Could Maryland's energy office legally move money from a fund set up to make low-interest loans for community energy efficiency projects into a separate fund used to make loans to state agencies?

Plain-English summary

Frederick G. Davis, Director of the Maryland Energy Administration (MEA), asked the Attorney General, at the suggestion of the Legislative Auditor, whether it was proper for MEA to transfer money between two special funds it administers: the Community Energy Loan Program (CELP) Fund, which makes low-interest loans to local governments and nonprofits for energy efficiency projects, and the State Agency Loan Program (SALP) account within the broader Energy Overcharge Restitution Fund, which makes interest-free loans to state agencies. A legislative audit had flagged two transfers, $500,000 in December 2001 and $400,000 in November 2004, moved from the CELP Fund to the SALP account to keep SALP solvent while it awaited loan repayments.

The opinion concluded MEA lacked legal authority to make those transfers. It found the CELP Fund's governing statute limits spending strictly to CELP's own purposes (loans and expenses of the CELP program itself), with no authorization to expend CELP money on SALP or any other Restitution Fund purpose. It rejected MEA's position that including the transfers in budget submission spreadsheets was sufficient, noting they were never actually reflected as budget amendment requests or appropriations in either the operating or capital budget bills, and that neither type of bill could lawfully authorize this kind of fund transfer in any event. The opinion did identify one lawful path forward: under a prior 1986 opinion's reasoning, excess or unestimated CELP receipts could be transferred to another fund, including back to the Restitution Fund, through an approved budget amendment, so long as CELP's own governing statute did not prohibit it, which it did not.

Currency note

This opinion was issued in 2006. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, fund structure, or procedure mentioned here, particularly since MEA's programs and the State Finance and Procurement Article's budget amendment provisions may have since changed.

Common questions

Could a Maryland state agency just move money between two funds it manages if both funds serve similar energy-related purposes?
No, according to this opinion. It concluded that money appropriated to a specific statutory fund, here the CELP Fund, may only be spent on the purposes set out in the law creating that fund, so MEA needed either a new law or an approved budget amendment before it could redirect CELP money to the separate SALP account, even though both ultimately supported state energy programs.

Did it matter that MEA told state budget officials about the transfers in its paperwork?
Not enough, in the opinion's view. It found the transfers were included in revenue spreadsheets submitted to the Department of Budget and Management as part of the capital project coordination process, but were never actually identified as budget amendment requests or reflected in any appropriation in the operating or capital budget bills, so they did not satisfy the legal requirements for a valid fund transfer.

Was there ANY legal way for MEA to move the CELP surplus into the SALP program?
Yes, potentially. The opinion explained that under the reasoning of a 1986 Attorney General opinion, unestimated and excess receipts could be transferred from one special fund to another through an approved budget amendment, so long as the law governing the source fund didn't prohibit it, and CELP's statute contained no such prohibition; the problem was simply that MEA had not actually used that budget amendment process for these particular transfers.

Background and statutory framework

The Energy Overcharge Restitution Fund was created in 1989 (Chapter 526, Laws of Maryland 1989, codified at SFP §7-315), succeeding a 1984 predecessor fund, to hold Maryland's share of restitution from federal oil price control violation settlements from 1975 to 1981, plus gifts for energy assistance. SFP §7-315(f)(2) lists the fund's authorized uses, including State Energy Assistance and Information Act programs, MEA and Community Development Administration weatherization programs, federal low-income energy programs, and, as one specifically listed purpose among several, the Community Energy Loan Program. Unspent Restitution Fund appropriations do not revert to the general fund under SFP §7-304, and expenditures must follow the State budget or an approved budget amendment under SFP §7-315(d).

CELP itself, created in 1989 (Chapter 421, Laws of Maryland 1989) and later recodified and transferred to MEA in 1991 (Chapter 468, Laws of Maryland 1991), makes low-interest loans for energy efficiency projects to local governments and nonprofits, funded by its own CELP Fund consisting of Restitution Fund appropriations, other public or private contributions, interest earnings, and loan repayments, dedicated to CELP loans and expenses. SALP, created in 1991 as a revolving loan account within the Restitution Fund (capitalized from one of the Restitution Fund's settlement-specific accounts) to make interest-free loans to state agencies for energy efficiency improvements, is not itself codified in statute or given its own special fund the way CELP is. The opinion applied the general principle, drawn from a 1986 Attorney General opinion (71 Opinions of the Attorney General 3) and its own reading of SFP §7-315, that money appropriated to a special fund may only be spent according to the law governing that fund, applying it to conclude the two 2001 and 2004 CELP-to-SALP transfers lacked legal authorization.

