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AGO Opinion 98006

1997 Neb. Laws LB 70, Application of State CreditCard Requirements to the University of Nebraska, Authority of the University to Establish Banking Relationships
Opinion 98006

DATE: January 21, 1998

SUBJECT: 1997 Neb. Laws LB 70, Application of State CreditCard Requirements to the University of Nebraska, Authority of the University to Establish Banking Relationships

REQUESTED BY: David Heineman, Nebraska State Treasurer

WRITTEN BY: Don Stenberg, Attorney General

Dale A. Comer, Assistant Attorney General




You have requested our opinion with respect to two questions

involving recent legislation pertaining to the use of credit cards

by the State and several additional questions involving your

authority to conduct banking business on behalf of the State as

Nebraska State Treasurer. A number of those questions also involve

issues pertaining to the University of Nebraska and the government

of the University under the Nebraska Constitution. Our responses

to your various questions are set out below. We will divide those

responses as they pertain to questions regarding credit cards and

questions regarding your authority as State Treasurer with respect

to the banking relationships of the State. In each case, we will

set out your entire question and then offer our response.




Use of Credit Cards by State Agencies and the University




During the 1997 legislative session, the Nebraska Legislature

passed LB 70, 1997 Neb. Laws LB 70 (codified as is pertinent at

Neb. Rev. Stat. §§ 13-609 and 81-118.01 (Supp. 1997)), which

generally authorizes governmental subdivisions and state agencies

in Nebraska to accept credit card payments as cash payments in

certain instances. Section 81-118.01(1) states:




Any state official or state agency may accept credit

cards, charge cards, or debit cards as a method of cash

payment of any tax, levy, excise, duty, custom, toll,

interest, penalty, fine, license, fee, or assessment of

whatever kind or nature, whether general or special, as

provided by section 77-1702.




In addition, Section 81-118.01(3) grants "any state official or

state agency operating a facility in a proprietary capacity"

similar authority to accept credit cards as a means of cash

payment. Section 81-118.01(5) then goes on to provide, in

pertinent part:




The types of credit cards, charge cards, or debit cards

accepted and the services provided for any state official

or state agency shall be determined by the State

Treasurer and the Director of Administrative Services

with the advice of the committee convened pursuant to

subsection (5) of section 13-609. The State Treasurer

and the director shall contract with one or more credit

card, charge card, or debit card companies or third-party

merchant banks for services on behalf of the state and

those counties, cities, and political subdivisions that

choose to participate in the state contract for such

services.




Your initial questions focus on the University of Nebraska as a

state agency under LB 70, and to what extent, if at all, the

requirements of that bill dealing with acceptance of credit cards

by state agencies pertain to it.




Question No. 1. "Is the University of Nebraska a "state

official or state agency" as described in LB 70 and as

such required to comply with this statute?"




LB 70 does not contain any definition for the terms "state

official" or "state agency." Moreover, we have reviewed the

legislative history of that bill, and those materials offer little

guidance as to the meaning of those terms. However, several

Nebraska cases do offer some insight on the question of whether the

University of Nebraska is a "state agency."




First of all, in Board of Regents of the University of

Nebraska v. County of Lancaster, 154 Neb. 398, 48 N.W.2d 221

(1951), a lawsuit by the Regents against Lancaster County on a

claim for drugs and medicines furnished to indigent patients sent

to University Hospital, the court indicated that the Board of

Regents is an "administrative agency of the state." Id. at 402, 48

N.W.2d at 223. More recently, in Catania v. University of

Nebraska, 204 Neb. 304, 282 N.W.2d 27 (1979), overruled on other

grounds Blitzkie v. State, 228 Neb. 409, 422 N.W.2d 773 (1988), the

court indicated that the University is a state agency for purposes

of the State Tort Claims Act. Finally, in State ex rel. Spire V.

Conway, 238 Neb. 766, 472 N.W.2d 403 (1991), a case which involved

the state Separation of Powers clause and simultaneous service by

a member of the Legislature as a teacher in a state college, the

court stated:




While the Board of Regents is an "independent body

charged with the power and responsibility to manage and

operate the University," it is, nevertheless, an

administrative or executive agency of the state.




