Associated General Contractors of South Dakota, Inc. v. Schreiner

• Decision Date: 25 November 1992
• Docket Number: No. 17917,17917
• Citation: 492 N.W.2d 916
• Parties: ASSOCIATED GENERAL CONTRACTORS OF SOUTH DAKOTA, INC., Highway-Heavy-Utilities Chapter, a South Dakota Corporation with its principal place of business in Pierre, South Dakota; South Dakota Trucking Association, a South Dakota Corporation with its principal place of business in Sioux Falls, South Dakota; Gregory B. Branaugh, Individually; D & G Concrete Construction, Inc., a South Dakota Corporation; Pat Tlustos, Individually; and Hills Materials Co., a South Dakota Corporation, Applicants, v. Ronald SCHREINER, duly Appointed Secretary of the Department of Revenue; Vern Larson, duly Elected Auditor; Homer Harding, duly Elected Treasurer of the State of South Dakota; Curt Johnson, duly Elected Commissioner of School and Public Lands; Richard L. Howard, duly Appointed Secretary of the Department of Transportation; the Department of Transportation; the Transportation Commission; Jay Swisher, Secretary of Department of Agriculture; Russell L. Stone, Director of the Division of Conservation of State Department of Agriculture; and the Conservation Commission, Respondents. and South Dakota Corn Growers Association, a South Dakota incorporated association; East River Electric, a South Dakota incorporated cooperative; South Dakota Association of Cooperatives, a South Dakota incorporated association; Broin Enterprises, a South Dakota corporation; Ethanol Producers Association, a South Dakota incorporated association; MG Oil, Inc., a South Dakota corporation; Ethanol Distributors, Inc., a South Dakota corporation; Viroment, a South Dakota corporation; Fuel Food Mart, Inc., a South Dakota corporation; South Dakota Farmers Union, a South Dakota incorporated association; South Dakota Farm Bureau, a South Dakota incorporated association; South Dakota Wheatgrowers Elevator Association, a South Dakota incorporated cooperative; Heartland Grain Fuels, L.P., a limited partnership; Agriculture Energy Servo Systems, a South Dakota corporation; American Coalition for Ethanol, an incorporat
• Court: South Dakota Supreme Court

Page 916

492 N.W.2d 916

ASSOCIATED GENERAL CONTRACTORS OF SOUTH DAKOTA, INC.,

Highway-Heavy-Utilities Chapter, a South Dakota Corporation

with its principal place of business in Pierre, South

Dakota; South Dakota Trucking Association, a South Dakota

Corporation with its principal place of business in Sioux

Falls, South Dakota; Gregory B. Branaugh, Individually; D

& G Concrete Construction, Inc., a South Dakota Corporation;

Pat Tlustos, Individually; and Hills Materials Co., a South Dakota Corporation, Applicants, v. Ronald SCHREINER, duly Appointed Secretary of the Department

of Revenue; Vern Larson, duly Elected Auditor; Homer

Harding, duly Elected Treasurer of the State of South

Dakota; Curt Johnson, duly Elected Commissioner of School

and Public Lands; Richard L. Howard, duly Appointed

Secretary of the Department of Transportation; the

Department of Transportation; the Transportation

Commission; Jay Swisher, Secretary of Department of

Agriculture; Russell L. Stone, Director of the Division of

Conservation of State Department of Agriculture; and the

Conservation Commission, Respondents.

and

South Dakota Corn Growers Association, a South Dakota

incorporated association; East River Electric, a South

Dakota incorporated cooperative; South Dakota Association

of Cooperatives, a South Dakota incorporated association;

Broin Enterprises, a South Dakota corporation; Ethanol

Producers Association, a South Dakota incorporated

association; MG Oil, Inc., a South Dakota corporation;

Ethanol Distributors, Inc., a South Dakota corporation;

