State Ex Rel. Hawkins v. Oklahoma Tax Commission

JACKSON, Justice.

The primary question for decision is whether the revenues derived from gasoline excise taxes levied by the provisions of 68 O.S.Supp.1967, Sections 502, 516, and 522, and apportioned in the same act for specific purposes by Sections 504, 519, and 523 (adopted in 1963), may be disbursed and payments made therefrom more than two and one-half years after the passage of the appropriation act.

The question arises by reason of a formal opinion of the Attorney General in response to questions presented to him by a member of the State Senate.

In his formal opinion the Attorney General concluded that Sections 504, 519, and 523, constitute appropriations by law within the meaning of Article 5, Section 55, Oklahoma Constitution, citing Edwards v. Childers, 102 Okl. 158, 228 P. 472, and no issue is made of that conclusion.

In answer to the primary question of whether these excise tax revenues may be disbursed and payments made therefrom more than two and one-half years after the passage of the act in 1963, the Attorney General concluded that no valid disbursements may be made following two and one-half years after the passage of the act in view of Art. 5, Sec. 55, Oklahoma Constitution, which provides:

“No money shall ever be paid out of the treasury of this State, nor any of its funds, nor any of the funds under its management * * * unless such payments be made within two and one-half years after the passage of such .appropriation act * *

This original action is brought by the State of Oklahoma, ex rel., L. G. Hawkins, *538as plaintiff, against the Oklahoma Tax Commission and Leo Winters, State Treasurer, to prevent them from following the Attorney General's opinion and to compel them to apportion and pay all gasoline tax revenues as directed by the taxing and apportionment statutes above cited. We assume jurisdiction. State ex rel. Board of Education of City of Sapulpa v. State Board of Education et al., 197 Okl. 324, 170 P.2d 540; State ex rel. Babb v. Mathews, 134 Okl. 288, 273 P. 352; State ex rel. West v. Cobb, 24 Okl. 662, 104 P. 361, 24 L.R.A.,N.S., 639.

In State ex rel. Board of Commissioners of Harmon County v. Oklahoma Tax Commission, 191 Okl. 155, 127 P.2d 1052, and in Craig County Excise Board v. Texas-Empire Pipe Line Co., 195 Okl. 627, 159 P.2d 1003, we held in construing Art. 10, Sec. 19, Oklahoma Constitution, that gasoline excise taxes when collected and apportioned by statute for “constructing and maintaining county or township highways and permanent bridges in each county” could not be diverted to the general revenue funds of the state or county; and directed that the collected revenue from the gasoline tax be placed in the county highway funds for expenditure as directed by the statute which levied the tax and apportioned the revenue, even though more than two and one-half years had elapsed after the passage of the act.

In the Harmon County case the tax was levied and apportioned in 1937. Our decision was promulgated June 30, 1942, or five years after the passage of the act. In the Craig County case the tax appears to have been levied and apportioned in 1939, 68 O.S.1941, Secs. 659a and 659b. Our decision was adopted on July 3, 1945, six years after the adoption of the act. In the third paragraph of our syllabus in the Craig County case we held:

“Craig county of Oklahoma finances its county highways by means of a cash fund derived from excise taxes of the State of Oklahoma. At the close of the fiscal year of 1943-44 it had on hand in such fund a cash balance of $8,124.60. Held that such cash balance should be carried forward into the next fiscal year as .an asset of the county highway cash fund and should be available for expenditure.”

See also Application of Oklahoma Turnpike Authority, Okl., 359 P.2d 680, and Application of Oklahoma Turnpike Authority, Okl., 348 P.2d 510, wherein we held, among other things, that Oklahoma turnpike bond holders would have a vested right in certain gasoline tax revenue as it accumulates in the segregated Trust Fund pursuant to 69 O.S.Supp.1959, Secs. 680 and 683(a) and (b) without further or subsequent appropriations.

