Court Opinion

ID: 3679887
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:25:31.766422+00
Date Added: 2024-06-11T15:27:50.331769
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 467 
The initiative measure known as chapter 339 of the Laws of North Dakota of 1944-1945 is,
"An Act To secure for the state of North Dakota the benefits of federal funds . . . authorizing the state highway department to prepare a highway construction program to be financed by the issuance and sale . . . of state highway revenue anticipation certificates . . . imposing a one cent per gallon motor vehicle fuel tax upon all dealers . . . excepting only motor vehicle fuels sold and used solely for agricultural and industrial purposes, creating . . . retirement fund into which the said motor vehicle fuel tax shall be paid, authorizing the transfer into such fund from the state highway fund of such amounts, not exceeding $250,000.00 in any one year, as may be required to meet any deficit . . . pledging and appropriating such fund for the payment of said certificates, . . . ."
The purpose of this statute, as set forth in § 1 thereof is, "to enable the state to participate in and receive the full benefits of federal funds now available, and to be made available, by acts of congress . . . in the form of grants to the state in aid of the construction and reconstruction of public highways and bridges within this state, . . . ." Further it is the purpose to prevent unemployment and public relief of unemployed and to provide employment for citizens of the state who shall be in need of employment. To carry out this purpose, "The state highway department, as now or hereafter constituted, shall be, and is *Page 472 
hereby, authorized and directed to prepare and provide a plan and program for the construction and reconstruction of public highways and bridges within this state to be financed in part by the issuance and sale of `state highway revenue anticipation certificates,' as hereinafter provided. Such program and method of financing to be in addition to, and supplemental of, the construction, reconstruction, maintenance and repair of public highways and bridges authorized and being carried on by said state highway department under existing laws; and the power and authority given the state highway department herein shall be in addition to and not in derogation of the powers and authority now vested in the state highway commissioner or the state highway department under any existing law or constitutional amendment now in force or hereafter enacted."
Section 2 authorizes and empowers the state highway department, "to do all acts authorized by this law or necessary to carry into effect the provisions hereof; provided, that nothing in this act contained shall be so construed as to authorize or permit the state highway department or any officer or agency of the state, to create any state debt, or to incur any obligation of any kind or nature except such as shall be payable solely from the motor vehicle fuel tax hereinafter imposed and from revenues accruing to the state highway fund from excise taxes allocated to, and appropriated for, the construction, reconstruction and maintenance of public highways, including the retirement of obligations for the payment of which such revenues are pledged, as directed and required by section 186, as amended, and article 56 of amendments to the constitution of North Dakota, and chapter 169, laws of North Dakota for 1939, and other laws relating to the imposition, collection and use of such excise taxes now in force or amendments thereto. It shall be plainly stated upon the face of each certificate that it is issued under the provisions of this act and that it does not constitute an indebtedness of the state within the meaning of any constitutional provision or limitation."
The statute authorizes the state highway department, after it has prepared its plans and program for the work to be done, *Page 473 
"and has determined the amount that will be required to pay the state's share of the estimated cost of such construction" to prepare and issue "said state highway revenue anticipation certificates in a total aggregate amount not exceeding twelve million three hundred sixty thousand dollars ($12,360,000.00) par value, in form as hereinafter provided."
Provision is made for the form of such certificates, their negotiation, their value, rate of interest, date of maturity, etc.
Section 8 provides that the moneys realized upon the negotiation and sale of the certificates are to be placed, "by the state treasurer in and credited to a fund hereby created to be known as `state highway special construction fund', and thesame are hereby appropriated (italics ours) and shall be used and expended only for the construction and reconstruction of such highways and bridges. . . ."
Section 9 provides:
"For the purpose of providing funds for the payment of the semi-annual interest and the redemption of said certificates as the same become payable, there is hereby imposed on dealers in motor vehicle fuels, a special motor vehicle fuel license tax of one cent (1¢) per gallon on all motor vehicle fuels used and sold in the state of North Dakota; which tax shall be separate and apart from and in addition to any license tax or other tax imposed upon or applicable to motor vehicle fuels or dealers therein under the laws of this state, and said additional one cent (1¢) per gallon tax shall be in addition to and over and above the three cent (3¢) tax now imposed and assessed by the initiated measure approved June 30, 1926, and amendments thereof and acts supplementary thereto, known as `Motor Vehicle Fuel Tax Law', provided, however, that said additional one cent (1¢) per gallon tax shall not be imposed upon or applicable to motor vehicle fuels sold in this state to be used solely for agricultural and industrial purposes and said motor vehicle fuels so sold to be used solely for agricultural and industrial purposes shall be tax exempt, as is provided by chapter 147 of the 1939 session laws of the state of North Dakota, and amendments thereto, or any law hereafter enacted." *Page 474 
Section 10 requires every dealer in motor vehicle fuels as defined by the law described in § 9 to pay this additional 1¢ per gallon tax and by § 11 such dealer is entitled to collect an additional 1¢ as part of the selling price of the motor vehicle fuels.
