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AGO Opinion 98043

Uncashed State Warrants and Application of the Nebraska Uniform Disposition of Unclaimed Property Act in Particular Instances
Opinion 98043

DATE: October 26, 1998

SUBJECT: Uncashed State Warrants and Application of the Nebraska Uniform Disposition of Unclaimed Property Act in Particular Instances

REQUESTED BY: David Heineman, Nebraska State Treasurer

WRITTEN BY: Don Stenberg, Attorney General

Dale A. Comer, Assistant Attorney General

Under the Nebraska Constitution and pertinent provisions of

the Nebraska Statutes, no monies can be withdrawn from the Nebraska

State Treasury except as pursuant to a specific appropriation and

upon presentation of a properly issued state warrant. Neb. Const.

art. III, § 25; Neb. Rev. Stat. §§ 77-2201 through 77-2215 (1996).

As a result, state expenditures, whether for payroll or other

purposes, are generally accomplished through the issuance of state

warrants. You have now posed a number of questions to us involving

uncashed state warrants. Several of those questions also involve

the Uniform Disposition of Unclaimed Property Act (the "Act" or the

"Unclaimed Property Act"), Neb. Rev. Stat. §§ 69-1301 through 69-

1329 (1996, Supp. 1997).




1. Uncashed warrants in payment of Unclaimed Property

Claims.




Your initial question involves uncashed warrants which are

prepared for payment of claims under the Unclaimed Property Act.

That act generally provides that various forms of property such as

bank deposits, monies, stock certificates, dividends, utility

deposits and other forms of intangible personal property held by

entities in Nebraska such as corporations, banks and insurance

companies are presumed abandoned and must be reported and remitted

to the Nebraska State Treasurer when that property remains

unclaimed by its true owner after a set period of time. The

Treasurer holds the property in a custodial capacity, and the true

owner can come forward at any time to reclaim his or her property.

Property which remains unclaimed over time goes to the Permanent

School Fund.




In your opinion request letter, you state:




The State Treasurer's Office returns unclaimed property

to rightful owners and we utilize a state warrant as the

instrument of payment. When the rightful owner is

located our office requests the Department of

Administrative Services to issue a state warrant. If

that warrant is uncashed after one year, it expires and

the money is transferred to the State's General Fund.

However unclaimed property is not part of the State's

General Fund. It is to be transferred to the Permanent

School Fund and held in trust until it is returned to the

rightful owner. In the case of an uncashed unclaimed

property payment, the money has not been returned to the

rightful owner and therefore should not be transferred to

the General Fund.




You then ask, " . . . should these [unclaimed property] funds

[involving uncashed warrants] be transferred to the General Fund or

should they remain in the Unclaimed Property Fund and be

transferred to the Permanent School Fund as required under the

Unclaimed Property Statute?"




Two Nebraska Statutes have a bearing on your initial question.

First of all, Neb. Rev. Stat. § 69-1317 (Supp. 1997) provides as is

pertinent:




(a)(1) All funds received under the Uniform Disposition

of Unclaimed Property Act . . . shall be deposited by

the State Treasurer is a separate trust fund from which

he or she shall make prompt payment of claims allowed

pursuant to the act . . .




* * *




(b)(1) On or after October 6, 1992, the State Treasurer shall

periodically transfer any balance in excess of an amount not

to exceed five hundred thousand dollars from the separate

trust fund to the General Fund no less frequently than on or

before November 1 and May 1 of each year, except that the

total amount of all such transfers shall not exceed five

million dollars.




(2)(i) On the next succeeding November 1 after five

million dollars has been transferred to the General fund

in the manner described in subdivision (b)(1) of this

section or (ii) on November 1, 1996, whichever occurs

first, and on or before November 1 of each year

thereafter, the State Treasurer shall transfer any

balance in excess of an amount not to exceed five hundred

thousand dollars from the separate trust fund to the

permanent school fund.




In addition, Neb. Rev. Stat. § 77-2205 (1996) provides, as is

pertinent:




The State Treasurer shall not pay any warrant, unless

registered for any of the reasons set forth in this

section, which is presented to him or her for payment

more than two years after the date of its issuance if

issued prior to October 1, 1992, or one year after the

date of its issuance if issued on or after October 1,

1992, and any such warrant shall cease to be an

obligation of the State of Nebraska and shall be charged

off upon the books of the State Treasurer. Except as

otherwise provided by law, the amount stated on such

warrant shall be credited to the General Fund. Such

warrant may, however, thereafter by presented to the

State Claims Board which may approve a claim pursuant to

the State Miscellaneous Claims Act for the amount of the

warrant.