Id. at 786, 472 N.W.2d at 415 (citations omitted). On the basis of

those various cases, it appears to us that the University is a

"state agency" which would fall under the language of LB 70. In

addition, we believe that the term "state official" in that

legislation, given its ordinary meaning, is broad enough to cover

members of the University's Board of Regents. Therefore, in our

view, the University is a "state official" or a "state agency"

under the language of LB 70.




Apart from construction of the statutory language found in LB

70, your first question regarding the requirements placed upon the

University with respect to compliance with that legislation also

raises issues under the Nebraska Constitution. Those issues arise

as a result of Board of Regents of the University of Nebraska v.

Exon, 199 Neb. 146, 256 N.W.2d 330 (1977).




The Exon case involved a declaratory judgment action by the

University Board of Regents to determine the constitutionality of

certain statutes under Art. VII, § 10 of the Nebraska Constitution.

That constitutional provision states, as is pertinent:




The general government of the University of Nebraska

shall, under direction of the Legislature, be vested in

a board of not less than six nor more than eight regents

to be designated the Board of Regents of the University

of Nebraska, who shall be elected from and by districts

. . .




At issue in the Exon case was a general appropriation bill which

contained numerous statements directing the Board of Regents or

employees of the University to take certain actions. In addition,

the Court considered whether a number of other statutes which

pertained generally to state agencies and governed such matters as

acceptance of gifts, raises to be given employees, and

participation in such state functions as central data processing,

planning and design for new facilities and centralized state

purchasing could constitutionally be applied to the University

under Art. VII, § 10.




In Exon, the court ultimately concluded that:




. . . although the Legislature may add to or subtract

from the powers and duties of the Regents, the general

government of the University must remain vested in the

Board of Regents and powers or duties that should remain

in the Regents cannot be delegated to other officers or

agencies.




Id. at 149, 256 N.W.2d at 333. Consequently, the statements in the

general appropriation bill at issue in that case which contained

directions to the Board of Regents and University employees were

held to be advisory only and not mandatory. Id. at 149, 256 N.W.2d

at 333. Moreover, the other statutes governing the various

practices of state agencies were held to be inapplicable to the

University because, if applied to that agency, they would result in

an unlawful delegation of the authority vested in the Regents by

the Constitution. Id. at 152, 153, 256 N.W.2d at 334, 335. The

Court also held that while the Legislature has complete control of

the money appropriated to the University from the general revenue

of the State, the funds of the University not derived from taxation

can be expended only by the Board of Regents for the University,

and no annual appropriation of those monies is required when they

are once set apart and appropriated for the use of that

institution. Id. at 151, 152, 256 N.W.2d at 333, 334.




In the present instance, it could be argued, under Exon, that

the choice of credit cards to be used by the University together

with the nature of the contracts for credit card services for the

University are matters involving the general government of that

institution which cannot be delegated under LB 70 to other officers

such as the State Treasurer. However, while the issue is certainly

not without some doubt, we believe that the better argument is to

the contrary, for the reasons discussed below.




First of all, while Exon provides that the "general

government" of the University must remain vested in the Board of

Regents, it does not state that all statutes which pertain to state

government have no application to the University. As we noted in

1979-1980 Rep. Att'y Gen. 166, 167 (Opinion No. 117, dated May 16,

1979):




Despite what Board of Regents v. Exon says, the Board of

Regents is probably not totally insulated from the impact

of general laws passed by the Legislature. When the

Legislature attempts to specifically direct or control

actions of the Board, the legislation is suspect. But we

do not believe the court intended to say that the Board

could ignore laws of general application. [The Board of

Regents] . . . is not, after all, a separate,

independent sovereignty.




As a result, it seems to us that statutes which pertain generally

to state agencies and which do not purport to direct the Board of

Regents as to matters which are central to the University's

educational function or its "government," can have application to

the University, even under Exon. To some extent, examples of such

statutes include those described in University Police Officers

Union, International Brotherhood of Police Officers, Local 567 v.