The inclusion of that part of Art. 5, Sec. 55, Constitution, supra, which provides that no money shall be paid out of the treasury of the State, unless made within two and one-half years after the passage of the appropriation act, was intended for some useful purpose. One useful purpose was to enable the Legislature to .ascertain at each biennial session the amount of surplus revenues that would be available for appropriation during the next biennium. In order to do so it was necessary to establish a terminal date upon the effectiveness of prior appropriations. This was especially true as applied to general fund appropriations from which the three branches or departments of government are financed. Art. 5, Sec. 56, Constitution. In 81 C.J.S. States § 162, at page 1205, it is said:

“General funds, available for general state purposes, which are deposited in the state treasury, are subject to constitutional requirements as to appropriations with respect to their disbursement, and this is true regardless of the source from which such funds are derived.” (Emphasis supplied.)

However, as to special funds apportioned or earmarked for special purposes, it is said (pages 1205 and 1206):

“While there is some authority holding that constitutional provisions as to appropriations apply to special funds, *539* * * it is generally held that constitutional provisions as to appropriations do not apply as to special funds devoted to special purposes." (Citing cases from Kansas, Louisiana, Mississippi, Montana, Oklahoma, Texas, and Washington.) (Emphasis supplied.)

In the body of the opinion in State ex rel. State Aeronautics Commission v. Board of Examiners of State, 124 Mont. 402, 194 P.2d 633, 638, it was said:

“Is this fund subject to the provisions of section 12, Article XII of the Constitution to the effect that ‘no appropriation of public moneys shall be made for a longer term than two years’ and to the provisions of section 10, Article XII that ‘no money shall be drawn from the treasury but in pursuance of specific appropriations made by law’ and to the similar provision of section 34 of Article V. This court has repeatedly held that these sections of the Constitution have no application to special or trust funds which have never been placed in the general funds of the state.”

In the body of the opinion in Edwards v. Childers (1924), 102 Okl. 158, 228 P. 472, 477, after noting a distinction (p. 475) between that case and the case of Menefee v. Askew, infra, we said:

“Our attention is called to the provisions of article 5, § 55, of the Constitution, which provides that no money shall be paid out of the state treasury or any of its funds ‘unless such payments be made within two and one-half years after the passage of such appropriation act.’ It is urged that, under the provisions of the statutes under consideration, the appropriation of the fund so created continues as long as the act remains in force. The parties have referred us to no case squarely in point, and we have found none applying this limitation to a case where the appropriation is that of a special fund created by a continuing special tax, the whole of which is dedicated to a single purpose.”

In Menefee v. Askew (1910), 25 Okl. 623, 107 P. 159, 27 L.R.A.,N.S., 537, supra, we recognized that the sole issue was whether the statute in question constituted an appropriation satisfactory to the provisions of Art. 5, Sec. 55, supra. After holding that an appropriation had been made we added the following dictum: (107 P. p. 162)

“ * * * But when considered with the limitations of Section 55, art. 5, Const., supra, and section 56, which (sec. 56)' provides that: ‘The general appropriations bill shall embrace nothing but appropriations for the expenses of the executive, legislative, and judicial departments of the state, and for interest on the public debt. The salary of no officer or employee of the state, or any subdivision thereof, shall be increased in such bill, nor shall any appropriation be made therein for any such officer or employee, unless his employment and the amount of his salary, shall have been already provided for by law’ — clearly, shows that a continuing appropriation is not permissible under our Constitution. In none of the authorities that we have been able to find, where a continuing appropriation was permitted, were such sections as 55 and 56, art. 5, supra, contained at that time. See, also, People ex rel. Richardson v. Spruance, 8 Colo. 530, 9 Pac. 628; In re Continuing Appropriations, 18 Colo. [192] 195, 32 Pac. 272. The result is that such appropriation is effective only for 2y2 years after the passage of said act by the Legislature.”