Viroment, a South Dakota corporation; Fuel Food Mart, Inc.,

a South Dakota corporation; South Dakota Farmers Union, a

South Dakota incorporated association; South Dakota Farm

Bureau, a South Dakota incorporated association; South

Dakota Wheatgrowers Elevator Association, a South Dakota

incorporated cooperative; Heartland Grain Fuels, L.P., a

limited partnership; Agriculture Energy Servo Systems, a

South Dakota corporation; American Coalition for Ethanol,

an incorporated association; and South Dakota Association

of Conservation Districts; South Dakota Wheat, Inc., a

South Dakota corporation; and South Dakota Lakes and

Streams Association, a South Dakota corporation, Intervenors

and Respondents.

No. 17917.

Supreme Court of South Dakota.

Argued Aug. 4, 1992.

Decided Nov. 25, 1992.

Ronald G. Schmidt, Schmidt, Schroyer, Colwill and Moreno, Pierre, for applicants.

Mark Barnett, Atty. Gen., Pierre, for respondents.

Jeff Masten, Canton, and Jeffrey J. Fox, Sioux Falls, for intervenors except South Dakota Ass'n of Conservation Dist.

John L. Brown, Riter, Mayer, Hofer & Riter, Pierre, for intervenors South Dakota Ass'n of Conservation Districts; South Dakota Wheat; and South Dakota Lakes & Streams Ass'n.

WUEST, Justice.

AGC seeks a permanent writ of prohibition to prevent State from disbursing funds, claiming the statutes authorizing the expenditures are contrary to our State Constitution.

This is an original proceeding brought to this court under S.D. Const. art. V, Sec. 5, the provisions of SDCL chs. 21-30 and SDCL 15-25-1.

Associated General Contractors and the Trucking Association (hereinafter AGC) filed a verified application for an alternative writ and permanent writ of prohibition contending both HB 1311, appropriating ethanol production payments, and HB 1009, creating ethanol tax credits, violate S.D. Const. art. XI, Sec. 8 and art. XIII, Secs. 1 and 2. AGC sought to prohibit Department of Revenue Secretary Ronald Schreiner, State Auditor Vern Larson and State Treasurer Homer Harding (hereinafter State) from expending state highway funds received from vehicle and fuel taxes for ethanol production payments and ethanol tax credits. AGC was granted an alternative writ of prohibition on April 27, 1992. State was given an opportunity to show cause why a permanent writ should not be issued.

On May 6, 1992, AGC filed a verified, amended, supplemental application expanding the list of state officials whose activities it sought to prohibit. AGC also augmented the list of challenged legislation to include SB 143, HB 1174, SB 204, and HB 1098. State filed a motion to quash and filed its verified answer to the application as amended and supplemented, denying any constitutional violations, and seeking dismissal of the application. An amended, supplemental alternative writ of prohibition was granted May 12, 1992.

South Dakota Corn Growers, et al., filed a motion to intervene on May 8, 1992, asking that the application for a permanent writ be denied and joining in the State's motion to quash. On May 15, 1992, Gregory B. Branaugh, D & G Concrete Construction, Inc., Pat Tlustos, and Hills Materials Co., applied to intervene as applicants. On May 19, 1992, a motion to intervene was filed on behalf of the South Dakota Association of Conservation Districts. All motions to intervene were granted.

FACTS

The sixty-seventh session of the South Dakota Legislature, 1992, passed six bills which appropriated proceeds from the motor fuel tax for the purpose of subsidizing private ethanol producers and for other agricultural programs.

HB's 1311 and 1009 were enacted and approved as emergency measures by the Governor and became effective upon execution. SB 143, HB 1174, SB 204, and HB 1098 were enacted and approved by the Governor and became effective July 1, 1992.

(1) HB 1311

This act creates the "Unclaimed Nonhighway Agricultural Motor Fuel Tax Fund." It further provides that up to $80,000, the amount which the legislature found represents the unclaimed tax refunds for fiscal year (FY) 1992, may be appropriated from the fund to the Department of Revenue to provide for ethanol production payments in April and May, 1992.