(Emphasis added). Consequently, § 77-2205 requires that the amount

of a state warrant which remains uncashed for more than one year

after issuance shall be transferred to the State's General Fund

"unless otherwise provided by law." Section 69-1317 establishes a

specific trust fund for unclaimed property, and any amounts in that

fund over $500,000 must be transferred to the Permanent School Fund

on a yearly basis.




While the answer to your first question is not entirely clear,

it seems to us that, when § 77-2205 and § 69-1317 are considered

together, the amount of uncashed state warrants for payment of

unclaimed property claims should be paid into the Unclaimed

Property Trust Fund at the end of a year rather than into the

State's General Fund. Section 77-2205 requires payment of uncashed

warrants into the General Fund "unless otherwise provided by law."

With respect to uncashed state warrants for unclaimed property

claims, the law requires "otherwise" because there is an unclaimed

property trust fund and because § 69-1317(b)(2)(ii) contemplates

that excess unclaimed property receipts will ultimately be placed

in the Permanent School Fund. On that basis, we believe that the

answer to your first question is that those warrants drawn on the

Unclaimed Property Trust Fund for payment of unclaimed property

claims which remain uncashed after one year should be returned to

the Unclaimed Property Trust Fund.




2. Uncashed warrants representing payments by third party

payors as unclaimed property.




With respect to your second group of questions, you state:




Certain agencies of state government utilize a state

warrant as the instrument of payment to transfer federal

or other types of "assistance payments" including child

support funds, student grants or other assistance

payments. These payments are made by the State of

Nebraska to the recipient and issued using a state

warrant. The monies being transferred to the payee may

not be State funds. The State may be the transferring

agent of such funds.




You then ask:




Should the monies paid by the State on behalf of another

political entity, such as the federal government, be

transferred to the State's General Fund if the warrant is

uncashed after a year or should the funds be transferred

to the Unclaimed Property Fund in the name of the payee

so that the rightful owner can be located and the payment

reissued? Why should the funds from these uncashed

warrants become the property of the State, placed in the

General Fund and ultimately used for other State

expenditures? If these funds should not be placed in the

Unclaimed Property Fund or the General Fund, should they

be returned to the political entity that provided the

funds originally to the State?




A. Unclaimed Property Analysis.




Your first inquiry in this group of questions involves the

issue of whether uncashed state warrants representing payments for

another governmental entity such as the federal government

constitute unclaimed property under the Unclaimed Property Act. As

discussed below, the answer to that question appears to depend upon

several variables and specific facts which we do not have before us

in the context of your general question.




The portion of the Unclaimed Property Act which most

specifically applies to unclaimed property held by government

officials including state officers is Neb. Rev. Stat. § 69-1307.01

(1996). That section provides:




Except as otherwise provided by law, all intangible

personal property held for the owner by any court, public

corporation, public authority, or public officer of this

state, or a political subdivision thereof, that has

remained unclaimed by the owner for more than three years

is presumed abandoned.




We discussed the application of that provision to uncashed state

warrants in a previous opinion of this office.




In Op. Att'y Gen. No. 95025 (April 3, 1995), we considered the

general question of whether uncashed state warrants are unclaimed

property under the Unclaimed Property Act, and concluded that they

are not. In the course of that opinion, we first determined that

uncashed state warrants constitute evidence of indebtedness or

causes of action which are intangible personal property held by a

"public authority" or "public officer" under § 69-1307.01, and

which are presumed abandoned and reportable to the State Treasurer

under that statute three years after their date of issuance. We

then considered § 77-2205, and noted that those same state warrants

cease to be an obligation of the State of Nebraska under the terms

of that statute one year after their date of issuance. Because

state warrants cease to be an obligation of the state within one

year under § 77-2205 and the underlying causes of action for those

warrants no longer exist, we concluded that those warrants need not

be reported as unclaimed property three years after their issuance

under § 69-1307.01. In a similar fashion, we concluded that

unclaimed state payroll warrants which are presumed abandoned and

reportable as unclaimed property one year after their issuance are

not unclaimed property, since they cease to be an obligation of the

State within that same time frame under § 77-2205. As a result,

we concluded in Opinion # 95025 that uncashed state warrants are

generally not presumed abandoned or reportable as unclaimed

property.




