                                April    1.   1987




Honorable     Bob Bullock                          Opinion        No. ~~-666
Comptroller      of Public   Accounts
L.B.J.    State Office     Building                RI?: Whether       the     Comptroller       may
Austin,    Texas     70774                         certify      an appropriations        bill    for
                                                   the next biennium        if a deficit       vi11
                                                   exist     at   the   end of      the    current
                                                   biennium,      and related     questions

Dear   Mr. Bullock:

       The body of your March 10, 1987, letter                       requesting       an opinion   of
this   office  is reproduced here in its entirety:

             For the      first     the    since   article     III,   sec.      49a.
             Tex. Conat.        was passed     in 1943. Texas has borrowed
             money     through      cash   management      notes.      When the
             notes     are     paid   off    on August     31,     1987.     it    is
             estimated       the state     will   be a billion       dollars       in
             the red.

             The Constitution           intend8   Texas     to operate      on a
             ‘pay    aa you go’ basis.           Art.    III,    sec.    49 pro-
             hibits     the state     from creating     debt.     If no action
             Is taken by the Legislature            to correct      the current
             situation, there will be a conflict                      with   this
             provision      in this biennium.         If the funds borrowed
             from other       accounts     to pay off the cash management
             notes     are not replenished        by August      31, 1987.     the
             state    will    enter the new biennium          in the red.

              It    appeare   to me the very      purpoac     for  the   in-
              clusion      of sec.   09a becomes   meaningless      if this
              deficit     is carried   into the upcoming    biennium.

              Therefore,   I hereby    request             your    official       opinion
              on the following    question:

                  May the Comptroller            certify      any Appropriation
                  Bill   under Art. III.         sec.     49a, Tex. Conat.      for
                  the   198849      biennium      if    the Comptroller      eatl-
                  mates     and/or     certifies        that    a deficit     vi11
                  exist    at 12:00 midnight,            August   31, 1987, and
                  that   sufficient      revenues       will   not be available



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Honorable    Bob Bullock      - Page      2   (m-666)




                 to retire        that    deficit        prior   to   September     1,
                 1987?

             Because    of the importance   of this     question,     I will
             appreciate     it if you will     expedite    your opinion.
             If you desire,     I and my staff    will   be available      to
             consult    with you on this   question     at any time.

      In order   to properly     address     your question.  it   is first   necessary
to establish    the relationship        betveen   sections  49 and 49a of article
III,  of the Texas    Constitution,        and to delineate     the relative     powers
of the Comptroller      of Public        Accounts   and the Texas Legislature          as
they are affected    by section      49a.

       Section     49 of article         III has been a part of           the Texas        Conatitu-
tion   since   its   adoption    in      1876 and has never been          amended.         It reads:

                  Sec.     49.      No debt        shall     be created      by or on
             behalf       of    the      State,      except        CO supply     casual
             deficiencies          of revenue,         repel     invasion.    suppress
             inaurrectlon,            defend      the     State     in war,     or pay
             existing        debt;      and     the     debt     created    to supply
             deficiencies          in the revenue,           shall    never exceed in
             the aggregate           at any one time two hundred              thousand
             dollars.         (Emphasis       added).

       The term “casual     deficiencies”     is not defined        by section      49, but
its meaning has never      been unclear.       The terms “debt ,I’ “deficiencies.”
and “casual”      as used    in article     III,     section    49 were discussed          by
Attorney    General    Gerald     Mann in     Attorney       General     Opinion     O-2118
 (1940).    The opinion,       written    for    the     Attorney    General      by then-
Assistant    Attorney   General     Ocie Speer in the year before              the section
49a amendment was proposed          by the legislature,        declared,     in pertinent
part:

                   ‘Debt’      signifies         the pecuniary        obligation     of
              one who voluntarily               aaaumea     a liability,       or upon
              vhom the        law imposes           a liability.         In case,    as
              here,     the     State       is    sought    to be charged         as   a
              debtor.      such debt may only be created                 through   some
              agency     lavfully        authorized      to bind the State.

                   ‘Deficiencies,’           as   the     word  is    here     used.
              pertains      expressly      to ‘the revenue.’         A deficiency
              is a shortage         or Inadequacy        in a sum or fund,        and
              the revenue         contemplated        18 that   portion      of the
              public     moneys      appropriated       by the Legislature         to
              the     particular        purpose      as    to  vhich     there      is
              claimed      to be a deficiency.




