72 N.Y.2d 363 | NY | 1988
Lead Opinion
OPINION OF THE COURT
Petitioner, a resident and taxpayer of Nassau County, instituted this article 78 proceeding to invalidate the 1988 Nassau County budget and to. compel respondents to prepare and adopt a new one. At bottom the dispute concerns whether respondents, the County Executive and members of the County Board of Supervisors, illegally held estimated surplus moneys off budget in violation of the requirements of section 302 of the Nassau County Charter. Petitioner has been successful in the courts below and the matter is here by permission of this court.
I
On October 26, 1987 the Nassau County Executive, respondent Gulotta, issued an official county news release announcing that he anticipated a year-end cash surplus of $80.1 million in the county general fund. Stating that the entire surplus could be applied to reduce property tax rates for 1988 but that such "action would be short-sighted and could result in a dramatic increase in taxes next year”, he proposed to "stabilize property taxes” by using the accumulated surplus over a three-year period. Two weeks later, on November 9, 1987, Gulotta announced his proposed 1988 budget to the public and sent it to the Board of Supervisors for approval. The charter also required him to send the Board of Supervisors an accompanying budget message and in his message, Gulotta repeated his earlier estimate of a record surplus, this time placing it at $90 million. He stated once more that the entire amount was available to reduce 1988 taxes but repeated his plan to accumulate the surplus and spend it proportion
Petitioner instituted this article 78 proceeding contending that the budget proposed by the County Executive and passed by the Board of Supervisors did not comply with County Charter § 302 (5). That section requires the executive budget to contain a "statement of the estimated cash balance, after deducting commitments estimated to be outstanding at the close of the [then] current fiscal year”. Respondents denied the essential allegations of the petition, interposed several objections in point of law and asserted counterclaims for abuse of process and malicious prosecution. They subsequently moved to dismiss the petition. On the return of the motion Supreme Court held that mandamus was an appropriate proceeding to compel executive action but not to review the validity of the legislatively adopted budget. Accordingly, it severed the proceeding against the Board members and converted it to an action under section 51 of the General Municipal Law. It treated respondents’ motion to dismiss the petition as a motion for summary judgment, searched the record and granted judgment to petitioner. In a well-reasoned decision, Justice DiPaola held that the budget adopted was invalid and could not be made effective by legislative action because "the Board of Supervisors relied upon a false premise, namely, that the entire amount of the year-end surplus required to be included” was so included. Two separate judgments were entered. In the first (the article 78 proceeding), the County Executive is the named respondent and the judgment directs him to resubmit to the Board of Supervisors a revised 1988 Nassau County budget which contains a statement complying
We agree with the courts below that the County Executive failed to comply with the legal requirements of the County Charter directing him to account in the budget for all estimated revenues and that the Board of Supervisors’ action, in approving a document which did not state the County Executive’s true estimate of the anticipated unencumbered cash balance, was a nullity. Accordingly, we modify the order of the Appellate Division, with respect to the time of performance only, and otherwise affirm.
II
Several threshold contentions raised by respondents must be treated before addressing the merits.
Respondents’ principal claim is that this matter is nonjusticiable because it requires the courts to invade the budgetary process, the exclusive domain of the executive and legislative branches of government. They rely on Saxton v Carey (44 NY2d 545) and Judge Breitel’s dissenting opinion in Hidley v Rockefeller (28 NY2d 439, 440). These authorities stand for the principle established in People v Tremaine (281 NY 1) that the executive must itemize entries in the budget but that the degree of itemization is a matter of discretion which the court will not review. Manifestly, the courts cannot and will not intervene in the budget process if doing so requires them to substitute their judgment on matters of discretion. As we stated in Saxton, however, "[w]e do not suggest by our decision today that the budgetary process is per se always beyond the realm of judicial consideration * * * The courts will always be available to resolve disputes concerning the scope of that authority which is granted by the Constitution to the two other branches of the government” (44 NY2d 545, 551, supra; see also, Wein v Carey, 41 NY2d 498, rearg denied 42 NY2d 910; Matter of Block v Sprague, 285 NY 69; People v Tremaine, 281 NY 1, supra).