Your present question presents a different facet of the same

issue. In this instance, the state warrants which are the subject

of your opinion request do not involve payment of state funds, but

rather payment of federal funds or funds of other governmental

entities where the state acts as a transferring agent for the

monies in question. As discussed below, the different source of

the funds for such warrants may create a somewhat different result

with respect to the Unclaimed Property Act.




As we noted in Opinion # 95025, state warrants usually

represent evidence of indebtedness or causes of action against the

state which could be considered intangible personal property

subject to § 69-1307.01. However, because § 77-2205 provides that

such warrants "cease to be an obligation of the state," the

underlying evidence of indebtedness or cause of action against the

state represented by the warrant is extinguished after one year

under that statute. For that reason, state warrants representing

payments by the state of state funds are not presumed abandoned and

reportable as unclaimed property under § 69-1307.01, since that

statute contains a dormancy period of three years.




Your opinion request involves a different situation in which

the state warrants at issue represent payment of federal funds or

funds of other governmental entities where the state acts as a

transferring agent for the monies in question. You have not

specified precisely what funds from other government entities are

included in your opinion request except to state that they might be

`"assistance payments" including child support funds, student

grants or other assistance payments.' Consequently, we have no way

of knowing whether there are statutes, contractual provisions,

grant provisions or other documents which create continuing

underlying obligations, claims or causes of action against the

other governmental entities involved to pay the payees on the

warrants in question. However, if there are such continuing

underlying obligations on the part of the other governmental

entities with respect to the funds at issue, then those obligations

may not be extinguished by § 77-2205, since that statute, by its

terms, applies to obligations of the state. Consequently, it

appears to us that causes of action against other governmental

entities may survive the application of § 77-2205 and the resultant

cancellation of state warrants if there are continuing causes of

action against the other governmental entities which are

sufficiently certain under the terms of the applicable grants,

statutes or contracts. Those continuing obligations and the funds

they represent may then be presumed abandoned and become reportable

as unclaimed property in three years under § 69-1307.01. Since we

have concluded that some of the funds at issue in your opinion

request may constitute unclaimed property in certain circumstances,

it becomes necessary to determine what should be done with any such

funds from the time the state warrants for their payment become

stale to the end of the three-year dormancy period.




B. Transfer of funds represented by uncashed state

warrants back to the originating governmental

entity.




In your second group of questions, you also asked us whether

funds from uncashed state warrants which originated from other

governmental entities should "be returned to the political entity

that provided the funds originally to the State?" It seems to us

that the answer to that question helps resolve the issue of where

such funds should be placed during the three-year dormancy period

described above.




We believe that the necessity for return of funds from other

governmental entities to those entities after state warrants become

stale depends entirely upon the requirements of the governmental

entity which originated the funds and the language of any statutes

or any agreements between the state and that entity pertaining to

the funds at issue. For example, if the state is acting as a

transfer agent for certain federal "assistance" funds, then there

very likely may be federal statutes which pertain to those monies

and which require return of the amounts of uncashed warrants or

unused funds to the federal government. Alternatively, there very

well may be agreements between the state agency and the source of

the federal funds pertaining to the return of such monies. Such

statutes or agreements would prevail over the requirements of § 69-

1307.01 and § 77-2205, since the provisions of both of those

statutes pertaining to disposition of funds only become operative

in instances where there is nothing "otherwise provided by law."

Therefore, if the other governmental entity which originated the

funds for the uncashed warrant at issue requires return of those

funds, those monies should be returned to that governmental entity.

That determination, in turn, will have to be made on a case-by-case

basis based upon the particulars of the agency and funds involved.




On the other hand, in the event that the other governmental

entity which provided the funds for a stale warrant does not

require those funds to be returned, then it appears that you may

hold those funds as State Treasurer and ultimately take possession

of them as unclaimed property. Neb. Rev. Stat. § 69-1321(b) (1996)

provides:




A holder [of unclaimed property] may pay or deliver

property before the property is presumed abandoned with

written consent of the State Treasurer and upon

conditions and terms prescribed by the State Treasurer.

Property paid or delivered under this subsection shall be

held by the State Treasurer and is not presumed abandoned

until such time as it otherwise would be presumed

abandoned under the act.




