Did the money collected by Maryland's new Chesapeake Bay Trust have to be deposited into the State Treasury like other state funds?

Plain-English summary

When the General Assembly created the Chesapeake Bay Trust in 1985 to fund public awareness and restoration projects for the Bay, the Governor's office asked the Attorney General to resolve a question left open during bill review: were the Trust's funds "moneys of the State" under Article VI, §3 of the Maryland Constitution, meaning they had to sit in the State Treasury and could only be spent through the constitutional appropriations process, or could the 15-member Trust board hold and disburse grant money more freely?

The Attorney General concluded the Trust's funds were "moneys of the State." Drawing on two Court of Appeals decisions and several prior AG opinions, the opinion identified the State's discretion over how funds are spent as the most important factor: money that merely passes through a state entity to a predetermined class of private recipients, like bond proceeds or workers' compensation payments, is not "moneys of the State," but money the State can direct toward public purposes as it sees fit generally is. Because the Trust's board had broad discretion over which grant proposals to fund and in what amounts, rather than simply administering fixed payouts, the opinion concluded the Trust did not merely collect and transmit money and that its funds belonged in the Treasury. An editor's note attached to the opinion records that this conclusion was overruled about a year later, in a 1986 opinion (71 Op. Att'y Gen. 10, October 29, 1986) that found the Trust to be an "autonomous activity for fiscal purposes" not subject to the Article VI, §3 requirement, though that later opinion did not dispute this opinion's discussion of the general factors relevant to the "moneys of the State" question.

Currency note

This opinion was issued in 1985. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Notably, this opinion's own conclusion was overruled by a 1986 opinion of the same office (71 Op. Att'y Gen. 10), as recorded in the editor's note at the end of the original text below.

Common questions

Did the Attorney General conclude that all money held by the Chesapeake Bay Trust had to go into Maryland's State Treasury?
Yes, in this 1985 opinion, but that conclusion did not stand. The opinion held the Trust's funds were "moneys of the State" requiring Treasury deposit and the constitutional appropriations process, but a 1986 opinion from the same office (71 Op. Att'y Gen. 10) later overruled that conclusion and found the Trust was an autonomous fiscal activity not subject to that requirement.

What test did the Attorney General use to decide whether a state entity's funds counted as "moneys of the State"?
The opinion looked at several factors drawn from prior cases and opinions, especially how much discretion the State had over spending the funds. Money that simply passed through to a fixed category of private recipients, like the bondholders in Wyatt v. State Roads Comm'n or the injured workers in Subsequent Injury Fund v. Pack, was not "moneys of the State," while money the State could direct toward its own purposes with real discretion generally was.

Why did the Trust's broad discretion over its grants matter to the outcome?
The opinion reasoned that because the Trust's 15-member board decided who received grants, in what amounts, and for what purposes, rather than merely administering predetermined payments, the Trust was doing more than acting as a "medium of collection and transmission," which pointed toward treating its funds as belonging to the State rather than to private beneficiaries.

Background and statutory framework

The Chesapeake Bay Trust was created by Chapter 789, Laws of Maryland 1985, "to promote public awareness and participation in the restoration and protection... of the Chesapeake Bay," codified at §8-1901 of the Natural Resources Article, and governed by a 15-member board of five state officials and ten gubernatorial appointees under §8-1903. The Trust could solicit and accept gifts, provide grants for citizen involvement projects, and receive state appropriations under §8-1905(a), depositing funds "as directed by the Trust" under §8-1908 and holding any leftover funds with the State Treasurer upon its scheduled 1989 expiration under §8-1910.

Article VI, §3 of the Maryland Constitution required the Treasurer to receive and deposit "the moneys of the State," while Article III, §32 barred drawing money from the Treasury except through an appropriation, and Article III, §52(1) required appropriations to follow the constitutional budget procedures. The opinion drew its analytical framework from Wyatt v. State Roads Comm'n, 175 Md. 258, 269 (1938), which held toll revenue dedicated to bond redemption was not "moneys of the State" because the State was merely "a medium of collection and transmission," and from Subsequent Injury Fund v. Pack, 250 Md. 306, 312 (1968), which reached the same conclusion for a fund that paid adjudicated workers' compensation claims to injured employees. It also surveyed a line of prior AG opinions on the State Accident Fund, the Maryland Automobile Insurance Fund, federal block grants, and the Maryland Historical Trust, concluding that the degree of State discretion over expenditure, tested against the state-agency framework in A.S. Abell Pub. Co. v. Mezzanote, 297 Md. 26, 35 (1983), was the most important factor, and finding the Trust's broad grant-making discretion placed it on the "moneys of the State" side of that line.