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Honorable     Bob Bullock      - Page     3    (~~-666)




                   ‘Casual      deficiencies,’           in    this     connection,
              means an unforeseen            and unexpected         deficiency       --
              an insufficiency         or lack of funds          to meet a aitua-
              tion which unexpectedly              develops     and requires        the
              immediate      attention       at a time when the Legiala-
              ture,     the    usual      authority.        is   unable     to act.
              Levis    v. Loaley,         19 S.E. 57; 92 Ga. 804; In re
               IAlnuronriationa
               - _..                    of the General         Aaaemblv. 22 Pac.
              464,    lj Cola.       316;    LeFebre      V. Callaghan       (Ariz.)
              263 Pac. 589.

        The Mann opinion          construed       articles       4351 and 4351a.         V.T.C.S.,
both of which remain           in force.         Artfcle     4351 permits        the Governor       to
approve     “deficiency       claims,”      which     approval      will    authorize     (but   not
compel)      the Comptroller         to issue        “deficiency        varranta”      to pay     the
claims.       Article    4351a limits         the amount of such deficlencv               warrants
to    $200,000       in   the    aggregate.         See     Fort    Worth Cavalry         Club     V.
Sheppard.       83 S.W.2d        660    (Tex.      19%).       Cf.    Terre11      V. Middleton,
 (concurring       opinion),       191 S.W.        1138     (Tez      1917)     (written     before
article      4?Sla- was enacted).              Attorney      General      Opinion     O-2118    said
at 5:

                  There can be no casual              deficiency       of revenues,
              such as we are considering,               except    vith   respect      to
              those    purposes       for    which    there     has been made a
              specific      appropriation.          It is obvious.       therefore,
              that the Legislature            did not intend        to confer    upon
              the Governor        authority      to approve       the issuance        of
              deficiency      warrants      to finance       a project    vhich     the
              Legislature       considered,        or might      have considered,
              during      its    session,       and    failed      or refused         to
              appropriate       money for.

       Thus, shortly       before    section     49a was proposed        as an amendment,        It
was the opinion        of this    office     that section     49 prohibited        the creation
of debt       to cure unexpected,          unforeseen      “casual     deficiencies       in the
revenue”        in  an amount        greater      than    $200,000.        Undoubtedly,        the
drafters       of the proposal        to add section        49a to the constitution            had
that    situation     in mind.      Notwithstanding        that    construction       of section
49, however,       the   section     had   proved    (and   was   shortly     to   prove   again)
unable     to atop the flow of red ink.

         The impotence         of section        49 before   the adoption      of section     49a is
 demonstrated         by the case         of King V. Sheppard,            157 S.W.2d 682 (Tex.
 Civ.     App. - Austin           1941,     writ     ref’d  v.o.m.), decided         a few months
 after     Attorney      General      Opinion        O-2118 was issued.        and a few months
 before      the     voters       adopted       section    49s.       In the     King   case,      the
 legislature       had appropriated            $1.500,000     from the General        Revenue    Fund
 for expenditures           related     to the acquisition         of Big Bend National         Park.
 The suit      was one to enjoin             the Comptroller        from paying     out the money
 because,      Inter    alla.      a deficit      of approximately       $27,000.000    existed      in



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Aonorable      Bob Bullock         - Page      4          (m-666)
                                                                                                                  ,




that   fund.     The Court,   although   observing                         that   section       49 inhibited
the creation      of a debt    to supply   revenue                        deficicnciea         in excess     of
$200,000,    nevertheless   declared:

                It     is    stipulated          that       there       la    a deficit          of
                approximately           S27,000,000            in the General            Revenue
                Fund.        No shoving          is made that            the appropriation
                exceeds       the anticipated             revenues        for the year;         and
                the      authorities          hold       that       no debt        is    created
                unless      the appropriation                is made or obligation                is
                created        in excess         of the reasonably                 anticipated
                revenues         for       the      year.          (Citations          omitted).
                Furthermore,           If     it     should        be assumed          that     the
                appropriations            for the year             are in excess           of the
                anticipated          revenues         for the year,            the bill       does
                not provide         which of the items                should     be excluded.
                Obviously,          the      existence          of     the     deficit       alone
                cannot       render       the Legislature               powerless        to make
                appropriations             for     the operation             of the govern-
                ment.       Nor does the fact                 that    the Legislature           has
                permitted         a large        deficit         to accumulate           in this
                particular         fund prohibit            it from making appropria-
                 tions      for      the      current         year      operation         of    the
                 government.

King     v.   Sheppard,       157 S.W.2d        at        685-86.

