Are donations and grants held by a state-created nonprofit like the Chesapeake Bay Trust subject to Maryland's regular treasury and budget rules?

Plain-English summary

The Governor's office asked the Attorney General to reconsider a 1985 opinion which had concluded that funds held by the Chesapeake Bay Trust, a body the General Assembly created to promote public participation in Bay restoration, were "moneys of the State" under Article VI, §3 of the Maryland Constitution and therefore had to flow through the State Treasury and the regular appropriations process. That 1985 opinion had assumed, without much analysis, that the Trust was simply a state agency.

On reconsideration, the Attorney General concluded that assumption was wrong. Applying a multi-factor framework borrowed from governmental accounting standards, looking at who controls the Trust's board and staff, who bears responsibility for its surpluses and deficits, where its money comes from, and how broadly exempt it is from the statutes that normally bind state agencies, the opinion found that most of the factors pointed toward the Trust functioning as a fiscally independent, autonomous body rather than a component of state government. On that basis, the opinion concluded the Trust's funds were not "moneys of the State" and the Trust was not subject to the constitutional deposit and appropriations requirements, reversing the office's own prior position.

Currency note

This opinion was issued in 1986. 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.

Common questions

Did the Attorney General's office simply stick with its earlier position that the Chesapeake Bay Trust's money had to go through the State Treasury?
No. The opinion expressly reversed the conclusion reached the year before in 70 Opinions of the Attorney General 35 (1985), which had assumed without discussion that the Trust was a state agency. This opinion examined the question in depth and reached the opposite conclusion.

How did the Attorney General decide whether a body like the Bay Trust counted as part of state government for fiscal purposes?
The opinion applied a set of criteria borrowed from governmental accounting standards then in use for state financial reporting, including who appoints and controls the Trust's board, who manages its day-to-day operations, who is responsible for its surpluses or deficits, and how broadly it is exempted from the statutes that normally govern state agencies' budgets, procurement, and personnel.

Did this opinion mean the Chesapeake Bay Trust had no state oversight at all?
No. The opinion noted the Trust was still subject to audit by the State and remained subject to the Executive Budget Amendment to the extent it received State appropriations, which by the time of the opinion were a small and declining share of its funding compared to grants and donations from other sources.

Background and statutory framework

Article VI, §3 of the Maryland Constitution requires the State Treasurer to receive "the moneys of the State" and directs that they be deposited securely and disbursed "for the purposes of the State according to law," a phrase the opinion read as invoking the constitutional appropriations process in Article III, §52 (the Executive Budget Amendment). The opinion explained that this framework exists to ensure both the physical security of state funds and legislative and executive control over how they are spent, so that the Governor and General Assembly can set fiscal priorities within a balanced budget.

The General Assembly created the Chesapeake Bay Trust by Chapter 789, Laws of Maryland 1985, codified in the Natural Resources Article, "to promote public awareness and participation in the restoration and protection of the water quality and aquatic and land resources of the Chesapeake Bay." The statute described the Trust as "a body corporate" but did not expressly state whether it was part of state government. To answer that question, the opinion applied criteria drawn from governmental accounting standards then used for the state's financial reporting, examining board control, management authority, fiscal responsibility for surpluses and deficits, funding sources, and the breadth of the Trust's exemption from statutes governing state budgeting, procurement, the merit personnel system, and pensions. Most of these factors, particularly the Trust's broad statutory exemption from ordinary state fiscal procedures and its ability to act "without obtaining the consent of any department, board, or agency of the State," pointed toward the Trust functioning autonomously, leading the opinion to conclude the Trust's funds were not "moneys of the State" even though the Trust remained subject to state audit and to budget procedures for the limited State appropriations it did receive.

Citations

Statutes:

• Article VI, §3 of the Maryland Constitution ("moneys of the State" deposit and disbursement requirement)
• Article III, §48 of the Maryland Constitution (General Assembly's authority to create public-purpose corporations outside state government)
• Article III, §52 of the Maryland Constitution, including §52(2), (3), (5a), (6), (8), (11), and (12) (Executive Budget Amendment and budget bill procedures)
• Chapter 789, Laws of Maryland 1985 (statute creating the Chesapeake Bay Trust)
• §8-1901, §8-1902, §8-1903(b) and (d), §8-1904(e), §8-1905(a), §8-1908, and §8-1909(a) of the Natural Resources Article (Chesapeake Bay Trust's purpose, governance, powers, and exemptions)
• Article 48A, §601(b)(1) and (d) of the Maryland Code, as enacted by Chapter 663, Laws of Maryland 1986 (comparative example, Commercial Casualty Underwriting Association)
• §7-302 and §7-304 of the State Finance and Procurement Article (reversion of surplus funds)
• §2-1215(a) of the State Government Article (audit requirement for units of state government)