Next, respondent County Executive contends that the remedy of mandamus does not lie to review his estimate of the unencumbered cash balance because it is an inherently discretionary act. He contends that he complied with the requirement of section 302 (5) when he included in his proposed budget an item for estimated cash balance and that courts may not substitute their judgment as to the appropriateness of the particular figure chosen by him. Mandamus will lie to compel acts that public officials are duty bound to perform regardless of how they may exercise their discretion in doing so (see, Klostermann v Cuomo, 61 NY2d 525, 539-540). The remedy is appropriate here because the present dispute does not involve a difference of opinion on the size of the estimate contained in the budget but whether respondents may omit from the budget account of estimated year-end cash balance sums which the County Executive acknowledged the county would receive. That is a matter of statutory interpretation appropriately decided by the judiciary.
Respondents also contend that Supreme Court erred in holding that petitioner’s failure to appear and object at a
Finally, respondents maintain that the Supreme Court’s severance of a portion of petitioner’s article 78 proceeding and its conversion to a General Municipal Law §51 action was improper on the ground that a taxpayer’s action pursuant to section 51 does not lie to challenge the legality of the budget process. Extending this reasoning to its logical end, respondents would argue that even if the County Executive violated section 302 (5) of the County Charter and mandamus were available to compel respondent Gulotta to comply with the statutory mandate, the matter is now beyond judicial review because the Board of Supervisors has passed the budget.
We have recognized that an action pursuant to General Municipal Law § 51 may take the form of action for a declaratory judgment if it satisfies the statute’s requirements (Wein v City of New York, 36 NY2d 610, 621; Bloom v Mayor of City of N. Y., 35 AD2d 92, 95, affd 28 NY2d 92). Section 51, entitled "Prosecution of officers for illegal acts”, provides that: "All officers * * * and other persons acting, or who have acted, for and on behalf of any county * * * in this state, and each and every one of them, may be prosecuted, and an action may be maintained against them to prevent any illegal official act on the part of any such officers * * * or other persons, or to prevent waste or injury to, or to restore and make good, any property, funds or estate of such county” (emphasis added). Although the disjunctive phrasing of the statute would appear to authorize suits if there is either an "illegal official act” or "to prevent waste” we have held that a showing of mere illegality is not enough (see, Mesivta of Forest Hills Inst. v City of New York, 58 NY2d 1014; Kaskel v Impellitteri, 306 NY 73,
In this case, respondent County Executive submitted an allegedly illegal budget to the Board of Supervisors. In acting upon it, the Board relied upon a false premise, i.e., that the full estimated cash balance had been included in the proposed budget when in fact the estimate did not comply with the legal requirements of the County Charter. The Board lacked the power to authorize a budget that was illegal and its action in adopting the budget was a nullity. It is irrelevant that the Board members knew of the deficiency when they acted or that they acted in good faith; the Board’s action could not legalize a budget which did not comply with statutory mandates. Petitioner has met his burden of demonstrating a public injury entitling him to maintain a section 51 action because county moneys, available to reduce property taxes, were not lawfully appropriated at the time of the passage of the 1988 budget, but were held off-budget. Their existence, unaccounted for, was illegal and threatened the public interest.
III
Respondents assert that even if these threshold considerations are resolved against them the order of the Appellate Division should be reversed because they have complied with the requirements of section 302 (5).
A budget is a statement of the financial position of the government, for a definite period of time, based upon an estimate of proposed expenditures and anticipated revenues (see, Matter of Collins v City of Schenectady, 256 App Div 389, 391). The method by which public budgets are prepared is governed by the State Constitution and the applicable State statutes. The requirements contained in those documents are not particularly burdensome and permit the executive and
The governing statute in this case is the Nassau County Charter enacted by the State Legislature in 1936 and which contains provisions essentially the same as those found in the laws governing other municipalities (see, County Law § 355 [1] [g]; Town Law § 107 [1] [b]; Village Law § 5-506 [1] [c]). It provides that no later than the 15th day of September each year Nassau County department heads shall furnish to the County Executive estimates of revenues and expenditures for their departments for the next fiscal year (§ 301). From this data the County Executive must prepare his proposed budget for the ensuing fiscal year and submit it to the legislature no later than the second Monday in November (§ 302). The proposal must contain a statement of all estimated revenues exclusive of revenues derived from the tax levy (§ 302 [1]), a statement of estimated revenues from the tax levy (subd [2]), a statement of estimated receipts from the sale of bonds and other borrowing (subd [3]), a statement of the amount of the sinking fund available to pay bonded indebtedness (subd [4]) and "a statement of the estimated cash balance, after deducting commitments estimated to be outstanding at the close of the current fiscal year, in each fund, applicable to expenditures of the ensuing fiscal year” (subd [5]).