Section 13 specifies when such 1¢ additional tax becomes collectible. The remaining sections of the statute are as follows:
Section 14: "There is hereby created a special fund to be used solely for the payment and retirement of the certificates authorized and to be issued under the provisions of this act and the payment of the interest to accrue upon said certificates, said special fund to be known as `state highway revenue anticipation certificate retirement fund', into which fund the state treasurer shall pay or transfer all monies derived from said one cent (1¢) motor vehicle fuel tax and all monies directed by this act to be transferred thereto from the state highway fund."
Section 15: "In the event the amount to the credit of said state highway revenue anticipation certificate retirement fund at any time shall be insufficient to pay the semi-annual interest and pay and retire the principal of said certificates, as they fall due and mature, there is hereby appropriated so much of the funds allocated and appropriated by the constitution and laws of this state for the construction, reconstruction and maintenance of public highways then credited to the state highway fund as may be necessary to meet such deficit in the state highway revenue anticipation certificate retirement fund, not exceeding, however, the sum of two hundred fifty thousand dollars ($250,000.00) in any one year, which amount so appropriated shall thereupon be transferred by the state treasurer to said state highway revenue anticipation certificate retirement fund and used for the payment of such interest and the retirement of the principal of said certificates so maturing."
Section 16: "The total proceeds of said special license tax of one cent (1¢) per gallon and any monies transferred to said state highway revenue anticipation certificate retirement fund from the state highway fund, as herein provided, are hereby appropriated and allocated without any deduction for administrative costs whatever and shall be expended only for the payment *Page 475 
of the interest to accrue upon said certificates and the payment of the principal and the retirement of said certificates as the same mature or become payable."
Section 17: "The total proceeds of said one cent (1¢) per gallon motor vehicle fuel tax and any monies transferred or to be transferred under Section 15 hereof from the state highway fund to said state highway revenue anticipation certificate retirement fund are hereby irrevocably pledged for the payment of the principal and interest of said certificates, and so long as any of said certificates remain outstanding and unpaid, the laws imposing said taxes shall not be repealed nor shall the same be altered or amended by reducing the amount or the requirement for the collection, disposition and use of said taxes, as herein and in the laws imposing said taxes provided. When there are sufficient funds in said state highway revenue anticipation certificate retirement fund to retire all outstanding and unpaid certificates said tax shall cease and terminate."
Section 18: "If any section, paragraph, sentence, part or provision of this act shall be found by any court to be invalid, it shall be conclusively presumed that this act would have been passed and enacted by the people without such invalid section, paragraph, sentence, part or provision."
The plaintiff alleges the state highway department has prepared and provided a plan and program under the provisions of this act and has determined that the sum of $12,360,000.00 is the amount required to pay the state's share of the estimated cost and, with the approval of the governor, has prepared,
". . . state highway revenue anticipation certificates in a total aggregate amount of $12,360,000.00 in the form prescribed by said Measure, and proposes, . . . to issue such certificates in the total amount of $4,000,000.00 forthwith, and in the additional amount of $2,000,000.00 in the latter part of 1946, and the remainder . . . when deemed necessary . . . in amounts not exceeding $6,000,000.00 in any one fiscal year. . . ."
The complaint challenges the constitutionality of this act on the grounds: that it violates § 25 of the constitution in conferring legislative powers upon the state highway commissioner and the *Page 476 
governor; that it violates § 182 of the constitution in providing for the incurring of a public debt that is not evidenced by a bond issue of the state as required by the constitution; makes no provision for a sinking fund for the payment of the principal and interest of the debt; provides for no levy of an annual tax to meet the indebtedness; and "that said certificates would constitute debts of the state in excess of the maximum debt limit provided by said section." Further, that the law violates the provisions of § 186 of the constitution as amended by article 53 of the amendments in that it provides for "the use and expenditure of funds of the state derived from taxation without appropriation being first made by the Legislature."
