Case Name: State ex rel. Phillips v. Carter, State Auditor
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1940-02-20
Citations: 186 Okla. 571
Docket Number: No. 29678
Parties: State ex rel. Phillips v. Carter, State Auditor.
Judges: BAYLESS, C. J., and RILEY, OSBORN, CORN, DAVISON, and DAN-NER, JJ., concur. WELCH, V. C. J., and HURST, J., dissent.
Reporter: Oklahoma Reports
Volume: 186
Pages: 571–583

Head Matter:
State ex rel. Phillips v. Carter, State Auditor.
99 P. 2d 1025.
No. 29678.
Feb. 20, 1940.
Mac Q. Williamson, Atty. Gen., Randell S. Cobb, Asst. Atty. Gen., and Houston W. Reeves, Asst. Atty. Gen., for plaintiff.
Charles E. McPherren, of Oklahoma City, for defendant.
Hayes, Richardson, Shartel & Gilli-land, of Oklahoma City, amici curiae.

Opinion:
GIBSON, J.
The Governor of Oklahoma brings this original action in this court against the State Auditor to compel the issuance of nonpayable warrants of the state in payment of current claims incurred by various institutions, departments, officers, and employees pursuant to appropriations made by the Seventeenth Legislature for the fiscal year ending June 30, 1940. The claims are within the limits of the appropriations made therefor by the Legislature for the first year of the biennium for which the regular session of the Legislature appropriated revenues.
It is conceded that the State Treasurer will register and deliver the warrants, if issued, but the Auditor has declined to issue nonpayable warrants on the ground that at the time the claims were reached in regular order there were not sufficient moneys or revenues in the State Treasury to meet payment. The petition lists specifically sundry claims presented during December, 1939, and the first part of January, 1940, for several of the state's hospitals and schools, the State Penitentiary, the Board of Affairs, Board of Health, and the Industrial Commission. It is alleged that these are representative of numerous other lawful claims filed with the Auditor, and the Auditor asserts that the claims listed are only about 1.13 per cent, of the claims on file at the time of the filing of the petition herein. The financial condition of the state at the date of filing the petition, January 22, 1940, is set forth in the answer of the Auditor, from which pertinent allegations will be quoted.
It is apparent from the Auditor's answer that, although revenue might have accrued to pay some of the claims on file, there will be a continued refusal to issue warrants for other claims for the'payment of which revenues are not or will not be available. Among the claims for which warrants are requested are those for school aid under Senate Bill No. 22 enacted by the Seventeenth Legislature (Session Laws 1939, ch. 34, art. 14). The petition of the Governor alleges that the action of the Auditor in refusing to issue nonpayable warrants for the institutions, the school aid, and the departments of government is embarrassing the state in carrying out its governmental functions. He alleges that the laws of the state are being thwarted and that as Governor he is empowered to bring this action in the name of the state. He appears by the Attorney General, and the Auditor, consequently, appears by other counsel, but in his official capacity. The right of each party so to appear is not questioned.
It is apparent, of course, that the matter is of great public interest, and, because of the many functions of government affected, demands as prompt a decision as possible to be given with due regard to the questions presented. This court accordingly assumed jurisdiction, and with the cooperation of counsel has advanced the hearing. By permission of the court counsel representing specially various groups and individuals affected have filed brief and made argument in support of the Governor's position. The case has been adequately presented by all parties.
A stipulation of facts has been filed, which in' some essentials admits the financial condition and acts alleged in the Auditor's answer. Since the pertinent parts of his answer succinctly state such facts and his position herein, we quote therefrom as follows:
"HI.
"That to the date of the filing of the petition herein, January 22, 1940, the defendant as State Auditor had written and transmitted to the State Treasurer, and the said Treasurer had registered warrants against the General Revenue Fund of the state in the total amount of $8,750,836.39, which warrants against the said General Revenue Fund were registered and returned by the State Treasurer without being marked 'Non-payable,' and said warrants were delivered by the State Auditor to the various departments and institutions as required by section 1 of article 1, chapter 3, Session Laws of 1939. That, as is hereinafter stated, the said warrants so written, registered and delivered were in excess of the revenue and funds in the State Treasury to the credit of the General Fund in the amount of $400,000.
"IV.
"That the amount of warrants so written and transmitted by the State Auditor to the State Treasurer and registered and delivered being $400,000 in excess of the amount of revenue which had accrued in the State Treasury to the credit of the General Fund from taxation, transfers and other miscellaneous sources, the defendant as Auditor declined to transmit warrants in recognition and based upon claims thereafter presented in excess of the said $400,000. That prior to the said date of January 22, 1940, claims over and above the said $400,000 had been filed by the said various departments and institutions in the sum of $2,009,085.85. That the claims herein sued upon total only the sum of $22,748.75, being only about 1.13% of said claims now on file with the defendant as State Auditor."