The provisions of section 302 are mandatory. They direct that the proposed budget "shall” contain a statement of the estimated cash balance. The requirement is in accord with the strong policy of the law to require a full accounting of all public funds and to prevent municipal governments from acquiring tax proceeds faster than they are needed. A corollary of this generally recognized principle is that funds may not be accumulated for the remote future or for contingencies which may never occur. The accumulation is unjust because it deprives the people of the use of money taken from them by taxes for a considerable period and it is impolitic because it may tempt public officials having custody of the funds (see generally, 15 McQuillin, Municipal Corporations § 39.02a [3d rev ed]). The rule is intended to protect taxpayers from the misuse of surplus funds "to hide deficit spending or to reap political profit” (see, Town of Evans v Catalino, 103 Misc 2d
The New York State Comptroller considered this specific issue when he interpreted County Law § 355 (1) (g). In that instance a County Treasurer estimated that the county would enjoy a surplus of between $600,000 and $700,000 for fiscal 1969. The Board of Supervisors estimated $450,000 of this sum as revenue for 1970 and the remainder was set aside to operate the county in the first three months of 1970. The Comptroller observed that it was unlawful for the county to set aside $150,000 to $250,000 for the purpose of operating the county during the early part of the next fiscal year. "The practice employed by the county herein of estimating surplus for the purpose of carrying moneys into fiscal 1970 is completely unauthorized, contrary to statutory directive, and unnecessary to make moneys available for the operation of county government * * * The tentative budget must contain a statement of the aggregate amount of cash surplus in the general fund estimated to be on hand at the close of a fiscal year, after deducting encumbrances estimated to be outstanding at the close of that fiscal year (County Law, § 355 (1) (j)). In other words, the entirety of the estimated unencumbered surplus must be counted as a revenue of the forthcoming fiscal year and thereby be used to reduce real property taxes to be levied for such forthcoming fiscal year” (1970 Opns St Comp No. 70-393; see also, 1980 Opns St Comp No. 80-280, at 79 [interpreting Town Law § 107 (1)]; 1969 Opns St Comp No. 69-708 [also interpreting Town Law § 107 [1]; 2 Opns St Comp, 1946, No. 46-1467, at 399).
Respondents assert several reasons why they believe the County Executive complied with the mandate of the charter notwithstanding the discrepancy between his announced $80-90 million estimate and the $17.7 million estimate included in the budget. Their principal contention is that it was permissible not to include $24.5 million (an amount substantially less than the balance of $80-90 million remaining after the budget was adopted). They claim the sum was a "commitment” within the meaning of County Charter § 302 (5) because in February 1988 the Board of Supervisors set up a tax-stabilization reserve fund, purportedly authorized by General Municipal Law § 6-e, in the amount of $24.5 million. At the time the budget was proposed and adopted in 1987, however, this $24.5 million could not have been a "commitment” within the meaning of section 302 (5) because the fund had not yet been
When the County Executive and the Board of Supervisors prepared the budget for 1988 in 1987, they could have treated the proceeds as estimated or anticipated revenue for the reduction of taxes in the next fiscal year or attempted to create and fund a tax-stabilization reserve fund in lieu thereof to avoid the unauthorized carry over of surplus for three years. In either event, however, the charter required that the sums be included in the proposed budget’s statement of estimated cash balance, since the decision to create the fund would not occur until after the proposed budget was submitted by the County Executive and because at the time the budget was proposed the anticipated revenues were not encumbered (see, 2 Opns St Comp, 1946, No. 46-1467, at 399).