On the basis of that statute, we believe that you may hold the

amount of funds from other governmental entities underlying

uncashed warrants when those funds will constitute unclaimed

property in the circumstances described above, and when the other

governmental entities do not require their return. At the end of

the three-year dormancy period prescribed by § 69-1321(b) you may

then consider those funds as unclaimed property.




C. Summary.




Based upon the lengthy discussion above, it appears to us that

you should engage in the following analysis to determine whether

money from another governmental entity that forms the basis for a

particular state warrant may be considered as unclaimed property

and ultimately placed in the Unclaimed Property Trust Fund when

that warrant remains uncashed:




1. Are there any applicable statutes, regulations,

grant provisions or agreements which require that

the funds be returned to the originating

governmental entity? If so, then they should be

returned. If not, then continue with this

analysis.




2. Is there is a statute, contract, grant provision or

other document which creates a continuing

underlying obligation, claim or cause of action

against the other governmental entity involved to

pay the payee on the warrant in question? That

obligation must be sufficiently clear and certain

so that it is not considered an "unliquidated"

claim. If there is such a continuing obligation,

then you may hold the money for three years until

it becomes unclaimed property under § 69-1307.01.

If there is no such continuing obligation, then we

do not believe that the funds can be considered as

unclaimed property, and the monies should be placed

in the General Fund.




As is obvious from the discussion above, the interaction of

the Unclaimed Property Act and the statutes pertaining to state

warrants is complicated and not entirely clear. For that reason,

we suggest that you might wish to consider proposing remedial

legislation which would clearly define uncashed state warrants as

unclaimed property. The policy reasons for that statutory change

are much the same as the policy considerations set out at length on

page 2 of your opinion request letter. We would also note that the

statutes and other materials which you provided us from other

states, while not of great assistance in assessing the requirements

of our particular statutes, could provide prototypes for such

remedial legislation.




3. Propriety of classifications which result from failure to

treat uncashed warrants as Unclaimed Property.




Your next question regarding uncashed state warrants and the

Unclaimed Property Act involves a classification which you perceive

as growing out of failure to treat uncashed warrants as unclaimed

property. You state:




By treating stale dated payment instruments (state

warrants) differently under the Unclaimed Property

statutes I am concerned that we have created a separate

class that derives no benefit from the Unclaimed Property

Statutes. Nebraska residents that are employed by

private business receive the benefit of the services and

protection of the Unclaimed Property Statutes. If their

paycheck or expense reimbursement check is lost and

remains uncashed for one year, the funds are remitted to

the Unclaimed Property Division of the State Treasurer's

Office. As required by law, the State Treasurer's Office

makes every effort to locate them. However, if your

employer is the State of Nebraska and your paycheck or

expense reimbursement check is lost and remains uncashed

for one year, no attempt is made to locate you because

the money is not currently remitted to the State

Treasurer's Office as unclaimed property. Your money is

transferred to the State's General Fund. If you learn of

this situation, you are then required to apply for your

money with the State's Claims Board




You then ask, "[w]as it the intent of the Legislature to create a

separate class of people, a class that receives no benefit from the

Unclaimed Property Statutes because they are being paid by the

State of Nebraska via a state warrant or was it presumed that

employees of the State would be afforded the same benefits of the

Unclaimed Property Statutes as Nebraska residents who are employed

by private businesses?"




As noted above, we have previously provided you with an

opinion on the issue of whether uncashed state payroll warrants are

presumed abandoned and reportable as unclaimed property. In Op.

Att'y Gen. No. 95025 (April 3, 1995), we stated:




You also inquire as to whether uncashed state

warrants which are payroll checks must be reported to

your office as unclaimed property after one year under

Section 69-1307.02. That section provides:




Unpaid wages, including wages represented by

payroll checks owing in the ordinary course of

the holder's business which remain unclaimed

by the owner for more than one year after

becoming payable, are presumed abandoned.




While Section 69-1307.02 appears to cover uncashed

payroll warrants issued by the State, Section 77-2205

again prevents application of that statute for the

reasons discussed above. Under Section 77-2205, the

obligation inherent in the payroll warrant issued by the

state would cease to exist one year after its issuance,

at the same time as the duty to report it under the Act

would arise. Under those circumstances, we do not

believe that uncashed state payroll warrants need be

reported to your office.