        The Ineffectiveness           of section       49 to prevent      resort    to deficit
spending      was fhe result        of its    lack of an enforcement          mechanism.         As
indicated       in Ping,      no adequate      shoving    could     be made that      an appro-
priation       exceeded     the anticipated        revenues      for the year,       or,   es to
vhich     items   should    be excluded     if it did.        The adoption      of section     49a
in    1942 vaa       designed      to correct        that   situation.       Cf.   Johnson       V.
Ferguaon.       55 S.W.2d 153 (Tax. Civ.            App. - Austin       1932-it         diam’d);
Fcrguaon      V. Johnson.       57 S.W.Zd 372 (Tex. Civ. App. - Austin               1933, vrit
diam’d) .

          Section     49a. of       article        III,       of    the   Texas   Constitution         consists
 of    three    paragraphs:

                      Sec. 49a.        It shall       be the duty         of the Comp-
                 troller        of Public       Accounts        In advance      of each
                 Regular       Session    of the Legislature            to prepare      and
                 submit      to the Governor        and to the Legislature            upon
                 its convening         a statement       under oath shoving          fully
                 the financial          condition      of the State         Treasury      at
                 the close         of the last      fiscal       period   and an cati-
                 mate of the probable               receipts        and disbursements
                 for     the     then   current     fiscal        year.     There    shall
                 also     be contained         in said       statement      an itemized
                 estimate        of the anticipated            revenue    based on the



                                                     p.     3041
Honorable   Bob Bullock        - Page      5   (J?+666)




            lava    then     in effect      that will      be received        by and
            for   the State         from all      sources     shoving     the fund
            accounca        to be credited           during      the    succeeding
            biennium       and said        statement      shall     contain     such
            other      information        as    may be required            by    law.
            Supplemental         statements      shall    be submitted        at any
            Special       Session      of the Legislature            and at      such
            other     times     as may be necessary            to shov.probable
            changes.

                 Prom and after             January       1, 1945,         save     in the
            case of emergency             and imperative            public      necessity
            and with         a four-fifths         vote     of the total          member-
            ship of each House, no appropriation                          in excess        of
            the cash and anticipated                revenue        of the funds from
            which      such appropriation              is to be made shall                 be
            valid.        From and after            January        1, 1945, no bill
            containing         an appropriation           shall     be considered           as
            passed      or be sent         to the Governor             for conaidera-
            tion    until       and unless        the Comptroller              of Public
            Accounts        endorses     his     certificate          thereon      shoving
            that    the amount appropriated                  is within        the amount
            estimated         to be available            in the affected             funds.
            When .the Comptroller              finds       an appropriation             bill
            exceeds        the    estimated        revenue        he shall         endorse
            such     finding       thereon     and return           to the House in
            which      same originated.             Such information             shall     be
            immediately           made     known       to     both      the     House       of
            Representatives            and the Senate             and the necessary
            steps      shall     be taken       to bring         such appropriation
            to     within        the     revenue,          either        by     providing
            additional         revenue or reducing              the appropriation.

                 For the      purpose       of financing         the outstanding
            obligations        of the       General      Revenue      Fund of       the
            State     and placing       its    current      accounts      on a cash
            basis     the Legislature           of the      State     of Texas        is
            hereby      authorized        to provide         for    the issuance,
            sale.     and retirement           of serial        bonds,      equal     in
            principal       to the       total     outstanding,         valid,       and
            approved        obligeciona         owing      by     said      fund      on
            September       1, 1943, provided            such bonds        shall     not
            draw interest         in excess        of two (2) per cent               per
            annum and shall           mature      within      twenty     (20)     years
            from date.        (Emphasis       added).

      The purpose        for the enactment    of section   49a is discussed    in 1
Braden,     The ‘Constitution      of the State    of Texas:    An Annotated     and
Comparative     Analysis     207 (1977).   The explanation   of section   49a notes
that:




                                                   p.   3042
Honorable    Bob Bullock          - Page   6   (JH-666)




             Section     49a   was   proposed      in    1941 es    a device
             designed     to atop deficit     financing.      The amendment
             was adopted      at the general       election   in 1942 by a
             vote    of 96,418     to 72,816.       Four other    amendments
             voted    upon at the same election          were defeated.

                  .   .   .   .

                  Texans     say that      their    constitution      embodies        a
             ‘pay-as-you-go’          philosophy.        When applied         to the
             prohibition        on incurring       debt,     the expression         is
             not wholly        accurate.       Section      49 means in effect
             that    only    the voters      may put the state          into    debt.
             Section      49a is the embodiment           of a ‘pay-as-you-go’
             philosophy.         The section       says,     in effect,        ‘Don’t
             spend more than your income;                don’t   slip     into debt
             accidentally.’

