-422(b)

demonstrates that it was enacted to clarify that the SAEF is subject

to the budget and appropriations process that applies generally to

moneys of the State.5

In any event, it is well established that, when the General

Assembly establishes a special fund dedicated to specific purposes,
178 [89 Op. Att’y

the budget bill may only appropriate money from that fund for those

specific purposes. See 20 Opinions of the Attorney General 201,

203-4 (1935). While the Legislature may condition the use of

moneys from a special fund in the budget bill, it is constrained from

changing the statutory uses by the prohibition against “legislating in

the budget.” The Court of Appeals has explained that permissible

conditions in the budget bill “are directly related to the expenditure

of the sum appropriated, do not amend substantive legislation or

duly adopted administrative rules and are effective only during the

fiscal year for which the appropriation is made.” Bayne v. Secretary

of State, 283 Md. 560, 576, 392 A.2d 67 (1978) (emphasis added);

see also 73 Opinions of the Attorney General 43, 46-48 (1988)

(recounting history of prohibition against “legislating in the

budget”). “A budget bill is not a means by which the General

Assembly may enlarge the scope of a statute.” 81 Opinions of the

Attorney General 269, 275 (1996). However, where the statutory

language specifying the use of a special fund is ambiguous, budget

bill language may aid in measuring the scope of the statutory

restrictions. Id. at 275-76 (ambiguous phrase “transportation related

purpose” could reasonably be construed to encompass stadium

parking lot in light of budget bill language authorizing the use of a

special fund grant for that purpose). 

Thus, the budget bill cannot expand the purposes for which

SAEF funds may be used. The General Assembly has specified

those purposes in the Unemployment Insurance Law. The

appropriation of moneys from the SAEF in the budget bill is limited

to those purposes. Of course, the General Assembly may expand

those purposes in separate legislation. And, to the extent that the

SAEF statute is ambiguous, language in the budget bill may shed

light on the meaning of that statute. 

2. Use of SAEF Funds for Other Purposes under Budget

Amendment

The budget amendment procedure is set forth in Annotated

Code of Maryland, State Finance & Procurement Article (“SFP”),

§7-209. Under that statute, an appropriation for a program of an

officer or unit of the Executive Branch may be amended with the

approval of the Secretary of Budget and Management and the

Governor. SFP §7-209(b). 

There are several important constraints on the content of a

budget amendment. While a budget amendment may change the

monetary amount of an appropriation, it “may not change any
Gen. 172] 179

 SFP §§7-209 and 7-217, among others, were substantially 6

amended in the Budget Reconciliation and Financing Act of 2004.

Chapter 430, §1, Laws of Maryland 2004. The pertinent amendments

became effective on June 1, 2004. Id., §34.

language or substantive provision in the State budget.” SFP §7-

210(a). 

Special restrictions govern the amendment of appropriations

from a special fund such as the SAEF. SFP §7-209(c)(1)(ii)

provides that “an amendment of an appropriation for a program ...

may permit the expenditure of money from a special fund ... as

provided in [SFP] §2-201 or §7-217(a)....” SFP §2-201 pertains to

the acceptance and use of gifts. The other cross-referenced

provision states:

An office or unit of the State government

may spend money from a special fund ... that

is not estimated or included in the State

budget or exceeds the estimate in the State

budget and is paid into the State Treasury for

a program after an approved amendment of a

special ... fund appropriation for the program:

(1) for the specific purpose to which the

money is dedicated by State law or act of

Congress; or

(2) if the money is not dedicated to a

specific purpose, with the approval of the

Governor and as authorized in an approved

budget amendment, for necessary current

operations.

SFP §7-217(a) (emphasis added). Thus, pertinent to the SAEF, a 6

budget amendment may appropriate unestimated or excess receipts

in a special fund “for the specific purpose to which the money is

dedicated by State law” – i.e., the SAEF statute. The State budget

bill reiterates this authority with respect to federal and special funds.

See, e.g., Chapter 429, §5, Laws of Maryland 2004 at p. 1797

(amounts received pursuant to SFP §2-201 or SFP §7-217 may be

expended under an approved budget amendment); id., §7 (receipts

in excess of budget estimates for special and federal funds may be

made available by budget amendment). 
180 [89 Op. Att’y

 Shortly thereafter, the law governing the Transportation Trust Fund 7

was amended to restrict transfers to special funds. Chapter 291, Laws of

Maryland 1987, codified at Annotated Code of Maryland, Transportation

Article, §3-216(f).

