Opinion ID: 2600267
Heading Depth: 1
Heading Rank: 1

Heading: Indemnity Funds Are State Funds

Text: ¶ 18 The Indemnity Fund was created by the Legislature in 1989, [8] and is now codified at 17 O.S.Supp.2006 § 353. [9] Although § 353 has been amended several times, [10] the statutory sources for the money deposited in the fund has remained constant since 1989. Section 353 identifies the sources of Indemnity Funds as follows: D. The Indemnity Fund shall consist of: 1. All monies received by the Commission as proceeds from the assessment imposed pursuant to Section 354 of this title; 2. Interest attributable to investment of money in the Indemnity Fund; and 3. Money received by the Commission in the form of gifts, grants, reimbursements, or from any other source intended to be used for the purposes specified by or collected pursuant to the provisions of the Oklahoma Petroleum Storage Tank Release Indemnity Program. 17 O.S.Supp.2006 § 353(D). ¶ 19 The assessment imposed pursuant to § 354 is an assessment of one cent ($0.01) per gallon upon the sale of each gallon of motor fuel, diesel fuel and blending materials used or consumed in this state. 17 O.S.Supp.2006 § 354(A). The § 354 assessment of one cent ($0.01) per gallon is precollected and remitted to the Oklahoma Tax Commission in accordance with the provisions of the Motor Fuel Tax Code (68 O.S. § 500.1, et seq.). 17 O.S.Supp.2006 § 354(A). The motor fuel tax is a direct tax on the ultimate consumer of the fuel and, like the § 354 assessment, is precollected before the sale to the ultimate consumer. [11] The assessment is precollected by every supplier, licensed importer or any other appropriate person. . . . 17 O.S.2001 § 355(A). The legislative intent is that the Oklahoma Petroleum Storage Tank Release Indemnity Program be funded by an assessment on the sale of motor fuel, diesel fuel, and blending materials in this state by a distributor. 17 O.S.Supp.2006 § 351(A)(7). ¶ 20 The § 354 assessment of one cent ($0.01) per gallon is currently [12] distributed this way: (1) First one million dollars in a fiscal year to the Corporation Commission Revolving Fund, (2) Eight per cent of the remaining money to the Department of Environmental Quality Revolving Fund, (3) Twenty-five per cent of the money remaining after (1) and (2) to the Higher Education Facilities Revolving Fund until the amount deposited since July 1, 2002, totals thirty-eight million dollars, and (4) Seventy-five per cent of the remaining after (1) and (2) to the Petroleum Storage Tank Indemnity Fund. 17 O.S.Supp. 2006 § 354(C)(1-4). This formula is modified upon certain events and amounts are distributed to the Corporation Commission Storage Tank Regulation Revolving Fund (17 O.S.Supp.2006 § 315), the State Transportation Fund for matching Federal-Aid funds, and additional amounts to the Petroleum Storage Tank Indemnity Fund. 17 O.S.Supp. 2006 § 354(C)(5) & (D). ¶ 21 The Oklahoma Attorney General, through an Assistant Attorney General, filed an amicus curiae brief with the District Court and addressed the issue of the nature of the Indemnity Fund. The brief describes the Indemnity Fund as containing public money funded by a one penny gasoline tax. In support of this conclusion that the one-cent assessment creates a public fund, the brief points out the creation of the Higher Education Facilities Revolving Fund and its use to pay for construction of a weather center at the University of Oklahoma and for facilities on the campus at Oklahoma State University. In 2002 the Legislature created in the State Treasury a revolving fund for the Department of Central Services to be designated the `Higher Education Facilities Revolving Fund' and the one-cent assessment paid to this Fund is for purposes described by the amicus curiae brief. 