Citations and references

Statutes:
- SFP §7-315, §7-315(b)(2)(ii), (d), (e), (f)(2) and its subparts (i)-(ix), and (f)(4), governing the Energy Overcharge Restitution Fund's creation, authorized uses, and administration
- SFP §7-304, providing that unspent special fund appropriations do not revert to the general fund
- SFP §3-601, governing the Department of Budget and Management's coordination of the State's capital project program
- SG §9-20A-01, the recodified location of CELP's governing statute (State Government Article)
- Article 41, §6-401, the original State Energy Assistance and Information Act codification referenced for one Restitution Fund use
- Article III, §52(8) of the Maryland Constitution, requiring a supplementary appropriation bill be limited to a single work, object, or purpose
- Article 83B, §4-901, CELP's original 1989 codification before its 1991 transfer to MEA
- Chapter 526, Laws of Maryland 1989, creating the Energy Overcharge Restitution Fund
- Chapter 759, Laws of Maryland 1984, creating the Restitution Fund's predecessor, the Energy Overcharge Restitution Trust Fund
- Chapter 421, Laws of Maryland 1989, the original enactment of CELP
- Chapter 468, Laws of Maryland 1991, recodifying and transferring CELP to MEA
- Chapter 443, Laws of Maryland 2005, the State budget bill cited as an example of CELP and SALP capital appropriations

Cases:
- City of Baltimore v. State, 281 Md. 217, 378 A.2d 1326 (1977), and Panitz v. Comptroller, 247 Md. 501, 232 A.2d 891 (1967), holding a capital budget bill's single work or object is the creation of State debt through bond issuance, relevant to whether such a bill could authorize a CELP-to-Restitution-Fund transfer

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/2006/91oag24.pdf

Original opinion text

24 [91 Op. Att'y

          BUDGETARY ADMINISTRATION

T RANSFER OF M ONEYS B ETWEEN T WO S PECIAL F UNDS
A DMINISTERED BY THE M ARYLAND E NERGY
A DMINISTRATION

                      January 25, 2006

Mr. Frederick G. Davis
Director
Maryland Energy Administration

  At the suggestion of the Legislative Auditor, your predecessor

requested our opinion concerning the propriety of certain transfers
of funds between special funds administered by the Maryland
Energy Administration ("MEA"). Specifically, he asked whether it
was permissible for the Director of MEA to transfer funds from the
Community Energy Loan Program ("CELP") Fund to the State
Agency Loan Program ("SALP") account of the Energy Overcharge
Restitution Fund ("Restitution Fund"). The CELP Fund was
originally capitalized with moneys from the Restitution Fund. Both
the CELP Fund and Restitution Fund are administered by MEA.

   In our opinion, moneys in the CELP Fund may only be spent

in accordance within the statute creating that fund; a transfer of
funds to the SALP account is not currently authorized by that statute.
Excess or unestimated receipts in the CELP Fund may be transferred
to another fund by an approved budget amendment. Thus, funds
may be transferred from the CELP Fund to the SALP account only
if the General Assembly passes a law authorizing such a transfer or
expanding the purposes of the CELP Fund or if an appropriate
budget amendment is approved in accordance with State law.

                              I

                       Background

A. Energy Overcharge Restitution Fund

  The Energy Overcharge Restitution Fund ("Restitution Fund")

is a special fund created in 1989 primarily to hold the State's share
of restitution paid by various companies in settlements of actions
brought by the federal Department of Energy for violations of
federal oil price controls during the period between January 1975
and the end of those controls in January 1981. Chapter 526, Laws
of Maryland 1989, codified in Annotated Code of Maryland, State
Finance & Procurement Article ("SFP"), §7-315.[1] The Restitution
Fund is also to receive any gifts expressly given to the State for
energy assistance or weatherization for individuals. SFP §7-
315(b)(2)(ii).

  The statute specifically authorizes the use of money in the

Restitution Fund for various energy assistance, conservation, and
weatherization programs. SFP §7-315(f)(2). They include:

  !       assistance to households under the State Energy
          Assistance and Information Act.[2] SFP §7-315(f)(2)(i)-
          (ii).