The defendants demurred to the complaint "upon the grounds that the same does not state facts sufficient to constitute a cause of action against the defendants herein."
The trial court sustained the demurrer and the plaintiff appeals.
Legislative power cannot be delegated. State ex rel. Rusk v. Budge, 14 N.D. 532, 105 N.W. 724. The legislature may delegate to a board or agency the power of administration, in order to carry the legislative will into effect. State ex rel. Gaulke v. Turner,37 N.D. 635, 164 N.W. 924; Neer v. State Live Stock Sanitary Bd.40 N.D. 340, 168 N.W. 601, 18 NCCA 1. Thus matters of administration may be delegated to the authority specified by statute. Efficiency in management requires the exercise of a certain amount of discretion as to the manner in which the legislative mandate may be effectuated. Manifestly the legislature cannot foresee and provide for every contingency. The range of discretion must necessarily vary in accordance with the importance of the work contemplated. Some authority must determine what highway must first be built or repaired; what method of construction shall be employed and other details which depend largely upon judgment, experience and knowledge. We are not prepared to state that there is in this statute any unlawful delegation of power herein. The power given to the officials seems rather to be that of administration merely.
Great stress is laid by the appellant upon the contention that *Page 477 
the initiative measure attempts to create a "special fund" out of State taxes; that the certificates to be issued and sold will create an "indebtedness" of the State; that this debt will not be evidenced by a bond issue; that this indebtedness is controlled by all the provisions of § 182 of the constitution; that the initiative measure is a device based on the "special fund theory," to evade the prohibitions set forth in § 182; and that it will divert revenue of the state to the specific purpose proclaimed in the measure and thus in effect destroy any debt limit provision.
There is no question but that in recent years the "special fund doctrine" has been established — that is, the theory that the revenue obtained from some utility or any public improvement is devoted to the debt created by that utility or improvement as the sole source of payment of the indebtedness and thus does not become a public debt of the state within the meaning of the term indebtedness used in consideration of debt limits. We have so held in this state. See Lang v. Cavalier, 59 N.D. 75, 228 N.W. 819. In this case cited we were considering the provisions of § 183 of the constitution dealing with the debt limit of cities; but the principle therein announced is applicable to the debt limit of the state. The general theory set forth in the Lang Case cited is the prevailing rule. Where a law provides for public utilities or improvements, for a revenue therefrom and that all indebtedness created is payable solely from that revenue and not from state taxation this indebtedness is not taken into consideration in determining the debt limit of the state or municipality.
An examination of this economic development shows that the special funds so set up, and which purport to be derived solely from the revenue of the improvement, are almost universally a product of legislation. As such product they are subject to the scrutiny of constitutional provisions. It is possible the proponents of this initiative measure and the people in adopting the same were under the impression that the revenue to be raised by the provision of the initiative measure could be and would be set up under some such "special fund" not heretofore created.
Whatever may have been the theory the fact remains that the initiative measure could not establish any "special fund" by *Page 478 
means of revenue from gasoline tax in the face of the one created by Article 56.
Thus when the initiative measure provides for a tax upon gasoline and these other sources of revenue it does not create a new fund. Article 56 of the amendments requires all revenue raised by such taxation to be devoted to the purpose therein stated. Therefore the revenue to be raised by the initiative measure is part of this fund, and any interpretation of the measure to the effect that it establishes a separate and independent "special fund," must be rejected.
The money raised by this one cent tax is part of the revenue controlled by Article 56 of the amendments.
Thus, in the case at bar we are confronted with a constitutional fund. That the people may establish a "special fund" by constitutional provision cannot be gainsaid. Therefore the controversy here as to the constitutionality of this initiative measure is to be determined by a comparison, interpretation and attempted harmonizing of the provisions of § 182, with § 186 and with Article 56 of the amendments to the constitution.
Section 182 makes provision for the State issuing and guaranteeing the payment of bonds, ". . ., provided that all bonds in excess of two million dollars shall be secured by first mortgage upon real estate in amounts not to exceed one-half of its value; or upon real and personal property of state owned utilities, enterprises or industries, in amounts not exceeding its value and provided further, that the state shall not issue or guarantee bonds upon property of state owned utilities, enterprises or industries in excess of ten million dollars.
