Does Maine law require the Governor to balance the state budget before the new fiscal year begins, or only to react if revenues fall short during the year?

Plain-English summary

Governor John R. McKernan asked Tierney's office whether Maine law required him to ensure that the FY 1991 state budget was in balance before fiscal year start on July 1, 1990. Chief Deputy Attorney General James T. Kilbreth answered no. He said the Governor could work with the Legislature on an amended budget for projected revenue reductions, or use temporary allotment curtailments if revenues appeared insufficient.

Two legal obligations operate on state budgeting. First, Me. Const. art. IX, § 14 prohibits the State from incurring debts or liabilities in excess of $2 million absent an exception, including voter-approved bonds. That ceiling, combined with restrictions on temporary loans, has the practical effect of requiring the State to function on a cash basis and precludes deficit financing. Second, the State Budget Act (5 M.R.S.A. §§ 3661 et seq.) requires the Governor to submit a budget for each biennium "showing the balanced relations between the total proposed expenditures and the total anticipated revenues." The submission requirement applies at the outset of each biennium.

Kilbreth's logic ran like this. The constitutional debt limit does not require any particular advance step before an actual shortfall. The statutory submission duty concerns the proposed budget at the outset of a biennium. To account for projected reductions in revenue, the Governor and Legislature could enact an amended budget. If revenues appeared insufficient to meet budgeted expenses, the Governor could temporarily curtail allotments under 5 M.R.S.A. § 1668. That section requires a written report from the Commissioner of Finance and Administration that anticipated income and other available funds will not meet authorized expenditures. It then permits the Governor to "temporarily curtail allotments equitably so that expenditures will not exceed the anticipated income and other available funds." No allotment may be terminated, and the Governor must notify legislative leaders of the specifics and impact of any curtailment so the Legislature can amend the budget if it chooses.

The opinion attaches two earlier AG opinions on related questions: AG Richard S. Cohen's March 19, 1980 opinion (Op. Me. Att'y Gen. 80-65) to Senator Jerome A. Emerson, ruling that the Governor's § 1668 curtailment authority does not extend to money in the State Aid Construction Fund (23 M.R.S.A. §§ 1101-1109) appropriated and matched with municipal contributions in prior biennia; and AG James E. Tierney's March 2, 1983 opinion to Representative John Diamond, concluding that Maine's constitutional and statutory structure already contemplates a balanced budget. The 1980 opinion's broader teaching is that not every state account is reachable by § 1668. The State Aid Construction Fund is a "joint fund" carried as a nonlapsing account for highway purposes, and a general principle of law prohibits diverting special-fund money to other purposes.

Currency note

This opinion was issued in 1990. 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, deadline, or remedy mentioned here.

Common questions

What does Article IX, Section 14 of the Maine Constitution actually prohibit?

It prohibits the Legislature from creating debts or liabilities that, together with all previous debts, exceed $2 million at any one time, except (a) to suppress insurrection, repel invasion, or prosecute war; (b) for temporary loans repaid from taxes raised during the same fiscal year; and (c) by two-thirds vote of both houses authorizing bonds ratified by a majority of voters at a general or special election. The effect is to require the State to function largely on cash revenues, with limited borrowing capacity.

What is the difference between "appropriations" and "allotments" in Maine state finance?

The 1980 opinion quotes § 1668, which allows the Governor to temporarily curtail allotments after the Commissioner reports that anticipated income and other available funds appear insufficient to meet authorized expenditures. It says "no allotment shall be terminated" under that section.

Did the opinion say a Maine balanced-budget constitutional amendment was unnecessary?

The attached 1983 Tierney opinion to Representative Diamond reached that conclusion. It read Maine's existing constitutional and statutory structure as contemplating a balanced budget, even without a dedicated balanced-budget constitutional provision. That reading rested on the debt-limit clause combined with the budget statutes.

Why was the State Aid Construction Fund treated differently in the 1980 opinion?

