State Budget Com'n v. Lebus

• Decision Date: 24 June 1932
• Citation: 51 S.W.2d 965,244 Ky. 700
• Parties: STATE BUDGET COMMISSION et al. v. LEBUS et al.
• Court: Kentucky Court of Appeals

51 S.W.2d 965

244 Ky. 700

STATE BUDGET COMMISSION et al. v. LEBUS et al.

Court of Appeals of Kentucky

June 24, 1932

Appeal from Circuit Court, Franklin County.

Suit by Orie Lebus and others against the State Budget Commission and others. From a judgment in favor of plaintiffs, defendants appeal.

Affirmed.

Bailey P. Wootton, Atty. Gen., and Francis M. Burke and S. H. Brown Asst. Attys. Gen., for appellants.

Peter Lee, Tabb, Krieger & Heyburn and Cary Tabb, all of Louisville, and M. Carlisle Minor, of Danville, for appellees.

RICHARDSON J.

When the General Assembly convened on the first Tuesday in January, 1932, there were in existence auditor's warrants, indorsed by the state treasurer as interest bearing, aggregating more than $13,000,000. By Senate Bill No. 454, adopted by the General Assembly at its 1932 session and approved by the Governor, these warrants were recognized as debts of the commonwealth, and their payment was provided for by the issuance and sale of bonds by the State Budget Commission, to the amount of $14,000,000.

A suit was filed in the Franklin circuit court, by certain taxpayers against the members of the State Budget Commission, wherein it was alleged that the Senate Bill violated sections 49 and 50 of the State Constitution, and was void. The circuit court entered a judgment declaring the act void. The State Budget Commission appeals.

It is insisted by the taxpayers that warrants drawn by the auditor under section 143, Ky. St., against legal appropriations indorsed by the state treasurer as provided by section 4688a-2, Ky. Statutes, are not "debts" within the meaning of sections 49 and 50 of the Constitution. The State Budget Commission contends they constitute debts within the meaning of these sections, and that the General Assembly was within its constitutional rights when it adopted Senate Bill, 454, authorizing the issuance and sale of bonds without submitting the question of their issuance and sale to the people at a general election.

The vital questions presented by this appeal are not ones of first impression with this court. However, we shall so consider and dispose of them. To consider and dispose of them we are required to do so in the light of sections 49 and 50 of the Constitution. It is essential to view sections 49 and 50 in connection with other related sections and also certain sections of the statutes enacted in pursuance thereof.

Section 49 reads: "The general assembly may contract debts to meet casual deficits or failures in the revenue; but such debts, direct or contingent, singly or in the aggregate, shall not at any time exceed five hundred thousand dollars ($500,000.00), and the moneys arising from loans creating such debts shall be applied only to the purpose or purposes for which they were obtained, or to repay such debts: Provided, The general assembly may contract debts to repel invasion, suppress insurrection, or, if hostilities are threatened, provide for the public defense."

Section 50 is in this language: "No act of the general assembly shall authorize any debt to be contracted on behalf of the Commonwealth except for the purposes mentioned in § 49, unless provision be made therein to levy and collect an annual tax sufficient to pay the interest stipulated, and to discharge the debt within thirty years; nor shall such act take effect until it shall have been submitted to the people at a general election, and shall have received a majority of all the votes cast for and against it: Provided, The general assembly may contract debts by borrowing money to pay any part of the debt of the state, without submission to the people, and without making provision in the act authorizing the same for a tax to discharge the debt so contracted, or the interest thereon."

Section 171 provides, in part: "The general assembly shall provide by law an annual tax, which with other resources, shall be sufficient to defray the estimated expenses of the Commonwealth for each fiscal year. ***"

Section 230 declares: "No money shall be drawn from the state treasury, except in pursuance of appropriations made by law."

Section 88 confers on the Governor power to disapprove "any part or parts of appropriation bills embracing distinct items, and the part or parts disapproved shall not become a law unless reconsidered and passed, as in case of a bill." Fergus v. Russel, 270 Ill. 304, 110 N.E. 130, Ann.Cas. 1916B, 1120.