University of Nebraska, 203 Neb. 4, 277 N.W.2d 529 (1979) in which

the Court stated that the University is subject to actions before

the Court of Industrial Relations, to the Nebraska Workmen's

Compensation Law and the Nebraska Employment Securities Law. In a

similar fashion, we do not believe that subjecting the University

to the general state credit card arrangements made by the State

Treasurer for all state agencies intrudes, in any significant

sense, in the University's educational function or its

"government." For that reason, we believe that LB 70 is acceptable

under the Exon decision.




We also believe that the decision in the Exon case does not

invalidate the requirements of LB 70 for another reason. In the

University Police Officers case, supra, the Court pointed out that

Art. VII, § 10 of the Nebraska Constitution must be read in

connection with the other provisions of the Nebraska Constitution.

In that regard, the office of the Nebraska State Treasurer has

existed as a constitutional and Executive Branch office since the

first Nebraska Constitution was approved by the people of the State

in 1866. Neb. Const. of 1866, art. III, § 1 (1867). Therefore,

the authority of the University Board of Regents under Art. VII, §

10 of the Nebraska Constitution must be considered in light of Art.

IV, § 1 and the fact that the Nebraska Constitution also

contemplates the existence of and duties for the office of State

Treasurer.




This office has indicated in previous opinions that

constitutional officers such as the State Treasurer have certain

core functions and inherent constitutional authority which cannot

be removed by legislative enactment. Op. Att'y Gen. No. 93012

(March 4, 1993); 1969-70 Rep. Att'y Gen. 164 (Opinion No. 110,

dated May 5, 1970). Our research discloses that, since the

inception of statehood in Nebraska, the State Treasurer has had the

duty to receive and keep all money of the State not expressly

required to be received and kept by some other officer. Neb. Rev.

Stat. § 84-602(1) (1994); Neb. Rev. Stat. 1866, c. 4, § 18.

Moreover, since 1891, the State Treasurer has had authority to

deposit the funds of the State in his keeping in state and national

banks. Neb. Rev. Stat. § 77-2301 (1996), 1891 Neb. Laws, c. 50, §

1, p. 347. It is also generally accepted that the Treasurer of a

state has, by law, the custody of the monies of the State. 81A

C.J.S. States § 135. Based upon those historical duties of the

State Treasurer, it seems to us that the core functions of that

office would clearly include maintaining custody of state funds.

Arguably, those core functions would also include general

supervision of State's relationships with state and national banks.




Since Art. VII, § 10 of the Nebraska Constitution must be read

together with Art. IV, § 1, and since the core functions of the

State Treasurer seem to include those matters enumerated above, we

believe that the general government of the University vested in the

Board of Regents under the Nebraska Constitution may only be

exercised in such a way as to preserve the Treasurer's general

authority over the custody of state funds and the supervision of

the State's relationships with state and national banks.

Therefore, the credit card provisions of LB 70 appear acceptable

under the Exon case because they involve the Treasurer's general

supervision of matters related to the State's business with banks.

On the other hand, it remains clear under Exon that the Treasurer's

authority with respect to state funds and general supervision of

the State's relationships with banks cannot be used to intrude upon

the authority of Board of Regents in the general government of the

University.




Question 2. "LB 70 also amends 23-1601, Section 2 and

refers to county treasurer, county official, or political

subdivision official. Regarding this part of LB 70, is

the University of Nebraska a political subdivision and

therefore has an option whether to participate or not in

the state's credit card contract?"




Section 2 of LB 70 (codified at Neb. Rev. Stat. § 13-609(5)

(Supp 1997)) allows counties, cities and "other political

subdivisions" that choose not to participate in the state credit

card contract to negotiate and contract independently or

collectively with credit card companies or other financial

institutions for the provision of credit card services. Your

second question goes to whether the University is a "political

subdivision" under that portion of LB 70.