Cases:

• Wyatt v. State Roads Comm'n, 175 Md. 258 (1938)
• Moberly v. Herboldsheimer, 276 Md. 211 (1975)
• A.S. Abell Publishing Co. v. Mezzanotte, 297 Md. 26, 39 (1983)
• Baltimore v. O'Conor, 147 Md. 639, 644 (1925)
• Highfield Water Co. v. Public Serv. Comm'n, 488 F. Supp. 1176 (D.Md. 1980)
• Kentucky Region Eight v. Commonwealth, 507 S.W.2d 489, 491 (Ky. 1974)
• Matter of Wash. State Bar Ass'n, 548 P.2d 310, 314 (Wash. 1976)

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/1986/Volume71_1986.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 Chesapeake Bay Trust Is An Autonomous Activity For Fiscal Purposes And Therefore Is Not Subject To The Constitutional "Moneys Of The State" Requirements.

October 29, 1986

The Honorable Harry Hughes
Governor

Your office has requested that we reconsider the status of the funds of the Chesapeake Bay Trust. In 70 Opinions of the Attorney General 35 (1985) we concluded that the funds of the Trust are "moneys of the State," within the meaning of Article VI, §3 of the Maryland Constitution, and consequently are subject to deposit in the State Treasury and withdrawal only in accordance with the appropriations process.1

70 Opinions of the Attorney General 35 (1985) assumed, without discussion, that the Chesapeake Bay Trust was a State agency, although the statute creating the Bay Trust does not expressly characterize its relation to the State. That assumption has since been questioned. Thus, we will specifically examine the status of the Bay Trust. In order to do so, we will try to identify criteria that will aid in categorizing State-created activities for purposes of Article VI, §3.

Under this approach to "moneys of the State" problems, one first examines whether the activity itself is subject to the constitutional requirement. If not, the constitutional inquiry ends.2 If so, one then examines whether the particular "moneys" in question, though held by an activity generally subject to the requirement, are nonetheless not "moneys of the State." This latter inquiry turns on whether the funds are of such a character that application of the State's budgetary and fiscal control procedures would be inconsistent with the nature of the funds or pointless in terms of the constitutional requirements governing State finances. See Wyatt v. State Roads Comm'n, 175 Md. 258 (1938).

In brief, we believe that an activity created by the General Assembly is subject to the "moneys of the State" requirement of Article VI, §3 unless the statute authorizing the activity (1) manifests an intent that the activity function autonomously for fiscal purposes, by excluding the activity from State oversight and fiscal accountability; or (2) manifests an intent that the activity function as part of local, rather than State, government.3

For the reasons stated below, we conclude that the Chesapeake Bay Trust is an autonomous activity for fiscal purposes and is therefore not subject to the "moneys of the State" requirement. Hence, the result reached in 70 Opinions of the Attorney General 35 was incorrect.4

I
Introduction

The General Assembly unquestionably has authority to create corporations or similar bodies that serve a public purpose but that are not a part of State government. Article III, §48 of the Maryland Constitution. See generally Moberly v. Herboldsheimer, 276 Md. 211 (1975).

"[A]s the objects of governmental interest change, so, often, do the institutions through which government seeks to achieve its new, or altered, purposes ..., each [institution] with its own special structure and special public purposes." 49 Opinions of the Attorney General 164, 172 (1964). See also 70 Opinions of the Attorney General 180, 183 n.2 (1985). To cite but one example from the 1986 Session, the General Assembly created the Commercial Casualty Underwriting Association, expressly stated to be "not a department, unit, agency or instrumentality of the State." Article 48A, §601(b)(1) of the Maryland Code, as enacted by Chapter 663, Laws of Maryland 1986.

In 68 Opinions of the Attorney General 86, 91 (1983), we concluded that "under Article VI, §3, the General Assembly lacks power to prescribe that 'moneys of the State' not enter the Treasury." However, it does not follow that the General Assembly lacks power to create activities whose funds are simply not "moneys of the State" at all, because the activity itself is not a component of State government.

If the General Assembly expressly identifies an activity as part of State government, the activity is generally subject to Article VI, §3. Conversely, if the General Assembly expressly identifies an activity as excluded from State government and creates a funding mechanism reflecting that exclusion, the funds of the activity cannot be said to be "moneys of the State."5

But express identification of an activity's status is often lacking:

"[O]n some occasions, the General Assembly has expressly characterized certain entities that it has established as State 'agen[cies]' ... or 'instrumentalit[ies]' .... Other entities established by the General Assembly have been expressly characterized as 'not a department, agency, or instrumentality of the State' .... In some cases, the General Assembly has not expressly stated whether an entity that it has established is or is not an agency or instrumentality of the State." A.S. Abell Publishing Co. v. Mezzanotte, 297 Md. 26, 39 (1983).