The parties also dispute the propriety of not including in the estimated cash balance amounts attributable to the so-called Tax Law § 1262 (d) (sales tax) revenues. In view of our holding that the budget was illegal because of the failure to include all estimated revenues, particularly those subsequently deposited in the tax-stabilization fund, we need not pass on the merits of this argument.
We concur with the courts below that there is nothing to indicate that respondents acted with anything less than complete good faith or with any intention of harming the public and that there is thus no basis for a prosecution under section 51 to hold them personally responsible. Nevertheless, the budget does not comply with the provisions of the County Charter and must be corrected.
. On February 22, 1988, while the motion to dismiss the petition was pending in Supreme Court, the Board of Supervisors created a tax-stabilization reserve fund pursuant to General Municipal Law § 6-e and appropriated $24.5 million of 1987 revenues into the fund.
. We note that General Municipal Law § 51 is equitable in nature, and nothing in this opinion should be read as preventing a court from assessing equitable factors under that section, especially before drastic relief, such as the invalidation of a municipality’s budget, is ordered. Appellants, however, do not raise this issue on appeal, and we do not consider it here.
Dissenting Opinion
(dissenting). By constitutional design, our system of government is tripartite in nature, with power shared among three coequal branches. "It is a fundamental principle of the organic law that each department should be free from interference, in the discharge of its peculiar duties, by either of the others” (Saxton v Carey, 44 NY2d 545, 549). We have held that "the court as a policy matter, even apart from principles of subject matter jurisdiction, will abstain from venturing into areas if it is ill-equipped to undertake the responsibility and other branches of government are far more suited to the task” (Jones v Beame, 45 NY2d 402, 408-409 [Breitel, Ch. J.]). Such judicial restraint reflects a recognition that there are "questions of broad legislative and administrative policy beyond the scope of judicial correction” (Jones v Beame, 45 NY2d, at 408, supra) and that certain decisions, involving "questions of judgment, discretion, allocation of resources and priorities inappropriate for resolution in the judicial arena”, are better left to the "network of executive officials, administrative agencies and local legislative bodies” (Matter of Abrams v New York City Tr. Auth., 39 NY2d 990, 992). Because we believe the majority, in affirming the determination below invalidating the Nassau County budget, has departed from fundamental principles defining the proper scope of judicial authority, and has intruded into an area of responsibility constitutionally reserved to the other branches of government, we respectfully dissent.
It can hardly be disputed that the creation and enactment of a local budget is a responsibility peculiar to the executive and legislative branches of government (Saxton v Carey, 44 NY2d 545, 549, supra). The executive branch "has the responsibility and the obligation to ascertain the financial needs of the various departments and projects of the [local] government, and to submit to the [local legislative body] for its consideration a budget and various appropriation bills incorporating those needs” (Saxton v Carey, 44 NY2d, at 549, supra). It is then for the local legislative body "to approve or disapprove of the various expenditures proposed” (Saxton v Carey, 44 NY2d, at 549, supra). Of course, this is not to say that the
Article III of the County Government Law of Nassau County (County Charter) (L 1936, ch 879 and amendments thereunder) directs the County Executive to submit to the Board of Supervisors a "proposed budget of revenue and expenditure for the ensuing fiscal year for the county” (County Charter § 302). The proposed budget must contain, among other things, "a statement of the estimated cash balance, after deducting commitments estimated to be outstanding at the close of the current fiscal year, in each fund, applicable to expenditures of the ensuing fiscal year” (County Charter § 302 [5]). In accordance with this legislative mandate, respondent Gulotta transmitted his proposed 1988 budget for Nassau County to the county legislature on November 9, 1987. The proposed budget, totaling approximately $1,429 billion in operating revenues, contained an estimated general fund balance of $17.7 million. On December 21, 1987, after holding a public hearing on the budget as required by County Charter § 304, respondent Nassau County Board of Supervisors (Board) formally adopted the budget. In the process of its review and adoption of the proposed budget, the Board allocated an additional $2.5 million to the general fund balance, raising the amount of the total balance to $20.2 million.
