State Budget Commission v. Lebus

• Decision Date: 24 June 1932
• Citation: 244 Ky. 700
• Parties: State Budget Commission et al. v. Lebus et al.
• Court: United States State Supreme Court — District of Kentucky

244 Ky. 700

State Budget Commission et al. v. Lebus et al.

Court of Appeals of Kentucky.

Decided June 24, 1932.

1. States. — Legislature may at succeeding session provide for supplemental levy and collection of taxes to meet prior appropriations (Constitution, secs. 49, 50, 53, 171).

If General Assembly, in exercise of constitutional powers overestimates revenues when making appropriations and providing for levy and collection of taxes for their payment, and Governor, by inadvertence, or otherwise, permits such appropriations to pass his veto power, and appropriations exceed levy and collection of taxes provided for their payment, and thereby actual deficit results, Legislature may constitutionally at any succeeding session provide, by its enactment, for additional or supplemental levy and collection of taxes with which to meet such appropriations.

2. States. — When making appropriations, Legislature may consider taxes levied and in process of collection as in state treasury (Constitution, secs. 49, 50, 53, 171).

State funds so in sight, but not actually on hand, may be anticipated and appropriated, as though actually in hands of state treasurer.

3. States. — Auditor's warrants against appropriations, notwithstanding inadequacy of revenues provided to meet them, are

valid orders on treasury and evidence of "casual deficits" within Constitution (Constitution, secs. 49, 50, 53, 171; Ky. Stats., secs. 143, 4688a-2).

If Legislature overestimates revenues and fails to make provision for sufficient funds to carry out appropriations, and auditor issues warrants against them, and they are indorsed by state treasurer as interest bearing, under Ky. Stats., sec. 4688a-2, such warrants, notwithstanding revenue proves inadequate to pay them, are valid assignments of such appropriations or orders on treasury, and may be denominated valid evidence of "casual deficits," within Constitution, secs. 49, 50.

4. States. — Legislature, for purpose of meeting "casual deficits," may provide for supplemental tax levy, but, if contracting debt for such purpose, must comply with constitutional requirements where deficit exceeds $500,000 (Constitution, secs. 49, 50, 53, 171).

If "casual deficits" are less than $500,000, Legislature, under Constitution, sec. 49, may contract debt for payment of such deficits without submission of question to people at general election, but if casual deficits or failure in revenue exceeds $500,000, Legislature must provide either for payment thereof in manner and way authorized by section 171, which authorizes annual tax to defray expenses for fiscal year, or in manner authorized by section 50, which provides for submission of question to people at general election.

5. Taxation. — In providing for annual tax to defray expenses for fiscal year, Legislature is sovereign and controlled solely by own discretion (Constitution, sec. 171).

6. States. — Legislature may contract debts only to extent and in manner provided by Constitution (Constitution, secs. 49, 50).

7. States. — Constitutional proviso, authorizing Legislature to borrow money to pay state "debts" without submission to people, held not confined to debts existing when Constitution was adopted (Constitution, sec. 50).

8. States. — Terms "casual deficits" and "failures in revenue," within provision authorizing Legislature to contract debt to meet such deficits, are synonymous (Constitution, secs. 49, 50).

9. States. — "Debt," within constitutional debt limitation, means obligation entered in strict accordance with provisions of Constitution binding commonwealth to pay it by levy and collection of general taxes (Constitution, secs. 49, 50, 171).

10. States. — Contingent liability is not "debt" of state within meaning of constitutional debt limitation (Constitution, secs. 49, 50, 171).

11. States. — "Casual deficits" are not "debts" of state within constitutional debt limitation (Constitution, secs. 49, 50, 171).

"Casual deficit," as term is used in Constitution, sec. 49, means a deficit happening by chance or accident and without

any design to avoid constitutional inhibitions of state against incurring an unauthorized expenditure of state's funds above certain amount.

12. States. — It is duty of Legislature to provide for levy and collection of taxes to pay warrants, or such portions thereof, annually, as it may deem prudent, or to contract debts for that purpose in constitutional manner (Constitution, secs. 49, 50, 171).

13. States. — There can be no "floating debt" of state under Kentucky Constitution (Constitution, secs. 49, 50).

A "floating debt" means strictly loans for which no permanent provision was required to be made, which have been obtained for temporary purposes, with intention of paying them off within a brief period.

14. States. — Neither Legislature nor state's officers can create debt by borrowing money or issuing and selling bonds except in manner provided by Constitution (Constitution, secs. 49, 50).

15. Constitutional Law. — Court cannot hold state bond issue constitutional because of expediency or to meet temporary condition, if bonds were issued without power (Constitution, secs. 49, 50).

16. States. — Statute providing for $14,000,000 bond issue, without submission to voters, to pay auditor's warrants drawn against legal appropriations and indorsed by state treasurer as interest bearing, held unconstitutional; such warrants not being "debt" within Constitution (Acts 1932, Senate Bill No. 454; Ky. Stats., secs. 143, 4688a-2; Constitution, secs. 49, 50, 171; Ky. Stats., secs. 143, 4688-2).

Acts 1932, Senate Bill No. 454, providing for issuance and sale of such bonds by State Budget Commission, in amount of $14,000,000, was unconstitutional, since such warrants, drawn by auditor under Ky. Stats., sec. 143, against legal appropriations, and indorsed by state treasurer, as provided by section 4688a-2, though there were not sufficient funds for their payment, were not "debt," within meaning of proviso of (Constitution, sec. 50, which authorizes General Assembly to borrow money to pay any part of the "debt" of the state without submission to people, and without making provision, in the act authorizing such debt, for a tax to discharge debt so contracted or interest thereon; Legislature being authorized to provide for payment of such warrants by levying tax under Constitution, sec. 171, or submit bond issue to voters under section 50.

Appeal from Franklin Circuit Court.

BAILEY P. WOOTTON, Attorney General, and FRANCIS M. BURKE and S.H. BROWN, Assistant Attorneys General, for appellants.

PETER LEE, TABB, KRIEGER & HEYBURN; CARY TABB; and M. CARLISLE MINOR for appellees.

OPINION OF THE COURT BY JUDGE RICHARDSON.

Affirming.

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. Stats., 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 sec. 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...