In our present consideration of the quoted statement from Menefee we notice that Sections 55 and 56, Const., are cited as supporting the conclusion that “it is clearly shown that a continuing appropriation is not permissible under our Constitution”, but it is also noticed that section 56 was quoted in support of that conclusion. Since section 56 is quoted as the authority for the conclusion that “a continuing appropriation is not permissible” it seems possible that we were referring to the general appropriations bill financed by the general revenues of the state. If this is so, we are *540in complete agreement that general appropriations for the expenses of the executive, legislative, and judicial departments of the state are effective only for two and one-half years after the passage of the general appropriations bill. This analysis of the Menefee case may also explain why the Court was unable to find any authorities holding that a continuing appropriation was permissible. Menefee cites no case involving a special fund created for a special purpose and dedicated by the act to a particular use.

We have examined the Colorado cases cited in Menefee and it does not appear that Colorado has a constitutional provision limiting expenditures of an appropriation for a specified time.

The Kansas Constitution has a constitutional provision providing that “no appropriation shall be for a longer term than two years.” Const, art. 2, § 24. In State ex rel. Boynton v. Kansas State Highway Commission, 139 Kan. 391, 32 P.2d 493, that court held that their constitutional provision had no application to public funds not required to be paid into the state treasury.

Considering the number of cases wherein this court has approved the expenditure of special funds earmarked for a special purpose more than two and one-half years after the passage of appropriation acts it is apparent we have held in effect that the time limitation upon the expenditure of an appropriation imposed by Art. 5, Sec. 55, Const., is not applicable to revenues levied and earmarked for a specific purpose which have accrued in a special fund. To that limited extent our decisions are consistent with the general rule as expressed in 81 C.J.S. States § 162, supra. The confusion has arisen because of the time limitation imposed by Art. 5, Sec. 55, which we now believe was intended to apply to general fund appropriations, and Art. 10, Sec. 19, Const., which provides:

“Every act enacted by the Legislature * * * levying a tax shall specify distinctly the purpose for which said tax is levied, and no tax levied and collected for one purpose shall ever be devoted to another purpose.”

The practice of levying special taxes for special purposes and allocating or appropriating all or specified percentages of the revenue to specific purposes has been followed by the Legislature for many years. H.B. 492, S.L.1908; S.B. No. 2, S.L.1909; H.B. No. 187, S.L.1915; and H.B. No. 503, S.L. 1923, are among the earlier ones. Our former decisions have not prevented that practice.

It must be assumed that the legislators were aware of the constitutional two and one-half year limitation upon expenditures of appropriations at the time they framed the amendment to Art. 10, Sec. 23, Okla. Constitution. That amendment, known as the “Budget Balancing Amendment”, was framed by the Legislature and submitted to the people in 1941. House Joint Resolution No. 10, S.L.1941, page 547. After the amendment was adopted it was vitalized by the same Legislature which drafted the amendment. H.B. No. 461, S.L.1941, page 273. That amendment recognizes that there will be “special funds” separate and apart from the General Revenue Fund; that there may, or may not be, any surplus in á special fund; that if there is a surplus in a special fund it may be appropriated; that there may be special funds in the hands of the State Treasurer at the end of the biennium which have been “previously appropriated” ; that future revenues accruing in special funds, and surpluses therein, if any, may be transferred “from one fund to another;” and that some agencies of the State will be operating on revenues derived from taxes which are allocated to such agencies. For convenience we quote and emphasize pertinent provisions of Section 23, which we believe support the statements we have just made:

“(T)he State Board of Equalization shall make an itemized estimate of the revenues to be received by the State under the laws in effect at the time such estimate is made for each year * * * showing separately the revenues to accrue to the credit of the General Revenue *541Fund and each special fund of the State, and the total amount of such estimate for each fiscal year shall not exceed the average total revenue which accrued to each such fiend for the three (3) last preceding fiscal years, to which amount shall be added the cash surplus, if any, from the preceding• fiscal year in the hands of the State Treasurer to the credit of any such fund and not previously appropriated by the State Legislature at the time such estimate is made. * * * The Legislature shall not pass or enact any bill, act or measure making an appropriation of money for any purpose until such estimate is made and filed * * * and all appropriations made in excess of such estimate shall be null and void; Provided, However, that the Legislature may at any regular session or special session called for that purpose, enact laws to provide for additional revenues, other than ad valorem taxes, or transferring the existing revenues or surpluses from one fund to another, whereupon it shall be the duty of the State Board of Equalization to make an estimate of the revenues that will accrue under such laws and to file the same with the Governor and with the President of the Senate and the Speaker of the House of Representatives, and the amount of any increase or decrease, resulting, for any reason, from such laws shall be added to or deducted from each respective fund, as the case may be.
“ * * * Revenues deposited in the State Treasury to the credit of the General Revenue Fund or of any special fund, (which derives its revenue in whole or part from State taxes or fees) shall * * * be allocated monthly to each department, institution, board, commission or special appropriation on a percentage basis, * * * and no warrant shall be issued in excess of said allocation. Any department, institution or agency of the State operating on revenues derived from any lazo or laws which allocate the revenues thereof to such department, institution or agency, shall not incur obligations in excess of the unencumbered balance of surplus cash on hand. * * *.

In the instant case it is apparent that all of the gasoline tax revenues were apportioned or “earmarked” for specific agencies and purposes by the provisions of 68 O.S. Supp.1967, Sections 504, 519, and 523, which was enacted in 1963, and there is no unappropriated cash surplus unless the object and purpose of the tax has been completely satisfied. This conclusion is supported by Art. 10, Sec. 19, Const., which provides that taxes levied for one purpose shall not be devoted to another, and our decisions in the Harmon and Craig County cases above mentioned. It is to be noted, however, that under Section 23, supra, the Legislature may now enact laws for transferring existing (future) revenues or surpluses from one fund to another without re-enacting the taxing statute. Art. 10, Sec. 19, Const, has been modified to that extent.

If there is any doubt as to whether the Legislature, in framing the amendment, intended to have constitutional approval for special funds for special purposes to be disbursed and payments made therefrom more than two and one-half years following the “appropriation act” we are authorized to examine legislation which vitalized the amendment.

In State ex rel. Kerr, Gov. v. Grand River Dam Authority (1945), 195 Okl. 8, 154 P.2d 946, the meaning of certain provisions of Art. 10, Sec. 23, Const., were under consideration. Therein we said that in construing a constitutional provision the object is to give effect to the intent of the framers and of the people in adopting it. We further said:

“Legislatures, like courts, must function within constitutional limitations, and it is to be presumed that it acts with a conscious regard thereof. Hence a legislative construction of the Constitution is deemed highly persuasive by the courts. Coyle v. Smith, 28 Okl. 121, 113 P. 944. This rule should have its most pronounced effect in instances like the pres*542ent where the construction is afforded by the Legislature that framed the amendment and must have been conversant with its intent.”

In the title of H.B. 461, S.L.1941, vitalizing Sec. 23, Art. 10, Const., supra, we notice the following:

“AN ACT vitalizing the Constitutional Amendment to Section 23, of Article 10 of the Constitution; expressing Legislative intent; * * * providing for procedure in handling Special Funds; * * * providing procedure for handling earmarked funds; * * *.”

Section 7 of the Act provides:

“Deposit of Allocated Funds. The allocation of cash deposited in the State Treasury to the credit of a special fund shall be deposited by the State Auditor directly to the credit of the cash account of the department, institution, or agency which operates from such special fund at the time the deposit is made.”

Section 11 of the Act provides:

“Any department, institution, or agency of the State, operating on revenues derived from any law, or laws, which allocate the revenues thereof, to such department, institution, or agency, shall not incur obligations in excess of the unencumbered balance of surplus cash on hand. Such funds shall be non-fiscal-year appropriations, unless the Legislature has provided by law that the unencumbered balance at the end of the fiscal year shall be transferred to another fund. The State Highway Department shall operate under this Section and the State Auditor shall deposit the moneys received from the Federal Government for highway construction purposes to the credit of the cash account of the State Highway Department at the time the money is deposited to the credit of the State Highway Construction and Maintenance Fund.”, (emphasis supplied)

What are non-fiscal-year appropriations?

