Can a Mississippi city give federal flood-mitigation grant money directly to private homeowners?

Plain-English summary

Representative Tim Ladner asked the AG two questions about a fact pattern involving FEMA flood-mitigation grant funds passed through a city to private homeowners' residences:

1. Can FEMA give money directly to state, municipal, or county entities? The AG declined to answer. AG opinions are limited to questions of state law (§ 7-5-25). FEMA's authority is a question of federal law, outside the AG's scope. Ladner was directed to FEMA itself.

2. Does the Mississippi Constitution allow a state, city, or county to give taxpayer dollars to private individuals? Generally no. Section 66 of the Mississippi Constitution restricts donations: "No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use." The Mississippi Supreme Court in McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016), held that municipal donations to private citizens are unlawful and violate the Mississippi Constitution. The Court quoted the rule that a "municipal board cannot lawfully give away public money."

The defining feature of a "donation" under McAdams is the absence of consideration. If the city gives money or value in exchange for nothing of equivalent value back, that is a donation. Donations to private citizens by a city are not allowed unless specifically authorized by a law passed under Section 66's two-thirds vote.

The factual context (FEMA flood-mitigation funds) matters because some federal grant programs come with specific authorities to make payments to homeowners. The AG didn't analyze the specific FEMA program but referred Ladner to FEMA and the State Auditor for additional guidance. If the FEMA program authorizes city pass-through payments to homeowners, that may provide the necessary statutory authorization. Without that, Section 66 blocks the disbursement.

Practical takeaway: don't assume passing federal money through a city changes the analysis. Mississippi's constitutional limit on donations applies to whatever public money the city handles. Get an explicit answer on whether the federal program authorizes pass-through payments before the city writes a check to a homeowner.

What this means for you

If you are a Mississippi city handling federal grant funds

Pass-through grants to private parties require careful authority analysis. The federal grant agreement will typically describe what the city is allowed to do with the funds. Read it. If the federal authority is for the city to use the funds for public purposes (infrastructure, services), that's one scenario. If the federal authority is for the city to disburse to private parties (homeowners, businesses), that's another, and Section 66 of the Mississippi Constitution comes into play if the disbursement to the private party is essentially a donation.

If you are a Mississippi homeowner expecting a flood-mitigation reimbursement

Don't assume your check is automatic. The city has to first determine that it has the legal authority to pay you. If the program structure makes the city the grantee and you a downstream recipient, the city may need either (a) explicit federal program authority for pass-through payments, or (b) a service-or-property exchange that qualifies as "consideration" under McAdams. Programs structured as state-level grants directly to homeowners avoid this issue.

If you are a state legislator

Federal flood-mitigation programs sometimes require local match or local administration. If you want Mississippi cities to be able to pass federal money to private property owners directly, consider whether explicit state authorizing legislation is needed. Federal authorization alone may not be enough to override Section 66's general prohibition.

If you are a city attorney

Walk through these questions for any disbursement to a private party:
- Is there explicit Mississippi statutory authority for this kind of payment?
- Is there explicit federal program authority for the city to make these pass-through payments?
- Is there consideration in the form of services or property received by the city?
- Is the program structured so the city is acting as a fiscal agent rather than a donor?

If none of those answers is clear, hold the disbursement until the authority question is resolved. The State Auditor will eventually look at this, and the McAdams rule is unforgiving.

If you are at the State Auditor's office

This kind of disbursement is exactly what audit reviews look for. Cities that pass federal money to homeowners without clear legal authority are exposed under McAdams, and the question of whether consideration was received is fact-specific. Your guidance to local officials on the front end is more valuable than enforcement on the back end.

Common questions

Q: What is Section 66 of the Mississippi Constitution?
A: It provides: "No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use." It restricts both who can authorize donations (only the Legislature, by supermajority) and what can be subsidized (no sectarian purposes).

Q: What is "consideration" in this context?
A: It's a contract-law concept: something of value given in exchange for something else of value. If the city receives services, property, or some other benefit in exchange for its payment, that's consideration. If the city gives money for nothing back, that's a donation.

Q: How did the McAdams case define a donation?
A: The Mississippi Supreme Court said: a donation is "the transfer of money or other things of value from the owner to another without any consideration." (Internal citations omitted.) The absence of consideration is what makes a transfer a donation.

Q: Are there exceptions where a city can give money to a private party?
A: Yes, with specific legal authority. Mississippi statutes authorize various public-purpose payments, like economic development incentives under specific programs, contracts for services, certain types of grants for nonprofit beneficiaries, and so on. Each of those has statutory authorization that, in effect, makes the payment something other than a "donation" within the constitutional sense.

Q: What about federal grant funds passing through a city?
A: It depends on the federal program. Some federal programs explicitly authorize cities to make pass-through payments to private homeowners (e.g., certain HUD CDBG-DR programs after a federally declared disaster). Others authorize cities to use funds only for public infrastructure, with private benefit being incidental. Read the federal grant agreement carefully.

Q: What's the practical risk if a city disburses without clear authority?
A: State Auditor findings of improper expenditure; personal liability of officials in some circumstances; mandamus or declaratory action to recover funds; political fallout. McAdams itself involved a successor mayor seeking to hold a former mayor liable for unauthorized payments.

