Holster v. Board of Trustees of Passaic County College

• Decision Date: 09 July 1971
• Citation: 59 N.J. 60,279 A.2d 798
• Parties: William HOLSTER, Substituted Plaintiff-Respondent, v. The BOARD OF TRUSTEES OF the PASSAIC COUNTY COLLEGE, et al., Defendants
• Court: New Jersey Supreme Court

Page 60

59 N.J. 60

279 A.2d 798

William HOLSTER, Substituted Plaintiff-Respondent, v. The BOARD OF TRUSTEES OF the PASSAIC COUNTY COLLEGE, et al Defendants.

Supreme Court of New Jersey,

Argued June 7, 1971.

Decided July 9, 1971.

George F. Kugler, Jr., Trenton, for defendants-appellants (George F. Kugler, Jr., Atty. Gen., Stephen Skillman, Asst. Atty. Gen., of counsel and on the brief; Victor Librizzi, Jr., Gordon J. Golum, Philip I. Kagan, Deputy Attys. Gen., on the brief).

Joseph L. Conn, Paterson, for defendant-intervenor-appellant (Joseph L. Conn, City Counsel and Atty., Henry Ramer, Hackensack, on the brief).

Herman W. Steinberg, Paterson, filed a statement in lieu of brief on behalf of defendant Board of Chosen Freeholders of Passaic County.

Uldric L. Fiore, Ringwood, filed a statement in lieu of brief on behalf of defendant Board of Trustees of the Passaic County College.

Arthur J. Sullivan, Jr., Passaic, for substituted plaintiff-respondent.

The opinion of the court was delivered by

MOUNTAIN, J.

This appeal presents for review the issue as to the constitutionality of the County College Bond Act, L.1971, c. 12 (N.J.S.A. 18A:64A--22.1 to 22.8). The judge who heard the matter below reached a determination that the act was unconstitutional, 114 N.J.Super. 228, 275 A.2d 762 (Law Div.1971). Notice of appeal was filed in the Appellate Division and before argument this Court granted certification.

The statute in question supplements an act passed in 1962 which provided for the creation of county colleges, N.J.S.A. 18A:64A--1 et seq., and must be examined in the context of that legislation to be clearly understood. In brief, the earlier enabling act provides a method whereby counties throughout the state may establish local two-year colleges. Such a project may be undertaken by a single county or by two or more counties acting together. The college, when established, comes under the general supervision of the State Board of Higher Education but is more directly governed by a board of trustees, locally selected, in which is reposed general powers of administration and control.

It is the manner in which county colleges are financed that is here our chief concern. The original enabling act provides for a board of school estimate, to which the board of trustees annually submits a proposed budget for the ensuing year. Following a public hearing, the board of school estimate fixes the amount of money needed for the operation of the college for the coming year, as well as the amount needed for capital outlay expenses, exclusive of such funds as may be received from the State or other sources. These amounts are certified to the board of freeholders. The latter must raise the sum needed for operation expenses by the assessment, levy and collection of taxes. Monies needed for capital outlay may be raised either by taxation or by the issuance of bonds. N.J.S.A. 18A:64A--19.

In addition to funds so raised at the county level, the statute anticipates a substantial amount of state support.

The board of higher education shall formulate annual budget requests for state support of county colleges. Within the limits of funds appropriated to the board of higher education for such purposes and in accordance with rules and regulations prescribed by the board of higher education, the board of trustees of a county college may apply to the board of higher education and receive state support:

a. For capital projects approved by the board of higher education in amounts not to exceed one half of the cost of said capital projects, and

b. For operational costs to the extent of one half thereof or $600.00 per equated full-time student, including such students resident in other counties, whichever is the lesser amount.

State support for the operational costs of county colleges shall be made within limits of state appropriation and only after an annual review and approval by the board of higher education of the financial program for operation of the county college, including the charges to be made for student tuition and fees and the establishment of the county share of said costs. (N.J.S.A. 18A:64A--22)

Thus it would appear to have been the legislative intent that the State and county, in general, share equally in the financial support of a county college, dependent at all times, however, upon the availability of funds appropriated by the Legislature to the Board of Higher Education for this purpose.

