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MILTON J. SHAPP v. GRACE M. SLOAN (07/19/78)

decided: July 19, 1978.

MILTON J. SHAPP, GOVERNOR, ET AL., APPELLANTS,
v.
GRACE M. SLOAN, STATE TREASURER, AND THE GENERAL ASSEMBLY OF THE COMMONWEALTH OF PENNSYLVANIA (TWO CASES). MILTON J. SHAPP, GOVERNOR, ET AL. V. GRACE M. SLOAN, STATE TREASURER, AND THE GENERAL ASSEMBLY OF THE COMMONWEALTH OF PENNSYLVANIA, APPELLANTS



No. 214 January Term, 1977. No. 586 January Term, 1976. No. 4 January Term, 1977, Appeal from the Final Order of the Commonwealth Court of Pennsylvania at No. 1194 C.D. 1976 and Cross-Appeals from the Commonwealth Court's Order dated July 15, 1976.

COUNSEL

Duane, Morris & Heckscher, Henry T. Reath, Roland Morris, Hugh M. Emory, Philadelphia, for appellants at No. 586.

James M. Marsh, Vincent X. Yakowicz, Sol. Gen., Harrisburg, for appellees at No. 586.

Melvin R. Shuster, Deputy Atty. Gen., J. Justin Blewitt, Jr., Deputy Atty. Gen., Chief, Civil Litigation, Vincent X. Yakowicz, Sol. Gen., Robert P. Kane, Atty. Gen., for appellants at Nos. 4 and 214.

James M. Marsh, Deputy State Treasurer and Chief Counsel, Harrisburg, Duane, Morris & Heckscher, Roland Morris, Philadelphia, for appellees at Nos. 4 and 214.

Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Jones, former C. J., did not participate in the consideration or decision of this case. Pomeroy, J., concurs in the result. Roberts, J., filed a dissenting opinion in which O'Brien, J., joins.

Author: Manderino

[ 480 Pa. Page 458]

OPINION

On July 7, 1976, the Governor of Pennsylvania, various cabinet officers and the Governor's Justice Commission -- appellants in this case -- filed a petition for review directed against the State Treasurer challenging the constitutionality of Acts 117 and 17-A of 1976. They sought a declaratory judgment holding these acts to be null and void, and a writ of mandamus and injunctive relief to compel the State Treasurer to honor requisitions properly presented for federal funds allocated to State agencies pursuant to Acts of Congress. The Governor, Attorney General and the Justice Commission asked also for a preliminary injunction to enjoin the State Treasurer from refusing to honor requisitions for payment of federal funds to the Department of Justice for salaries and operating expenses incurred by the Office of the Special Prosecutor. The General Assembly was granted permission to intervene as a respondent.

After a hearing on the request for the preliminary injunction seeking release of the Special Prosecutor's funds, the Commonwealth Court entered an order dated July 15, 1976, denying the injunction as sought but granting an injunction directing the Treasurer to issue her warrant for payment of expenses already incurred, up to the amount of federal funds allocated to that office by the Law Enforcement Assistance Administration (LEAA) through June 30, 1976 and still unexpended. This Court denied a stay of that order. The parties are now before us on cross-appeal from this order of July 15, 1976.

Appellants are also appealing from the final order of the Commonwealth Court entered on December 3, 1976, granting the State Treasurer's and General Assembly's motions for summary judgment and dismissing appellants' motions for partial summary judgment and modification of order.

From 1961 to 1975, the annual appropriations acts of the General Assembly contained a general provision appropriating grants made to the Commonwealth for various federally

[ 480 Pa. Page 459]

    funded programs to the State agency involved in the programs' administration. The provision in the General Appropriations Act of 1975 was typical of these general allocations:

"In addition to the amounts appropriated by this act, all moneys received from the Federal Government, or from any other source as contributions for the programs provided herein, or as payment for services or materials furnished by one institution to another, except those collections designated as revenues, shall be paid into the General Fund and are hereby appropriated out of the General Fund for the purposes of the respective appropriations." (Emphasis added.)

General Appropriations Act of 1975, 1975 Act No. 8-A, § 8(b).

Although many of these General Appropriations Acts also appropriated funds for some specific programs, legislative control over the funds was, in the General Assembly's own terms, "minimal." At most, the General Assembly's actual control consisted of authorizing applications for particular federal programs and placing conditions or restrictions upon application for federal funds. The legislature did, of course, maintain exclusive control over appropriations of State matching funds and general revenue sharing.

Despite the minimal control exercised in the yearly Appropriations Acts, it is to be noted that for more than a decade the Acts clearly and unambiguously placed such federal funds into the State's General Fund, apparently without objection from the Executive.

By 1975, federal aid programs had been increasingly implemented in Pennsylvania, and federal funds accounted for approximately 25% of the total resources of the Commonwealth. The General Assembly accordingly decided to exercise over such federal funds the full control which it considers its constitutional responsibility as the branch of government entrusted with control of the state's finances.

[ 480 Pa. Page 460]

Therefore, on June 29, 1976, following extensive study and hearings, the General Assembly enacted Act 117 over the Governor's veto. The text is as follows:

"§ 4611. Requisitions on state treasury; indicating federal funds requested

Any person authorized by law to issue requisitions for the payment of moneys from the State Treasury shall, when submitting any such requisition to the State Treasury, indicate thereon whether any of the funds so requested were derived, in whole or in part, from Federal funds.

