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AGO Opinion 97020

LB 755; Constitutionality of Proposed Appropriation of Funds for the Women In Military Service For America Memorial
Opinion 97020




DATE: March 7, 1997




SUBJECT: LB 755; Constitutionality of Proposed Appropriation of Funds for the Women In Military Service For America Memorial




REQUESTED BY: Senator Chris Peterson

Nebraska State Legislature




WRITTEN BY: Don Stenberg, Attorney General

Lauren L. Hill, Assistant Attorney General






You have requested an opinion from this office regarding the

constitutionality of LB 755. Following the adoption of AM0533, the

legislation, in pertinent part, would appropriate "$30,000 from the

General Fund for FY1997-98 to the [Nebraska] Department of Veterans'

Affairs, for the Nebraska state donation for the Women In Military

Service For America Memorial."




Pursuant to the enactment of Pub. L. No. 99-610, 100 Stat.

3477, (November 6, 1986), the U.S. Congress authorized the Women in

Military Service For America Memorial Foundation, Inc. to establish

a memorial on federal land in the District of Columbia to honor women

who have served in the Armed Forces of the United States. The federal

law requires that the private foundation establish the memorial with

non-federal funds. Id. Although it is unclear to us from the

current language of LB 755, it appears that the legislation would

authorize a $30,000 grant to the private foundation, which grant is

to be paid by the Nebraska Department of Veterans' Affairs upon

appropriation of funds to that agency from the Legislature.




You have posed three specific questions for our review.




1. Is LB 755 in violation of the Nebraska Constitution,

Article III, §18; Article XIII, §3; or Article XV, §18?




In reviewing each of these three provisions, we note that,

because the Nebraska Constitution "is not a grant but, rather, a

restriction on legislative power, . . . the Legislature is free to act

on any subject not inhibited by the Constitution." State ex rel.

Stenberg v. Douglas Racing Corp., 246 Neb. 901, 905, 524 N.W.2d 61,

64 (1994); State ex rel. Creighton Univ. v. Smith, 217 Neb. 682, 353

N.W.2d 267 (1984). In so acting, however, the court has established

that "[t]he people of the state, by adopting a Constitution, have put

it beyond the power of the [L]egislature to pass laws in violation

thereof." State ex rel. Randall v. Hall, 125 Neb. 236, 243, 249 N.W.

756, 759 (1933); see also State ex rel. Stenberg v. Murphy, 247 Neb.

358, 527 N.W.2d 185 (1995) ("constitutional language controls

legislative language, not the other way around."); State ex rel.

Caldwell v. Peterson, 153 Neb. 402, 45 N.W.2d 122 (1950) (the

Legislature cannot lawfully act beyond limitations of Constitution).






Prohibition Against Local or Special Legislation.




Article III, Section 18 of the Nebraska Constitution

provides that "[t]he Legislature shall not pass local or special laws

in any of the following cases, that is to say: ... Granting to any

corporation, association, or individual any special or exclusive

privileges, immunity, or franchise whatever. ... In all other cases

where a general law can be made applicable, no special law shall be

enacted."




In construing Article III, § 18, the Nebraska Supreme Court

has determined that "[b]y definition, a legislative act is general,

and not special, if it operates alike on all persons of a class or on

persons who are brought within the relations and circumstances

provided for...." Haman v. Marsh, 237 Neb. 699, 709, 467 N.W.2d 836,

844-45 (1991) (citations omitted); State ex rel. Rogers v. Swanson,

192 Neb. 125, 219 N.W. 2d 726 (1974). Thus, a legislative act can

violate Article III, § 18 as special legislation in one of two ways:

(1) by creating a totally arbitrary and unreasonable method of

classification, or (2) by creating a permanently closed class.

Swanson v. State, 249 Neb. 466, 544 N.W.2d 333 (1996); City of

Scottsbluff v. Tiemann, 185 Neb. 256, 175 N.W.2d 74 (1970); Haman v.