No further indebtedness shall be incurred by the state unlessevidenced by a bond issue, which shall be authorized by law for certain purposes to be clearly defined. Every law authorizing a bond issue shall provide for levying an annual tax, or make other provision, sufficient to pay the interest semi-annually, and the principal within thirty years from the date of the issue of such bonds and shall specially appropriate the proceeds of such tax, or of such other provisions to the payment of said principal and interest, and such appropriation shall not be repealed nor the *Page 479 
tax or other provisions discontinued until such debt, both principal and interest, shall have been paid. No debt in excess of the limit named herein shall be incurred except for the purpose of repelling invasion, suppressing insurrection,defending the state in time of war or to provide for the publicdefense in case of threatened hostilities." (Italics ours)
In 1940 the people approved Article 56 of the amendments of the constitution, which reads as follows:
"Revenue from gasoline and other motor fuel excise and license taxation, motor vehicle registration and license taxes, after deduction of cost of administration and collection authorized by legislative appropriation only, and statutory refunds, shall be appropriated and used solely for construction, reconstruction, repair and maintenance of public highways, and the payment of obligations incurred in the construction, reconstruction, repair and maintenance of public highways."
Article 56 does not prevent the legislative authority from supplying by constitutional means the state highway department with funds from other sources of revenue than those mentioned therein; but it does prevent the diversion from the highway department of any "revenue whatsoever from gasoline and other motor fuel excise and license taxation" and other sources mentioned therein.
Article 56 is not wholly self-executing. The legislative department, which includes the people acting under the initiative, must specify the rate of taxation for the raising of the revenue provided for in the amendment; the legislative department can direct the state highway commission in the expenditures so long as there is no diversion of funds; and the legislative department, within the limitations provided, may specify how these funds may be expended. There is no delegation of legislative power here permitting the highway department to levy any tax it sees fit nor to spend it in any uncontrolled way (that is, there is no such provision in the constitutional amendment). Thus the legislature, in levying additional gasoline taxes, could provide that this additional money, already constitutionally appropriated to the development of the highways, could be used to repay *Page 480 
money borrowed for the building or rebuilding of the highways. The money is already appropriated for the general work, and the legislature could provide that the revenue derived from taxes on gasoline, etc., other than the one provided herein could be used to pay certain specified obligations incurred in the object, or for the building of necessary bridges or any other work within the purview of the object to be accomplished. The people acting under the initiative have the same power. An initiative measure is governed by constitutional provisions. Thus if the legislature should see fit to levy an additional tax on gasoline, it could say on what part of the building or repairing program it should be applied. The only limitation is that it must be used for building or rebuilding, etc., and the payment of the obligations incurred therefor.
Article 56 specifies that the revenue to be placed in this fund may be used in "the payment of obligations incurred in the construction, reconstruction, repair and maintenance of public highways." A comparison of the provisions in § 186 of the constitution, with reference to the allocation and appropriation of funds for the state highway department, with the provision in Article 56 shows the addition of this phrase, "the payment of obligations incurred."
Any portion of the money in this constitutional fund may be used for the payment of obligations. The initiative measure provides for the incurring of obligations, the proceeds thereof to be used solely for the purposes set forth in Article 56. The proceeds of this tax to be levied and of any and all similar taxes may be used for the purposes set forth in Article 56.
In a sense no construction or reconstruction of public highways could be made without incurring obligations in the form of contracts for building or repair, etc. Clearly the people intended by Article 56 to make the scope broad enough to include such device as the one adopted here — the issuance and sale of certificates of indebtedness. The initiative measure specifically limits expenditures to the construction, and reconstruction and the payment of any obligation arising from such construction, and reconstruction. The repayment of money borrowed for the purposes *Page 481 
of building the highways is an obligation contemplated by Article 56 and the amount taken from the other revenue raised by tax on gasoline as levied by the legislature can be used for the purposes specified in section 15 of the initiative measure.
Does the provision of § 182 of the constitution, which prescribes the debt limit apply to the provisions of Article 56?