The Fund was a "joint fund" under 23 M.R.S.A. § 1102, made up of municipal appropriations matched by state contributions for state-aid highway projects. The General Highway Fund's nonlapsing-carrying-account treatment in § 1652 was designed to let unused state contributions stay in the joint fund for future highway use rather than reverting to general revenue. AG Cohen concluded that allowing § 1668 curtailments to reach money already placed in the joint fund would amount to diverting special-fund money to non-highway purposes, violating both the special-fund principle and the legislative intent behind the nonlapsing provision.

What would the Governor do if the Legislature adjourned without an amended balanced budget?

The 1990 opinion answered that the Governor could exercise his § 1668 curtailment authority in fiscal 1991 to assure a balanced budget for that year. That power is restricted to temporary curtailments on an emergency basis, not permanent reductions.

Background and statutory framework

Maine's budget regime in 1990 was built from layers: a constitutional debt limit (Me. Const. art. IX, § 14), the State Budget Act of Title 5, and § 1668's curtailment authority added in 1976 (P.L. 1975, c. 771, § 77-A) when the executive functions of the abolished Executive Council were redistributed. Section 1668 was added by floor amendment in the Senate; the Statement of Fact attached to S-526 explained that the amendment codified a recurring provision of appropriations bills granting emergency curtailment authority. Sponsor Senator Merrill described the notification requirement as a "very minor step" beyond existing practice. The statute requires equitable curtailments consistent so far as practicable with legislative intent and notice to legislative leadership. The 1990 opinion says the Governor had no duty to take a particular step before an actual shortfall.

Citations

• Me. Const. art. IX, § 14 (state debt limit)
• 5 M.R.S.A. §§ 3661 et seq. (State Budget Act)
• 5 M.R.S.A. § 1663 (scope of the budget)
• 5 M.R.S.A. § 1664 (Part 1 of budget; balanced relations)
• 5 M.R.S.A. § 1666 (budget estimates)
• 5 M.R.S.A. § 1668 (temporary curtailment of allotments)
• 5 M.R.S.A. §§ 1511, 1544 (surplus procedures)
• 23 M.R.S.A. §§ 1101-1109 (State Aid Construction Fund)
• 23 M.R.S.A. § 1102 (joint fund for highway construction)
• 23 M.R.S.A. § 1652 (General Highway Fund nonlapsing carrying accounts)
• P.L. 1913, ch. 130, §§ 19-25 (creation of State Aid Construction Fund)
• P.L. 1931, ch. 251, § 4 (establishment of General Highway Fund)
• P.L. 1975, ch. 771, § 77-A (1976) (enactment of § 1668)
• P. & S.L. 1975, ch. 147, § 3 (1976) (predecessor curtailment provision)
• Stein v. Morrison, 75 P. 246 (Ida. 1904) (states with debt limits function on a cash basis)
• People ex rel. Ogilvie v. Lewis, 274 N.E.2d 87, 88 (Ill. 1971) (definition of balanced budget)
• Opinion of the Justices, 376 N.E.2d 1217, 1225 (Mass. 1978) (Massachusetts balanced-budget construction)
• Op. Me. Att'y Gen. 80-65 (Mar. 19, 1980) (curtailment authority does not reach State Aid Construction Fund)
• Mass. Const. art. 63, § 2
• Colo. Const. art. X, § 16 and art. XI, § 3
• 81A C.J.S. States § 228 (1977) (special-fund principle)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/1990/ag_19900112.pdf

Original opinion text

JAMES E. TIERNEY
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
STATE HOUSE STATION 6
AUGUSTA, MAINE 04333

January 12, 1990

Honorable John R. McKernan, Jr.
State House Station #1
Augusta, ME 04333

Dear Governor McKernan:

This is in response to your inquiry of January 11 whether Maine law requires you to ensure that the State budget for fiscal year 1991 is in balance prior to the commencement of that year on July 1, 1990. For the reasons which follow, it is the opinion of this Department that you are under no such obligation.

As set forth more fully in the attached Opinion of the Attorney General of March 2, 1983, there are two legal obligations concerning the balancing of the State budget. First, Article IX, Section 14 of the Maine Constitution prohibits the State from incurring any debts or liabilities in excess of $2,000,000, unless bonds to cover any debt or liability in excess of that amount are approved by the Legislature and the people. Second, Section 1664 of the State Budget Act, 5 M.R.S.A. §§ 3661 et seq., requires that the Governor submit a budget for each biennium showing "the balanced relations between the total proposed expenditures and the total anticipated revenues together with the other means of financing the budget for each fiscal year of the ensuing biennium."