                 Actually,        Section      49 embodies       the     same phi-
             losophy       as far    as the legislature            is concerned.
             That     is.    in order      to reserve      to the people        the
             decision       on whether       to go into      debt,     Section    49
             forbids       a casual      deficit   of more than $200,000.
             Section      49a is an attempt       to force the legislature
             to obey        the   command of Section           49.      It   is the
             addition       of an enforcement       device    that    is evidence
             of devotion        to ‘pay as you go’.         . . .

       The   purpose     and meaning    of section      49a.vere      also  addressed     by
Attorney     General     Mann shortly      after    the amendment      was adopted.       In
Attorney     General      Opinion   O-5135     (1943),   issued     on March 27.      1943.
folloving     adoption     of the amendment      the previous     November,    he answered
an inquiry      from the Chairman        of the State       Affairs     Committee   of the
House of     Representatives      that read:

                  The import of this              amendment        10 to place       the
              State    on a cash basis.            The language        of the second
              paragraph        appears      to restrict         future     appropria-
              tions     (after      January     1, 1945) to cash on hand or
              to revenue        anticipated        to be received         during      the
              succeeding        biennium.         Paragraph       three    authorizes
              the     issuance         of    bonds      ‘for      the    purpose        of
              financing         the     outstanding         obligations        of     the
              General      Revenue      Fund of the State           and placing       its
              current      accounts       on a cash basis.’

                   Assuming     ‘cash    basis’.   to mean that       actual     cash
              shall    be available       some time within        the succeeding
              biennium       to pay     items    of expense        for    which     an
              appropriation         has    been     made,    will      you    please
              advise       this      committee       whether       or     not      the



                                               p.   3043
Honorable     Bob Bullock      - Page    7     (JM-666)




              provisions     of Article         3, section    49s mandatorily
              require    the   State    to      operate    on a ‘cash   basis’
              from and after      January       1, 1945?

      Responding,        Attorney       General        Harm    said    in    Attorney      General
Opinion  O-5135 at       4-5:

              That the Legislature           in submitting     the amendment
              (and the people         in voting     for it)    intended     that
              the purpose      was to place      the State on a cash basis
              is    manifest     from    the   language    of    the   form    of
              ballot    contained      in the resolution      (E.J.R.    No. 1)
              submitting      the amendment,      which form of ballot        for
              those    in favor      of the adoption       of the amendment
              reads as follows:

                  ‘For the Amendment to the Constitution                      of the
                  State     of Texas.       requiring      appropriation        bills
                  passed     by the Legislature            to be presented            to
                  and certified         by the Comptroller            as to avall-
                  able funds       for payment       thereof,     limiting     appro-
                  priations      to the total        of such available         funds.
                  providing       for    issuance       of bonds        to pay off
                  State      obligations         outstanding         September        1,
                  1943, and fixing           the duties       of the Legislature
                  and Comptroller           of Public         Accounts     with     re-
                  ference     thereto.’

The opinion      continued:

                  In construing        a constitutional        provision       it
              should    be construed       as it vaa understood         by the
              average     voter   vhen     he cast      his ballot      for    or
              against    it.    Aa said by Judge Gaines,        in Brady vs.
              Brooks.    89 S.W. 1052,        ‘The voters,  as a rule.       are
              unlearned      in law and.        as persona   of this      class
              would    reasonably      construe     the Constitution        upon
              which they vote,       such ought to be the construction
              of the courts.’

                    Applying       that    rule    to the meaning        of Section
               49a.     Article      3, the voters          evidently    understood
               that the purpose          of the amendment was to limit              the
               authority        of the Legislature           to appropriate      money
               in excess         of the cash         and anticipated        revenues.
               or,    in other       vorda.     the    average    voter   understood
               that    its    purpose     vea to place         the State   on a cash
               basis.

                  The language    of    the  second   paragraph    of the
               amendment is clear    that   no appropriation    in excess




                                                  p.   3044
Honorable     Bob Bullock           - Page      8    (~74-666)
                                                                                                          .




                of the cash and anticipated            revenue    of the funds
                from which        such  appropriation       is  made shall     be
                valid.     with    one exception      only,    to wit,’ ‘. . .
                save    in case      of emergency     and imperative     public
                necessity       and with     a four-fifths       vote   of   the
                total    membership     of each house.       . . .’   (Emphasis
                added).

