Court Opinion

ID: 9687940
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:54:40.793051+00
Date Added: 2024-06-11T18:18:33.554767
License: Public Domain

BECKER, Justice
(dissenting).
I respectfully dissent from Division IV and the result. The special fund doctrine is so broadly interpreted here as to make Article VII, sections 2 and 5 practically meaningless.
Tuition is paid for current expenses. Defendants contend they may place all of this current expense income in a special fund and use it for debt retirement. The current expenses are to be paid by legislative appropriation from general State funds. The legislature can control contracts for future obligations but each successive legislature is confronted with obligations already incurred. It will be forced to provide replacement funds or see its entire University educational system break down.
This conclusion is amply demonstrated by the testimony of Robert W. Moore, Vice President for Business and Finance of Iowa State University:
"The plan is for the Legislature to replace the money that we take out of student fees. * * *
“The Plan is that we will use the tuition money we collect as an insurance to the bond buyers and expect the Legislature to replace it with appropriations so that we can maintain our current operating levels. This fee is an insurance to bond buyers by being pledged to support the debt service. We expect there will be funds appropriated to replace that debt service each year.
"It is generally understood by the officials at Iowa State University that the whole underlying theory of this bonding program for academic buildings is that the Legislature will replace all fees and charges which are used to finance the payments of bonds and interest on those building projects so that the University standards and operating levels will remain the same. If, for any reason, we had inadequate funds for operation and we had to curtail our services, that is our instructional service and the standard of courses offered, this would have a detrimental effect upon the student body and may jeopardize the income from tuition. It is our hope that the Legislature will make up annually the amount of money used for bonding in the form of appropriations. If that was not done, I do not think the bonding procedures would be desirable. I do not think it would be desirable to finance capital additions by bonding if this was not the approach. A more desirable approach would be to provide direct appropriations for the capital additions.” (Emphasis in record).
The State’s argument frankly concedes the above assessment of the situation is substantially correct. Iowa cases allowing issuance of revenue bonds are not in point. The distinction is clearly made in plaintiff’s brief. “None of those cases are *548applicable as the instant Act does not require and the instant project does not foresee that the ‘revenue bonds’ will be paid for wholly out of revenue arising therefrom, to the contrary, the record shows there will be insufficient revenue to retire the bonds.” This is simply debt management by the legislature — the very thing the constitutional prohibition is designed to prevent.
Put differently, the special fund theory has its use where a facility designed to be self-liquidating is contemplated. This might even be stretched to allow use of funds from other self-liquidating projects to bolster the weaker projects. But at this point the process should stop.
The difficulty is in the short step from “revenue bonds” (which give the theory legitimacy) to “special fund” (which allows evasion because the source of the special fund may indeed be tax money). If the special fund is to be proper the source of its income must also be proper. For me at least, this is not demonstrated here.