Clearly the indebtedness incurred by Article 56 is a state indebtedness and, unless Article 56 otherwise provides, the indebtedness would be governed by the limit set forth in § 182 of the constitution. But the people in adopting Article 56, though knowing of the debt limit provided by § 182, intended to permit the creation and provided for the creation of specific obligations limited to those incurred in the construction, reconstruction, etc. of public highways. The people intended that all such revenue as is described in this Article 56 — no matter what the amount thereof may be — could be and must be used for the payment of such obligations. This amendment does not attempt to place a limit upon the method of raising the revenue. The state already has levied a tax upon gasoline and other motor fuel and has provided rates of taxation for license, registration, etc. In so far as the rate is concerned there is no hampering of legislative activity. There is no provision for the rate of taxation. The limitation is on the purposes of the expenditure. No limitation is placed upon the amount which may be raised.
This court holds: obligations incurred by the state highway department in the construction, reconstruction, repair and maintenance of public highways are not subject to the limitations of § 182 of the Constitution.
Section 186 of the constitution as amended and now in force, requires that, "All public moneys, from whatever source derived, shall be paid over . . . to the State Treasurer . . . and shall be paid out and disbursed only pursuant to appropriation firstmade by the Legislature: . . . ." (Italics ours) There are exceptions thereto which are not involved in this case. Appellant points out that the appropriation is made in the bill and *Page 482 
contends the constitution prohibits appropriations of public money to be made unless made by the legislature.
However the same section of the constitution provides a standing appropriation for various departments and activities of the State including the "State Highway Department." Section 186 contains this language, ". . . provided however, that there is hereby appropriated . . . the funds allocated under the law to the State Highway Department and the various counties for the construction, reconstruction and maintenance of public roads."
Prior to July 1939 this § 186 of the constitution provided that, "No money shall be paid out of the State Treasury except upon appropriation by law, . . . ." In 1939 this section of the constitution was amended to provide that all public moneys from whatever source derived should be paid over to the State Treasurer and "paid out and disbursed only pursuant to appropriation first made by the Legislature; . . . ." The proviso heretofore set forth was included in the amendment and thus all "funds allocated under the law to the State Highway Department" were appropriated to the department by the people under the constitutional amendment. Thus the people determined that whatever amount of money was allocated to the Highway Department could be used by the Highway Department without appropriation by the Legislature. This section of the constitution did not specify the amount of the fund, nor its source; but it did determine that whatever money was allocated to the Highway Department could be expended without legislative appropriation. The Legislature, and the people in the exercise of the power of initiative, could determine the extent of these funds.
This court holds that the provisions of §§ 15 and 16 of the initiative measure "appropriating" the funds so raised are not in violation of § 186 of the constitution. It is true this § 186 provides that all public moneys from any source whatever must be paid to the state treasurer and cannot be paid out of the treasury except by legislative appropriation; but there is the express exception *Page 483 
in case of money allocated to the state highway department and this money is "appropriated" by the constitutional provision. No further "appropriation" is necessary, nor may the legislature prevent it. Article 56 contains the provision that the moneys in this constitutional fund "shall be appropriated and used solely" for highway construction work; but this appropriation has been made already under the provisions of section 186 of the constitution. This appropriation made in section 186 is not limited to funds already allocated at the time the constitutional provision was adopted. It affects all subsequent revenue raised for this specific purpose.
It is contended that the provisions in § 15 of the initiative measure, allocating to the payment of obligations created by the initiative measure a sum up to $250,000.00 in any one year from the revenue collected under Article 56 violates the constitutional provision dedicating this revenue to the sole purposes of building, repairing, etc., the highways in that it diverts a portion of the revenue in the interest of investors in revenue anticipation certificates and not to the actual building and repairing program.
The initiative measure is not attacked upon the ground that this special tax of one cent per gallon cannot be levied by the people in adopting the initiative measure. It is attacked on the ground that the total amount of indebtedness sought to be incurred exceeds the debt limit. But, as pointed out, Article 56 not only authorizes the payment of such obligations but clearly contemplates the incurring of such obligations no matter what may be their extent, and therefore in adopting Article 56, later in time, clearly provided by constitutional methods for a fund which is not to be considered in determining the extent of the debt limit as prescribed in § 182.
This court therefore holds: the objection that the indebtedness incurred is governed by and exceeds the debt limit is not tenable; that there is a constitutional and continuous appropriation of the revenue provided and that no legislative power is delegated by the measure. Consequently the initiative measure is not vulnerable to the constitutional attack made and the decision of the lower court is affirmed. *Page 484 
MORRIS, BURKE, and NUESSLE, JJ., concur.