The answer then asserts that there is no possibility of the revenues for the fiscal year being sufficient to meet the appropriations, and that there will be a deficit of several millions of dollars. This estimate is controverted.
The Auditor further states his position and the question involved as follows:
"That there is no reason to differentiate between the allowance, auditing and issuance and delivering of said warrants to cover the 1.13% of the said claims now on file with the defendant as State Auditor, and omitting the balance of $1,986,337.10, and the $13,300,-864.67 in claims that will accrue during the remainder of this fiscal year. That the controlling question as to all said claims and all claims that may be filed with the defendant as State Auditor during the remainder of the present fiscal year is as to whether or not it is the duty of this defendant as State Auditor to continue to audit and approve claims against the General Fund of the state and issue state warrants thereon against the General Revenue Fund of the state, and cause same to be registered by the State Treasurer as 'nonpayable,' and deliver same as evidence of indebtedness of the state greatly in excess of more than $400,000 above the amount of all revenue that could possibly accrue to the General Fund of the state for the fiscal year."
The stipulation presents the following additional information:
"That the total appropriations made from the General Fund of the state of Oklahoma for the preceding biennium by the Sixteenth Legislature and for the current biennium by the Seventeenth Legislature, and the difference between said appropriations are as follows:
Fiscal year 1937-38 _$34,157,195.23
Fiscal year 1938-39 . 28,499,640.75
Total for last biennium............§62,658,835.98
Fiscal year 1939-40 _$26,513,840.19
Fiscal year 1940-41 _ 25,802,525.03
52,316,365.22
Decrease for current biennium . . . .§10,340,470.76
"That the decrease in appropriations for the corresponding years of the preceding biennium as made by the Sixteenth Legislature and the current biennium as made by the Seventeenth Legislature is as follows:
Fiscal year 1937-38 _§34,157,195.23
Fiscal year 1939-40 _26,513,S40.19
Decrease . §7,643,355.04
Fiscal year 1938-39 . . . §28,499,640.75
Fiscal year 1940-41 _ 25,802,525.03
Decrease . $2,697,115.72
"That revenues collected by the Oklahoma Tax Commission and revenues accruing to the General Fund in the State Treasury during the fiscal years 1935-36, 1936-37, 1937-38 and 1938-39 are as follows:
Fiscal Year Tax Commission Collections Revenues Accruing To General Fund
1935-36 $43,372,964.80 §22,812,685.72
1936-37 56,429,543.04 27,389,171.03
1937-38 61,718,991.61 24,388,014.10
1938-39 56,252,182.13 19,756,732.05"
The stipulation further shows that during the session of the last Legislature, the Research and Statistics Division of the Tax Commission furnished reports to the members of the Legislature showing receipts of revenues by the state from all sources for various portions of the fiscal year ending June 30, 1939, as compared with the corresponding periods of the previous fiscal year, the one for January, 1939, covering a six months' period, the one for February a seven months' period, the one for March an eight months' period, the one for April a nine months' period, and each covering also specifically the last preceding month and comparison with the corresponding month of the previous fiscal year. The conclusion from these reports is that on the whole there was a substantial decrease in income to the state, illustrated by the nine months' report covering three main sources of revenue to the general fund; gross production tax approximately 30 per cent, decrease; income tax approximately 16 per cent, decrease; and cigarette tax approximately 1.6 per cent, decrease. For the corresponding six months' periods (first half of fiscal years), however, the decrease had been, respectively: gross production tax approximately 23 per cent, decrease; income tax approximately 35 per cent, decrease; cigarette tax approximately .35 per cent, decrease.
In addition it is stipulated that a joint survey committee of the Legislature reported tentatively to the House of Representatives an estimate that revenues for the general fund under the laws then existing would not exceed $21,000,000. The report was filed and published, but was never adopted by the Legislature. By agreement the Auditor has filed affidavits showing collections by months of various revenues during 1937, 1938, and 1939, and the financial condition of the general fund for each month. The information given supports the contention that at the present rate of collection the revenues will not meet the appropriations made. On the other hand, affidavits filed on behalf of the relator by members and employees of the Tax Commission are to the effect that there was a substantial increase in state revenues for the three months prior to February, 1940, and that it is impossible to tell how much, if any, the deficit at the end of the year will be. These affidavits are attacked by a counter affidavit. In view of the foregoing, therefore, it is apparent that if the court were compelled to decide the question, it might find difficulty in deciding as a fact how great the deficit, if any, may be at the end of the fiscal year. In view of the decisions, however, we find it unnecessary to decide the question; for if we assume that the revenues will not meet the appropriations by more than the $400,000 (fixed by the Auditor as the limit to which he will issue nonpayable warrants), we feel that the statutes and the decisions make clear the duty of the Auditor to issue warrants to the extent of the appropriations made by the Legislature.