       Several other   Attorney    General  Opinions  have also concluded     that
the amendment    mandatorily     requires   the state   “to operate   on a ‘cash
basis’   from and after    January   1. 1945.”    See Attorney General   Opinions
O-6738A (1946);    V-208 (1947);     M-66 (1967),

        Although     a number of Attorney           General      Opinions     have considered
the    operation       and effect      of section     49a in the 45 years             since      its
adoption,       the only     case    to come before        the courts      involving      section
49a has been Texas            Public     Building    Authority       v. Psttox.      686 S.W.2d
924 (Tex.       1985).      That case     involved    bonds      the Attorney      General      had
refused       to certify      because,      among other      things,     he considered         them
part     of a plan        to finance       state   operations        on a credit       basis       in
violation       of section      49a.     The Texas     Supreme      Court took a different
view,     declaring:

                     We .next       consider         whether        the Act and the bond
                issuance       violate         article        III,      section         49s.       That
                aeition       provides          that     no appropriation                  bill     can
                become law unless               and until         either       the Comptroller
                of Public          Accounts         certifies          that      .there      will    be
                sufficient           anticipated              revenues            to      meet      the
                appropriation            or the Legislature                   passes        the bill
                by a four-fifths              majority         of each house.                 Because
                all     future        appropriationa                for      the       payment       of
                rental       by the Commission                  in accordance              vlth     the
                lease      agreement vi11             be subject           to the procedures
                outlined        in article          III.      section        49a, neither           the
                Act nor the Lease                 Agreement          constitutes            a viola-
                tion      of    this      constitutional               provision.              In the
                absence       of sufficient            appropriationa               to pay future
                rentals,         the Authority             has       the     right        under     the
                Lease       Agreement          to terminate              the       lease.         There
                are,     at present,          some seven million                  dollars       in the
                State       Lease        Fund      to     pay      rental          fees      as    they
                become due.            The Attorney              General        cites      us to no
                authority         supporting           his     assertions            that     the Act
                or Lease         Agreement         violates          article         III.     section
                 49a, and we are aariafied                       that     this      appropriation
                 and future         appropriations              to the State             Lease Fund
                have and will             satisfy        the procedural               requirements
                 of article         III,    section        49a.

 686   S.W.2d     at   928.



                                                    p.   3045
.
    Honorable      Bob Bullock        - Page     9   (JM-666)




            The Supreme Court          held     that,    article     III.     section     49a was not
    violated      because    the amount currently           appropristed        for the purposes       of
    the statute         at issue    was within        the amount       already     available     in the
    affected       fund    from which        such     appropriation         was to be made,           and
    because      future    appropriations         would not be certified             unless,   at such
    times,     the fund contained          sufficient      moneys     to satisfy       the additional
    appropriations.

           The Attorney         General     had contended          in the Building                          case
    that    the Act was inconsistent               with the requirement               in sections        49 end
    49a that state          government       be operated         on a “cash basis”           as contrasted
    with    a “credit       basis”     fiscal     policy      and that         the legislature         created
    the    Texas      Public     Building       Authority         as a means          to circumvent           the
    constitutional          prohibition        against      deficit        financing.        In a time          of
    anticipated        revenue       shortages.        the     legislature         hsd enacted         article
    bold,    V.T.C.S..       for the purpose         of financing           future     major construction
    projects       without     appropriating          the funds         to pay for those            projects.
    The Supreme Court,           in a unanimous          vote,      sanctioned       this   legislation.

           Despite    this  office’s   disagreement      with   the Court’s’interpreta-
    tion    of sections    49 and 49s.    this    office   is not at liberty       to ignore
    the    opinion    of the Court   and its        leas  than   strict   construction     of
    sections     49 and 49a in analyzing       the question    before   us.

           The constitutional       provision      added in 1942 does not. use the term
    “debt.”     Section     49a speaks.    Instead,     of “outstanding    obligations”       and
    “placing    its    current   revenues     on a cash basis.”         It introduces      a new
    element   into    the transactional       equation:     the Comptroller’s       statements
    and estimates.

            The Comptroller            of Public      Accounts      carried     out his responsibility
    under section         49a by submitting             to the 69th Legislature,              in advance       of
    its    regular      aeaaion       in 1985, “an itemized             estimate      of the anticipated
    revenues      baaed on the lava then in effect                     that vi11 be received            by and
    for     the    State      from      all    sources       shoving       the    fund    accounts       to be
    credited       during      the succeeding          biennium.”        The regular        session     of the
    69th Legislature             adopted,       in conformity         to the Comptroller’s             revenue
    estimates,         a balanced          budget.        A   combination        of   unforeseen       circum-
    stances,       triggered        in large       measure      by a sharp       decline     in oil      prices
    vhich      began      in     late      1985     and    resulted       in    a full-blow’          economic
    recession        in the statewide            economy,      produced      a situation.       unparalleled
     in recent        Texas     history,        in which       it quickly        became clear        that     the
    original        revenue       estimates        would      fall    considerably         short    of     those
     forecast      at the beginning           of 1985.