Citations

Statutes:

• Article VI, §3 of the Maryland Constitution (Treasurer's duty to receive and deposit "moneys of the State")
• Article III, §32 of the Maryland Constitution (no withdrawal from Treasury except by appropriation)
• Article III, §52(1) of the Maryland Constitution (constitutional budget/appropriation procedures)
• Chapter 789, Laws of Maryland 1985 (created the Chesapeake Bay Trust)
• §8-1901 of the Natural Resources Article (Trust's statutory purpose)
• §8-1902 of the Natural Resources Article (Trust as a body corporate)
• §8-1903 of the Natural Resources Article (15-member board of trustees)
• §8-1905(a) of the Natural Resources Article (Trust's powers, including grants and gifts)
• §8-1908 of the Natural Resources Article (deposit/investment of Trust funds)
• §8-1909 of the Natural Resources Article (exemption from budgetary administration provisions)
• §8-1910 of the Natural Resources Article (disposition of funds upon Trust's 1989 expiration)

Cases:

• Wyatt v. State Roads Comm'n, 175 Md. 258 (1938)
• Subsequent Injury Fund v. Pack, 250 Md. 306 (1968)
• A.S. Abell Pub. Co. v. Mezzanote, 297 Md. 26, 35 (1983)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1985/Volume70_1985.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

BUDGETARY ADMINISTRATION

"Moneys of the State"—The Funds of the Chesapeake Bay Trust are "Moneys of the State," Subject to Deposit in the State Treasury and Withdrawal only in Accordance with the Appropriation Process.

November 26, 1985

The Honorable Harry Hughes
Governor

In our letter approving for constitutionality and legal sufficiency the legislation that established the Chesapeake Bay Trust, we reserved for a future opinion the question of whether the funds of the Trust are "moneys of the State," within the meaning of Article VI, §3 of the Maryland Constitution. See Bill Review Letter (Senate Bill 583, 1985 Regular Session) from Stephen H. Sachs, Attorney General to Harry Hughes, Governor (May 25, 1985).

For the reasons given below, we conclude that the funds of the Trust are "moneys of the State." Accordingly, they must be deposited in the State Treasury and withdrawn only in accordance with the appropriations process prescribed in the Constitution.1

I
The Chesapeake Bay Trust

The Trust was established by Chapter 789, Laws of Maryland 1985 (Regular Session), "to promote public awareness and participation in the restoration and protection... of the Chesapeake Bay." §8-1901 of the Natural Resources Article ("NR" Article). The Trust is governed by a 15-member board of trustees, comprising five State officials and "10 individuals appointed by the Governor, who shall represent the interests of local government, education, business, environmental conservation, and the general public." NR §8-1903. It is "a body corporate," the purpose of which is declared to be "of general benefit to the citizens and charitable in nature." NR §8-1902.

In order to carry out its purpose, the Trust has various powers, including the power to:

"(1) Solicit and accept any gift, grant, legacy, or endowment of money from the federal government, State government, local government, or any private source in furtherance of the Trust;

(2) Provide grants... for citizen involvement projects;

(5) Make, execute, and enter into any contract or other legal instrument;

(6) Receive appropriations as provided in the State budget;

... [and]

(9) Take any other action necessary to carry out the purposes of the Trust." NR §8-1905(a).

Money received by the Trust is to be deposited in financial institutions meeting certain qualifications or invested in certain kinds of public securities, "as directed by the Trust." NR §8-1908. The Trust is exempt from various provisions of State law, including the provisions on budgetary administration now codified in the State Finance and Procurement Article. NR §8-1909.2 Upon the expiration of the Trust on July 1, 1989, any funds "remaining to the credit of the Trust" are to be "held by the State Treasurer until legislation is enacted providing for the disposition of the funds." NR §8-1910.

II
"Moneys of the State"
A. Constitutional Provisions

Under Article VI, §3 of the Maryland Constitution, "[t]he Treasurer shall receive the moneys of the State, and, until otherwise prescribed by law, deposit them, as soon as received, to the credit of the State, in such bank or banks as he may, from time to time, with the approval of the Governor, select..., and he... shall disburse the same for the purposes of the State according to law." Article III, §32 provides that "[n]o money shall be drawn from the Treasury of the State, by any order or resolution, nor except in accordance with an appropriation by Law." Finally, Article III, §52(1) directs that "[t]he General Assembly shall not appropriate any money out of the Treasury except in accordance with" the budgetary procedures specified in the remainder of Article III, §52.

Thus, if the funds of the Trust are "moneys of the State," the Constitution requires that they be held as part of the State Treasury and may be withdrawn from the Treasury only through the appropriations process.