74 O.S.Supp.2006 § 110.4; 2002 Okla. Sess. Laws Ch. 23, §§ 1-2. ¶ 22 Neither Phillips nor the Corporation Commission challenges the one-cent assessment as creating state funds that are distributed to the Corporation Commission Revolving Fund, the Department of Environmental Quality Revolving Fund, and the Higher Education Facilities Revolving Fund. They do not expressly argue that the public nature of these funds somehow loses its character as state funds when distributed to the Indemnity Fund. Instead, they rely upon a statute, 17 O.S.Supp.2006 § 353(E)(1), and a comparison of the Indemnity Fund with the State Insurance Fund, now CompSource Oklahoma. [13] ¶ 23 Section 353(E)(1) states the following. E. 1. The monies deposited in the Indemnity Fund shall at no time become monies of the state and shall not become part of the general budget of the Commission or any other state agency. Except as otherwise authorized by the Oklahoma Storage Tank Regulation Act and the Oklahoma Petroleum Storage Tank Release Indemnity Program, no monies from the Indemnity Fund shall be transferred for any purpose to any other state agency or any account of the Commission or be used for the purpose of contracting with any other state agency or reimbursing any other state agency for any expense. Phillips and the Commission emphasize the language: The monies deposited in the Indemnity Fund shall at no time become monies of the state. . . . Of course, this language shows legislative intent, but a mere legislative declaration that particular funds are not monies of the state is not, by itself, determinative of the issue. [14] ¶ 24 One of the circumstances we examine is the identity of the owner of the funds at issue. State ex rel. Twist v. Bailey, 1956 OK 103, ¶ 4, 295 P.2d 763, 765. While the Commission and Phillips deny ownership interest in these funds by the State of Oklahoma, they do not state what entity owns such funds. They argue that the funds are distributed to the Petroleum Storage Tank Release Environmental Cleanup Indemnity Fund. But nothing in the Petroleum Storage Tank Release Indemnity Program indicates that the Indemnity Fund is anything other than a specified account for holding money to be distributed according to the indemnity program. The Indemnity Fund cannot own the funds distributed to the Indemnity Fund unless it is an entity as well as an account. The Indemnity Fund is maintained, operated, and administered by the Corporation Commission, a constitutional agency of the State created by Okla. Const. Art 9 § 15. ¶ 25 We also examine the nature of the transaction that generated the funds at issue. For example, in Moran v. State ex rel. Derryberry, 1975 OK 69, 534 P.2d 1282, we examined the nature of the transaction that generated funds for the State Insurance Fund. We said, It appears to be agreed, or conceded, that no State appropriation has ever been used by the State Insurance Fund. Id. 534 P.2d at 1285. We then noted that the Insurance Fund entered into contracts of insurance and received premiums as payment for the insurance issued. [15] ¶ 26 In the case before us, a mandatory assessment is made upon those required to pay the motor fuel tax. 17 O.S.Supp.2006 § 354(A). Do those required to pay the assessment receive consideration for their assessment payment similar to the employers purchasing insurance in Moran ? Nothing in the Petroleum Storage Tank Release Indemnity Program shows such consideration. Additionally, § 354(A) describes the assessment as precollected in accordance with the Motor Fuel Tax Code. That Code imposes a tax that is precollected from the ultimate consumer and not those remitters required to make the tax payments to the Tax Commission. 68 O.S.2001 § 500.2(A) & (C). [16] ¶ 27 Phillips and the Commission argue that funds in the Indemnity Fund are not subject to appropriation by the Legislature for purposes other than the Indemnity Fund, and this proves the funds are not state funds. They regard the language in § 354(E)(1) that the funds shall not become part of the general budget of the Commission or any other state agency as a limitation on legislative action. We do not view this language as a limitation upon the Legislature. It is a well-known principle of statutory and constitutional construction that one Legislature cannot bind another. [17] Instead, the language limits the actions of state officials charged with administering the Indemnity Fund and states how the funds in the Fund should be regarded for state budgetary purposes. ¶ 28 Money in the Indemnity Fund must be owned by someone, some entity. With the Corporation Commission, a constitutional agency of the State, administering those funds for the purposes required by the Petroleum Storage Tank Release Indemnity Program, the money in the Indemnity Fund belongs to the State of Oklahoma.