Opinion ID: 2433423
Heading Depth: 1
Heading Rank: 2

Heading: Federal Receipts

Text: By far the largest category of receipts excluded from state revenue by the trial court consists of funds received from the federal government. These amounted to almost $3.8 billion out of total state receipts of $11.9 billion. The Committee, adopting a definition of revenue developed by this Court in the context of the Hancock Amendment [4] the annual or periodical yield of taxes, excises, customs, duties, and other sources of income that a nation, state or municipality collects and receives into the treasury for public use [5] first argues that federal funds are revenue. In particular, appellants argue that that is the implication of article X, section 17(1): `Total state revenues' includes all general and special revenues, license and fees, excluding federal funds.... The Committee argues that it would be unnecessary to exclude federal funds from this definition, unless they were a species of general or special revenues. Even accepting, arguendo, the premise that this definition, which is explicitly limited to article X, [6] should be consulted to determine the meaning of a phrase used in article IX, this argument is unconvincing. While the section, arguably, supports the conclusion that federal funds are revenues, it undermines the Committee's position that federal funds are state revenues, since the definition explicitly excludes them from the calculation of total state revenues. The Committee's chief argument is that federal funds are properly included in state revenue because they must be deposited into the state treasury [7] and become, therefore, a part of the revenue pie available for appropriation by the legislature. This view finds some support in earlier cases, which often appear to equate state revenue with deposit into the treasury. [8] Later cases, however, undermined this simple identity, holding that moneys paid to the state treasury did not become a homogenous class of state money. [9] The 1986 amendment to article IV, section 15 conclusively resolved this issue by explicitly constitutionalizing two of this Court's principal conclusions in Mallory . The 1986 amendment not only specifically requires that federal funds be deposited into the treasury (All revenue collected and moneys received by the state which are state funds or funds received from the United States government shall go promptly into the state treasury), but also makes clear that even once deposited into the treasury, such moneys retain their character as federal (as opposed to state) funds: The investment and deposit of state, United States and nonstate funds shall be subject to such restrictions as may be prescribed by law. [10] The idea that the state is more like a custodian of federal funds than their owner is entirely consistent with the constitutional provision authorizing receipt of federal moneys: Money or property may also be received from the United States and be redistributed together with public money of this state for any public purpose designated by the United States. [11] It is no longer the case, if, indeed, it ever was, that state revenue merely means all moneys deposited into the state treasury. Federal funds, which, when received into the treasury, do not become state funds and are held by the state subject to the dictates of federal law, are not state revenue within the meaning of article IX, section 3(b).