Marsh.




The Article III, §18 limitation is applicable to legislative

appropriation bills as well as to substantive legislative enactments.

See Henry v. Rockey, 246 Neb. 398, 518 N.W.2d 658 (1994). In fact,

the court has expressly determined that although the Legislature is

specifically empowered to make appropriations for the expenses of the

government, it "is not vested with unlimited power to make

appropriations. `The purpose ... of an appropriation bill is to make

provision for lawfully taking money out of the state treasury....'"

Id. at 405, 518 N.W.2d at 663 (quoting Rein v. Johnson, 149 Neb. 67,

78, 30 N.W.2d 548, 556 (1947), cert. denied 335 U.S. 814, 69 S.Ct. 31,

93 L.Ed. 369 (1948). Therefore, the court has concluded: "[t]he

Legislature is not empowered to make appropriations for purely

charitable purposes. ... The purse strings of this state are not

open for the purpose of simply giving money away." Id. (citing Haman

v. Marsh; Weaver v. Koehn, 120 Neb. 114, 231 N.W. 703 (1930)).




Based upon these principles, the court has found that

"[t]he test for statutes challenged under the special-laws

prohibitions is that they must bear a reasonable and substantial

relation to the object sought to be accomplished by the legislation."

Henry, 246 Neb. at 404, 518 N.W.2d at 662.




If LB 755 had proposed to appropriate funds directly to

individual Nebraska women veterans, then the Article III, § 18

prohibition would likely preclude such an appropriation. The

distinction, however, is that the proposed appropriation of taxpayer

funds will be used for construction of a national memorial to past and

future women veterans. The purpose stated within LB 755 for

expenditure of the funds is to memorialize and honor, "while providing

visibility and an educational experience about an important segment

of the nation's history, women's roles in national defense." LB 755,

as amended by AMO533, §1. Additionally, the proposed expenditure

would "be a tribute to Nebraska's [women veterans]." Id.




We find that, because the proposal incorporated within LB

755 is similar to other enactments of the Legislature which set aside

tributary memorials to reflect other individuals and aspects of

Nebraska history, it is not violative of Article III, § 18. See,

e.g., Neb. Rev. Stat. §72-724 - §72-729.01 (1996)(authorizing creation

of the Nebraska Hall of Fame Commission to "bring public attention and

to recognize officially those people who... have achieved prominence

and who were outstanding Nebraskans."); Neb. Rev. Stat. §82-120 - §82-

123 (1994)(authorizing the Nebraska State Historical Society to expend

public funds for the purchase of highway historical markers which

recognize historical events, personalities, and traditions);Neb. Rev.

Stat. §80-201 - §80-205 (1994)(authorizing political subdivisions to

erect statues, monuments, or other memorials commemorating the

services of veterans who served in specified conflicts and wars).





Prohibition Against Lending Credit of the State.




You have also asked that we address whether LB 755 violates

the provision of the state Constitution which mandates that "[t]he

credit of the state shall never be given or loaned in aid of any

individual, association, or corporation...." Neb. Const. art. XIII,

§3. In its Haman decision, the Nebraska Supreme Court interpreted

this provision. At issue in Haman was legislation which appropriated

state tax money to compensate depositors who had suffered losses due

to the failure of industrial loan and investment companies in

Nebraska.




The court set out a three-prong test and found that, in

order to establish a law as invalid under Article XIII, § 3, each of

the following elements must exist: (1) The credit of the state (2) is

given or loaned; (3) in aid of any individual, association, or

corporation. 237 Neb. at 719, 467 N.W.2d at 850; Callan v. Balka, 248

Neb. 469, 536 N.W.2d 47 (1995). In addition, the court expressly held

that "[t]he prohibition against the pledge of the state's credit does

not hinge on whether the legislation achieves a `public purpose,' when

the pledge benefits a private individual, association, or

corporation." Id. at 722, 467 N.W.2d at 852. Rather, the key focus

of Article XIII, §3 is whether the state stands as a creditor through

the expenditure of its funds or as a debtor by the extension of

credit. Id.