§ 4612. Requisitions on state treasury; indicating requested funds as matching funds to federal funds

Any person authorized by law to issue requisitions for the payment of moneys from the State Treasury shall, when submitting any such requisition to the State Treasurer, indicate thereon whether any of the funds so requested will be used, directly or indirectly, as matching funds to Federal funds.

§ 4613. Warrants for requisitioned federal funds; specific appropriations by act of General Assembly

The State Treasurer is hereby specifically prohibited from issuing any warrant for requisitioned funds which were derived, in whole or in part, from Federal funds unless such funds have been specifically appropriated by an act of the General Assembly.

§ 4614. Warrants for requisitioned funds used as matching funds to federal funds; specific appropriation by act of General Assembly

The State Treasurer is hereby specifically prohibited from issuing any warrants for requisitioned funds which will be used, directly or indirectly, as matching funds to Federal funds unless such Federal funds have been specifically appropriated by an act of the General Assembly.

§ 4615. Deposit of funds; credit to general fund account; exception

Except as may be hereinafter provided in this section, no Federal funds, whether designated as grants, augmentations,

[ 480 Pa. Page 461]

    credits or otherwise, received from the Federal Government in any fiscal year shall, by executive order of the Governor or by any other executive action, be deposited in or designated as a special or restricted fund account, separate and distinct from the General Fund account. All such federal funds shall be deposited in and credited to the General Fund account, be contained in the budget as hereinafter provided, and be available for appropriation by the General Assembly as part of its operating budget, except that such federal funds need not be deposited in nor disbursed by appropriation from the General Fund account under the following limited statutory circumstances. If the General Assembly has by statutory enactment created a special fund or restricted receipt account and has specifically provided therein for an exclusive, special purpose or purposes for which Federal funds deposited in such special fund or restricted receipt account can only be used, then under such statutory circumstances, Federal funds received which are specifically and exclusively ear-marked for such General Assembly determined special fund or restricted receipt purpose or purposes may be deposited in such statutorily created special fund or restricted receipt account. And, without further statutory appropriation being required, can be used solely and exclusively for such specific statutory special fund or restricted receipt purpose or purposes. But, under no circumstances shall Federal funds received and deposited in such statutorily created special fund or restricted receipt account be disbursed by executive order of the Governor or by any other executive action for any purpose or purposes not specifically prescribed by the statute which created said special or restricted receipt account, except by appropriation made by law during the fiscal year in which such funds were received.

§ 4616. Preparation of state budget estimates; inclusion of federal funds received or anticipated; legislative intent

[ 480 Pa. Page 462]

Notwithstanding anything in any law to the contrary, it shall be the duty of the Secretary of Revenue when submitting to the Budget Secretary and to the Governor his officially certified estimate of revenues and receipts from any and all sources for use in the preparation of the Governor's proposed budget for the ensuing fiscal year to specifically include therein an estimate of any and all funds received or anticipated to be received from the Federal Government whether such funds are designated as grants, augmentations, credits or otherwise, together with the purposes for which such funds, as aforesaid, are provided or to be provided. The Secretary of Revenue shall provide a Federal funds estimate to the Governor for use by the Governor in signing any appropriation bill.

The General Assembly hereby declares its legislative intent not to enact any operating budget for any fiscal year unless and until a budget is submitted in accordance with the provisions of this act.

§ 4617. Law[s] governing

Notwithstanding any other law or portion of any other law including section 3 of the act of December 27, 1933 (Sp.Sess. 1933-34, P.L. 113, No. 29), entitled 'An act authorizing the State Treasurer to act as custodian of moneys and securities contributed to or deposited with the Commonwealth, or officers, departments, boards or commissions of the Commonwealth; prescribing the manner in which such moneys or securities shall be held and disbursed or delivered up; and making an appropriation to the Treasury Department for the cost of administering such moneys and securities,' the provisions of this act shall prevail."

1976, P.L. 469, No. 117, 72 P.S. § 4611, et seq.

In essence, Act 117 mandates that all federal funds be deposited in the General Fund without designation as a restricted or separate account, and that they be available for appropriation by the General Assembly, (§ 5, 72 P.S. § 4615). The State Treasurer is prohibited from paying out any such federal funds unless pursuant to a specific appropriation by the General Assembly. (§ 3, 72 P.S. § 4613).

[ 480 Pa. Page 463]

Act 17-A of 1976, also in issue, is the Federal Augmentation Appropriation Act of 1976, implementing Act 117 by making the line appropriations of federal monies to the intended programs.

This controversy arose when the State Treasurer refused, in the absence of an appropriation, to disperse to the Justice Department for the office of the Special Prosecutor monies allocated to Pennsylvania by the Law Enforcement Assistance Administration (LEAA).

Appellants urge us to consider numerous arguments in support of their position, bolstered in a voluminous brief by contentions both of policy and of constitutional interpretation. Nevertheless, the conflict revolves around one basic question -- the validity of Acts 117 and 17-A of 1976 under the Pennsylvania and the United States Constitutions. If the Acts in issue were constitutionally enacted, the ...


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