Id. at p. 5. We continue to believe that our analysis set out in

Opinion # 95025 is correct. However, we have again reviewed the

legislative history of § 69-1307.02 in response to your most recent

question noted above.




Section 69-1307.02 was added to the Unclaimed Property Act in

1992 as a part of LB 26 which was passed by the Legislature during

its Third Special Session that year. See 1992 Neb. Laws Third

Special Session LB 26, § 11. Part of the clear purpose of that

bill was to apply the unclaimed property law to governmental and

public entities, and to reduce the dormancy period for unpaid wages

to one year. Committee Records on LB 26, 92 Neb. Leg., 3rd Spec.

Sess. 1 (September 23, 1992) (Introducer's Statement of Intent).

Apart from that general statement of purpose, however, we found no

specific discussion of applicability of the act to payment of wages

to state employees by state warrant.




On the other hand, § 77-2205 was also amended during the

regular session in 1992 to provide that state warrants should cease

to be an obligation of the state after one year from the date of

issuance and to provide that the amounts of such warrants should be

placed in the general fund. See 1992 Neb. Laws LB 982, § 1. When

the Legislature enacts a law affecting an area which is already the

subject of other statutes, it is presumed that it did so with full

knowledge of the preexisting legislation. White v. State, 248 Neb.

977, 540 N.W.2d 354 (1995). Therefore, it must be presumed that

the Legislature amended the Unclaimed Property Act in 1992 with

full knowledge of what it had done previously that year in § 77-

2205. Under those circumstances, had the Legislature intended to

remove state payroll warrants from the requirements of § 77-2205

and consider those state warrants separately as unclaimed property,

it could easily have done so by adding language clearly requiring

that result into § 69-1307.02. It did not do so, and for that

reason, we believe that the language of § 77-2205 controls as

stated in Opinion # 95025. Again, however, you may wish to propose

remedial legislation in this area which would specifically provide

that uncashed state payroll warrants should be placed in the

Unclaimed Property Trust Fund.




4. Application of the Federal Labor Laws to uncashed state

warrants.




Your final question with respect to uncashed state warrants

involves the federal labor laws. You ask, "[d]oes the State's

current practice [of placing the amount of uncashed state payroll

warrants in the General Fund under § 77-2205] violate any Federal

Labor Laws regarding an employer's obligation to pay wages and

expenses of employees even if the payment instrument is stale

dated?"




You did not specify precisely what "Federal Labor Laws" are

the focus of your concern in your opinion request. In that regard,

we have previously indicated that a general question on the

constitutionality of proposed legislation will necessarily result

in a general response from this office. Op. Att'y Gen. No. 94012

(March 8, 1994). In a similar fashion, our response to this

portion of your opinion request must be in general terms, absent

some specific articulation of what portions of the Federal Labor

Laws you believe are at issue.


It seems to us that one portion of the Federal Labor Laws

which might apply to the situation at issue in your opinion request

is the federal Fair Labor Standards Act, 29 U.S.C. §§ 201-219, 251-

262 ("FLSA"). That Act, which applies to state government, deals

generally with the federal minimum wage and the federal work week

including requirements for overtime or compensatory time

compensation. The FLSA implicitly requires that wages must be paid

promptly when due. Biggs V. Wilson, 828 F.Supp. 774 (E.D. Cal

1991). It also requires that wages must be paid in cash or its

equivalent. 29 C.F.R. § 531.27. However, it is clear that the

rules contained in the FLSA are intended only to insure that

employees are compensated for their labors at not less than the

minimum wage. They are not designed generally to interfere with

the methods and practices by which the compensation is paid.

Southern Railroad Company v. Black, 127 F.2d 280 (4th Cir. 1942);

48A Am. Jur. 2d Labor and Labor Relations, § 4196.




Based upon the authorities discussed above, we do not believe

that the State's current practice of placing the amount of uncashed

state payroll warrants in the General Fund after one year under §

77-2205 violates the FSLA. The State promptly issues payroll

warrants to its employees, so it is in compliance with the payment

provisions of that Act. Beyond that, we could find no portion of

the FSLA which would prohibit an employer from subsequently taking

possession of payroll funds in a situation where a payroll check or

warrant is properly issued but remains unnegotiated for a lengthy

period of time. Therefore, we do not believe that the application

of § 77-2205 to payroll warrants violates the FSLA.




Sincerely yours,




DON STENBERG

Attorney General








Dale A. Comer

Assistant Attorney General