“Non-fiscal-year funds” has two definitions under the provisions of Section 9 of the act, and we quote:

(1) “Non-fiscal-year funds shall be cash funds of any agency of the State which does not incur obligations against such funds in excess of the unencumbered balance of surplus cash on hand, and where the balance at the end of any fiscal year remains by law in the same fund for the subsequent fiscal year.”
(2) “Non-fiscal-year funds shall also include appropriations from the General Revenue Fund for the construction of new buildings which, for the purpose of allocating revenue to its cash account, shall receive revenue only during the twelve months of the year for which they are appropriated. However, for contractual purposes, such funds may be contracted or expended any time within the two and one-half years provided by the Constitution before the appropriation shall lapse.”

It is clear that definition No. 1, supra, refers to collected tax revenues, all of which are earmarked for specific purposes. There is no fiscal year, nor two and one-half year, limitation upon the expenditure of such funds where the balance at the end of any fiscal year remains by law in the same fund for the subsequent fiscal year.

Definition No. 2, supra, pertains to General Revenue Funds for the construction of new buildings and is not pertinent to our inquiry.

The 1941 Legislature’s interpretation of Art. 10, Sec. 23, supra, as reflected in H.B. 461, S.L.1941, clearly approves a continuing appropriation or apportionment of a special fund arising from a special tax which is allocated or dedicated to a special purpose. Section 23 is susceptible to the construction placed upon it by the Legislature.

It is to be noticed that H.B. 461, S.L. 1941 (62 O.S.1941, Secs. 8.1-8.18, inclusive), was repealed in 1947, Senate Bill No. 36, S. L.1947, page 370, but this does not detract from the construction placed upon Sec. 23, Const., by the Legislature which framed it in 1941. However, it is also noticed that when the Legislature repealed H.B. 461, supra, in 1947 it enacted legislation requir*543ing stricter supervision over the special funds. 62 O.S.1961, Secs. 41.1 et seq.

Art. 10, Sec. 23, was amended in 1968 after being proposed by the Legislature in H.J.R. No. SSI, S.L.1968, page 787, without change except that the itemized estimate of revenues to be received by the state is based upon the amounts received in each fund during the last preceding fiscal year, as distinguished from the average revenue accruing during the past three years as provided by the amendment in 1941.

From our examination of the session laws enacted since 1941, we find that the Legislature has appropriated the revenues from the excise taxes on gasoline to the State Highway Construction and Maintenance Fund at each regular session of the Legislature, and in some sessions has appropriated General Fund Revenues to supplement the construction and maintenance of state highways. This practice is not prohibited by the provisions of Art. 10, Sec. 23, Okla. Constitution.

Considering the foregoing it is the order and judgment of this court that the defendants, the Oklahoma Tax Commission and the State Treasurer should be, and accordingly are, ordered and directed to perform their statutory duties with respect to the apportioning and crediting of all money collected by the Oklahoma Tax Commission pursuant to the gasoline excise tax statutes directly involved herein and with respect to the payment to the various counties, cities, and towns of this state of any portion of such money which may be due any of them under those statutes.

It is the further order and judgment of this court that the defendants, the Oklahoma Tax Commission and the State Treasurer should be, and accordingly are, ordered and directed to perform their statutory duties with respect to the apportioning and crediting to the State Assistance Fund of all money collected by the Oklahoma Tax Commission which, under the applicable statutes, should be apportioned and credited to that Fund, and the State Treasurer is hereby ordered and directed to perform his statutory duties with respect to the payment of money out of the State Assistance fund.

IRWIN, C. J., BERRY, V. C. J., and DAVISON and WILLIAMS, JJ., concur. BLACKBIRD, HODGES, LAVENDER and McINERNEY, JJ., dissent.