  !       energy assistance and weatherization programs provided
          through the MEA and the Community Development
          Administration of the Department of Housing and
          Community Development. SFP §7-315(f)(2)(iii).

  !       energy extension service and low income home energy
          programs under 42 U.S.C. §§7001 et seq., 8621 et seq.
          SFP §7-315(f)(2)(iv).

  !       other energy assistance or weatherization programs
          satisfying federal guidelines for the use of overcharge
          restitution funds. SFP §7-315(f)(2)(v).

  !    "energy conservation programs" encompassed by
       specified federal laws.[3] SFP §7-315(f)(2)(vi).

  !    the State Energy Efficiency and Economic Development
       Loan Program.[4] SFP §7-315(f)(2)(vii).

  !    the Community Energy Loan Program.                   SFP §7-
       315(f)(2)(viii).

  !    "any other purpose required as a condition of ...
       acceptance [of the funds]." SFP §7-315(f)(2)(ix).

The Legislature has charged the Director of MEA with the task of
assessing needs and making recommendations to the Governor for
the use of the Restitution Fund. SFP §7-315(e).

   Expenditures are to be made from the Restitution Fund in

accordance with the State budget or an approved budget amendment.
SFP §7-315(d).[5] Disbursements from the Restitution Fund are to
supplement rather than supplant funds that are otherwise available
for energy assistance programs under State or federal law. SFP §7-
315(f)(4).

 In connection with the Restitution Fund, the Treasurer

maintains seven revenue accounts corresponding to settlements of
seven cases providing for restitution to consumers through the
states.[6] Each settlement contains somewhat different restrictions on
the use of funds. An eighth account is dedicated to the SALP. Your
predecessor advised that, while these accounts have not been
codified as special funds by statute, the Treasurer has treated the
accounts as though they were separate funds, as opposed to a single
Restitution Fund with separate sub-accounts. The Legislature has
also created a second special fund for moneys appropriated from the
Restitution Fund for one of its purposes - i.e., the Community
Energy Loan Program Fund ("CELP Fund").

  The State's annual budget bill typically makes appropriations

for both CELP and SALP under the MEA portion of the budget;
each is designated as a "capital appropriation - special fund
appropriation." See, e.g., Chapter 443, Laws of Maryland 2005 at
pp. 2096-97. Those appropriations are made, respectively, from the
CELP Fund and the SALP account of the Restitution Fund.

B. Community Energy Loan Program

   As indicated above, CELP is specifically identified in the

statute governing the Restitution Fund as a permissible use of
moneys in the Restitution Fund.[7] SFP §7-315(f)(2)(viii). CELP
itself is currently codified at Annotated Code of Maryland, State
Government Article ("SG"), §9-2101 et seq.[8]; see also COMAR
14.26.01. Under CELP, MEA makes low-interest loans available to
promote energy efficiency and conservation in buildings owned by
local governments or nonprofit organizations, including hospitals
and schools. SG §9-2103. MEA indicates that CELP funds
approximately $1.5 million in new projects each fiscal year. See
.

  As a repository for funds devoted to CELP, the Legislature

created the CELP Fund; it consists of moneys appropriated from the
Restitution Fund, moneys received from other public or private
sources for CELP, interest on the CELP Fund's earnings, and
repayments of loans. SG §9-2107(a). The MEA is to use the CELP
Fund to make loans and pay the expenses of CELP. SG §9-2107(c).
MEA is to reserve a portion of the CELP Fund specifically for loans
to schools and hospitals. SG §9-2107(b); COMAR 14.26.01.08.
The statute does not authorize the expenditure of moneys from the
CELP Fund for the SALP or any of the other purposes of the
Restitution Fund.

C. State Agency Loan Program

  SALP was created in 1991 as a revolving loan account within

the Restitution Fund to make loans to State agencies for cost-
effective energy efficiency improvements in State facilities. SALP
was developed by MEA, then known as the Maryland Energy Office
and part of the Department of Housing and Community
Development, to enhance energy savings in State agencies. The
SALP account was capitalized with funds from one of the restitution
accounts within the Restitution Fund.[9] According to MEA, loans
from the Restitution Fund totaling approximately $1 million are
appropriated each year for SALP. While an agency pays no interest
on a loan, it does pay a 1% administrative fee to the Restitution
Fund. As noted above, unlike CELP, SALP is not codified in statute
and does not have its own special fund created by statute.