Under the legislation it reviewed, the Haman court found

that "the state would be forever liable for the losses of industrial

company depositors. . . ." Id. at 720, 467 N.W.2d at 850. Moreover,

the "stated purpose of the act [was] redemption of the guarantees of

a private corporation to depositors by obligating present and future

taxes from the state's general fund." Id. Thus, the court found that

the state's credit was "given or loaned." Since state funds would be

provided to private depositors, the court found the third-prong of the

Article XIII, §3 to be implicated, as well, by the legislation.




To determine whether the expenditure of state funds proposed

by LB 755 would violate Article XIII, Sec. 3, we return to the

three-prong test set forth in Haman v. Marsh. The threshold question

which must be analyzed is whether the appropriation proposed in LB 755

involves the "credit of the state." In Haman, the court stated that

"[t]here is a distinction between the loaning of state funds and the

loaning of the state's credit. When a state loans funds, it is in the

position of creditor, whereas the state is in the position of debtor

upon a loan of credit." Id. at 719-720, 467 N.W.2d at 850.




The $30,000 grant proposed by LB 755 is a one-time

expenditure of state funds. Clearly, the appropriation authorized by

LB 755 does not place the State of Nebraska in the position of a

debtor or surety of another's debt. Therefore, we conclude that the

legislative proposal does not violate Article XIII, Section 3 of the

state Constitution. Our conclusion is that the use of state funds as

a donation to a private foundation for the purpose of constructing a

memorial to women veterans would not violate the constitutional

prohibition against lending the credit of the state; however, the LB

755 proposal might be challenged as an expenditure of state funds for

private purposes. (See our discussion, below, in response to your

second question).




Limitation on Governmental Powers.




The additional provision of the Constitution which you have

asked us to assess provides:




The state or any local government may exercise any of its

powers or perform any of its functions, including financing

the same, jointly or in cooperation with any other

governmental entity or entities, either within or without

the state, except as the Legislature shall provide

otherwise by law.




Neb. Const. art. XV, §18. This provision has no application to LB

755. Under the current version of that bill, a state agency, at the

direction of the Legislature, would be making a $30,000 grant to a

private memorial foundation as a contribution to the construction of

the Women In Military Service For America Memorial. Although

construction of the memorial is expressly authorized by federal law,

a private, incorporated foundation -- and not the federal government -

- would be the recipient of the grant funds. Therefore, Section XV,

§18 is not implicated by the proposal set forth in LB 755.






2. Would these moneys [which, for purposes of analysis, we

assume to be the proposed $30,000 appropriation] be

considered public moneys being used to encourage private

enterprise?




Article XIII, § 3 of the Nebraska Constitution is the

provision which is intended to prevent the State from extending its

credit to private enterprises. United Community Services v. The Omaha

National Bank, 162 Neb. 786, 77 N.W.2d 576 (1956). "Closely related

to the prohibition against the giving or lending of the state's credit

. . . is the principle of law that public funds cannot be expended for

private purposes." Haman, 237 Neb. at 721-722, 467 N.W.2d at 851.




This longstanding constitutional principle involves the

expenditure of state funds in contrast to the extension of credit.

While the Constitution contains no express provision against expending

funds for essentially private purposes, the Nebraska Supreme Court has

stated that this principle "is grounded on the `fundamental concepts

of our constitutional system.'" State ex rel. Douglas v. Thone, 204

Neb. 836, 842, 286 N.W.2d 249 (1979) (quoting State ex rel. Beck v.

City of York, 164 Neb. 223, 82 N.W.2d 269 (1957)); Oxnard Beet Sugar

Co. v. State, 73 Neb. 57, r'hrg denied, 73 Neb. 66 (1905).




