State Bond Com'n v. All Taxpayers, Etc.State Bond Com'n v. All Taxpayers, Etc.
Michael S. Baer, III, Alexandria, for defendant-reconvenor applicant.
A. Edward Hardin, Baton Rouge, for defendant-respondent.
This validation action, filed pursuant to
I
On April 12, 1988, a motion for judgment was filed in the 19th Judicial District Court by the State Bond Commission pursuant to Louisiana\‘s validation statute,
The district judge ordered publication of the motion on April 14 and 15 and further ordered all taxpayers, property owners and citizens to show cause on April 26, 1988 why the relief should not be granted.3
Camille F. Gravel, Jr., in his capacity as a taxpayer and citizen of the state, filed an
The parties filed a joint stipulation of facts, which included the following:
- The resolution authorizing the issuance of the notes was properly published in the state\‘s official journal.
- The notes will be repaid solely from revenues anticipated during the current fiscal year, but not yet credited to the state general fund, and from revenues accruing in the current fiscal year and collected during the first forty-five days of the following fiscal year.
- It is a normal practice for revenues to accrue to the State in a current fiscal year and for those revenues to be collected in the following fiscal year, with such accrued revenues received in the following fiscal year being credited to the current fiscal year if they are received within the first forty-five days of the following fiscal year.
- The state treasury is currently faced with cash flow shortfalls which will prevent the timely honoring of warrants upon the treasury in the current fiscal year, and funds within the state general fund are not anticipated to be sufficient for timely honoring of warrants payable in the months of May and June, 1988.
Pursuant to a joint application for supervisory writs, this court decided to bypass the normal trial and appellate procedures and ordered the filing of the record here and an expedited briefing and argument schedule. See State Bond Commission v. All Taxpayers, Property Owners and Citizens of the State, 510 So.2d 662 (La.1987).
II
Revenue anticipation notes were first authorized by Act 28 of 1986, which enacted
“This legislature hereby finds that the state currently experiences and may hereafter experience fluctuations in revenues and expenditures and that as a consequence thereof, temporary cash flow deficits could occur resulting in the temporary inability of the state to pay expenses from currently budgeted and appropriated revenues of its various funds. The purpose of this Part is to authorize the State Bond Commission to issue and sell revenue anticipation notes to avoid temporary cash flow deficits and to provide a working balance in the state general fund to enable the state to pay expenses in a timely manner from currently budgeted and appropriated revenues of the state general fund.”
Act 28 authorized the Commission to issue revenue anticipation notes in an amount not exceeding twenty per cent of the revenues anticipated, but not yet credited to the general fund for the fiscal year in which the notes are issued. Under that authority the Commission on July 9, 1987 adopted a resolution to issue revenue anticipation notes in the amount of $280,000,000.
The constitutionality of Act 28 and of the Commission\‘s resolution was challenged in State Bond Commission v. All Taxpayers, Property Owners and Citizens of the State, 510 So.2d 662 (La.1987). The defendants asserted that the Act and the revenue anticipation notes, authorized for issuance by the Bond Commission, violated
“Unless otherwise authorized by this constitution, the state shall have no power, directly or indirectly, or through any state board, agency, commission, or otherwise, to incur debt or issue bonds except by law enacted by two-thirds of the elected members of each house of the Legislature.”
Since Act 28 had been enacted by only a majority of the Legislature and not by the two-thirds required by the constitution, the critical issue in that litigation was whether the revenue anticipation notes constituted the incurring of debt within the meaning and context of Article VII, § 6(A). In holding Act 28 to be valid and constitutional, this court stated:
“It is clear the device utilized by the bond commission to enhance the cash flow of the state fisc is one which does not provide any additional money for state purposes. An `indebtedness\’ may be created in one sense but not a `debt\’ historically understood to burden future legislatures and taxpayers and one which is secured by the full faith and credit of the state.” (emphasis in original)
During the 1988 Extraordinary Session, the Legislature enacted Act 14, which amended
(1)
(2) The expiration date was extended to June 30, 1989; and
(3) Revenue anticipation notes were allowed to be secured not only by revenues as previously provided in Act 28 of 1986, but also by revenues which will accrue and be credited to the state general fund for the fiscal year in which the notes are issued, although the revenues will not actually be received until the succeeding fiscal year.5
Thus, the only material change, pertinent to the present litigation, effected by the 1988 legislation was that which permitted revenues which accrue during the current fiscal year and are to be received in the first forty-five days of the following fiscal year to serve as a source of repayment for revenue anticipation notes, which are now allowed to mature within that forty-five-day period.