The County College Bond Act supplements this financial arrangement. Initially it should be noted that this statute applies only to monies needed for capital outlay expenses and pertains only to the State's share of such expense. It has nothing to do with the financing of operational needs nor is it related to the county's share of capital expenditure. The scheme contemplates that a county will issue its bonds; the proceeds received upon the sale of these bonds will then be devoted to making up the State's share of the cost of a particular approved capital outlay. Thereafter recurrent interest payments will be met by State appropriations as will the principal of the bonds at their maturity. When funds appropriated by the Legislature to the Board of Higher Education for county college purposes are insufficient to satisfy the State's share of capital projects, resort may be had to the procedure outlined in the act. Pursuant thereto the Chancellor first certifies to the State Treasurer the amount of State support recommended for such project and the amount available within the limit of State appropriations. The State Treasurer then makes an independent analysis as to the 'necessity or advisability of making available additional State support.' N.J.S.A. 18A:64A--22.2. Assuming a favorable determination, he then certifies to the freeholders of the county the amount of bonds that may be issued by the county and that will come within the favor of the statute. The act fixes an overall ceiling of $40,000,000 upon the amount of bonds that may be so issued.

Within one year after receiving such State approval, the county may issue bonds in the designated amount. The statute directs that as interest and principal payments fall due, they will be met by State appropriations. Thus it is contemplated that bonds in an amount initially approved by the State will be issued by the county and as they mature be paid by the State. This is not all, however, because the statute concludes with the following provision:

Bonds or notes issued under the provisions of this act shall not be deemed to constitute a debt or liability of the State or a pledge of the faith and credit of the State but are dependent for repayment upon appropriations provided by law from time to time (N.J.S.A. 18A:64A--22.8)

The validity of the legislation is challenged upon the ground that it violates Article VIII, § 2, paragraph 3 of the New Jersey Constitution, commonly known as the debt limitation clause. ¹

As will be seen, the statute contains an apparent internal inconsistency which must be resolved. It purports on the one hand to provide for the payment of county bonds by means of State appropriations, while on the other hand it disavows any obligation on the part of the State that can be characterized as a debt or liability. If the issuance of bonds by a county in reliance upon the statute can be said to create a debt or liability on the part of the State, either to the county or to the bondholders, then the debt limitation provision mentioned above has been violated. If not, the Constitution is in no way offended.

The trial court interpreted the act as requiring the State to fulfill the obligation of payment in the manner set forth in the statute, deciding at the same time that the provision quoted above, purporting to insulate the State from liability, did not have that effect, but only precluded action against the State by bondholders. (114 N.J.Super. at 241, 275 A.2d 762).

It is an accepted principle of statutory interpretation that, if possible, legislation will be so read as to sustain its constitutionality. Our reading of the statute differs from that of the trial judge. We hold that the bonds do not become the obligations of the State and that the statute does not impose upon the State a legally binding or enforceable obligation to pay them or to reimburse the county upon its making payment. Accordingly we conclude that there is no infringement of the debt limitation provision of the Constitution.

Although there is doubtless a strong likelihood that payment of the bonds will in fact be met by legislative appropriations, we find nothing in the statute compelling the State to make such payments as a matter of law. Hence, both issuing counties and purchasing bondholders are on notice that the faith and credit of the State will not be pledged in respect of bonds issued pursuant to this enactment, but that payment on the part of the State will be dependent upon appropriations provided from time to time. Lacking such appropriations, recourse can be had only against the county which will have no recourse over against the State.

In reaching this conclusion, we are mindful of the decisional law in this State which has dealt with the constitutional provision here under examination. A debt limitation provision very similar to that in our present Constitution appeared as Article IV, § VI, paragraph 4 of the Constitution of 1844, and has been said to have provided a pattern for debt limitation clauses in other states. Heins, Constitutional Restrictions Against State Debt, 8 (1963).

In Wilson, Atty. Gen. v. State Water Supply Commission, 84 N.J.Eq. 150, 93 A. 732 (E. & A.1915), the Attorney General sought to enjoin the carrying out of a contract whereby the State Water Supply Commission had undertaken to purchase a tract of land for the sum of $1,000,000, the purchase price to be in the form of bonds in that amount, secured by a mortgage upon the land purchased....