Q: Why does the AG decline to answer the FEMA question?
A: § 7-5-25 limits AG opinions to prospective questions of state law. Federal agency authority is a federal-law question. The AG also cannot opine on factual scenarios. For FEMA-specific authority, FEMA itself is the right source, possibly with help from the U.S. Department of Justice or a federal grants attorney.

Q: What about a state-level pass-through where the state authorizes the payment?
A: That's a different analysis. If the Legislature has authorized a specific kind of payment by general law, that may provide the necessary statutory basis under Section 66's two-thirds rule (which Section 66 contemplates as the path for any donation legislation). Section 66 is constitutional permission for donation legislation passed by supermajority, not a permanent ban.

Background and statutory framework

Section 66 of the Mississippi Constitution dates to the 19th century and reflects an enduring concern in state constitutions about the use of public funds for private benefit. The provision is a structural limit on the legislative process itself: only laws passed by two-thirds vote of each chamber can authorize donations or gratuities, and even those laws cannot be for sectarian purposes.

The provision has been read together with Section 95 (the related provision that prohibits the donation of state lands to private corporations, individuals, or railroad companies). The two together create a dual barrier:
- Section 66: Donations of money or other public assets generally require a two-thirds legislative vote.
- Section 95: Donations of state lands to private parties are categorically prohibited.

The Mississippi Supreme Court in McAdams v. Perkins, 204 So. 3d 1257, 1265 (Miss. 2016), made the local-government rule explicit: "'Donations by a municipality are unlawful' and violate the Mississippi Constitution. Indeed, a 'municipal board cannot lawfully give away public money.'"

The case is also helpful for the consideration analysis: "A donation or gratuity is characterized by an absence of consideration, i.e., 'the transfer of money or other things of value from the owner to another without any consideration.'" McAdams, 204 So. 3d at 1265. So the determinative question is whether the city is receiving something in return.

The federal-funds wrinkle is real and not fully resolved by this opinion. When federal grant programs require pass-through payments, the federal authority can sometimes be read as supplying the necessary statutory authorization, especially if Mississippi has accepted the federal grant under existing authority. But the analysis is fact-specific, and the AG declined to opine on the FEMA program in particular.

The AG's referral to the State Auditor is useful: cities considering pass-through payments to private parties should run the analysis past their auditor before making the payments. Audit findings on improper public-fund expenditures can carry both fiscal and personal-liability consequences.

Citations and references

Constitution:
- Miss. Const. § 66 (donations or gratuities require two-thirds legislative vote; no sectarian purposes)

Statutes:
- Miss. Code Ann. § 7-5-25 (AG opinion authority limited to prospective state-law questions)

Cases:
- McAdams v. Perkins, 204 So. 3d 1257 (Miss. 2016) (municipal donations to private citizens are unlawful absent consideration)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2024/02/T.Ladner-February-20-2024-Municipal-Donations.pdf

Original opinion text

February 20, 2024

The Honorable Tim Ladner
Mississippi House of Representatives
MS House District 93
Poplarville, Mississippi 39470

Re: Municipal Donations

Dear Representative Ladner:

The Office of the Attorney General has received your request for an official opinion.

Questions Presented

1. Can the Federal Emergency Management Agency give monies directly to state, municipal, or county entities?

2. Does the Mississippi Constitution allow a state, municipal, or county government entity to give taxpayer dollars to private individuals?

Brief Response

1. Opinions of this office are limited to questions of state law and not federal law. This office cannot opine on the authority of federal agencies.

2. Unless specifically authorized by law, in the absence of consideration, municipal donations to private citizens violate the Mississippi Constitution.

Applicable Law and Discussion

We understand that your request relates to federal grant funds received by a municipality for flood mitigation to private citizens' residences. As an initial matter, pursuant to Mississippi Code Annotated Section 7-5-25, the Attorney General is authorized to issue official opinions on prospective questions of state law only. This office cannot opine on questions that require interpretations of federal law. Thus, we are unable to respond to your first question regarding the authority of the Federal Emergency Management Agency to give monies to state, municipal, or county entities.

In response to your second question, Section 66 of the Mississippi Constitution provides: "No law granting a donation or gratuity in favor of any person or object shall be enacted except by the concurrence of two-thirds of the members elect of each branch of the Legislature, nor by any vote for a sectarian purpose or use." The Mississippi Supreme Court has stated that "'[d]onations by a municipality are unlawful' and violate the Mississippi Constitution. Indeed, a 'municipal board cannot lawfully give away public money.' A donation or gratuity is characterized by an absence of consideration, i.e., 'the transfer of money or other things of value from the owner to another without any consideration.'" McAdams v. Perkins, 204 So. 3d 1257, 1265 (Miss. 2016) (internal citations omitted). Therefore, unless the city finds that there is some consideration in exchange for the city's funds, "the payment of such . . . is a donation of public funds to a private individual." Id.

We recommend that you also contact the Office of the State Auditor and the Federal Emergency Management Agency for further guidance.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General