McKeldin v. Steedman

Sobeloff, C. J., delivered the opinion of the Court. A taxpayer is here seeking an adjudication as to the validity of Chapter 780 of the Acts of the General Assembly of 1953. This measure, known as the “General Construction Loan of 1953”, authorizes the Board of Public Works to create a debt in the sum of $15,040,950, and provides for the issuance of bonds to be discharged according to what is known as the serial annuity plan within fifteen years. Section 8 of the Act directs the levy of a state tax at a rate to be determined annually by the Board of Public Works, said- tax to be imposed by the governing bodies of the counties and Baltimore City.

It is as follows: “SEC. 8. And be it further enacted, That until all of the interest on and principal of any certificates issued under this Act have been paid in full, there is hereby levied and imposed an annual State tax on each $100 of assessable ⁹² property at the rate to be determined in the following manner: on or before December 1, 1953, and on or before December 1 in each calendar year thereafter, the Board of Public Works shall certify to the governing bodies of each of the Counties and Baltimore City the rate of State tax on each $100 of assessable property necessary to produce revenue to meet all interest and principal which will be payable to the close of the next ensuing calendar year on all certificates theretofore issued or theretofore authorized by resolution of the Board of Public Works to be issued, and the governing bodies of each of the Counties and Baltimore City shall forthwith levy and collect such tax at such rate. All matters committed by this act to the discretion of the Board of Public Works shall be determined by a majority of said Board.” This section is orthodox in form. It in fact follows the language customarily employed in loan authorizations to comply with the requirements of Sec. 34 of Art. Ill of the Constitution of Maryland, which is as follows: “Sec. 34.

No debt shall be hereafter contracted by the General Assembly unless such debt , shall be authorized by a law providing for the collection of an annual tax or taxes sufficient to pay the interest on such debt as it falls due, and also to discharge the principal thereof within fifteen years from the time of contracting the same; and the taxes laid for this purpose shall not be repealed or applied to any other object until the said debt and interest thereon shall be fully discharged. The credit of the State shall not in any manner be given, or loaned to, or in aid of any individual, association or corporation; nor shall the General Assembly have the power in any mode to involve the State in ⁹³ the construction of works of internal improvements, nor in granting any aid thereto which shall involve the faith or credit of the State; nor make any appropriation therefor, except in aid of the Construction of works of internal improvement in the counties of St. Mary’s, Charles and Calvert, which have had no direct advantage from such works as have been heretofore aided by the State; and provided that such aid, advances or appropriations shall not exceed in the aggregate the sum of five hundred thous- and dollars. And they shall not use or appropriate the proceeds of the internal improvement companies, or of the State tax, now levied, or which may hereafter be levied, to pay off the public debt (or) to any other purpose until the interest and debt are fully paid or the sinking fund shall be equal to the amount of the outstanding debt; but the General Assembly may, without laying a tax, borrow an amount never to exceed fifty thousand dollars to meet temporary deficiencies in the Treasury, and may contract debts to any amount that may be necessary for the defense of the State. And provided further that nothing in this section shall be construed to prohibit the raising of funds for the purpose of aiding or compensating in such manner or way as the General Assembly of the State shall deem proper, those citizens of the State who have served, with honor, their Country and State in time of war; provided, however, that such action of the General Assembly shall be effective only when submitted to and approved by a vote of the people of the State at the General Election next following the enactment of such legislation.” Sec. 9 of Chapter 780, however, adds a provision new in the history of loan authorizations in this state.

It reads: ⁹⁴ “Sec. 9. And be it further enacted, that the state tax imposed in the preceding section shall not be levied or collected except in the event that funds sufficient to make the payments of interest and principal on the Certificates of Indebtedness issued under the provisions of this Act shall not be present and available as in this section required. In submitting his budget program to the General Assembly in each and every year pursuant to the provisions of Section 52 of Article 3 of the Constitution of Maryland, the Governor shall place therein an item covering the required payments for the following fiscal year of the principal and interest due on the Certificates of Indebtedness issued under this Act. Said funds shall be taken from the General funds of this State and shall be paid over for the payment of the principal and interest on the Certificate of Indebtedness issued under this Act during such fiscal year.

No levy or partial levy shall be made of the taxes imposed under the preceding section of this act except in the event that funds are not present and available for the payment of said principal and interest as required in this section.” The bill of complaint alleges that the Board of Public Works has approved a request of the State Board of Education to expend $230,000 from the larger aggregate for the acquisition of additional land for Coppin State Teachers’ College, as purportedly authorized by the Act, pending issuance and sale of the bonds, repayment to the State Treasury to be made out of the proceeds when realized. The complainant alleges that “all or part” of the Act, and the action based upon it, are illegal, unconstitutional and void. First, it is charged that the Act is violative of Art. Ill, Sec. 29 of the Constitution of Maryland because its title is inadequate, vague and misleading in that ⁹⁵ it fails to disclose that Section 9 purports under certain circumstances to require use of general funds to pay the interest on and principal of the bonds to be issued, rather than the levy of a tax in the manner required by Art. III, Sec. 34. Secondly, it is asserted that the challenged measure is in violation of Section 34 itself in that, while purporting in Section 8 to require the levy of a tax in connection with the creation of a State debt, Section 9 in effect nullifies the tax for which Section 8 provides.

