Background

• Petitioner James D. Schowalter, as Minnesota Commissioner, filed a Verified Complaint seeking validation of tobacco appropriation bonds under Minn.Stat. § 16A.99 (Supp.2011) to refund outstanding tobacco securitization bonds.
• The dispute centers on whether the proposed tobacco appropriation bonds are constitutional under Article XI, Sections 4 and 5 of the Minnesota Constitution.
• The state previously issued tobacco securitization bonds (2011 Tobacco Settlement Revenue Bonds) secured by tobacco settlement payments, with debt service paid from those revenues beginning in 2014.
• Legislation authorized the Commissioner to issue tobacco securitization bonds or tobacco appropriation bonds, with net proceeds not to exceed $640 million in 2012–2013 and with a validation procedure for appropriation bonds.
• The proposed Appropriation Refunding Bonds would be payable from future general fund appropriations and are not pledged to the full faith, credit, and taxing powers of the state; they include a continuing appropriation but are subject to legislative modification.
• The court held the controversy presented was solely the constitutionality under Article XI and concluded the appropriation bonds do not constitute public debt under the plain language of Article XI, §4, thus §5 does not apply.

Issues

Key Cases Cited

• State v. Osterloh, 275 N.W.2d 578 (Minn. 1978) (court defines constitutional interpretation as judicial, not legislative, decisionmaking)
• In re Schmidt, 443 N.W.2d 824 (Minn. 1989) (court emphasizes not issuing advisory opinions; require justiciable controversy)
• Rice v. Connolly, 488 N.W.2d 241 (Minn. 1992) (limits on expansive interpretation of constitutional provisions)
• State ex rel. Gardner v. Holm, 62 N.W.2d 52 (Minn. 1954) (language of provision controls unless ambiguous)
• Osterloh (repeat), 275 N.W.2d 578 (Minn. 1978) (see above)