D. Legislative Audit

  During a recent audit of MEA, the Legislative Auditor

questioned two transfers of money from the CELP Fund to the SALP
account. In December 2001 the MEA transferred $500,000 from the
CELP Fund to the SALP account. A similar transfer of $400,000
was effected in November 2004. The transfers were apparently done
to fund additional loans to State agencies through SALP. Your
predecessor indicated that the purpose of the transfers was to ensure
that the SALP account would remain solvent while awaiting
repayment of loans.

 MEA management believed that the Director of MEA had

authority to make the transfers in connection with the annual budget
process. We understand that both transfers were included in MEA's
submissions to the Department of Budget and Management
("DBM") as part of DBM's coordination of the State's capital
project program under SFP §3-601 et seq. Apparently, the transfers
were included in materials submitted to DBM in revenue
spreadsheets for CELP and SALP that detailed the projected revenue
for both programs, but were not identified as budget amendment
requests. As we understand it, the transfers were not reflected in any
appropriation in the operating budget or capital budget bills.[10]

 The Auditor questioned the legality of the transfers and

recommended that MEA obtain an opinion from the Attorney
General on the issue.

                               II

                           Analysis

 The issue raised by the Auditor concerns the transfer of

moneys from one special fund - the CELP Fund - to an account in
another special fund - the SALP account in the Restitution Fund.

  Moneys appropriated to a special fund may only be expended

in accordance with the law governing that fund. See 89 Opinions of
the Attorney General 172, 177-78 (2004). Unspent moneys
appropriated to a special fund remain in that fund and do not revert
to the general fund. SFP §7-304. Thus, the moneys appropriated to
the CELP Fund in the various budgets since the inception of that
fund are to be expended for the purposes set forth in the law creating
the CELP Fund. Unless the Legislature enacts a law that transfers
those funds to another fund or authorizes their use for other
purposes, the MEA has no authority to devote them to any other
purpose - e.g., transfer them to the SALP account or otherwise
return them to the Restitution Fund.

  Your predecessor indicated that information concerning the

2001 and 2004 transfers was provided to DBM as part of the "capital
budget process." However, we understand that transfers were not
part of any appropriation in either the operating budget or capital
budget bill. Even if they had been, neither the operating budget bill[11]
nor capital budget bill[12] could ordinarily authorize such a transfer.
Unless the transfers were authorized in laws passed by the
Legislature or in an approved budget amendment, the transfers
would not be valid. In any event, it appears that neither the annual
budget bills nor the capital budget bills for the pertinent fiscal years
purport to authorize such transfers. Moreover, we are unable to
locate any provision specifically authorizing the transfers in any bills
enacted by the Legislature during the relevant time period.

  In sum, MEA lacked legal authority to transfer funds from the

CELP Fund to the SALP account. However, it is perhaps not
surprising that there might be some confusion on the MEA's
authority to transfer funds from the CELP Fund to other authorized
purposes of the Restitution Fund. Our answer to your question
results from the fact that the Legislature has established the CELP
Fund as a special fund by statute and not just as an account within
the Restitution Fund. Had the moneys designated for CELP simply
been part of an account within the Restitution Fund, they could have
been transferred to any of the other accounts within that Fund
without special action by the Legislature. Appropriation of the funds
to that purpose as part of the budget process or in an authorized
budget amendment would have been sufficient.

  Finally, we discuss the extent to which moneys in the CELP

Fund might be transferred to the SALP account in the Restitution
Fund by means of a budget amendment. In 71 Opinions of the
Attorney General 3, Attorney General Sachs concluded that
unestimated and excess receipts could be transferred from one
special fund to another special fund under the laws governing budget
amendments if the law governing special fund that was the source of
the transfer did not prohibit the transfer. See also 89 Opinions of the
Attorney General 172, 181 (2004) (transfer by budget amendment
not permitted when statute governing the special fund prohibited
transfer). The statute governing the CELP Fund does not prohibit a
transfer of excess or unestimated receipts to the Restitution Fund.
Thus, in our view, funds could be transferred from the CELP Fund
back to the Restitution Fund by an approved budget amendment.
However, as we understand it, the transfers in question were not
effected by budget amendment.