Often, then, the determination of an activity's status can be made only by examining "all aspects of the interrelationship" between the State and the activity, viewed in light of the particular purpose for which the determination is to be made. Id. See also 71 Opinions of the Attorney General 128, 128 n. 1 (1986).6

The General Assembly established the Chesapeake Bay Trust in Chapter 789, Laws of Maryland 1985, "to promote public awareness and participation in the restoration and protection of the water quality and aquatic and land resources of the Chesapeake Bay." §8-1901 of the Natural Resources Article ("NR" Article). Although the Trust is described as "a body corporate," with "perpetual existence, subject to modification or termination by the General Assembly if necessary to effectuate its purpose or when and if its substantial purpose ceases," its relationship with the State is not characterized in the statute. NR §8-1902.

As a recent opinion summarized, "it is well established that an entity may be considered an agency, unit, or instrumentality of government for one purpose, but not for another." 70 Opinions of the Attorney General 30, 32 (1985). The conclusion that an activity is not a State entity for the purposes of one statute has "no bearing on whether [the activity] might be considered a State entity for other purposes." Id.

Thus, in order to decide the status of the Bay Trust in this context, we must look first to the purposes of the "moneys of the State" provision in Article VI, §3 of the Constitution and of the related budgetary procedures in Article III, §52.

II
Purpose of State Fiscal Controls

In 68 Opinions of the Attorney General 86 (1983), the block grants opinion, we discussed the history of Article VI, §3. See 68 Opinions of the Attorney General at 90-91.

From that history, we discerned that, in one respect, Article VI, §3 is simply a housekeeping procedure: The requirement as to receipt and deposit of funds is straightforwardly intended to assure the security of the money. Cf. Opinion No. 85-026 at 4 (November 18, 1985) (unpublished) (analogous provision for deposit of county funds by Cecil County Treasurer requires that treasurer "handle the public funds in his or her possession in a prudent manner, putting them into safekeeping as soon after their receipt as is practicable").

In addition, the phrase "until otherwise prescribed by law" in Article VI, §3 invokes the provisions of the Constitution that prescribe the appropriations process. That is, "this language was intended to reflect ... the authority of the General Assembly (and later, on passage of the Executive Budget Amendment, the Governor) to prescribe, through the budgetary process, the appropriations of funds from the Treasury." 68 Opinions of the Attorney General at 90 (emphasis in original).7

Thus, the overall purpose of Article VI, §3 is accountability, in the most basic sense of assuring that receipts are handled securely and are documented properly and, more broadly, that the expenditure of the funds is controlled by the appropriations process.

The budgetary procedures in Article III, §52 of the Constitution have a related but distinct purpose: "To place before the Legislature a complete picture of the State's financial resources and needs" and thereby prevent an "excessive expenditure over receipts." Report of the Commission on Economy and Efficiency on Budget System (Goodnow Commission), reprinted in 1916 S. Journal at 130. The Court of Appeals has summarized the origin and purpose of the Executive Budget Amendment as follows:

"Prior to the adoption of the budget amendment by the people of the State in 1916, there was no orderly plan or system which the General Assembly was required to follow in disbursing the State's revenues, and as a result appropriations were more or less uncorrelated and deficits in the State Treasury were not unusual. The purpose of the budget amendment was to remedy this situation by providing an intelligent and definite method of estimating and appropriating the income of the State." Baltimore v. O'Conor, 147 Md. 639, 644 (1925).8

In other words, the budget process permits, indeed, requires, the Governor and General Assembly to set fiscal priorities: to trade off one worthwhile goal against another, in light of limited State resources and the constitutional requirements that the budget be balanced. See Article III, §52(5a) of the Constitution. If an activity is part of the State's governmental apparatus, so that the State will be held accountable for the activity's use of funds, "accountable" in terms of both the State's bond rating and like measures of financial soundness and, more broadly, for the policy decisions reflected in fiscal allocations, the activity must be included within the "moneys of the State" requirement. Otherwise, "an intelligent and definite method of estimating and appropriating the income of the State" would be impossible. Baltimore v. O'Conor, 147 Md. at 644.

III
Identification of Activities Outside State Fiscal Operations

A. Background

As part of its former revenue sharing program, the federal government required an audit of "all funds" of the State. Office of Revenue Sharing Audit Guide §II.A.1.c (December 1977). In that context, the State needed to identify which State-created activities were part of the State's fiscal operations and which were not.

