Opinion of the Justices

• Decision Date: 15 June 1995
• Docket Number: No. 346,346
• Citation: 665 So.2d 1357
• Parties: OPINION OF THE JUSTICES.
• Court: Alabama Supreme Court

Page 1357

665 So.2d 1357

OPINION OF THE JUSTICES.

No. 346.

Supreme Court of Alabama.

June 15, 1995.

Members of the House of Representatives

Alabama State House

Montgomery, Alabama 36130

Dear Representatives:

We have received House Resolution No. 176 ("the Resolution") by which you request the opinion of the Justices as to whether House Bill 586 (sometimes herein called the "Bill"), now pending in the House of Representatives, violates the Constitution of Alabama of 1901, as amended.

We are aware that H.B. 586 was introduced to honor the State's commitment to Mercedes-Benz, and we applaud the legislature's willingness to do so. We also applaud Mercedes-Benz for its decision to locate its facility in Alabama, and we are confident that the administration and the legislative leadership will find a way to honor Alabama's part of the bargain. We regret that we are compelled to conclude that H.B. 586 violates at least two provisions of the Constitution.

The specific questions propounded to this Court are:

"(1) Do the provisions of Section 11 of H.B. 586 that constitute a continuing withdrawal and appropriation to the Authority of a portion of the interest on investments held in the Alabama Trust Fund (the "appropriated funds") violate the provisions of Section 5(a) of Amendment No. 450 to the Constitution of Alabama of 1901?

"(2) Do the provisions of Section 11 and Section 8(d) of H.B. 586, which, taken together, appropriate the appropriated funds to the Authority from the Alabama Trust Fund and authorize the Authority to pledge the appropriated funds for payment of its obligations, violate Section 213 of the Constitution of Alabama, as amended?

"(3) Do the provisions of Section 12(a)(3) of H.B. 586, which, taken together with Sections 8(a), 8(d), and 11(a) of H.B. 586, authorize the financing by the Authority, through the issuance of bonds secured by a pledge of the appropriated funds, of industrial or research facilities that may be leased to a private entity (with an option granted to said entity to purchase at fair market value), violate the provisions of Section 93 of the Constitution of Alabama of 1901, as amended?

"(4) Do the provisions of Section 12(a)(4) of H.B. 586, which, taken together with Sections 8(a), 8(d), and 11(a) of H.B. 586, authorize the financing by the Authority, through the issuance of bonds secured by a pledge of the appropriated funds, of industrial or research facilities to be owned by a private entity but with limitations upon the disposition of the financed facilities, violate Section 93 of the Constitution of Alabama of 1901, as amended?

"(5) Do the provisions of Section 12(a)(5) of H.B. 586, which, taken together with Sections 8(a), 8(d), and 11(a) of H.B. 586, authorize the financing by the Authority, through the issuance of bonds secured by a pledge of the appropriated funds, of a training facility to be operated and managed by a private entity (with an option granted to said entity to purchase at fair market value) and of management fees to be paid to said entity, violate Section 93 of the Constitution of Alabama of 1901, as amended?"

Our response to the first question of this Resolution is that the appropriation that would be made by Section 11 of House Bill 586 would be contrary to § 5(a) of Amendment No. 450 of the Alabama Constitution, 1901. Section 5(a) of Amendment No. 450 states:

"The trust capital shall be held in perpetual trust and shall not be appropriated by the legislature or expended or disbursed for any purpose other than to acquire eligible investments in accordance with the provisions of this amendment.... [But] any trust income derived therefrom shall be paid directly into the general fund as it is received by the board, subject to appropriation and withdrawal by the legislature."

(Emphasis added.) In the Amendment, "trust income" is defined as "the net income received by the state, subsequent to the transfer of the initial trust capital by the state treasurer to the board, from the investment and reinvestment of all assets of the trust fund, determined in accordance with the provisions of this amendment."