            Article      49a requires     the   Comptroller      to submit       “supplemental
     statements.       . . . at any special       session     of the Legislature           and at
     such other      times  as may be necessary       to ahov probable        changes     [in the
     original       revenue    estimate]   .”    The     duty    to    submit      supplemental
     statements       co the Governor’       as the chief       executive     officer      of the
     state.     is not limited      to times   when the legialsture         is in session       or




                                                         p.   3046
Honorable      Bob Bullock       - Page    10        (JM-666)
                                                                                                             1




to times       immediately    prior    thereto.     It          is    his duty  to      submit    them
whenever,       in his opinion,     it is necessary             to   show “probable       changes.”

       Attorney         General     Mann noted       in Attorney       General       Opinion      O-5135
(1943)     at 5. that           “Section     49s imposes       a duty     upon the Comptroller
vhich     requires         no legislation          to make       it    effective.”           See also
Attorney      General        Opinion     H-66 (1967).        The section        is self-enacting.
In our opinion,           the legislature        cannot    control     by statute       the times or
method utilized            by the Comptroller           to determfne       the condition          of the
treasury        or whether         an appropriation         bill     exceeds      the     anticipated
revenue      of      the    fund    from which        the   appropriation         la    to be paid,
although        that     officer     may be subject          to mandamus         in the       event    he
should     fail      to perform       his duty as contemplated             by the constitution.
Jernigan      v. Finley,         38 S.W. 24 (Tex. 1896).            Cf. V.T.C.S.        art.     4393-1,
53.043(k);         Jeaaen      Associates.      Inc.     V. Bullox          531 S.W.2d        593, 602
 (Tex. 1976).

        In Attorney    General   Opinion     w-640     (1959),   Attorney      General      Will
Wilson    considered     the constitutionality          of a bill      that,     among other
things,     attempted      to  control      the    Comptroller’s       estimates         of   the
outstanding      but undiaburaed       appropriations       to be expected         at the end
of a biennium.        The opinion     concluded,      “Insofar   as this      bill     attempts
to make estimates       it is unconstitutional           as a legislative         invasion      of
the duties      of the comptroller.”

       The bill      at issue    there,      with     the offending   provision       “making
estimates”     deleted.    became article         4348a. V.T.C.S..   still    extant.     The
remainder     of the bill,        in the       form it    was considered       by Attorney
General    Wilson,     was characterized        as an instruction    to the Comptroller
“to use the cash accounting             basis”      and was pronounced     constitutional
inasmuch    as, according      to the opinion:

               Reading   Section   49s of Article           III   from its       four
               corners,   it is our opinion        that   this    constitutional
               provision    contemplates       that     the     Comptroller’        in
               making his estimate       for certification         of bills,      uee
               the cash accounting       method.

        Thus,   article     4348a. V.T.C.S..      is to be read not as a leglalativc
mandate     defining     the power of the Comptroller          under section     49a with
respect      to certifications         or estimates     made for    that  purpose.    but,
rather,     as a direction        that he conform     to the requirements      of section
49a itself        by using      the cash   accounting     method   in arriving     at his
estimates      for that purpose.

        The Comptroller         fulfilled         his    constitutional       duty under        article
 49a by revising        his     revenue         estimates       dovnvard.    beginning        in early
 1986 and continuing            throughout          the year.         Prior   to and during            the
 first    and second     called        sessions       of the 69th Legislature.            he advised
 the    governor    and     the      legislature          of    an anticipated        shortfall         of
 substantial     proportions          for the current            biennium.      Nevertheless,          the



                                                p.   3047
Honorable      Bob Bullock        - Page       11        (m-666)




legislature        adjourned       the special     session     in September.   1986. oith              the
knovledge        that     expenditures      would      in all     probability    substantially
exceed      revenues.        Prior     to and during       this,    the 70th Session       of          the
Legislature,          the    Comptroller       again      advised     the Governor       and           the
Legislature        of an anticipated         shortfall      of substantial    proportions.

        It has never        been assumed,          however,       that    no deficit        could    ever
occur     in the accounts         of the state          after    the adoption        of section         49a
or, if one did occur,            that    it could not be carried               forvard     to the next
fiscal     period.      In fact,       the third       paragraph       of section       49a.   speaking
in     1942,    contemplated        the     existence         of   s deficit        in    the    General
Revenue Fund as of September                1, 1943.        To retire       the expected       deficit,
It authorized         the    sale     of bonds        in an amount equal               to the     actual
deficit      on that     date,     but without         assurance       that    the bonds       could     be
sold (on the basis          permitted)        in time to eliminate             the shortage       before
January      1. 1945, the date           “from and after”           which the accounts            of the
state     were to be put on a cash basis.

