Opinion ID: 1716385
Heading Depth: 1
Heading Rank: 4

Heading: Offshore Mineral Revenues; Use of Funds

Text: Section 10. Funds derived from offshore mineral leases and held in escrow under agreement between the state and the United States pending settlement of the dispute between the parties shall be deposited in the state treasury when received. Upon such settlement, these funds and the interest from their investment, except the portion otherwise allocated or dedicated by this constitution, shall be used by the state treasurer to purchase, retire, or pay in advance of maturity the existing bonded indebtedness of the state or shall be invested for that purpose. If any of these funds cannot be so expended within one year, the legislature may appropriate annually, for capital improvements or for the purchase of land, ten percent of the remaining funds, not to exceed ten million dollars in one year. of Article IV, Section 2 of the Constitution to be placed in the Royalty Road Fund to the credit of the parish from which production is had and not including any portion of such funds now dedicated or allocated to public education purposes, shall be credited by the state treasurer to a special fund in the state treasury. So much of the monies credited to the special fund hereinabove provided for as are needed for the purpose shall be expended by the state treasurer, when authorized and directed to do so by the Board of Liquidation of the State Debt, to purchase and retire in advance of maturity the callable bonds or other evidences of indebtedness of the state of Louisiana or its agencies, boards and commissions. Monies thereafter remaining on deposit in said special fund, which cannot be expended immediately for the purpose hereinabove provided, shall be invested by the state treasurer, in such amounts as he in his discretion may deem advisable and in the best interest of the state. Such funds, including any interest earned thereon, shall be invested and reinvested in time certificates of deposit in state banks organized under the laws of Louisiana or national banks having their principal office in the state of Louisiana and in short-term United States Treasury bills and in bonds and other direct obligations of the United States Government. Out of the total funds remaining in the said special fund on the last day of each calendar year there shall be set aside such amount as is needed to pay the principal of and interest on the outstanding bonded and other indebtedness of the state and its agencies, boards and commissions in the next succeeding calendar year, as hereinabove provided, and such funds so set aside shall be so used. Thereafter, not more than ten percentum of the total value of the said special fund remaining on the last day of each preceding calendar year, up to but not in excess of Ten Million Dollars, may be appropriated by the Legislature during the first calendar year following the adoption of this amendment in 1966 and in any calendar year thereafter, for capital improvements, including the purchase of land, architect and engineering fees, construction costs and equipment for buildings and other costs. This Section shall be self-operative and shall require no further or other legislation to place it into effect. III. Analysis of Predecessor Constitutional Provision re Threshold Issue; Intent of 1974 Constitution's Section 10 The quoted predecessor provision of the 1921 constitution required tidelands funds when received to be placed into a special fund. From this fund, when authorized and directed by a political organ of government then entrusted with aspects of debt management, the treasurer was to expend monies to purchase and retire in advance of maturity the callable [7] bonds or other evidences of indebtedness of the state. (Italics ours.) The section further provided that monies not so used should be invested so as to bear interest; and that, annually, Out of the total funds remaining in the said special [invested] funds on the last day of each calendar year, a sum shall be set aside and used to pay the principal of and interest on the outstanding indebtedness of the state ... in the next succeeding calendar year. Thus, with regard to the specific issue before us, the predecessor provision directed that the funds be immediately used to reduce indebtedness in advance of maturity only before the end of the calendar year. However, the political agencies of the state were authorized and in fact directed to use the remainder of the funds annually thereafter to the extent needed to pay the principal and interest of the existing state indebtedness, either as it fell due or (by implication) in advance of maturity. With regard to the specific issue before us, the general language of the 1974 constitutional provision may reasonably be interpreted to similar effect. In light of the constitutional intent to incorporate the substance of this predecessor provision in Article 14, Section 10 of the 1974 constitution, the proper interpretation of the provision [8] in the matter now at issue is: 1. The tidelands funds may not be used to pay bonded indebtedness already due at the time of the receipt of the funds or that which falls due immediately thereafter. During an initial period after receipt, the funds may be used only to reduce bonded indebtedness in advance of its maturity. 2. However, the tidelands funds may be invested to pay bonded indebtedness not yet due, rather than being immediately used to pay such bonded indebtedness in advance of maturity. The convention debates [9] and the arguments before us indicate practical reasons why it may be financially advantageous to the state instead to invest the funds at the present high rates of interest in order to use the proceeds to pay off lowinterest obligations later, at their subsequent maturity. This, indeed, was the explicit purpose of the floor amendment explicitly permitting investment of the funds to pay obligations not yet mature rather than using the tidelands funds immediately for such purpose. [10] 3. The obligations not then due at the date of the receipt of the tidelands funds include the indebtedness of the next and succeeding years. Tidelands funds may be invested to pay these debts. That is, we can find no intent in the predecessor provision or the constitutional debates that directs the use of the funds only to longterm obligations of the state which would not ordinarily be paid from the revenues of the year in question. [11] No intent is reflected to prevent this so-called windfall to the legislatures of the succeeding years, whether consecutive to the receipt of the tidelands funds or long thereafter, by using tidelands funds rather than current revenues to pay off obligations which mature in those succeeding years. 4. Unlike the predecessor provision, the 1974 section does not specify the initial period during which only debts not yet matured may be paid in advance of maturity. (During this period, the tidelands funds may be invested to pay indebtedness maturing after expiration of the period, so as to pay such unmatured debts as they mature; rather than paying such unmatured debts immediately during this initial period, to the possible financial detriment of the state.) The 1974 provision does not itself clearly define this initial period, nor do the constitutional debates shed any light as to it. The issue thus addresses itself to judicial ascertainment. Arguably, in view of the constitutional intent to retain the substance of the prior constitutional provision, this initial period could be the same as that specified by the predecessor provisioni.e., tidelands funds could be used to pay only debt maturing after the end of the calendar year in which the funds are received. However, to select this date (end of the calendar year) as the termination of the initial period when only unmatured debts may be paid, is to reach a construction not founded upon any constitutional language, without any clear constitutional intent to guide us to this result. Arguably also, this initial period could terminate at the end of one year after date of receipt of the tidelands funds. This construction would be based upon the final sentence of the 1974 section, which provides that the legislature may annually appropriate, for land and capital improvements, ten percent of the funds not so expended within one year of receipt, not to exceed ten million dollars. No party so contends, however, perhaps because, in the context of the limited purpose of the sentence (see part V, question 8, below), ascribing this constitutional effect to the sentence is not founded upon any constitutional intent. The taxpayers and the state treasurer argue that: Construing the constitution as a whole, it has made provision for the payment of obligations which become due and payable within the current fiscal year, see Article 7, Section 9(B). This being so, tidelands funds should not be used to pay such obligations as they mature during the fiscal year of the receipt of the funds, in view of the constitutional intent of Article 14, Section 10, that only unmatured debts may be paid by tidelands funds during some initial period after the state receives them. Implicit in this limited prohibition upon the use of tidelands funds is that, during this initial period after receipt, they should be used to pay only unmatured obligations which would not otherwise be paid. We find this last to be the most reasonable of the interpretations available to us. It is based upon constitutional language, and it implements the functional intent of Section 10's limitation upon the use of tidelands funds, during an initial period after receipt, to pay only in advance of maturity some of the existing bonded indebtedness of the state. We therefore would conclude that tidelands funds may not be used or invested to reduce any of the bonded indebtedness of the state which are due and payable during the fiscal year of their receipt by the state. See also part IV of our opinion below. We thus to this extent affirm the ruling of the trial court in granting a preliminary injunction in the taxpayers' suit, Fenner et al. v. Parker, Treasurer.