The second of these requirements is not implicated by your question, since it relates only to the submission of a proposed budget at the outset of each biennium. The first requirement, however, does impose upon the State government the obligation not to overspend (in excess of $2,000,000) actual revenues (and other available funds). Thus, during any one fiscal year, if insufficient funds are on hand to meet new debts or liabilities, no such obligations (in excess of $2,000,000) can be incurred. Article IX, Section 14 of the Maine Constitution, however, does not require you to take any particular step in advance of the actual event of such a shortfall. As we understand it, no shortfall is projected for fiscal 1990 in any case.

With respect to your question about how you may act to assure that the budget remains in balance, the answer depends on the circumstances. First, and most obvious, you and the Legislature may enact an amended budget for the biennium to take into account projected reductions in revenues. Second, if it appears that revenues will be insufficient to meet budgeted expenses, you may "temporarily curtail" allotments following the procedures set forth in 5 M.R.S.A. § 1668. As the attached opinion reflects, that section requires an explanation of the impact of such curtailments so that the Legislature may amend the budget should it choose to do so in response to your action. Op. Me. Att'y Gen. 80-65.

This leads to your final question about FY 1991. Should the Legislature adjourn without enacting an amended balanced budget, you could exercise your allotment curtailment powers in fiscal 1991 to assure a balanced budget for that year. That power is, as the attached opinion by Attorney General Cohen makes clear, restricted to temporary curtailments of allotments, on an emergency basis.

I hope the foregoing answers your questions. Please feel free to reinquire if further clarification is necessary.

Sincerely,
JAMES T. KILBRETH
Chief Deputy Attorney General

JTK:sw

JAMES E. TIERNEY

ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
STATE HOUSE STATION 6
AUGUSTA, MAINE 04333

March 2, 1983

Honorable John Diamond
House of Representatives
State House Station #2
Augusta, Maine 04330

Dear Representative Diamond:

You have requested an opinion from this office on the question of whether the state budget is required to be balanced under current constitutional and statutory pro- visions, or whether an amendment to the Maine Constitution is necessary to achieve that purpose. This office concludes that the current constitutional and statutory structure contemplates that the state budget be balanced.

It is important at the outset to define the term "balanced budget." It will be assumed, for purposes of this opinion, that a balanced budget is one in which "proposed expenditures [do] not exceed estimated avail- able funds." People ex rel. Ogilvie v. Lewis, 274 N.E.2d 87, 88 (Ill. 1971). A review of our relevant constitutional and statutory provisions indicates that they contemplate a budgetary and appropriation process in which no deficits occur.

Maine's constitutional limitation on the incurrence of debt by the State has the effect of ensuring that the

State function on a "cash basis." See Stein v. Morrison, 75 P. 246 (Ida. 1904). Section 14 of Art. IX of the Maine Constitution provides, in pertinent part:

The Legislature shall not create any debt

or debts, liability or liabilities, on behalf of the State, which shall singly, or in the aggregate, with previous debts and liabilities hereafter incurred at any one time, exceed

two million dollars, except to suppress insurrection, to repel invasion, or for

the purposes of war, and except for temporary loans to be paid out of money raised by taxa- tion during the fiscal year in which they are made; and excepting also that whenever two- thirds of both Houses shall deem it necessary,

by proper enactment ratified by a majority of the electors voting thereon at a general or special election, the Legislature may authorize the issuance of bonds on behalf of:the. State at such times and.in such amounts and for

such purposes as approved by such action... .

Thus, § 14 prohibits the State from incurring long-term debt in the amount of more than $2,000,000, except for certain specified emergencies, without a vote of the people. By requiring the State to function on its revenues and by prohibiting loans except under carefully limited circumstances, the Maine Constitution guarantees that the State's budget will be balanced and precludes deficit financing.