       That possibility        was also    addressed -by Attorney    General  Mann in
Attorney       General    Opinl&    O=S13S 71943)’ to Chairman       Manford   of the
House      State    Affairs     Comsittec.      The Chairman    posed,   to  him  the
following:

               If,   hovever,           the    State      is required           to go on a
               ‘cash     basis’        from and after           January         1, 1945 the
               question       arises        as to the future             status         of out-
               standing      and unpaid          warrants      as compared with that
               of warrants         issued      after     that date:          Paragraph         one
               of the amendment               above    quoted       required         [sic]      the
               Comptroller           in     advance      of each        Session          of     the
               Legislature          to estimate         funds that         will     be avail-
               able for appropriation                during      such Session            and for
               the succeeding biennium.                    Our question          is will        the
               Comptroller         be required         to take into consideration
               the    total      outstanding          unpaid       warrants         in deter-
               mining       the       net     amount        of   cash      that        will      be
               available         for      appropriation           for     the      succeeding
               biennium?          In other         words,      till      the net           amount
               available        for appropriation              be the gross              antici-
               pated      revenue         for    the     succeeding         biennium          less
               the total          amount        of    varrants         outstanding              and
               unpaid      that     were issued         prior     to the date of such
               estimate?

                    For   example.     assume      that    on January         1. 1945
               the General        Fund     Revenue       anticipated         for    the
               succeeding       biennium      together      with     cash     on hand
               totals    $36,000,000.00.         and that the total          warrants
               then   outstanding        amount to $26,000,000:D0.               would
               the Comptroller         be required        to deduct       the unpaid
               warrants     before    certifying       the amount of cash that



                                                    p.   3048
Honorable     Bob Bullock       - Page     12          (JM-666)




              would     be available.        to wit:       $10,000,000.00.         or
              could     he disregard     all   previously       issued    warrants
              and    certify      $36.000,000.00        as    the     net   amount
              available      for appropriation?

      The answer   given     by            Attorney           General    Plans demonstrated      his
contemporaneous  understanding               of        the   amendment’s   effect:

                  In reply        to your second           question      us think       the
              Comptroller         vi11      necessarily        have     to take       into
              consideration           the     total     outstanding        warrants       in
              determining        the net amount             of cash      that will        be
              available       for appropriation;              otherwise,       it would
              be impossible          to place       the State       on a cash basis.
              If    the     aotlcipated           revenues       for     the    biennium
              beginning      January        1, 1945, should          be estimated         at
              $36,000,000        and the Legislature             should     appropriate
              $36,000,000         (sic]      the outstanding           warrants     would
              necessarily        have to be paid in the order of their
              registration         and at the end of the biennium                   there
              would be outstanding               approximately        the same amount
              of warrants          as     in the beginning,           -and the State
              would     not     be on a cash              basis.        The financial
              situation      would not be changed.

       As originally         drafted.     Attorney       General    Opinion O-5135 contained
an additional        paragraph        which    concluded       that    unless,      prior   to that
date,   the legislature           enacted    legislation        to refund      obligations      owing
byhc      General      Revenue        Fund on September           1. 1943, it        could    not be
done.     The paragraph          was deleted        before     the opfnion        was issued.         A
memorandum dated March 26. 1943 in the file                        recowsending        the deletion
observed.    Inter     alia:

              ~a a practical            matter     it   is   impossible         for    the
              Legislature        during     the present       session       (unless      it
              lasts      until       after      September        1st)       ‘to     enact
              necessary       legislation,’         because     no one knows,            or
              can knov,         now the       azsount    of deficiency            in the
              general      fund on September             1. 1943.        The falling
              off in State         revenue     and the rate        of expenditures
              betveen     now and then will           determine       that.

        The effect   of revenue    shortfalls       on appropriation    bills    certified
 by the Comptroller       as being    within     estimated    revenues   anticipated,      to
 be available      for  their    payment      was considered       by Attorney      General
 Grover    Sellers   in Attorney     General      Opinion    Nor. O-6497 and O-6497A
 (1945).     These questions    were posed:

                  Should    the appropriation                    by the legislature       be
               within    the Comptroller’s                   estimate     as filed    under
               oath   vlth    the Governor.                  and if    it    subsequently



                                                  p.     3049
Honorable      Bob Bullock        - Page     13    (J?4-666)




               should    develop    that   for some unforeseen           cause the
               sources     of revenue      should      diminish     to the point
               that    it would     not meet      the    appropriation,        would
               the deficit       thus    created      be a legal        obligation
               upon the State?

