Opinion ID: 1755180
Heading Depth: 1
Heading Rank: 14

Heading: Impermissible Delegation of Authority

Text: Myers contends that [t]he Nebraska State Funds Investment Act does not provide for delegation of any of the duties imposed on the NIC and the Investment Officer. Brief for appellant at 18. He first argues that the express authorization in § 72-1242 for the investment officer to retain financial advisors operates to exclude a more extensive delegation of investment decisions. He apparently argues the investment officer has no authority to retain investment management services. As noted, however, § 72-1249.02 explicitly provides: Management, custodial, and service costs which are a direct expense of state trust funds may be paid from the income of such trust funds. . . . We find no merit to his argument that § 72-1242 prohibited the NIC from contracting for investment management services. Second, Myers contends that the WG Trading contract, with a term of 49 years, constituted a total abdication of power and control by the NIC regarding the money it invested in Westridge and WG Trading. Brief for appellant at 16-17. But he does not direct us to, nor has our research uncovered, any case law holding that a governmental entity charged by the Legislature with the investment of state funds may not contract for any investment services. The Nebraska Constitution does not prohibit the State from doing business or contracting with private institutions in fulfilling a governmental duty and furthering a public purpose. Father Flanagan's Boys Home v. Dept. of Soc. Servs., 255 Neb. 303, 583 N.W.2d 774 (1998). Compare State ex rel. Douglas v. Thone, 204 Neb. 836, 286 N.W.2d 249 (1979). In Father Flanagan's Boys Home, the statute at issue obligated the State to pay the cost of educating state wards under defined circumstances. The Nebraska Department of Health and Human Services argued that the statute violated Nebraska's constitutional prohibition against public appropriations to private schools. This court stated that the case did not involve a contractual delegation of the state's duty to provide a free public education to its citizens. Rather, it involves a contract made by a state agency to obtain educational services for state wards for whom it is responsible in a quasi-parental capacity. Id. at 315, 583 N.W.2d at 782. Similarly, regarding municipal corporations acting as state agents, this court has adopted the following rule, which is equally applicable to other governmental entities acting as state agents: ` Unless authorized by statute or charter, a [governmental entity], in its public character as an agent of the state, cannot surrender, by contract or otherwise, any of its legislative and governmental functions and powers. . . .' (Emphasis in original.) Vap v. City of McCook, 178 Neb. 844, 850, 136 N.W.2d 220, 224-25 (1965), quoting 2 Eugene McQuillin, The Law of Municipal Corporations § 10.38 (3d ed. 1966). In Vap, this court rejected the argument by resident taxpayers that the city had bartered away its police power to regulate parking in the future. 178 Neb. at 849, 136 N.W.2d at 224. There, the city contracted with the State Department of Roads to prohibit parking on a street, in connection with improvements planned for U.S. highways passing through the city. We concluded that unlike some of our earlier cases, the Legislature had authorized the contracts between political subdivisions and the Department of Roads for a broad array of purposes. We reversed the district court's judgment that the contract was illegal and void. Id. As in Father Flanagan's Boys Home and Vap, the Legislature has expressly granted power to the NIC to contract for investment management services. When a government entity is responsible for providing a service and has the power or legislative authority to contract for those services, its determination to enter into a contract for those services is a legislative act. See Tracy v. City of Deshler, 253 Neb. 170, 568 N.W.2d 903 (1997). See, also, Winter v. Lower Elkhorn Nat. Resources Dist., 206 Neb. 70, 291 N.W.2d 245 (1980). It is true that the NIC officials could not delegate their duty to formulate and establish policies for the investment of state funds as set out in § 72-1239. Similarly, the investment officer could not delegate his duty to direct investments and reinvestments of state funds. See § 72-1243. But if the Legislature had intended the investment officer or NIC officials to individually conduct every investment transaction involving state assets, it would not have authorized the investment officer to contract for investment management services. Even if the investment management contracts involve the relinquishment of some discretionary decisionmaking on a day-to-day basis, the contracts are not prohibited when expressly authorized by statute. Although the term of the partnership contract with WG Trading ended on December 31, 2050, the NIC could withdraw its capital investment with 6 months' notice. And the record shows that the NIC did withdraw its capital when it voted to terminate the contracts in February 2004 and its principal and income moneys were returned in September 2004. We conclude Myers' claim that the NIC totally abdicated its investment responsibilities by contracting to have part of those assets managed by a private business is without merit. Thus, Myers' claim that the contracts constituted an impermissible delegation of duties did not entitle him to recover any relief on behalf of the State.