The prerogative of making appropriations lies with the Legislature and upon it lies the responsibility to make the revenues meet the approprations. Those are its constitutional functions, and neither the administrative officers charged with the receipt and disbursement of the revenues nor the courts can annul valid appropriations made. The rules are well settled by prior decisions of this court. We are here called upon to reverse these rules, and to set up, as it were, a new fiscal policy. The earnestness with which the contention has been made leads us to review, though as briefly as possible, the decisions controlling here.
Sections 3547 and 3558, O. S. 1931, and section 1, article 13, chapter 20, S. L. 1937, provide for auditing accounts against the state, and the issuance of warrants by the Auditor, which shall be " 'payable' or 'nonpayable' as the case may be"; and that "when any warrant shall be presented to the Treasurer for redemption, and there shall be no funds in the treasury appropriated for that purpose, the Treasurer shall endorse thereon the date of its presentation and thereafter such warrant shall draw interest," etc. Nothing is said in the statutes as to the amount to which nonpayable warrants can be drawn, and the only limit to the amount is the appropriation made for the purposes. It is, therefore, clearly the duty of the Auditor to issue the warrants here, and all other warrants for claims coming within the appropriations made by the Legislature, unless he is prohibited by some constitutional provisions.
Issuance of nonpayable warrants has been a part of our state financing system since statehood. The people in adopting our Constitution must be presumed to have been familiar with the method adopted. A large part of the financing in the early days of statehood came from ad valorem taxation. Taxes from this source reached the state's treasury six months after the beginning of the fiscal year which under the Constitution begins July 1st. Consequently, it was often necessary to issue nonpayable warrants, and so far as the record in this case is concerned, the right so to issue was never seriously questioned until recently. And such warrants have never been considered debts within the constitutional provisions invoked here. The question was early decided in the case of Bryan v. Menefee, State Treasurer, 21 Okla. 1, 95 P. 471. There this court said:
"The next question arising is whether or not a warrant drawn by the proper officer on the Treasurer of the state under an appropriation by law is an evidence of indebtedness. In the case of In re State Warrants, 6 S. D. 521, 62 N. W. 102, 55 Am. St. Rep. 852, in construing sections 1 and 9 of article 11, and 1 and 2 of article 13, of the South Dakota Constitution, the court held:
" 'Appropriations from the assessed but uncollected revenues of the state, and the issuance of warrants in pursuance thereof to defray current expenses, is not the incurring of an indebtedness, within section 2, art. 13, Const., which provides that to make public improvements, or to meet extraordinary expenses, or deficits or failure in revenue, the state may contract debts never to exceed with previous debts, $100,000, and no greater indebtedness shall be incurred, except to repel invasion, suppress insurrection or defend the state or United States in war.'
"Section 23, art. 10 of our Constitution (Bunn's Ed. sec. 289), is substantially the same as section 2, art. 13, of the South Dakota Constitution, and in the same case the court further held:
" 'The fact that warrants issued in anticipation of such assessed revenues draw interest does not make the issuance of the warrants an incurring of indebtedness to the extent of such interest, within article 2, sec. 13, of said Constitution, where such warrants, with respect to interest, are not different from other warrants which may properly be drawn and issued.' "
The court quoted further from a North Dakota case, which approved the South Dakota rule: That the revenues of the state assessed and in process of collection may be considered as constructively in the treasury, they may be appropriated and treated as though actually and physically there, and an appropriation of them by the Legislature does not constitute the incurring of an indebtedness, within the meaning of the Constitution. This court then said all of article 10 of our Constitution pertaining to "public indebtedness" is substantially taken from the Constitutions of North and South Dakota.
Later, in the case of In re Application of State to Issue Bonds to Fund Indebtedness, 33 Okla. 797, 127 P. 1065, the court said that the limitations of section 23, art. 10, of the Constitution were not intended to apply to that class of pecuniary obligations arising out of the ordinary necessary current expense of maintaining the state government and which were in good faith intended to be paid and were lawfully payable out of the current yearly revenues, and other resources of the state for the fiscal year within which such obligations were incurred.
These interpretations have been acquiesced in for nearly 30 years, by the courts, by the Legislature, by the administrative officers charged with handling the finances, and presumably by the people, who have not changed the provisions construed, although abolishing the ad valorem tax for state purposes in 1933. But the 1933 amendment to section 9 of article 10 of the Constitution did not take from the Legislature the prerogative to make appropriations and to determine whether the amount of revenue provided would be sufficient to meet those appropriations. Nowhere do we find the power given to the courts to pass upon the good faith of the Legislature.