                    Should the appropriation            be within     the [Clomp-
               troller’s       estimate       and    it   should     subsequently
               [develop]       that     the revenue        fails    to meet the
               appropriation,          should      the    [CJomptroller       issue
               varrsnts      to meet the appropriation           even though the
               revenue      is exhausted        and vould      such warrants      be
               paid     vhen   sufficient       revenue     is secured     to meet
               such warrants?

       Attorney    General      Sellers      ansvered     each of the above questions         in
the af f innative,       indicating       his    belief     that  after bills   have    become
law.   a deficit     occurring       as a result        of conditions   not anticipated      by
the Comptroller’s          estimate      at the      time   they were certified      vi11   not
affect    their    validity,        although      the miscalculation       may require      the
issuance    of deficiency        warrants.

        A 1986     publication       of    your   office      noted:

                      An article        on   the      pay-as-you-go        amendment
                published        in   the    1940’s.        just    after    it    was
                adopted,      said     that    if     estimates      changed    after
                appropriations          were     certified       --    the   current
                situation      --   the appropriations           apparently     vould
                still     be valid.

                     What makes       ‘pay   as you go’ work is the fact
                that     before     each    nev     biennium.     a new revenue
                estimate       is   rolled      out.       In  making    this    new
                estimate,       the Comptroller        takes   expected    revenues
                in the upcoming           NO years       and adds sny expected
                surplus       from     the   preceding        budgLt    period     or
                subtracts      any deficit.

 Interfund      Borrowing        In Texas     State    Finances,       6 (Peb.    19861.

         We believe      this     procedure       is the proper         one for determining          vhat
 amount of appropriations,               if any,      the Comptroller          may properly      certify
 under     article     III,      section      49a.     of the Texas Constitution                for     the
 1988-89      biennfum.        If the Comptroller              estimates       or ccrtifics       that      a
 deficit     of one billion          dollars      in the General          Revenue Fund will         exist
 et    12:00 midnight,          August      31.     1987,    but anticipates          the receipt         in
 that    fund of twenty billion              dollars      in unencumbered         revenue   during      the
 1988-89      biennium.        there     vi11      be nineteen         billion      dollars    for      use
 and certification            during      the     biennium       available       according     to     that
 estimate.



                                                  p.   3050
Honorable      Bob Bullock        - Page     14     (J?4-666)




       If.    on   the    other    hand,  the Comptroller         estimates       that    a deficit
will    exist     in that fund at 12:00            midnight     on August       31,     1987.    vhich
exceeds       anticipated         unencumbered       revenues       during       the     succeeding
biennium.      no funds will         be available      for certification.             Thus,    in our
opinion,      there     is no constitutional          provision       which    forbids      carrying
an expected        deficit      forward   to the next fiscal           period.        Cf. Attorney
General      Opinion        VW-102 (1957)         [“Section     49(a)      does      nt     prohibit
deficit     financing”.       ]

        I believe      a caveat is in order.                 The Comptroller            has carried       out
his     constitutional            responsibility            of    advising         the     Governor       and
Legislature        of anticipated         revenue       shortfalls.         The Texas Constitution
Imposes       upon each member of the legislature                         a duty       to refrain        from
engaging       in deficit       financing.          Failure      of  the    legislature         to   prevent
deficit      financing       could     cause     the kind of financial               problems      that    the
people      spoke    out against         with     the passage        of sections          49 and 49a of
article       III of the Texas Constitution.                       While I may be powerless                  to
prevent      this    deficit      financing.        I feel     it is my duty not to yield                  our
constitutional          heritage        of a balanced           budget     vithout       registering         my
protest.

                                              SUMMARY

                        Sections      49 and 49a of article               III,     of the
                Texas     Constitution         are    related.       Neither     ‘section
                expressly       forbids      carrying      forward     a deficit       from
                one fiscal         period      to another.         If    a deficit         is
                carried      forward     from one biennium            to another,        the
                deficit      should     be deducted         from expected revenues
                for the new biennium             in determining         what funds       are
                available       during    the new biennium         for appropriation
                and certification           under section       49a.

                                                          zzb

                                                                           MATTOX
                                                                Attorney    General      of   Texas

 JACK RIGHTOWER
 First Assistant Attorney               General

 MARY KELLER
 Executive Assistant             Attorney      General

 JUDGE ZOLLIE STEAKJXY
 Special Assistant Attorney                 General




                                                   p.    3051


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