Section 53 imposes upon the General Assembly the duty to provide by law for monthly investigations into the accounts of the treasurer of the state, and the auditor of public accounts, with directions that the results of the investigations be reported to the Governor and by him "transmitted *** to the general assembly [at the beginning of each session] for scrutiny and appropriate action."

Section 143, Ky. St., reads: "A warrant of the auditor upon the treasury shall state upon its face the date, amount, and the name of the person to whom payable, and on what account, and out of what fund to be paid; and shall not be issued unless the money to pay the same has been appropriated by law; and he may require any claimant to state on the face of his claim the law under which it is payable."

Section 4688a-2, Ky. St., reads: "Whenever any warrant hereafter issued by the auditor of public accounts shall be presented to the treasurer for redemption, and the funds appropriated for the purpose for which said warrant was issued are exhausted, the treasurer shall endorse thereon the date of its presentation with the words, 'No funds with which to pay this warrant, and it bears five per cent. (5%) interest from this date until called in,' with his official signature thereto, and such warrant shall thereafter bear interest at the rate of five per cent. (5%) per annum, payable semi-annually."

With these constitutional and statutory provisions in mind, we shall consider the questions presented in connection with the validity of the warrants in existence at the time of the adoption of Senate Bill No. 454.

The purpose of section 53 was to provide the General Assembly and the Governor with statistical facts when considering acts providing for appropriations, carrying provisions for the levy, and collection of taxes with which to meet them.

If the General Assembly in the exercise of its constitutional powers overestimates the revenues, when making appropriations and providing for the levy and collection of taxes for their payment, and the Governor by inadvertence, or otherwise, permits such appropriations to pass his power of veto, and the appropriations exceed the levy and collection of taxes provided for their payment, and thereby an actual deficit results, the Legislature may constitutionally at any succeeding session provide, by its enactment, for an additional or supplemental levy and collection of taxes with which to meet such appropriations. If this were not so, the Constitution would be impotent and the Legislature prevented from functioning for governmental purposes. It is well understood that the aggregate of the general appropriations of each Legislature not infrequently in this, as in other states, greatly exceeds the amount of cash in the hands of the state treasurer when such appropriations are made. Therefore, when making appropriations the Legislature constitutionally may consider the taxes levied and in the process of collection, as in the state treasury, though not actually paid into the treasury, and its overestimate of the revenue will not nullify the appropriations. It is a general rule recognized in every jurisdiction that state funds so in sight, but not actually on hand, may be anticipated and appropriated, as though actually in the hands of the state treasurer, and if the appropriations as made by general law, and if the levy and collection of the general taxes intended to be provided for the payment of the appropriations are insufficient to meet them and thereby "casual deficits" result, later assessments, levies, and collections by general law may be provided for by the Legislature to meet them. In re State Warrants, 6 S. D. 518, 62 N.W. 101, 55 Am.St.Rep. 852; State v. McCauley, 15 Cal. 430; People ex rel. McCauley v. Brooks, 16 Cal. 28; State v. Medbery, 7 Ohio St. 529; People ex rel. Capron v. Nelson, 344 Ill. 46, 176 N.E. 59; Rhea v. Newman, 153 Ky. 604, 156 S.W. 154, 44 L.R.A. (N. S.) 989.

If the Legislature without proper statistical information, or for any other reason, overestimates the revenue on hand or incoming, and fails to make provision for sufficient funds to carry out the appropriations, and the auditor issues warrants against them, and the same are receipted and indorsed by the state treasurer as authorized by the statutes supra, such warrants, notwithstanding the revenue proves inadequate to pay them, are valid assignments of such appropriations, or orders on the treasury, and may be denominated valid evidence "of casual deficits," within the meaning of sections 49 and 50.

If the issuance of the warrant by the auditor against an appropriation and its receipt and indorsement by the treasurer created a "debt" within the meaning of sections 49 and 50, which when added to such other similar warrants exceed $500,000, the limitation of the indebtedness fixed by these sections, mean that the state must pay cash or have on hand in the treasury funds with which to meet them, else when the aggregate exceeded $500,000, the excess would be void in virtue of sections 49 and 50, such construction would prevent the operation of the state government by rendering impossible a compliance with the State Constitution, for it must always be presumed that some time will elapse between the issuance of warrants and their payment, during which time...