There is no hard and fast rule for determining whether a

proposed expenditure of public funds is for a public purpose. In

Platte Valley Public Power & Irrigation District v. County of Lincoln,

144 Neb. 584, 14 N.W.2d 202 (1944), the Nebraska Supreme Court

discussed the parameters of a "public purpose." Generally, the court

noted that a "public purpose" is one which has for its objective the

promotion of the public health, safety, morals, security, prosperity,

contentment, and the general welfare of citizens. Later, in United

Community Services v. The Omaha National Bank, 162 Neb. 786, 800, 77

N.W.2d 576 (1956), the court explained that




[i]t is the province of the [L]egislature to determine

matters of policy. In appropriating the public funds, if

there is reason for doubt or argument as to whether the

purpose for which the appropriation is made is a public or

private purpose, and reasonable men might differ in regard

to it, it is generally held that the matter is for the

[L]egislature [to determine].... [T]he vital point in all

such appropriations is whether the purpose is public; and

that, if it is, it does not matter whether the agency

through which it is dispensed is public or not; that the

appropriation is not made for the agency, but for the

object which it serves; the test is in the end, not in the

means [utilized to achieve the Unicameral's purpose].




Id. at 800-801, 77 N.W.2d at 587 (citations omitted).




In State ex rel. Douglas v. Thone, 204 Neb. 836, 286 N.W.2d

249 (1979), the court also held that there is no requirement that a

legislative act calling for the expenditure of public funds need

contain an express declaration of public purpose. Thus, our court has

evidenced a willingness to engage in a somewhat flexible

interpretation of the public purpose doctrine in relation to the

expenditure of state monies. For example, with regard to housing,

the court has found constitutional the act creating the Housing

Authority of the City of Omaha (Lennox v. Housing Authority of City

of Omaha, 137 Neb. 582, 290 N.W. 451 (1940)), and has found as

constitutional the act creating the Nebraska Mortgage Finance Fund

(State ex rel. Douglas v. Nebraska Mortgage Finance Fund, 204 Neb.

445, 283 N.W.2d 12 (1979)).




The court, however, has also held that laws which authorize

the expenditure of state funds to encourage private enterprises do not

serve a public interest. A statute offering compensation or a bounty

to private companies to encourage the manufacture of sugar and chicory

was found unconstitutional in Oxnard Beet Sugar Co. v. State, 73 Neb.

57 (1905). Further, in Chase v. County of Douglas, 195 Neb. 838, 241

N.W.2d 334 (1976), the court found that the provisions of the statute

authorizing expenditures for the purpose of acquiring real estate or

options on real estate for industrial development were in derogation

of Article XIII, § 3.




Clearly, the expenditure of funds authorized in LB 755 would

be made to a private foundation. It is asserted, however, that the

purpose of the expenditure would be to specially recognize the State

of Nebraska's financial contribution to the memorial honoring the

Nation's women veterans. Such an expenditure is similar to

legislation enacted in 1933 which authorized the collection of

voluntary donations and subscriptions and the levy of state taxes for

the purpose of placing, on behalf of the State of Nebraska, memorial

statues of William Jennings Bryan and J. Sterling Morton in Statuary

Hall in the U.S. Capitol in Washington, D.C. See 1933 Neb. Laws,

c.97, §1, §3, p. 405-406. We cannot clearly conclude that such

expenditures have no valid "public purpose." Thus, if the Legislature

determines, as a matter of policy, that such an expenditure is

appropriate, and demonstrates the basis for its decision during debate

on the measure, then it would likely survive scrutiny by the Nebraska

Supreme Court under Article XIII, § 3.




3. If LB 755 is in violation of the Nebraska Constitution,

is there any means in which the Nebraska Legislature could

appropriate funding to ensure that Nebraska women veterans

would receive the recognition that they deserve?


Due to our responses to the preceding questions, it is

unnecessary to address this question.




Sincerely,




DON STENBERG

Attorney General








Lauren L. Hill

Assistant Attorney General








cc: Patrick J. O'Donnell

Clerk of the Legislature








Approved:







Attorney General