 The 1986 opinion also reasoned that provisions in a budget bill 8

could “qualify” existing law and cited a 1949 opinion that stated that the

Legislature could repeal or amend an existing law in the budget bill. 71

Opinions of the Attorney General at 7, citing 34 Opinions of the Attorney

General 105 (1949). On its face, that proposition appears inconsistent

with the Court of Appeals’ decision in Bayne and other opinions of this

Office concerning the prohibition against legislating in the budget. See

Part II A 1 of this opinion. However, we note that the 1986 and 1949

opinions both concerned “qualification” of laws concerning the budget

process, such as the budget amendment procedure, that are currently

codified in Title 7 of the State Finance and Procurement Article. During

the first two decades of Maryland’s executive budget system, those

provisions were routinely enacted as part of the budget itself. See, e.g.,

Chapter 206, §3, Laws of Maryland 1918 (budget amendment procedure);

see also Letter of Assistant Attorney General Richard E. Israel to Senator

John A. Cade (February 28, 1985). In 1939, the General Assembly

codified those provisions in Article 15A, a predecessor of the State

Finance and Procurement Article. Chapter 64, Laws of Maryland 1939.

Thus, a distinction may be made between a budget bill provision that

qualifies the type of budget procedure that has long been part of the budget

bill and an attempt to alter substantive legislation that governs a particular

fund or agency. Moreover, to the extent that a provision concerning

budgetary procedure appears in the budget bill as submitted by the

Governor, one of the major reasons for the prohibition against “legislating

in the budget” – i.e., that the budget bill is not subject to a gubernatorial

veto – is of less concern. 

 The situation involved in the 1986 opinion had the further 9

(continued...)

In 71 Opinions of the Attorney General 3 (1986), Attorney

General Sachs concluded that money could be transferred from one

special fund – the Transportation Trust Fund – to another – the

Maryland Deposit Insurance Fund Corporation – by means of the

budget amendment process. At that time, State law explicitly barred

transfers from the Transportation Trust Fund to the General Fund,

but was silent on transfers to other special funds. Attorney General 7

Sachs relied on prior versions of SFP §7-209 and §7-217, as well as

 similar versions of §§5 and 7 of the budget bill, and concluded that 8

the transfer of unestimated and excess receipts was permissible. 

9
Gen. 172] 181

 (...continued) 9

complication that the funds would be transferred from one department to

another. Because the law then, as now, generally barred the use of budget

amendments to transfer funds between departments, Attorney General

Sachs advised that it would be necessary for the Governor to declare an

emergency to invoke one of the exceptions to the prohibition on interdepartmental transfers. See SFP §7-209(e); 71 Opinions of the Attorney

General at pp. 7-8.

The circumstances involving the SAEF are distinguishable.

Unlike the 1986 law governing the Transportation Trust Fund, the

SAEF statute provides that “[e]xcept as otherwise provided in this

subtitle, money in [the SAEF] may not be transferred to any other

fund.” LE §8-420(b)(2) (emphasis added). Because the SAEF

statute specifically prohibits transfers not otherwise authorized in the

Unemployment Insurance Law, the use of SAEF funds could not be

expanded by transferring the funds by means of a budget

amendment.

B. Replacement of Funds Received under §302 of Social

Security Act

The SAEF statute provides that DLLR may use moneys from

the SAEF:

for replacement within a reasonable period of

time of any money that the State receives

under §302 of the Social Security Act and that

because of an action or contingency has been

lost or has been used for purposes other than

or in amounts exceeding those necessary for

the proper administration of [the

Unemployment Insurance Law].

LE §8-421(b)(2)(iii)1. As noted above, §302 of the Social Security

Act provides for payments by the federal government to a state for

administration of the state’s unemployment compensation law.

The language of LE §8-421(b)(2)(iii)1 was derived directly

from §303(a)(9) of the Social Security Act. 42 U.S.C. §503(a)(9).

In 1939, Congress amended §303 of the Social Security Act to add

two conditions on the certification of payments under §302 to the

states. Those conditions are now codified at 42 U.S.C. §503(a)(8)-

(9). In essence, the Social Security Board was not to certify payment
182 [89 Op. Att’y

to a state unless the law of the state restricted the use of the funds to

the purposes designated by the federal agency and provided for

“replacement” of those funds if the guidelines were violated. Thus,

the Social Security Board could not certify a payment unless the

state’s law included provision for:

(8) Effective July 1, 1941, the expenditure of all moneys received pursuant to section

302 of this title solely for purposes and in the

amounts found necessary by the Board for the

proper and efficient administration of such

State law.

(9) Effective July 1, 1941, the replacement, within a reasonable time, of any moneys

received pursuant to section 302 of this title,

which, because of any action or contingency,

have been lost or have been expended for

purposes other than, or in amounts in excess

of, those found necessary by the Board for the

proper administration of such State law.

These provisions were evidently designed to ensure that the funds

distributed under §302 were spent in accordance with federal

guidelines and that the states would return funds to the extent that

they were not spent in accordance with those guidelines. 