B. Case Law

The Court of Appeals has twice held that particular pools of funds were not "moneys of the State." Although neither case purported to address "moneys of the State" issues comprehensively, their reasoning suggests the criteria to be applied in resolving such questions.

In Wyatt v. State Roads Comm'n, 175 Md. 258 (1938), tolls that were statutorily dedicated to the redemption of revenue bonds were held not to fall within the term "moneys of the State." Hence, the tolls were not required to be paid to and disbursed by the Treasurer.

In reaching its decision, the Court of Appeals noted that the funds in question were "made trust funds" by the road construction statute and that the State's role was "to disburse them in fulfillment of the special purpose for which they are to be created", to pay the bondholders. 175 Md. at 269. This "arrangement" did not violate the Constitution:

"The fund from tolls will be one coming into existence only for the special, peculiar, application to the bonds, and is completely appropriated to that purpose; and nothing more than a medium of collection and transmission is required. The State will have no right to the fund, and it would be a misapplication to put it into the ordinary channels for state revenues. The sections of the Constitution cited are not intended to deal with a fund so completely appropriated to outside persons." Id.

Thirty years after the decision in Wyatt, the Court of Appeals concluded that the moneys of the Subsequent Injury Fund were not "moneys of the State." Subsequent Injury Fund v. Pack, 250 Md. 306 (1968). The Court of Appeals noted that the Fund is composed of assessments levied by the State on employees and insurers for the benefit of previously injured employees who sustain a subsequent injury. Moreover, payments are not discretionary; they are made as a result of adjudicatory orders by the Workmen's Compensation Commission. 250 Md. at 308-09.

Thus, as in Wyatt, the State had no "right" to the fund and no discretion over its expenditures, because payments from it primarily benefited private parties. Under these circumstances, "the assessments paid into the Subsequent Injury Fund do not constitute 'moneys of the State' as contemplated by Article VI." 250 Md. at 312.

C. Opinions

Whether funds serve a public purpose and whether the State has control over disbursement are the principal factors that have guided this Office in assessing whether or not agency funds are "moneys of the State."

In 53 Opinions of the Attorney General 1 (1968), this Office concluded that the funds held by the State Accident Fund are not "public money in the sense of being money of the state to be used for, and on behalf of, the state for a state expenditure." 53 Opinions of the Attorney General at 6 (citation omitted). Rather, "[t]he fund is a public fund only in the sense of being administered by a public body." Id. (citation omitted).

In 58 Opinions of the Attorney General 88 (1973), the assets of the Maryland Automobile Insurance Fund (MAIF), like those of the State Accident Fund, were found not to be "moneys of the State." MAIF was created for the benefit of drivers whose applications for liability insurance are rejected by private insurers. The Treasurer's duty is merely to receive all moneys due MAIF and credit them to the account of the Fund.

Most recently, in 68 Opinions of the Attorney General 86 (1983), we concluded that federal block grants are "moneys of the State." See also 67 Opinions of the Attorney General 356, 365 (1982) (federal funds paid to and appropriated by the State for social service programs are "moneys of the State").3 We emphasized the degree of discretion that the State could exercise in the use of the funds:

"They are plainly intended to aid the State in the carrying out of State functions. Within the limits specified in the grant, the State may use the funds as it wishes." 68 Opinions of the Attorney General at 88.

Moreover, we wrote, the General Assembly does not have authority to adopt a statutory device "to avoid the constitutional requirement that 'moneys of the State' be deposited in the Treasury." 68 Opinions of the Attorney General at 90.4 The opinion observed that: "If State funds could be channeled to accounts outside the Treasury, the Constitution's elaborate budget process might well be circumvented." 68 Opinions of the Attorney General at 91.

The one opinion seemingly to the contrary, 63 Opinions of the Attorney General 492 (1978), concerned the Maryland Historical Trust. That opinion suggested, but did not hold, that the Historical Trust's funds might not be "moneys of the State." 63 Opinions of the Attorney General at 494. However, the opinion did not analyze the question or determine how the criteria developed in prior cases and opinions applied to the Historical Trust. Rather, the opinion concluded that, whether or not the Historical Trust's funds were "moneys of the State," the agency was authorized by statute to hold and administer its funds outside the Treasury. This conclusion was overruled by 68 Opinions of the Attorney General 86 (1983).

D. Summary of Criteria

The mere possession of funds by the State or its agencies does not alone make those funds "moneys of the State." Instead, the relevant court cases and past opinions of this Office suggest that several interrelated factors must be considered in determining whether funds are "moneys of the State": whether the State exercised its sovereign power to acquire the funds; whether the "ordinary channels for state revenues" are inconsistent with the purposes for which the funds are assembled; whether the expenditure of the funds primarily benefits private persons or the public at large;5 and whether the State, having a "right" to the funds, may exercise broad discretion over their expenditure. These general criteria necessarily are to be applied case-by-case, in light of all pertinent circumstances attending the particular funding arrangement.