The specific. statutory provisions which govern the budgetary process in Maine are consistent with the mandate of Art. IX, § 14, in that they contemplate that a balanced budget will be submitted to the Legislature. 5 M.R.S.A. § 1663, setting out the scope of the budget, provides that,

The budget of State Government. . . shall set forth all proposed expenditures for.

the administration, operation and main- tenance of the departments and agencies of the State Government; all interest and debt

l/ It is true that certain states do have both debt limits similar to ours and balanced budget requirements. See, e.g., Colo. Const., Art. X, § 16, and Art. XI, § 3. The language of the balanced budget provisions, however, is similar to the language of our budget statutes. Moreover, where a State is limited in its power to incur debt, that state's budget must ultimately balance in the sense that anticipated expenditures must equal estimated revenues, because, under such limitations, the need for state debt must be anticipated by the legislature.

redemption charges during each fiscal year and all expenditures for capital projects to be undertaken and executed during each fiscal year of the biennium.

It goes on to require that

the state budget... . set forth the
anticipated revenues of the State Govern- ment and any other additional means of financing expenditures proposed for each fiscal year of the biennium.

Section 1664 of that Title requires that Part 1 of the budget

shall embrace a general budget summary setting forth the aggregate figures of

the budget in such manner as to show the balanced relations between the total pro- posed expenditures. and the total anticipated revenues together with the other means of financing the budget. ...

Section 1666 of Title 5 similarly anticipates a budget based on

estimates. . . of the needs of the various departments and agencies and the total anticipated income of the State Govern- ment during the ensuing biennium.

Thus, the specific provisions of the budget statutes strongly support the proposition that Maine is to have a balanced budget. 2/

Other statutes dealing with the consequences of the budget procedure also suggest a budgetary and appropriation process in which no deficits are to occur. Sections 1511 and 1544 of Title 5 establish procedures dealing with budget surpluses.

No such statutes exist for deficits. Section 1668 establishes a method for temporarily curtailing allotments where it "appears. . . that the anticipated income and other available funds of the State will not be sufficient to meet the expend- itures authorized by the Legislature. "

2/ Indeed, the language of our statutes bears a strong similarity to language found in other states' consti- tutions which has been characterized by the courts as requiring a balanced budget. See, e.g., Mass. Const., Art. 63, §2; Opinion of the Justices, 376 N.E.2d 1217, 1225 (Mass. 1978). See, n. 1, supra.

The specific constitutional and statutory provisions discussed herein therefore have the practical effect of requiring this State to function on a balanced budget. I hope this information addresses your concern. Please do not hesitate to call on us if this office can be of further

service.
Sincerely,
JAMES E. TIERNEY
Attorney General
JET/ec

RICHARD S. COHEN
ATTORNEY GENERAL

STATE OF MAINE
DEPARTMENT OF THE ATTORNEY GENERAL
AUGUSTA, MAINE 04333

March 19, 1980

Honorable Jerome A. Emerson
Maine Senate

State House

Augusta, Maine 04333

Dear Senator Emerson:

You have asked whether under 5 M.R.S.A. § 1668 the Governor may, when there is a shortfall in revenues, "curtail allotments" to the State Aid Construction Fund which have been made pursuant to appropriations by prior Legislatures. While the answer is by no means free from doubt, we do not believe that the Governor has this authority.

The general power of the Governor to curtail allotments from legislative allocations because of a shortfall in revenues is set out in 5 M.R.S.A. § 1668. That section provides:

"Whenever it appears to the Commissioner

of Finance and Administration that the anticipated income and other available funds of the State will not be sufficient to meet the expenditures authorized by the Legis- lature, he shall so report in writing to the Governor, and shall send a copy of

the report to the President of the

Senate and the Speaker of the House

and the majority and minority leaders

of the Senate and House. After receiv-

ing the report, the Governor may
temporarily curtail allotments

equitably so that expenditures will

not exceed the anticipated income and
other available funds. No allotment
shall be terminated pursuant to this
section. Any curtailment of allot-
ments shall, insofar as practicable,
be made consistent with the intent of
the Legislature in authorizing these
expenditures.

