Alabama Attorney General Opinion 1979-0136

Y THE ATTORNEY GENERAL STATE OF ALABAMA • MONTGOMERY, ALABAMA 36130 001-360 '4-41'2)4 li5 CHARLES A. GRADDICK ATTORNEY GENERAL MAR 27 1979 Mr. Charles L. Byrd, President George Corley Wallace State Community College P. 0. Drawer 1049 Selma, Alabama 36701 Appropriations - Wallace State Community College - Unused and unencumbered appro- priations for maintenance and operation revert and may not be held over for use in next fiscal year. Dear President Byrd: Your request of March 2, 1979, relating to expenditure of appropriations, has been received and considered. It is the opinion of this office that any remaining unen- cumbered funds under consideration here revert at the end of the fiscal year in which they are appropriated to the funds in the State Treasury from which the appropriation is made and may not be held over by you for expenditure at any future time or need. It will be necessary that they be re-appropriated by the Legislature for such purposes. Code of Alabama 1975, §41-4-93 provides as follows: "All unencumbered balances of all appropri- ations shall revert to the state treasury at the end of each fiscal year and to the credit of the general fund or the special fund from which the appropriation or appropriations were made. Appro- priations for the purchase of land or the erection of buildings or new constructions shall continue in force until the attainment of the object or the completion of the work for which such appropriations are made." Mr. Charles L. Byrd, President George Corley Wallace State Community College Page Two Act #8, Acts of Alabama 1978, Second Special Session, page 1687, Section 7, Nos. 2 and 3 appropriates as follows: 2. George Corley Wallace State Community College (Selma): For Operations and Maintenance at the facility formerly Craig AFB . .116,300 3. George Corley Wallace State Community College - Technical Branch (Selma): For Operation and Maintenance at the facility formerly Craig AFB . .324,000 Said Adt in Section 2(a) also provides as follows: . . . . the appropriations herein made shall be subject to the provisions, terms, conditions and limitations of the Budget and Financial Con- trol Act (Article 4, Chapter 4, Title 41 of the Code of Alabama 1975), the provisions of Act No. 494, adopted at the 1976 Regular Session, and shall be in the amounts hereinafter specified." A proper consideration of these statutes along with previous opinions of this office (Opinion to Sen. Owen, Finance and Taxation Committee, April 15, 1976 is the latest expression from this office) and the rulings of the Supreme Court of. Alabama require the reversion of the unencumbered funds. This office adheres to the position that eduction needs all the funds it can possibly get, but it also adheres to the proposition that the use of such funds must be within the guidelines established by the law. Mr. Charles L. Byrd, President George Corley Wallace State Community College Page Three It is respectfully suggested that you request any unen- cumbered balances at the end of this fiscal year be made available by appropriation by the legislature for the next year beginning October 1, 1979, and it is hoped that you are successful in having this accomplished in the upcoming session. Sincerely, CHARLES A. GRADDICK Attorney General by- 9 Randolph G. Lurie Assistant Attorney General RGL:cd enc. • & iffir•••1 Pk JOI April 15: 1976 WiLLIAM J. BAXLEY ATTORNEY GENERAL GEORGE L. BECK DEPUTY ATTORNEY GENERAL E. RAY ACTON EXECUTIVE ASSISTANT WALTER S. TURNER C.F. ASSISTANT ATTORNEY GENERAL. LUCY M. RICHARDS CONFIDENTIAL ASSISTANT JACK D. SHOWS CHIEF INVESTIGATOR Senator D. Owen, Jr. Chairman, Finance and Taxation Committee Room 207 CAPITOL Dear Senator Owen: I have your request for an opinion of this office wherein you ask the following questions: "1. Does Title 55, Section 104 of the Alabama Code apply to public colleges and universities receiving State funds from the Special Education Trust Fund? "2. If the answer to question #1 is in the af- firmative, should unexpended and unencumbered funds appropriated from the Special Education Trust Fund to a college or university for a given fiscal year for purposes other than capital out- lay, revert to the Special Education Trust Fund at the end of the fiscal year in question? "3. what is the proper course for recovering funds that should have reverted back to the State, but which funds are currently held by the receiving institution? "4. Is there any legal justification for the transfer of funds appropriated for operational and maintenance purposes by a college and univer- sity to a capital outlay account without legisla- tive approval allowing such transfer? _Senator L. D. Owen, Jr. Wage Two "5. If the answer to question 4-;-4 is in the negative, what is the legal responsibilities of the institution in question concerning repayment of the funds?" Title 55, Section 104, Code of Alabama 1940, Recompiled 1958, states: "All unencumbered balances of all appropriations shall revert to the state treasury at the end of each fiscal year and to the credit of the general fund or the special fund from which the appropriation