Petitioner Korn, a taxpayer and resident of Nassau County, instituted this proceeding challenging the validity of the Nassau County budget based upon certain official pronouncements of respondent Gulotta indicating an estimated year-end surplus greater than the figure appearing in the budget as proposed and as adopted. In a news release issued on October 26, 1987, prior to the Board’s adoption of the budget, respondent had announced an estimated year-end cash surplus of $80.1 million. A similar prediction of "year-end cash surpluses of about $90 million” was repeated in the budget message
Petitioner contends, and the majority agrees — as did the lower courts — that respondent Gulotta has failed to comply with the mandate of County Charter § 302 (5) by not including "the entire estimated year-end cash balance” in the budget. Petitioner argues that the estimate is invalid because the figure submitted is less than the $80.1 million originally forecast by respondent as a "year-end cash surplus”. Petitioner’s argument, therefore, essentially is that the $17.7 million figure included in the budget submitted by respondent to the Board is erroneous because it is not equal to the estimated figure previously mentioned in an October 1987 press release. Such an argument, however, may not be countenanced by the courts, for resolution of the issue it presents implicates powers and responsibilities exclusively reserved to the other branches of government.
The County Charter provision at issue requires the County Executive to submit an estimate of the year-end cash balance; it does not, however, specify how that estimate is to be derived. It is elementary that the preparation of budget estimates is largely a discretionary function of budget officials in the executive and legislative branches (2 McQuillin, Municipal Corporations § 10.36; 15 McQuillin § 39.40 [3d rev ed]; 25 NY Jur 2d, Counties, Towns and Municipal Corporations, § 184; see, City of Beacon v County of Dutchess, 285 App Div 1050). Judicial review will not lie to correct perceived errors in the exercise of that discretion in the absence of corruption, fraud or bad faith (2 McQuillin, Municipal Corporations §§ 10.33, 10.34 [3d rev ed]; 25 NY Jur 2d, op. cit., § 184). Further, where a governmental official is duly authorized to perform a particular function, and the manner in which the authority is to be exercised is not specified by statute, "the courts will not undertake to control the manner of the exercise of the authority where no applicable rule of law is violated, and the
Here, respondent Gulotta was duly authorized to submit a statement of the estimated cash balance "after deducting commitments estimated to be outstanding at the close of the current fiscal year, in each fund, applicable to expenditures of the ensuing fiscal year” (County Charter § 302 [5]). Respondent did so, submitting an estimate of $17.7 million after deducting funds that were "committed”, inter alia, to a tax-stabilization fund to be created by the Board. Nowhere does the statute define "commitments” at all, much less give it the juristic connotation urged by the majority. Nor does it explain when funds, which might otherwise be considered part of the general fund balance, may be excluded from that balance because deemed not "applicable to expenditures of the ensuing fiscal year”.