"The Governor shall immediately upon
the curtailment of any allotment,
notify the President of the Senate
and the Speaker of the House and the
Majority and minority leaders of the
Senate and House of the specific
allotments curtailed, the extent of
curtailments of each allotment and
the effect of such curtailment on
the objects and purposes of the
program so affected."

Section 1668 was enacted in 1976 as part of comprehensive legis- lation redistributing the powers of the abolished Executive Council. P.L. 1975, c. 771, § 77-A (1976). It was not in- cluded, however, in the original bill redistributing such powers, but rather was added by amendment on the floor of the Senate. 1976 Maine Legislative Record, p. 971-72 (1976). The Statement of Fact to the amendment stated that:

"The purpose of the amendment is to put into the statutes a provision that has been in each appropriations bill for many years. The provisions allowed

1/ An example is the last such provision to be enacted, which appeared in the so-called special appropriation bill for the fiscal year 1976-77. P. & S.L. 1975, c. 147, § 3 (1976). The section provided:

"Sec. 3. Temporary curtailment of allotments.

Whenever it appears to the Commissioner of

Finance and Administration that the anticipated income and other available funds of the State

will not be sufficient to meet the expenditures authorized by the Legislature, he shall so report

to the Governor and Council and they may temporarily curtail allotments equitably so that expenditures will not exceed the anticipated income and other available funds."

the Governor and the Executive Council

to curtail allotments, temporarily and equitably, after notice of an anticipated revenue deficit from the Commissioner of Finance and Administration." Statement of Fact to Senate Document No. S-526, 107th Legislature (1976).

The purpose of the amendment was further explained by its sponsor, Senator Merrill, at the time of its introduction on the Senate floor:

"What this amendment requires is that [the cur- tailment] be done equitably, which is the traditional language in appropriations bills, and it requires that it be done in such a

way as to be consistent, so far as possible and practical, with the intent of the Legislature in passing the appropriations

bill.

"The thing that is really somewhat new, and I think is a very minor step, is that it pro- vides that once the Governor has made this curtailment he will notify the President

of the Senate and the Speaker of the House2/ of the cuts that he had made, in essence so to give those people an impact statement of what the impact of his actions will be. The obvious remedy, if this is grossly unaccept- able to the President and to the Speaker and to the constituents that they represent, namely, the members of the Legislature,

that the Legislature can call itself into session or, if it is in session, take some action to change this result." 1976

Maine Legislative Record, p. 971-72 (1976).

The purpose of Section 1668 is therefore clear. It was intended to codify the long-standing practice in biennial appropriations bills of giving the Governor the authority to make emergency curtailments of allotments authorized by those bills. The narrow question which your inquiry raises is whether

2/ The bill was subsequently amended to include the Majority and Minority Leaders of each House. 1976 Maine Legislative Record, p. 972 (1976).

the Governor may make such curtailments with regard to past allotments from the State Aid Construction Fund. Any response to this question, therefore, requires an understanding, not only of the legislative history of Section 1668 just set forth, but also of the precise operation of the State Aid Construc- tion Fund.

The State Aid Construction Fund was created in 1913, P.L. 1913, c. 130, §§ 19-25 (1913), now codified as amended at 23 M.R.S.A. §§ 1101-1109. From the beginning the Fund was characterized as a "joint fund,"23 M.R.S.A. § 1102, into which the municipalities of the State would be able to con- tribute money which they had appropriated for specific high- way purposes and into which the State would contribute match- ing funds, generally on an equal basis. Until 1931, the State contributions to the Fund were made from its general revenues. In that year, however, the Legislature established the General Highway Fund and began funding the State Aid Construction Fund from it, providing that all "unexpended balances of the General Highway Fund as have been set up for general con- struction and maintenance of highways and bridges shall be deemed nonlapsing carrying accounts." P.L. 1931, c. 251,

§ 4 (1931), now codified at 23 M.R.S.A. § 1652. Thus, State contributions to the State Aid Construction Fund were to be made from the General Highway Fund but were not to lapse if not actually spent in the period for which they were appropriated. Rather, they would remain in the "joint fund" for future use as needed.