                             III

                         Conclusion

   In our opinion, moneys in the CELP Fund may only be spent

in accordance within the statute creating that fund; expenditure for
purposes of the SALP is not currently authorized by that statute.
Excess or unestimated receipts in the CELP Fund may be transferred
to another fund by an approved budget amendment. Thus, funds
may be transferred from the CELP Fund to the SALP account only
if the General Assembly passes a law authorizing such a transfer or
expanding the purposes of the CELP Fund or if a budget amendment
is approved in accordance with State law.

                                    J. Joseph Curran, Jr.
                                    Attorney General


                                    Robert N. McDonald
                                    Chief Counsel
                                     Opinions and Advice

[1] The Restitution Fund is the successor of the Energy Overcharge
Restitution Trust Fund, which was originally created in 1984 for the same
purposes. Chapter 759, Laws of Maryland 1984. The history of energy
overcharge litigation and the creation of a special fund to hold the
proceeds of the restitution orders are recounted in 71 Opinions of the
Attorney General 226 (1986).

[2] Annotated Code of Maryland, Article 41, §6-401 et seq.

[3] Those laws include Pub.L. 97-377, 96 Stat. 1830, §155 (1982), and
the State Energy Programs Improvements Act of 1990, Pub.L. 101-440,
104 Stat. 1006 (1990).

[4] Annotated Code of Maryland, State Government Article, §9-20A-
01 et seq.

[5] Although the statute requires that any budget amendment be
submitted to and approved by the Legislative Policy Committee prior to
the expenditure or obligation of funds, this Office has previously advised
that the requirement of legislative "approval" of an administrative budget
amendment could be held to be an unconstitutional legislative veto. See
Letter of Attorney General J. Joseph Curran, Jr. to Governor Robert L.
Ehrlich, Jr. concerning House Bill 147 (May 19, 2005) at pp. 6-7.

[6] The cases are generally referred to by the following names: Exxon,
National Helium, Diamond Shamrock, Kansas Stripper Well, Amoco II,
Amoco Belridge, and Cities Service.

[7] The federal Department of Energy approved the use of restitution
proceeds for CELP in a letter dated June 18, 1989.

[8] CELP was originally created in 1989 as a program of the
Department of Housing and Community Development. Chapter 421,
Laws of Maryland 1989, codified at Article 83B, §4-901 et seq. It was
recodified and transferred to MEA in 1991. Chapter 468, Laws of
Maryland 1991.

[9] The State received approval from the federal Department of Energy
to use funds from the Stripper Well settlement for SALP. Department of
Energy response to State's Eighth Proposal for Use of Stripper Well Funds
(April 12, 1990).

[10] Appropriations to fund some of the State's capital projects appear
in the annual operating budget.

[11] When the General Assembly establishes a special fund dedicated
to specific purposes, the annual budget bill may only appropriate money
from that fund for the statutorily-identified purposes. See 89 Opinions of
the Attorney General 172, 177-78 (2004); 71 Opinions of the Attorney
General 3, 4 n.2 (1986); 20 Opinions of the Attorney General 201, 203-4
(1935). This is based on the principle that the Legislature ordinarily may
not "legislate in the budget." 89 Opinions of the Attorney General at 177-
78. "A budget bill is not a means by which the General Assembly may
enlarge the scope of a statute." 81 Opinions of the Attorney General 269,
275 (1996).

[12] The phrase "capital budget bill" is normally used to refer to a
supplementary appropriation bill that contains various appropriations for
various capital projects. It is enabling legislation for the creation of State
debt through the issuance of State of Maryland general obligation bonds,
the proceeds of which are used to fund various capital projects. As a
supplementary appropriation bill, it must be limited to "some single work,
object or purpose." Article III, §52(8). The Court of Appeals has held
that even though a capital budget bill may embrace a variety of projects,
its single work or object is the "obtention of funds for State purposes from
lenders" - i.e., the creation of a State debt. See City of Baltimore v. State,
281 Md. 217, 227, 378 A.2d 1326 (1977); Panitz v. Comptroller, 247 Md.
501, 513-14, 232 A.2d 891 (1967). This Office has cautioned against the
inclusion of provisions in the capital budget bill that are not items of
appropriation or related to the administration of the State debt program.
See Bill Review Letter concerning House Bill 340 - Capital Budget (May
19, 2005). Thus, it is doubtful whether the capital budget bill could
lawfully include a transfer of funds between the CELP Fund and the
Restitution Fund, as they do not relate to State debt.