or appropria- tions were made. Appropriations for the purchase of land or the erection of buildings or new constructions shall continue in force until the attainment of the object or the completion of the work for which such appropriations are made." This statute contains no exception with respect to public'col-, leges and universities but states that all unencumbered balances of all appropriations shall revert in the manner set out. It should be noted,however, that the statute, by its terms, applies only to "unencumbered balances" and only to "appropriations." Lawfully incurred claims that have been made and incurred within the es- timated budget may be paid within a reasonable time after the close of the fiscal year and, as in the case of our appropriation from the general fund, the balance thereafter remaining in the Treasury re- verts to that fund. Baker v. Singleton, 237 Ala_ 394, 187 So. 47S f1939). Nonappropriated funds are not within the coverage of the statute. Title 55, Section 103, Code of Alabama 1940, Recompiled 1958. Your first question is answered in the affirmative as to appropriated funds. Your second inquiry concerns reversion to the Special Education Trust Fund of unexpended and unencumbered funds appropriated from this Fund for a given fiscal year for purposes other than capital outlay. As set out above, such unencumbered balances of all approp- riations are subject to the provisions of Section 104, supra, and your second question is answered in the affirmative- However, approp- riated funds are to be distinguished from nonapprOpriated funds in this regard. Title 55, Section 103, states in part, as follows: Page-Three ". . _Anything herein to the contrary not withstanding, however, this article shall not apply to the fees, re- ceipts and income (other than appropriations) of the department of conservation, the department of agricul- ture and industries, or any educational, correctional or eleemosynary institutions or to any endowment or trust fund or gifts to any such institutions or to the income from such endowments or trust funds, or to pri- vate funds belonging to students or inmates of such institutions, nor shall such funds be subject to any allotment under this article or be taken into con- sideration in making any allotment or prorating of appropriations under this article, and all appropria- tions made to any such institutions are hereby de- clared to be in addition to such fees, receipts and other income, and all allotments from such appropria- tions shall be paid over to such institution, and when such allotments are received by such institutions, the same shall be deposited in any bank or banks in the state of Alabama, which have been duly designated and qualified as state depOsitories, for the use and bene- fit of such institution and such funds shall be avail- able only on the check of such institution depositing them, uhich is hereby authorized to withdraw such funds at its discretion." This statute specifically excepts from the requirements of the budget article all fees, receipts and income of an educational in- stitution other than appropriations; and affirmatively requires that such funds shall not be subject to any allotment, or be taken into consideration in making any allotment or proration; and that appropriations be considered to be in addition to such fees re- ceipts and other income. Allotments from appropriations are to be paid over to the educational institution and shall be deposited in banks in the State of Alabama, that have been designated as State depositories, for the use and benefit of the institution. The institution is expressly authorized to withdraw such funds at its discretion. Thus, the statute recognizes two types of funds of State educational institutions, viz., appropriated funds and all other funds of the institution. The latter are specifically Senator L. D. Owen, Jr. -Page Epur excluded from any of the provisions of Article 3, including Section 104-. The former are subject to the-provisions of Section 104, subject to the conditions of Section 103. See also Quarterly Report of Attorney General, Volume 76, page 63; and Quarterly Report of Attorney General, Volume 144, page 18. Under the constitutional or statutory provisions creating them, the governing bodies of educational institutions have broad authority in the management and control of their institutions. See, e.g., Section, 264, and Amendment 161, Constitution of Alabama 1901; Gerson v. Howard, 246 Ala. 567, 21 So. 2d 693 (1945); Cox v. Board of Trusteesj of the University of Alabama, 161 Ala. 639, 49 So. 814 (1909).. Opinions of the Attorney General that have affirmed the authority of theSe Boards of Trustees to manage and control the affairs of their institutions include Biennial Report of Attorney General 1918-20, pages 445 and 474; Biennial Report of Attorney General 1920-22, page 317; Quarterly Report of Attorney General, Volume 49, page 123; Quarterly Report of Attorney General, Volume 76, page 63; and Quarterly Report of Attorney General, Volume 144, page 18. Moreover, Section 103,. supra, specifically provides that ". . .all appropriations made to any such