At its next session, the Maryland General Assembly fulfilled

the federal conditions by amending Article 95A, §13(b) concerning

what was then called the Unemployment Compensation

Administration Fund to include language similar to the federal

statute. Chapter 17, Laws of Maryland 1941 at p.26. That provision

stated that any “replacement funds” needed to fulfill the federal

conditions would be appropriated from the State’s general funds. In

1945, the Legislature created the SAEF as the source of replacement

funds and again incorporated the language of the federal statute in

Article 95A, §13(c). Chapter 270, Laws of Maryland 1945. With

respect to expenditures from the Fund, the statute provided:
Gen. 172] 183

The moneys in this fund shall be used by the

Board for reimbursement of interest on

contributions erroneously collected and the

payment of costs of administration which are

found not to have been properly and validly

chargeable against Federal grants (or other

funds) received for or in the Unemployment

Compensation Fund on or after January 1,

1943. ...[procedural provisions concerning

transfer and payment of funds] ...The moneys

in this fund are hereby specifically made

available to replace, within a reasonable time,

any moneys received by this State pursuant to

Section 302 of the Federal Social Security Act

as amended, which because of any action or

contingency, have been lost or have been

expended for purposes other than, or in

amounts in excess of, those necessary for the

proper administration of the Unemployment

Compensation Law. ...

That language was ultimately recodified as LE §8-421(b)(2)(iii)1. 

It is evident that paragraph (9) of the federal statute is the

source of the odd language that now appears in LE §8-

421(b)(2)(iii)1. The purpose of the federal statute was to ensure that

states would repay federal funds that were not used in accordance

with federal guidelines. The purpose of including this language in

the SAEF statute was to identify that fund, as opposed to the General

Fund, as the source of the replacement money, if the conditions in

§303 of the Social Security Act were violated. 

Several questions posed by Secretary Fielder pertain to this use

of the SAEF:

Should this be accomplished through direct expenditure of

SAEF funds or by transfer of SAEF funds to the UIAF?

As explained above, under LE §8-421(b)(2)(iii)1, SAEF funds

are to be used to “replace” federal funds received, but not spent in

accordance with federal rules governing the use of such funds. For

that purpose, SAEF funds may be paid directly to the federal

government. See LE §8-422(d)(1). In addition, the SAEF statute also

allows the State Treasurer to transfer funds from the SAEF to the

UIAF “for costs of administration that are found to have been
184 [89 Op. Att’y

improperly charged against the federal money credited to the

[UIAF].” LE §§8-422(d)(2), 8-421(b)(2)(ii). Thus, the expenditure

of SAEF funds pursuant to LE §8-421(b)(2)(iii)1 may be

accomplished by direct expenditure or by transfer to the UIAF.

Assuming SAEF funds may be used to replace systems integral

to the operation of the unemployment insurance program that have

reached the end of their life cycle (such as mainframe laser

printers), are these expenditures best accomplished through the

budget process or the budget amendment process? May SAEF be

used to supplement/hire staff for purposes of increasing income to

the Unemployment Insurance Trust Fund?

Because LE §8-421(b)(2)(iii)1 concerns the “replacement” –

i.e., repayment – of federal funds, we do not believe that SAEF

funds would be available to purchase an item such as a mainframe

laser printer or to hire additional staff, at least under that particular

provision. As indicated in Part II.A. of this opinion, neither a budget

appropriation nor a budget amendment can expand the permissible

use of SAEF funds.

SAEF funds could be used for those purposes temporarily

under another part of the statute. For example, if federal law

subsidizes the hiring of such staff, money from the SAEF could be

employed temporarily for that purpose until the federal funds are

received. However, once the federal funding is received, the SAEF

should be reimbursed. See LE §8-421(b)(1) (use of the SAEF as a

“revolving account” for costs ultimately to be paid out of federal

funds). 

C. Uses of SAEF Funds Related to Space Used for

Administration of the Law

Secretary Fielder poses several questions concerning the costs

of occupying space for the administration of the Unemployment

Insurance Law. The SAEF law clearly contemplates that the Fund

may be used for such costs in its capacity as a revolving fund

pending federal reimbursement. See LE §8-422(e) (authorizing

temporary transfer of funds from the UIAF to the SAEF pending

federal reimbursement if SAEF funds are used to “acquire, repair,

or maintain” office space); LE §8-421(b)(1) (authorizing use of the

SAEF as revolving fund pending federal reimbursement).