(2) HB 1009

This act creates a tax credit program for producers of ethanol. A producer of ethanol may receive a credit, in the form of a transferrable motor fuel tax credit certificate, of twenty cents per gallon of ethanol. The credit is allowed only for ethanol produced in a South Dakota plant at which all fermentation, distillation, and dehydration takes place. Annual tax credits to one producer may not exceed the greater of $1,000,000 or an amount equal to $1,000,000 averaged over the last three years. Cumulatively, the incentive payments may not exceed five million dollars per year. The Secretary of Revenue is to adopt rules for the tax credit program. Producers must be licensed to be eligible to file for the credit. The credit may only be collected for the 120-month period following the producer's receipt of the first credit certificate.

(3) SB 143

This act appropriates money for the reconstruction of Lake Menno Dam. The act allocates $60,000 from the fund to the Commissioner of School and Public Lands in FY 1993 for the purpose of repairing Menno Dam. SB 143 directs the Secretary of Revenue to transfer $57,000 per month, for a period of ten months, into the unclaimed nonhighway agricultural motor fuel tax fund commencing July 1, 1992. Total transfers are not to exceed $570,000.

(4) HB 1174

This act appropriates $460,000 from the fund in FY 1993 to the Department of Transportation for public and special transportation grants. The grants are to assist South Dakota communities in meeting the match requirements of federally funded transportation programs.

(5) SB 204

This act appropriates $50,000 from the unclaimed nonhighway agricultural motor fuel tax fund in FY 1993 to the Department of Agriculture for the purpose of assisting the Northern Crops Institute located in Fargo, North Dakota.

(6) HB 1098

This act clarifies the uses of taxes imposed on motor fuel not used to propel a motor vehicle on public highways. It creates the "Conservation Commission Grant Fund," and appropriates $850,000 to the fund in FY 1993 and an amount not to exceed $1,500,000 per year thereafter.

The legislature found that not all motor fuel taxes which qualify for the nonhighway motor fuel tax refund are, in fact, refunded under the procedure set forth in SDCL Secs. 10-47A-46 to 10-47A-53, inclusive. The legislature determined that a certain amount of these unclaimed tax refunds from the sale of motor fuel for nonhighway uses should be utilized in a manner which benefits both agriculture and the citizens of the state by preserving South Dakota's natural resources. Thus, the legislature declared that an amount equal to 35% ¹ of the claimed refunds, $80,000 in FY 1992, not to exceed $1,420,000 in FY 1993 and not to exceed $1,500,000 in any single fiscal year thereafter, represents the amount of unclaimed tax refunds from the sale of motor fuel for nonhighway uses. The legislature further declared that it is the policy of this state to use these funds to implement the conservation grant program.

The burden is on AGC to prove beyond a reasonable doubt the legislature acted beyond its constitutional authority.

Any legislative act is accorded a presumption in favor of constitutionality and that presumption is not overcome until the unconstitutionality of the act is clearly and unmistakenly shown and there is no reasonable doubt that it violates fundamental constitutional principles.

Independent Community Bankers Ass'n v. State, 346 N.W.2d 737, 739 (S.D.1984); South Dakota Ass'n of Tobacco and Candy Distributors v. State, 280 N.W.2d 662, 664-65 (S.D.1979).

ISSUES

I. Whether the transfer of unclaimed nonhighway motor fuel tax refunds to the unclaimed nonhighway agricultural motor fuel tax fund pursuant to HB 143 was an unconstitutional diversion of highway funds under art. XI, Sec. 8 of the South Dakota Constitution.

II. Whether the legislative determination that 35% of the motor fuel tax fund attributable to nonhighway use goes unrefunded based on an estimate, rather than fact, violates art. XI, Sec. 8 of the South Dakota Constitution.

III. Whether the ethanol incentive tax credit created by HB 1009 is an unconstitutional diversion of highway funds under art. XI, Sec. 8 of the South Dakota...