In response to petitioner’s contention that the "entire year-end surplus” is missing from the budget, respondent explains that $24.5 million was omitted from the general fund balance because it was allocated to the tax-stabilization fund at the end of fiscal year 1987, and was therefore not applicable to expenditures in fiscal year 1988. The creation of a tax-stabilization fund was certainly within the exclusive power of the Board (General Municipal Law § 6-e; see, 1969 Opns St Comp No. 69-708 [unreported]). That the fund was not actually created until February 1988 does not render the actions of respondents retrospectively illegal. Gulotta unambiguously declared in his budget message his intention to use a portion of the budget surplus to stabilize property taxes; in adopting the budget, the Board knowingly accepted his proposal. There is no requirement in the statute that the moneys he "committed” to the stabilization fund actually or legally be appropriated in the 1987 calendar year. Nassau County maintains its books of account on a modified accrual basis, with revenues and expenditures booked to the period in which they accrue. Consequently, although the actual amount of the budget surplus was not ascertained until the beginning of the 1988 calendar year, that surplus was "committed” to the tax-stabilization fund during the 1987 fiscal year. Additionally, certain tax revenues included in the $80.1 million estimated surplus which were derived under Tax Law § 1262 (d) were applied directly to reduce real property taxes applicable to different municipalities within Nassau County, and thus were not
This does not mean that petitioner may not disagree with respondent Gulotta’s accounting methodology and budget calculations, and voice that disagreement at the public hearings on the budget required by statute (County Charter § 304). Such disagreement, however, surely presents no justiciable issue for this court’s review. Indeed, challenging the executive’s method of computing a budget estimate is analogous to challenging the degree of itemization in a budget. In rejecting the latter challenge as it related to the State budget, this court held: "[T]he degree of itemization necessary in a particular budget is whatever degree of itemization is necessary for the Legislature to effectively review that budget. This is a decision which is best left to the Legislature, for it is not something which can be accurately delineated by a court. It is, rather, a function of the political process, and that interplay between the various elected representatives of the people which was certainly envisioned by the draftsmen of the Constitution. Should the Legislature determine that a particular budget is so lacking in specificity as to preclude meaningful review, then it will be the duty of that Legislature to refuse to approve such a budget. If, however, as here, the Legislature is satisfied with the budget as submitted by the Governor, then it is not for the courts to intervene and declare such a budget invalid because of a failure to measure up to some mythical budget specifically delineating the exact fate of every penny of the public funds. 'Direct concern with the degree of particularization or subdivision of items lies exclusively with the executive and legislative branches of government simply because they are the sole participants in the negotiation and adoption of an executive budget’ * * * Should a Legislature fail in its
Moreover, even if the issue presented were deemed justiciable, we believe that Supreme Court erred in converting that part of the article 78 petition attacking the validity of the Nassau County budget into a declaratory judgment action authorized under General Municipal Law §51. "It is well established that a taxpayer action pursuant to section 51 of the General Municipal Law lies 'only when the acts complained of are fraudulent, or a waste of public property in the sense that they represent a use of public property or funds for entirely illegal purposes’ (Kaskel v Impellitteri, 306 NY 73, 79; see Gaynor v Rockefeller, 15 NY2d 120, 133-134; Stahl Soap Corp. v City of New York, 5 NY2d 200, 204; Talcott v City of Buffalo, 125 NY 280, 288).” (Mesivta of Forest Hills Inst. v City of New York, 58 NY2d 1014, 1016.) Here, there is no
Additionally, the drastic remedy decided on by the lower courts — invalidation of the entire Nassau County budget— constitutes an abuse of discretion as a matter of law. Petitioner has failed to demonstrate sufficient prejudice, and the one technical deficiency in a single line in an 832-page document relating to surplus funds allegedly not accounted for does not warrant so extreme a result (see, Kessel v D’Amato, 97 Misc 2d 675, 682). This is particularly true where respondents have explained the disposition of the disputed funds at great length, and where there clearly has been no attempt to hide any moneys from public scrutiny. Of course, as we conclude that the issue presented is not justiciable, we need not speculate on what might constitute an appropriate remedy.
The courts must be ever vigilant against upsetting our tripartite scheme of government by intruding upon the powers and responsibilities constitutionally delegated to the executive and legislative departments. In invalidating the Nassau County budget, we believe the majority has let down its guard and threatened this delicate constitutional balance. Accordingly, we would reverse the order of the Appellate Division and dismiss the petition as presenting a nonjusticiable issue.
Chief Judge Wachtler and Judges Kaye, Titone and Hancock, Jr., concur with Judge Simons; Judge Alexander dissents and votes to reverse in a separate opinion in which Judge Bellacosa concurs.
Order modified in accordance with the opinion herein and, as so modified, affirmed, with costs to petitioner.
As explained in the affidavit of Richard S. Camp, Nassau County’s Budget Director, pursuant to Tax Law § 1262 (d), Nassau County’s three towns permit their portion of sales tax revenues levied by the county on their behalf to be retained by the county, which then applies the revenues as a credit to reduce the towns’ property taxes. These section 1262 (d) moneys — amounting to about $23.9 million of the $80.1 million estimated budget surplus — are committed by law to the reduction of property taxes, and have no relation to the estimated surplus in the general fund balance.