The contention is that by directing that general funds be used to pay off the bonds without levying a tax to raise such funds, the mandate of Section 34, above quoted, is disregarded. A third ground of attack is that the Act violates Section 52 (8) (b) of Art. III of the State Constitution, in that it constitutes a supplementary appropriation bill which, while purporting in Section 8 to levy a tax to provide revenue to repay the appropriation, nevertheless in Section 9 directs the use of general funds for this purpose. The language of Section 52 (8) is as follows: “Sec. 52. (8) Supplementary Appropriation Bill.

Neither House shall consider other appropriations until the Budget Bill has been finally acted upon by both Houses, and no such other appropriation shall be valid except in accordance with the provisions following: (a) Every such appropriation shall be embodied in a separate bill limited to some single work, object or purpose therein stated and called herein a Supplementary Appropriation Bill; (b) Each Supplementary Appropriation Bill shall provide the revenue necessary to pay the appropriation thereby made [by] a tax, direct or indirect, to be levied and collected as shall be directed in said bill; (c) No Supplementary Appropriation Bill shall become law unless it be passed in each House by a vote of a majority of the whole ⁹⁶ number of the members elected, and the yeas and nays recorded on its final passage; (d) Each Supplementary Appropriation Bill shall be presented to the Governor of the State as provided in Section 17 of Article 2 of the Constitution and thereafter all the provisions of said section shall apply.” Finally, the contention is made that Section 9 is an integral part of the Act, inseparable from it, and that as Section 9 is void the entire act must fall. A declaration of the invalidity of the Act is sought and an injunction is prayed to prevent any action under its authority. On the appellants’ demurrer to the bill the Circuit Court No. 2 of Baltimore City, after argument, decreed that Section 9 is unconstitutional, but that the rest of the Act is valid. An appeal and a cross-appeal followed.

I. To understand the interplay of the various sections of the Constitution here involved, it is necessary to examine our budgetary system as a whole and to consider the events which led to its adoption. In common with other states of the Union, Maryland less than four decades ago had no orderly system of planned public expenditures. Appropriations for various purposes were made piece-meal by the General Assembly, each project receiving independent consideration without relation to other claims upon the public purse. In earlier times, when the range and scope of state activities were limited, this plainless procedure was not seriously objectionable, for it was nevertheless not impossible for members of the legislature to have a fairly clear grasp of the state’s fiscal operations.

Eventually, however, with the growth in the size and complexity of governmental programs and machinery, embarrassing deficits occurred. A particularly disturbing experience of this nature happened in the year 1915, when there was a deficit of $2,000,000 in the State Treasury. The gravity of the problem became widely recognized, and shortly after his in ⁹⁷ auguration Governor Harrington appointed a group which was designated the “Commission on Economy and Efficiency on a Budget System”. Dr. Frank J. Goodnow, then President of the Johns Hopkins.

University, was its chairman and among its distinguished members was Mr. F. Neal Parke, later a member of this Court. In accordance with the Commission’s proposals an executive budget system was adopted by constitutional amendment, ratified by the people in 1916. The heart of the scheme, as stated by the Goodnow Commission, is “to impose upon the Governor the sole responsibility * * * of presenting to the legislature a complete and comprehensive statement of the needs and resources of the State * * *; to make it impossible for the legislature so to change the plans proposed by the Governor as to produce a deficit; but, to permit the legislature to make provision for any purpose not included in the Governor’s plan on the condition that it provide for the revenue which the accomplishment of its purpose necessitates.” See “The Maryland Budget System”, First Report of the Commission on the Administrative Organization of the State (1951); and H. S. Miles, “The Maryland Executive Budget System” (1942). By this Amendment, Article III, Sec. 52, the General Assembly is forbidden to appropriate any money except in accordance with its provisions.

Every appropriation bill must be either a Budget Bill, or a Supplementary Appropriation Bill. Elaborately detailed directions are given for submission by the Governor to the General Assembly of a budget annually for the next ensuing fiscal year, and it is required to contain a complete plan of proposed expenditures and estimated revenues and the estimated surplus or deficit of revenues at the end of the preceding fiscal year. Neither House may consider other appropriations until the Budget Bill, prepared by the Governor as above recited, has been finally acted upon by both Houses. To be valid each Supplementary Budget Bill is required ⁹⁸ by Section 52 (8) to provide the necessary revenue to pay the appropriation thereby made “by a tax, direct or indirect, to be levied and collected as shall be directed in said bill.” Items proposed by the Governor in his Budget Bill may be reduced or eliminated by the legislature, but no new item may be introduced by amendment to the Budget Bill; only a Supplementary Budget Bill is permitted to be used for this purpose and it must provide a tax to raise the necessary revenue.

The constitutional objective, as revealed by these provisions, is two-fold: first, to prevent the possible disturbance of the balanced budget which the plan contemplated, and, second, to allow legislative additions to the executive budget if, and only if, the legislature is willing to assume the. burden and responsibility of sponsoring the necessary taxes to finance its proposals for additional