III
Gravel contends that the revenue anticipation notes, to be issued on May 2 during the current fiscal year and to be repaid with funds received after June 30, 1988, the last day of the current fiscal year, violate
The provisions of the Louisiana Constitution are limitations on the otherwise plenary power exercised by the Legislature, which may enact any legislation not prohibited by the Constitution. A party attacking legislation as invalid must rely upon some constitutional provision which limits the power of the Legislature to enact the particular statute. Board of Elementary and Secondary Education v. Nix, 347 So.2d 147 (La.1977).
Repayment of revenue anticipation notes issued in the current fiscal year with funds which are not received until the following fiscal year is an issue of first impression. In effect, statutory authorization of repayment from this source is a legislative recognition that funds constructively in the general fund during the current fiscal year may be treated as though actually in the fund.7 This provision is based on generally accepted accounting principles by which state and local governments may abandon cash accounting procedures in favor of accrual accounting procedures. See
“All cash balances occurring from appropriations made by legislative act ... to any state agency for which no bona fide liability exists on the last day of each fiscal year shall be remitted to the state treasurer by the fifteenth day following the last day of the fiscal year. Any appropriations ... remaining at the end of the fiscal year against which bona fide liabilities existed as of the last day of the fiscal year may be withdrawn from the state treasury during the forty-five day period after the last day of the fiscal year only as such liabilities come due for payment.” (emphasis added)
Section 11 of Act 18 of 1987, the General Appropriations Act, also recognized the accrual method of accounting:
“For the purpose of paying appropriations made herein, all revenues due the state in Fiscal Year 1987-88 shall be credited by the collecting agency to Fiscal Year 1987-88 provided such revenues are received in time to liquidate obligations incurred during Fiscal year 1987-88.” (emphasis added)
There is no constitutional prohibition against use of recognized accounting procedures which reasonably attribute revenues to the appropriate fiscal year in which the revenues either accrue or are actually received. Nor does the statutory establishment of a fiscal year preclude the use of such reasonable procedures.
As to the one-year limitation on appropriations,
As to the withdrawal of money from the treasury without a specific appropriation, Gravel argues that
An additional appropriation to pay the notes when they become due is not constitutionally required.8 The notes will be issued to fund the present payment of expenses for which appropriations were previously made by the Legislature, but for which funds are not yet available.
IV
Gravel finally contends that
As to the latter contention, Section 8(C), which applies to “[b]onds, notes, certificates, or other evidences of indebtedness of the state“, must be read in conjunction with Section 6(A) of Article VII, which this court in the litigation over the 1987 notes held was not applicable to revenue anticipation notes. Just as the issuance of revenue anticipation notes does not constitute the incurring of debt in the constitutional context of Section 6(A) and is not subject to Section 6(A)\‘s two-thirds vote requirement, the issuance of such notes is not subject to the procedures required by Section 8(C), since that section also applies only in the constitutional context to the incurring of debt or the issuance of bonds.
As to the injunction that
The Legislature, in enacting the validation procedure, stated its intention “to provide a uniform, expeditious and equitable procedure with due regard for the public fisc and rights of persons in interest for the judicial determination of the validity of bonds and related proceedings where material and substantial questions with regard thereto are involved or a judicial determination of issues relating to bonds is necessary to insure the marketability of bonds in investment channels“. While the nature of the procedure requires summary action, the ample opportunity provided to persons in interest to assert their rights fulfills the requirements of the constitutional provision mandating open courts.
DECREE
For the foregoing reasons, it is ordered, adjudged and decreed that Act 14 of 1988 Extraordinary Session and Section 12 of
It is further ordered, adjudged and decreed that revenue anticipation notes of the State of Louisiana in aggregate principal amount not exceeding Two Hundred Fifty Million ($250,000,000) Dollars, to be designated State of Louisiana, Revenue Anticipation Notes, Series 1988-A, to be issued in one or more series, are hereby validated and declared to be legal and valid obligations of the issuer, State Bond Commission of the State of Louisiana.
It is further ordered, adjudged and decreed that all pledges of revenue and all covenants and provisions contained in the instrument or proceedings authorizing or providing for the issuance of the notes more particularly described above are hereby validated and declared to be legal and valid; and,
It is further ordered, adjudged and decreed that any application for rehearing in this case be filed in this court not later than 1:00 p.m. on Thursday, April 28, 1988.
WATSON, J., concurs in part and dissents in part, assigns reasons.
WATSON, Justice, concurring in part and dissenting in part.
The majority opinion is correct in all particulars except the pronouncement that Article VII, Sect. 8(C) does not apply. The constitutional provision provides that all persons have a 30 day period within which to contest bonds, notes, certificates, or other evidences of indebtedness of the State.
While there is no question about fiscal urgency, in my opinion the State errs in advancing the argument and this court errs in accepting the proposition that the clear words of the Constitution are not applicable. It is noteworthy that in the prior suit concerning RANS, the judgment of this court was not released until after the constitutional period had expired.
Therefore, I respectfully dissent in part.