In Catania v. University of Nebraska, supra, the Nebraska

Supreme Court considered whether a negligence action against the

University of Nebraska should be brought under the State's

Political Subdivisions Tort Claims Act or the State Tort Claims

Act. Ultimately, the Court concluded that the University is a

state agency which must be sued under the State Tort Claims Act

rather than a political subdivision of the State. The Court came

to that conclusion, in part, because some of the indicia of a

political subdivision such as geographical area and boundaries and

the power to tax do not apply to the University. The Court stated:




The University is statewide in its service, has no

geographical limitations in the boundary sense of the

word and has no power to levy taxes. It is completely

dependent, initially at least, on the appropriations made

by the Legislature, as are all state agencies.




Id. at 308, 309, 282 N.W.2d at 30. The Court added, " . . .

considering our own statutes and constitutional provisions as well

as our own case law, we believe and hold that the Board of Regents

of the University of Nebraska is an agency of the state." Id. at

311, 282 N.W.2d at 31, 32. For the reasons discussed in the

Catania case, we do not believe that the University is a political

subdivision for purposes of LB 70, and that the University does not

have an option to decline to participate in the state credit card

contract under § 13-609(5).




Treasurer's Authority to Establish Banking

Relationships for the State




The second group of questions included in your opinion request

letter go to your authority as State Treasurer to establish the

banking relationships for the State of Nebraska. You cited a

number of provisions to us in Chapter 77 Article 23 of the Nebraska

Statutes, the Article pertaining to the "Deposit and Investment of

Public Funds." Your various questions are in that area.




Questions No. 3. "In reviewing the above statutes and

related statutes, does any state official or state

agency, other than the State Treasurer, have the

authority to establish a banking relationship on behalf

of the State?"




Two of the Nebraska statutes which you cited to us in regard

to this question are Neb. Rev. Stat. § 77-2301 (1996) and Neb. Rev.

Stat. § 77-2309 (1996). Section 77-2301, provides, as is

pertinent:




The State Treasurer shall deposit, and at all times keep

on deposit for safekeeping, in the state or national

banks, or some of them doing business in this state and

of approved standing and responsibility, the amount of

money in his hands belonging to the several current funds

in the state treasury.




Section 77-2309 states:




It is made the duty of the State Treasurer to use all

reasonable and proper means to secure to the state the

best terms for the depositing of the money belonging to

the state, consistent with the safekeeping and prompt

payment of the funds of the state when demanded.




We are unaware, generally, of any other statutes which specifically

give other state officials or state agencies the authority to

deposit the state's funds in a bank. As a result, to the extent

that "establishing a banking relationship" in your question is

synonymous with depositing funds in the state treasury in a bank,

we believe that your office is the only agency with such

authority.




Question No. 4. "Regarding the receipt and disbursement

of University funds, including non state (sic) tax

sources, are all University funds to be receipted through

the State Treasurer's Office?"




Several Nebraska Statutes have a bearing on your fourth

question. Neb. Rev. Stat. § 85-128 (1994) provides:




The State Treasurer shall be the custodian of all the

funds of the university. Disbursements from the funds

named in sections 85-124 to 85-127 [the Temporary

University Fund, the University Cash Fund, the United

States Morrill Fund, and the United States Experiment

Station Fund] shall be made in accordance with the

provisions of law relating to the disbursement of

university funds in the hands of the State Treasurer as

provided by law.




Neb. Rev. Stat. § 85-129 (1994) provides:




The State Treasurer shall be the treasurer of the state

university and the custodian of all funds donated to the

university or to the Agricultural Research Division by

the United States, including the Morrill, Hatch, and

Adams funds, all other donations, gifts, and bequests,

income from land and productive funds, fees paid by

students, and all funds for the use of the university

derived from any source, except (1) funds created by

taxation and paid into the state treasury as taxes, and

(2) the University Trust Fund which shall be held and

managed in the manner provided by section 85-123.01.




Finally, under Neb. Rev. Stat. § 85-123.01 (1994), the University

Trust Fund, which consists of all property, real or personal,

acquired by the Board of Regents by donation or bequest to it,

"shall be held and managed in such manner as the Board of Regents

. . . shall determine."




When those various statutes are read in their entirety and

together, as they must be, it appears to us that the State

Treasurer is the custodian of all funds of the University and of

all funds donated to the University except those funds created by

taxation and those funds in the University Trust Fund. We believe

that authority to act as custodian necessarily implies that the

funds in question will be receipted into the State Treasury.