institutions are hereby declared to be in addition to such fees, receipts and other income," and that such institution ". . is hereby authorized to withdraw such (appropriated) funds at its discretion." (Emphasis supplied.) Such being the case, no "unencumbered balances" or surplus appropriated funds would exist un- less the amount of appropriations for operation and maintenance ex- penses in a fiscal year exceeds expenditures for such operation and maintenance in that year. This interpretation has been generally accepted for many years. Educational institutions have carried forward from year to year balances of nonappropriated funds in their operation and maintenance accounts. They have also made transfers of nonappropriated funds from these accounts for capital purposes. Such practices have en- abled these institutions to improve the quality of educational pro- grams and services available to the citizens of Alabama, and have been instrumental in securing for. Alabama educational institutions substantial funds from nontax sources. These practices have been approved in numerous audits by the Department of Examiners of Public Senator L. p_ Owen, Jr. Va9a Five Accounts and have been recognized by the State Budget Officer. No unencumbered balances of appropriations have been found to exist where an institution spends more from its operation and maintenance account than the Legislature appropriates to it for such purposes. Your third inquiry relates to the method of recovery of any funds that should revert to the State under Section 104. The answer to this question is contained in Title 55, Sections 106 and 107, as follows: "If the governor shall ascertain that any department, institution, bureau, board, commission or other state agency has used any of the moneys appropriated to it for any purpose other than that for which the money was appropriated, budgeted and allotted and not in strict accordance with the provisions of law, the governor shall have the power and he is hereby auth- orized to suspend all appropriations and allotments to such department, institution, bureau, board, com- mission or other state agency until and after such amounts diverted or wrongfully expended have been replaced." "A wilful and knowing refusal to perform any of the requirements of this article or a wilful and knowing -refusal to perform any rule or requirement or request of the governor, director of finance or the budget officer made pursuant to or under authority of this article by any trustee, commissioner, director, manager, building committee, or other officer or person con- nected with any department, board, bureau, commission, agency, office or institution of the state, shall sub- ject the offender to a penalty of two hundred and fifty dollars to be recovered, in an action instituted in the circuit court of Montgomery county by the attorney general, for the use of the state of Alabama and shall also constitute a misdemeanor, punishable by fine or imprisonment, or both, in the discretion of the court, and shall subject such offender to disMissal from office by the person, department, board, bureau, I Senator L_ D X age Six . Owen, Jr. commission, agency, office, or institution of the state-underwhich such offender holds office of ap- pointment in accordance with the provisions of the merit system. If such offender be an officer elected by vote of the people, such offense shall be suf- ficient cause to subject the offender to impeachment. A refUsal to perform any requirement of this article or an improper or illegal performance of any require- ment of this article shall subject the budget officer or the director of finance to a penalty of five hundred dollars to be recovered in an action insti- tuted in the circuit court of Montgomery by the attorney general for the use of the state of Alabama, and it shall also constitute a felony- A refusal to perform any of the requirements of this article, or an improper or illegal performance of any re- quirement of this article by the governor, shall make him subject to impeachment." Your fourth.. inquiry concerns transfer of funds appropriated for operational and maintenance purposes to a capital outlay account. I find no legal authority for such a transfer of appropriated funds without legislative approval, and your question is answered in the negative. What has been said above concerning the distinction be-. tween appropriated and nonappropriated funds with respect to re- version, is also true of transfers from operation'and maintenance to capital outlay accounts. Your final question concerns that legal responsibility of an institution making such a prohibited transfer for repayment of the funds. In my opinion, where a determination is made in the manner set out in Sections 106 or 107, that appropriated funds have been wrongfully expended, the institution is responsible for repayment of such funds, and a willful and knowing refusal to make such WILLIAM J. BAXLEY Attorney General Y-. WALTER S. TURNER Chief Assistant Attorney General WST/ar Chen, Jr. Pa4e Seven 'repayment would subject those individuals responsible to the penal- ties set out in Section 107. Sincerely,