The process, as we understand it, by which the Department of Transportation makes money available to the municipalities from the State Aid Construction Fund, under this statutory scheme, is as follows: After the Legislature has made a biennial appropriation for the State Aid Construction Fund from the General Highway Fund, the Department commits a portion of that appropriation for each municipality which notifies the Department that it has made a like appropriation for highway purposes, and continues to set aside such funds until the entire fiscal year's appropriation has been committed. The State Controller then carries the State appropriated funds on his books until notified by the Department that a municipal- ity for which it has committed funds in the past is ready to begin construction on an approved project. The Controller then pays the municipality the committed funds. Since, however, a municipality may not be ready to begin construction for many years after it first makes an appropriation and State funds are committed, the State Aid Construction Fund had built up a balance of over $12,000,000 at the beginning of the 1979-1982 biennium. All of this money, however, the Department advises us, is committed to match specific municipal appropriations.

Having recited the relevant legal and factual background, the question becomes whether 5 M.R.S.A. § 1668 applies to money in the State Aid Construction Fund appropriated and matched with municipal contributions in prior biennia. While, as indicated above, the answer is not entirely free from doubt, it is our view that the Governor's power to curtail allotments does not extend to the funds under consideration.

Critical to our conclusion are two aspects of the State

Highway Law. First, the Legislature has provided that the aggregate

of the money appropriated by the towns and the matching funds apportioned by the Department "shall constitute a joint fund for the construction and improvement of the state or state aid highways in such towns." 23 M.R.S.A. § 1102. Second, the Legislature has further provided that once established, this joint fund shall constitute a nonlapsing carrying account.

23 M.R.S.A. § 1652. When read together, these statutes reveal a clear legislative intent to establish an ongoing "special fund" to be used for the construction and improvement of state or state aid highways and not for any other purpose.

It is a general principle of law that money in a special fund must be expended for the purpose recited in the statute creating the fund.

"Where a special fund is created or set

aside by statute for a particular pur-

pose or use, it must be administered and expended in accordance with the statute,

and must be applied only to the purpose for which it was created or set aside, and not diverted to any other purpose, or transferred to any other fund." 81A C.J.S. States § 228 (1977).

In our view, a construction of 5 M.R.S.A. § 1668 which would allow the Governor to reduce the amount of money appropriated and placed in the State Aid Construction Fund in prior biennia, would violate the above principle, in that it would constitute a diversion of the funds to other purposes. Similarly, it

3/ We should emphasize that we are dealing only with money appropriated by prior Legislatures and already placed in the "joint fund" in accordance with the applicable Sections of the Highway Law.

would defeat what we perceive as the intent behind the non- lapsing provision, namely, that State Aid money unexpended at the end of the biennium be maintained in the Fund and utilized for its original purpose.

We recognize that 5 M.R.S.A. § 1668 could be read as over- riding the relevant sections of the Highway Law and thus author- izing the Governor to reduce the amount of money placed in the Fund pursuant to appropriations by prior Legislatures. That reading does not, however, appear compatible with the language of § 1668 which was designed to allow the Governor to deal with shortfalls in "anticipated income and other available funds." Since the Legislature has limited the "availability" of money previously placed in the State Aid Construction Fund, we think it more reasonable to conclude that § 1668 does not extend to that money. Furthermore, in attempting to reconcile potentially conflicting statutes, every attempt must be made to effectuate the intent behind those laws. We believe that the interpreta- tion rendered herein accomplishes that objective, insofar as it construes the Governor's power to curtail allotments in a manner which preserves the legislative intent that certain areas of highway construction and improvement be financed through a special, nonlapsing fund.

To summarize, it is our view that 5 M.R.S.A. § 1668 does not authorize the Governor to reduce the amount of money placed

in the State Aid Construction Fund pursuant to appropriations in prior biennia.

Please let me know if we can be of any further service.

RICHARD S. COHEN
Attorney General

RSC/ec

4/ In light of the question posed, our opinion is limited to an interpretation of 5 M.R.S.A. § 1668. We do not address the extent of the Governor's power, under 23 M.R.S.A. § 1652, to approve temporary transfers from one account of the General Highway Fund to another account thereof.