Although no one factor by itself is determinative, we regard the degree of State control over the expenditure of the funds as the most important factor. Cf. A.S. Abell Pub. Co. v. Mezzanote, 297 Md. 26, 35 (1983) (test for whether entity is a State agency). The closer that the State entity is to a mere "medium of collection and transmission" [Wyatt, 175 Md. at 269], the more likely is the conclusion that the funds in question are not "moneys of the State." Conversely, the freer the State is to expend the funds as a matter of discretion, the more likely is the conclusion that the funds are "moneys of the State."

III
Application of Criteria to the Trust

The funds of the Chesapeake Bay Trust are expected to be derived from both public and private sources. NR §8-1905(a)(1) and (6). If the Trust accepts a gift to which conditions are attached, those conditions must be complied with. See 68 Opinions of the Attorney General at 94 n. 13.

However, funds derived from private gifts and other sources alike are to be used to promote the State's, that is, the public's, interest in restoring the Chesapeake Bay, not for anyone's private benefit. Additionally, the State, through the Trust's board, has broad discretion over the expenditure of these funds. The Trust will decide who gets its grants, in what amounts, and for what use. Subjecting such discretion to the control of the appropriations process is not incompatible with the carrying out of the Trust's purposes.

In short, the Trust does not simply collect and transmit the money. It is not an entity that does no more than transfer funds to designated beneficiaries or pay adjudicated claims. In our view, considering all of the pertinent factors, especially the degree of discretion exercised over expenditures, the Trust's funds are "moneys of the State."6

IV
Conclusion

In sum, it is our opinion that the funds of the Chesapeake Bay Trust are "moneys of the State," which must be deposited in the State Treasury and withdrawn only in accordance with the appropriation process.7

Stephen H. Sachs, Attorney General
Richard E. Israel, Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions and Advice

Editor's Note: The conclusion in this opinion was overruled in 71 Opinions of the Attorney General ___ (1986) [Opinion No. 86-056 (October 29, 1986)]. The later opinion concluded that the Chesapeake Bay Trust is an autonomous activity for fiscal purposes and is therefore not subject to the "moneys of the State" requirement of Article VI, §3. However, the later opinion did not disagree with the above opinion's discussion of the factors pertinent to determining whether funds held by an activity that is generally subject to Article VI, §3 are nevertheless not "moneys of the State."

1 Our bill review letter stated as a separate question whether funds to be remitted to the Treasurer upon the expiration of the Trust are "moneys of the State." These remitted funds, like the rest of the Trust's funds, are "moneys of the State." See note 7 below.

2 NR §8-1909 grants the Trust an exemption, except as to State appropriations, "from the provisions of Article 15A," which are now generally found in Titles 3 and 7 of the State Finance and Procurement Article. However, "[t]he books, records, and accounts of the Trust are subject to audit by the State." NR §8-1908(d).

3 Neither the prior opinions nor this one should be understood as a definitive treatment of the applicability of "moneys of the State" requirements to the various types of federal funds that are received by State entities. Each situation must be considered in its own context.

4 The phrase "until otherwise prescribed by law" in Article VI, §3 does not authorize a separate procedure for the maintenance and disbursement of "moneys of the State." Rather:

"[T]his language was intended to reflect (i) the authority of the General Assembly (and later, on passage of the Executive Budget Amendment, the Governor) to prescribe, through the budgetary process, the appropriation of funds from the Treasury and (ii) the authority of the General Assembly to prescribe, through the legislative process, the deposit of Treasury funds in financial institutions other than banks." 68 Opinions of the Attorney General at 90 (emphasis in original).

5 To be sure, a public purpose ultimately underlies even those statutory arrangements that involve private beneficiaries. Bondholders, for example, play an integral role in the quintessentially public program of road construction. But the "moneys of the State" provision in Article VI, §3 requires focus on whether the funds for the accomplishment of the public purpose are channeled to a particular and predetermined category of private recipient, e.g., bondholders (Wyatt) or injured employees (Pack).

6 Although the Trust's funds are "moneys of the State," there is no constitutional impediment to the exercise of the Trust's authority, under NR §8-1908(a), in effect to determine how the Treasurer should invest its funds. See note 4 above.

7 Likewise, given the State's discretion over the disposition of the Trust funds upon the expiration of the Trust, these funds should be regarded as "moneys of the State." See note 1 above.