Under this Bill, the legislature provides for a continuing appropriation over a period of 30 years, beginning in 1995, from the annual interest earned on investments of the Alabama Trust Fund to the Alabama Incentives Financing Authority. While the legislature's broad governmental power is plenary in character, it is not absolute and is subject to the express restrictions of the state constitution. Van Hart v. deGraffenried, 388 So.2d 1196, 1198 (Ala.1980); see also, e.g., City of Birmingham v. City of Vestavia Hills, 654 So.2d 532 (Ala.1995). Amendment No. 450, by express language, requires that the interest earnings on investments be paid into the state's General Fund upon receipt. After the trust income has been paid into the General Fund, the legislature may appropriate it as it sees fit, subject to constitutional restrictions. Article IV, § 71, of the Alabama Constitution, 1901, is one such constitutional restriction on the legislature's power to appropriate funds. According to § 71:

"The general appropriations bill shall embrace nothing but appropriations for the ordinary expenses of the executive, legislative, and judicial departments of the state, for interest on the public debt, and for public schools.... All other appropriations shall be made by separate bills, each embracing but one subject."

(Emphasis added.)

The legislature declares in § 11(a) of the Bill that the appropriation "is made pursuant to and in accordance with [Amendment No. 450] and that the interest income on investments in the Alabama Trust Fund is not a part of the General Fund of the State until deposited in the General Fund." The Governor, in his brief, argues that the appropriation of specified, annual installments of income from the Alabama Trust Fund for 30 years, made by Section 11 of H.B. 586, does not constitute an appropriation of money in the state's General Fund because the money is appropriated before it reaches the state's General Fund. The simple answer to this contention is: The constitution itself states that the income from investments of the Alabama Trust Fund shall be paid directly to the state's General Fund. The legislature is without power to override this express constitutional provision by the subterfuge of diverting such funds before they are actually paid into the General Fund. House Bill 586 is invalid, because it is in direct conflict with the constitutional provisions of Amendment No. 450. The constitution has "earmarked" these funds for the General Fund.

The Governor states in his brief that, because under H.B. 586 the legislature would be powerless to control the interest income earned by the Alabama Trust Fund, a fact in contrast to its ability to increase a special tax to service a debt, the scheme authorized by the Bill is not a debt of the state. He asserts it is the economic and legal equivalent of an annual appropriation. We cannot agree. The inescapable fact is: by constitutional mandate these funds are required to be paid into the General Fund as received, and the legislature is bound by the constitution to appropriate those funds only as permitted by express provisions of the constitution.

The legislature may not avoid constitutional restrictions on its authority to appropriate state funds by "diverting" such funds from the General Fund before they are received by the General Fund. A comparison of the language in Amendment No. 450, which established the Alabama Trust Fund, with the language used in Amendment No. 394, which created the Alabama Heritage Trust Fund, shows that H.B. 586 violates Amendment No. 450. Amendment No. 394 provides:

"[T]he trust capital shall be held in perpetual trust and shall not be appropriated by the legislature or expended or disbursed for any purpose other than to acquire eligible investments in accordance with the provisions of this amendment. All eligible investments acquired, in whole or in part, with moneys constituting part of the trust capital shall to the extent of such moneys constitute part of the trust capital, but any trust income derived therefrom shall be subject to appropriation and withdrawal by the legislature to the extent provided in this amendment."

(Emphasis added.) While this language substantially mirrors § 5(a) of Amendment No "Until and including the last day of the fiscal year next succeeding the fiscal year during which any trust income shall be received into the trust fund, the legislature may at any time and from time to time, whether before or after the actual receipt of such trust income, enact laws appropriating all or any part of such trust income for any lawful purpose, and any trust income so appropriated may be withdrawn from the trust fund at any time after receipt thereof; provided, however, that the right of the legislature to appropriate any trust income prior to the actual receipt thereof shall not be construed to authorize the recognition and withdrawal of any moneys equivalent to such trust income prior to the actual receipt thereof into the trust fund. If any trust income shall not be appropriated by a law which becomes effective on or before the last day of the fiscal year next succeeding that during which it was received, such trust income shall thereafter cease to be subject to appropriation and shall become part of the trust capital to be held in the trust fund on the same terms and conditions as are applicable to all other assets constituting the trust capital. Any trust income appropriated by a law becoming effective on or before the last day of the fiscal year next succeeding that during when it was received shall remain trust income even though it is permitted to remain in the trust fund after the end of such fiscal year, and any such trust income shall be subject to withdrawal from the trust fund at any time thereafter in the manner...