Consequently, for those funds for which you are the custodian, we

believe that they should be receipted into the State Treasury even

if they involve non-tax sources. On the other hand, you are

apparently not the custodian of the University Trust Fund under §

85-129, and under § 85-123.01, that fund may be held and managed as

the Board of Regents shall determine. Therefore, we do not believe

that funds accruing to the University Trust Fund need be receipted

through the State Treasurer's office in the event that the Board of

Regents elects to have those funds held and managed elsewhere.




Question No. 5. "Are all University funds to be

disbursed by the State Treasurer and Director of

Administrative Services at the direction of the Board of

Regents?"




Again, there are Nebraska Statutes which specifically deal

with this question. Neb. Rev. Stat. § 85-130 (1994) states, as is

pertinent:




The university funds, other than those created by

taxation, shall be held subject to the order of the Board

of Regents and shall be disbursed for the purposes

prescribed by law, upon presentation of warrants to the

Director of Administrative Services, to be issued on

certificates of the Board of Regents executed as required

by law, . . .




In addition, Neb. Rev. Stat. § 85-131 (1994) provides:




Disbursements from the university funds shall be made by

the State Treasurer upon warrants drawn by the Director

of Administrative Services, who shall issue warrants upon

certificates issued by the Board of Regents, signed by

the secretary and president.




On the basis of those statutes, it appears to us that all

University funds are to be disbursed by the State Treasurer and

Director of Administrative Services at the direction of the Board

of Regents with the exception of the university funds in the

University Trust Fund. To the extent that those funds are not held

by the State Treasurer as provided under § 85-123.01, then those

funds would not be disbursed by the Treasurer at the direction of

the Board of Regents.


Question 6. "Does the University have statutory

authority to establish a banking relationship to deposit

the university funds described in [Neb. Rev. Stat. §] 85-

125 [1996] and to disburse such funds independently

instead of using normal state disbursement procedures?"




Your final question involves the University Cash Fund

established by Neb. Rev. Stat. § 85-125 (1994). That statute

states, as is pertinent:




The University Cash Fund shall consist of the

matriculation and diploma fees, registration fees,

laboratory fees, tuition fees, summer session or school

fees, all other money or fees collected from students by

the authority of the Board of Regents for university

purposes, and receipts from all university activities

collected by the board in connection with the operation

of the university. . . . All money accruing to the

University Cash Fund shall become available when

appropriated by the legislature for the use of the

university and its activities and shall at all times be

subject to the orders of the Board of Regents

accordingly. No warrant shall be issued against such

fund unless there is money in the hands of the State

Treasurer sufficient to pay the same. The board shall

cause all money belonging to this fund, which is received

by its authority at the university, to be paid over from

time to time, as the same is received, to the State

Treasurer . . .




It appears to us that, under the express provisions of § 85-125

together with §§ 85-130 and 83-131, cited above, the Board of

Regents shall "cause all money belonging to the [University Cash

Fund] . . . to be paid over . . . to the State Treasurer"

where it can be disbursed by the State Treasurer and the Director

of Administrative Services at the direction of the Board.

Consequently, we do not believe that the University has statutory

authority to establish a banking relationship in order to deposit

the university funds described in § 85-125 and to disburse such

funds independently rather than using normal state disbursement

procedures.




We understand that it might be possible to argue, based upon

the Exon case, supra, that application of § 85-125 to require the

University to deposit its cash fund in the state treasury rather

than having an independent banking relationship impermissibly

intrudes upon the authority of the Board of Regents to govern the

University. However, for the reasons discussed at length in

response to your question No. 1 above, we do not believe that Exon

requires a contrary reading of the statutes at issue. Moreover, we

believe that the argument articulated in response to your Question

No. 1 above with respect to the core duties of the State Treasurer

is even more significant in this area, since it more clearly

involves the Treasurer's traditional involvement in the State's

banking relationships.




Sincerely yours,




DON STENBERG

Attorney General


Dale A. Comer

Assistant Attorney General