Opinion ID: 1597762
Heading Depth: 1
Heading Rank: 2

Heading: the borrowing power of the state of michigan.

Text: In considering the constitutionality of Act No 346, it is well at the outset to have in mind the limited power of the State of Michigan to borrow money. The State of Michigan is not authorized generally to borrow. Article 9, § 12, of the Constitution of 1963, says, No evidence of state indebtedness shall be issued except for debts authorized pursuant to this constitution. The prohibition is clear and unequivocal. The State is without authority to borrow money except as constitutionally granted. The Constitution of 1963 discloses only four specific instances in which the State is constitutionally permitted to borrow:

The framers of the 1963 Constitution created a pay-as-you-go government for the State of Michigan. In furtherance of that scheme, the State of Michigan is specifically prohibited from becoming a guarantor or surety for anyone. It would be an obviously useless thing for the Constitution to prohibit the State from borrowing money and then permit the State to incur liabilities by becoming party to the borrowing of others. Thus, article 9, § 18, of the Constitution provides: The credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution. The purpose of this provision is to make certain that the State, which itself cannot borrow, except as authorized, does not accumulate unauthorized debts by indorsing or guaranteeing the obligations of others. III. THE BORROWING POWER OF STATE AUTHORITIES AND PUBLIC CORPORATIONS. While the State of Michigan has no authority to borrow money except as specifically authorized in the Constitution, this is not true of public bodies corporate. Article 9, § 13, of the Constitution of 1963, provides: Public bodies corporate shall have power to borrow money and to issue their securities evidencing debt, subject to this constitution and law. Public corporations, unlike the State, have general power to borrow money except as prohibited by the Constitution and by the statutes. Nothing in section 13 refers to the purposes for which public bodies corporate may borrow money. Nor does the Constitution expressly limit the purposes for which public bodies corporate may spend money, which they obtain either by process of borrowing or by gift, appropriation, or profit-making. Article 7, § 21, of the Constitution of 1963, specifically provides that cities and villages may levy taxes only for public purposes. When attempting to assess the validity of borrowing by public corporations, other than cities and villages, however, no such constitutional guidelines are to be found. The validity of any borrowing by public corporations must be measured by the corporate purposes of the public body corporate itself, as contained in its charter or in the act of the legislature establishing the public body corporate. If a public body corporate has been validly and constitutionally created by the legislature, its borrowing and spending, insofar as any test of purpose is concerned, will be held to be valid whenever they are properly related to its corporate purposes. This is not to say that the test of public purpose is irrelevant in this case. The existence of a public purpose is important here in three different respects, and will be dealt with later in this opinion.