Otherwise, costs of occupancy may only be paid from the SAEF if

they are part of the cost of acquiring the space.
Gen. 172] 185

The statute specifies how the Fund may be used to acquire

office space as follows:

Subject to subsection (d) of this section and

approval by the Board of Public Works, the

Secretary may use the [SAEF] to acquire

office space that is suitable for effective

adm inistrati o n o f [the M aryl and

Unemployment Insurance Law] by:

(1) purchase;

(2) lease;

(3) construction; or

(4) use of money in the [SAEF]:

(i) to assist the State in financing a

building that the State builds for 1 of its

units in which space will be provided

under a lease or other contract between

[DLLR] and the State or its unit;

(ii) to pay architectural fees;

(iii) to make a deposit on a

building or land; or

(iv) for any other approved

purpose that is necessary for

acquisition of office space. 

LE §8-421(c). Under LE §8-421(d), the SAEF may not be used in

a manner that displaces federal funds available for administrative

costs.
186 [89 Op. Att’y

How do we structure these occupancy expenses such as

utilities, maintenance, and security in facilities owned by the

[DLLR] and used for the administration of [the Unemployment

Insurance Law] to ensure that the expenses are viewed as an

integral part of the cost of acquiring office space for the effective

administration of [that law]?

Section 8-421(c) authorizes the use of SAEF funds to

“acquire” office space. It further specifies several methods of

acquisition – purchase, lease, construction. It also authorizes use of

the funds for specific purposes related to the leasing, construction,

or purchase of a building through another State agency or “for any

other approved purpose that is necessary for acquisition of office

space” (emphasis added). Thus, the key criterion for determining the

permissible use of funds under this subsection is whether the use is

related to the “acquisition” of office space. 

The statute does not define “acquire” or “acquisition.” The

dictionary defines “acquire” as “to come into possession or

ownership of; get as one’s own” and “acquisition” as the “the act of

acquiring or gaining possession.” Random House Dictionary of the

English Language 18 (2d ed. 1987); see also Black’s Law Dictionary

24 (7th ed. 1999). There are various ways by which one may acquire

or gain possession of something – e.g., construct, purchase, or lease.

Ordinarily, the acquisition of space – i.e, taking possession or

ownership of it – does not include ongoing operational expenses

such as utilities, maintenance, and security. For example, when an

agency purchases, constructs, or refurbishes a building, payments for

utility services, routine maintenance, and security are generally not

part of “the act of acquiring or gaining possession”, but rather

obligations resulting from the fact of possession. However, some

landlords may include such costs as part of a monthly lease payment

and it may be difficult or burdensome for the landlord to separate out

those costs. As a result, there is some ambiguity as to whether the

SAEF statute permits the use of the SAEF for such costs. In these

circumstances, the budget bill may illuminate the scope of the

statute. See 81 Opinions of the Attorney General at 275-76. In our

opinion, if the budget bill authorizes the use of the SAEF to pay

utilities, maintenance, and security expenses associated with space

that DLLR occupies, those expenses may be included as part of the

cost of acquisition. 
Gen. 172] 187

May the SAEF be used to purchase desks and modular

furniture, computers, phone networks, and other equipment for

facilities purchased with SAEF monies?

Traditionally, furniture, computers, and telecommunications

equipment have generally not been part of the cost of acquiring

office space. To the extent that it has now become a standard

industry practice to provide certain types of furnishings or technical

equipment as part of office space, those costs may be paid with

SAEF monies. Otherwise, the SAEF may not be used for these

purposes, except in the limited circumstances in which the SAEF

functions as a revolving fund pending federal reimbursement.

D. Use of the SAEF for “Substituted Operational Costs”

Secretary Fielder notes that, over the past several years, DLLR

has changed the operation of the unemployment insurance program

to take advantage of new technologies. Previously, DLLR operated

26 walk-in offices throughout the State. In recent years, DLLR has

reduced the number of physical offices to five regional claim centers

and, at the same time, has begun accepting claims over a toll-free

telephone number and over the Internet. These changes have

increased telecommunications charges and reduced rent and building

expenses. 

May SAEF be used for telecommunications costs where those

costs are incurred as a result of consolidation of offices to save

occupancy costs and to take advantage of new technologies?

For the reasons set forth above, the SAEF may not be used for

these purposes. The General Assembly may wish to consider

amending the statute to permit the SAEF to be used for such

operational expenses.

III

Conclusion

SAEF funds may be used for the various administrative

purposes set forth in the SAEF statute. Neither the budget bill nor

a budget amendment may expand those purposes. Among the

purposes listed in the SAEF statute is the acquisition of space used

for the administration of the Unemployment Insurance Law. While

there is no specific provision in the SAEF statute that allows for the
188 [89 Op. Att’y

payment from the Fund of costs related to occupancy, such as

utilities, maintenance, and security, in some circumstances these

costs may be considered part of the cost of acquisition. Moneys in

the SAEF may not be devoted to a use not allowed by the SAEF

statute, such as operational expenses, unless the General Assembly

passes a law permitting that use.

J. Joseph Curran, Jr.

Attorney General

Robert N. McDonald

Chief Counsel

 Opinions and Advice