In the case of Davis v. Childers, 181 Okla. 468, 74 P. 2d 930, we said:
"The Constitution does not give the courts veto power over appropriations made by the Legislature, but fixes upon the Legislature the responsibility of making appropriations and raising sufficient revenues to finance such appropriations.
"The courts will not usurp the high prerogative exercised by the Legislature in making appropriations for state purposes, and, when called upon to review legislative acts, can neither assume bad faith on the part of the Legislature nor inquire into the motives or intent of the Legislature by evidence other than its recorded proceedings. Testimony of individual legislators or others as to happenings in the Legislature is incompetent, since that body speaks solely through its concerted action as shown by its vote.
"Under the provisions of the Oklahoma Constitution, if the Legislature has misjudged the amount of revenue to accrue from taxes levied and estimated to produce sufficient revenues during the biennium for which it makes appropriations, it may, at special session, or at the next regular session during such biennium, provide for additional revenues to meet such failure in revenues. Section 3, art. 10, of the Constitution. The courts, therefore, assume that its constitutional duty will be performed."
In that case we were but restating the rules which had been applied and followed for more than a quarter of a century.
The rule is the same as to municipalities, including school districts, which after appropriations have regularly been made, are authorized to issue warrants to the full extent of the appropriations, notwithstanding the fact that the revenues provided fail to meet the appropriations, and this under section 26, art. 10, of the Constitution, which is more restrictive than the provisions relating to the state. Such nonpayable warrants have not been considered debts within the meaning of the Constitution. See Blake v. Abraham, 149 Okla. 112, 299 P. 488; Kurn v. Helm, 182 Okla. 260, 77 P. 2d 552.
It is evident, therefore, that the practice and decisions have been uniform during all' these years. We do not think it the province of the court to change this fiscal policy because it may by some be thought insufficient for our present revenue measures.
In 11 Am. Jur. p. 659, par. 50, it is said:
"A cardinal rule in dealing with Constitutions is that they should receive a consistent and uniform interpretation, so that they shall not be taken to mean one thing at one time and another thing at another time, even though the circumstances may have so changed as to make a different rule seem desirable."
In William J. Scown, Appellant, v. Anthony Czarnecki et al., Appellees (Ill.) 106 N. E. 276, it is said:
"The court is the same, though the judges change, and it will not overturn a deliberate decision upon the constitutional power of the Legislature under which the highest political rights have been held and exercised without question for many years.' "
There are other cases by this court construing the constitutional provisions involved which we would be compelled to overrule to reach a different conclusion. It is suggested that the Governor should call the Legislature in special session. We have said that the Legislature may, in special session, during either of the fiscal years of the biennium or at the next regular session, levy taxes to meet any deficiency that may occur under the express authority given it by section 3 of article 10 of the Constitution. See Davis v. Childers, 181 Okla. 468, 74 P. 2d 930. But the people by their Constitution have seen fit to entrust exclusively to the Governor the right to call the Legislature into special session. They have further by that instrument provided that at any time dur ing the succeeding fiscal year the Legislature may provide for supplying any deficiencies in revenues accruing for a fiscal year. Article 10, section 3. The people also left to the Governor the power to judge the necessity of submitting financial statements either to a special or regular session of the Legislature by giving him the power to call special sessions (article 6, section 7) and requiring him to report fully to a regular session. (Article 6, section 9.)
We have here assumed that the allegations of the Auditor's answer may be true, and have found that, even if true, they constitute no reason not to follow the statute. But we are not here holding that there will be the deficit he claims. In the affidavits filed on behalf of relator it is stated by a member and a director of the Oklahoma Tax Commission:
"Affiants further say that it is impossible at this time to estimate with accuracy the amount of deficit, if any, which may be sustained in the General Revenue Fund during the present fiscal year, because of the many contingencies affecting tax collections which may occur between this date and June 30, 1940; that it is entirely possible no deficit whatever will exist in said Fund on June 30, 1940. "
Though this statement may be said to be a conclusion, it constitutes a challenge to the statements made on behalf of the respondents. But by virtue of the legal propositions involved, it is not necessary to decide the question of probabilities presented.
Since the appropriations under which the claims have been or will be filed are not challenged on other grounds than those considered, it follows that the Auditor should be, and he is, directed to deliver warrants for the claims filed with him within the appropriations, in accordance with the statutes hereinabove cited.
Writ ordered.
BAYLESS, C. J., and RILEY, OSBORN, CORN, DAVISON, and DAN-NER, JJ., concur. WELCH, V. C. J., and HURST, J., dissent.