Consequently, the accounting firm responsible for the State's financial reporting, Coopers & Lybrand, developed "a concept of the reporting entity; namely, the government as a functioning economic unit." This approach "establishes a set of criteria by which activities and programs may be evaluated for the purpose of determining whether they should be included in the reporting entity." Coopers & Lybrand, The Financial Reporting Entity of the State of Maryland 1 (n.d.) ("State Entity").9 Substantially identical criteria have been adopted by the accounting profession as general standards. Governmental Accounting Standards Board and Government Accounting Research Foundation, Governmental Accounting and Financial Reporting Standards §2100 (1984) ("Reporting Standards").

B. Applicability to "Moneys of the State" Questions

The heart of this financial reporting concept, that the State, in its fiscal operations, is to be viewed "as a functioning economic unit", is entirely consonant with the purpose of the constitutional provisions in question: to permit integrated, effective fiscal accountability and oversight by the Executive and Legislative branch officials charged with responsibility for the functioning of the State as a whole. In fact, the State's financial reports must reflect the full scope of the State's underlying financial operations. "Users interested in evaluating the performance of governmental entities need to be able to identify the operations for which their officials are responsible. Specific criteria for the reporting entity inclusion or exclusion can help fulfill that need." Reporting Standards §2100.104c, at 68.

These criteria "should be broad enough to include all governmental activities, organizations, and functions necessary to achieve the desired objectives.... [A] broad definition is necessary to provide users with all necessary information." Reporting Standards §2100.106, at 68.

In our view, a comparably inclusive definition of activities subject to Article VI, §3 and Article III, §52 is likewise necessary. Otherwise, the goal of accountability, discussed in Part II above, cannot be achieved. The criteria developed by the accounting profession for purposes of governmental financial reporting carry out, in this context, the Court of Appeals' instruction that "[a]ll aspects of the interrelationship between the State and the statutorily-established entity must be examined in order to determine" whether it is an agency or instrumentality of the State for a particular purpose. A.S. Abell Publishing Co. v. Mezzanotte, 297 Md. at 35.

As Coopers & Lybrand put it, the criteria should "lead to the determination of primary fiscal accountability, responsibility, and authority for financial reporting purposes." State Entity at 2. The criteria work as follows:

"In determining which governmental activities to include within the [State financial reporting] Entity, it is necessary to assess the nature of each activity and its relationship to the appropriate criteria. The criteria are structured to bring out the nature of basic responsibilities and authority in the governance and accountability of the organization over its financial transactions and economic undertakings. No one of the criteria should be controlling, but rather they should be viewed collectively and a judgment made as to whether a particular activity of government should be deemed a part of the Entity." Id. at 3.

The criteria, in other words, are a form of detailed inquiry into the degree of linkage between the State, treated as an integrated economic unit, and the activity, which is precisely the inquiry that we believe is called for in deciding the applicability of the "moneys of the State" requirements to an activity.10

IV
The Criteria and their Application to the Bay Trust

A. Manifestations of State Oversight Responsibility

1. Selection of governing authority

The governing authority for an activity is the body that has final decisionmaking authority, in the case of the Chesapeake Bay Trust, the Board of Trustees. This criterion examines not only whether the Governor or another State official appoints this body but also whether the appointment is "authoritative":

"When the governing authority is appointed by elected officials, a determination must be made as to whether the appointment is authoritative. One made by an elected official principally because he or she is in an official position, where the position the person is appointed to has little continuing linkage to the elected official (for example, appointment of a chairman for a charitable activity), is not authoritative. An authoritative appointment is one where the elected official maintains a significant continuing relationship with the appointed official with respect to carrying out important public functions." Reporting Standards §2100.110a, at 69.

If the appointment is "authoritative", that is, if the appointees, as part of "continuing linkage" with the State official who appointed them, run the activity in accordance with that official's policies, this fact evidences inclusion within the State entity. Conversely, the absence of this kind of policy linkage evidences exclusion.

The Bay Trust statute identifies five State officials as ex officio members of the Board of Trustees. NR §8-1903(b)(1), (2), and (3).11 The Governor appoints the remaining ten members of the Board, "who shall represent the interests of local government, education, business, environmental conservation, and the general public." NR §8-1903(b)(4). Except for the ex officio members, board members serve staggered four-year terms, rather than at the pleasure of the Governor. NR §8-1903(d)(1),(2).

Although State officials serve on the board, and presumably the views of the three departmental secretaries reflect the policy perspective of the Governor, the Board appointments are essentially "non-authoritative." The ex officio members, a distinct minority, bring to the board not simply their legislative or departmental objectives but also their personal expertise and their knowledge of related governmental activities. The staggered terms of the majority reflect an intention that the board is not to be a policymaking instrument of any one Governor but is to make independent decisions. Cf. Reporting Standards §2100.607 (industrial development board consisting of two ex officio members and seven mayoral appointees for staggered terms does not reflect continuing relationship with city).

Evidence of exclusion.

2. Designation of management

If a State official chooses the people who are in charge of the day-to-day operations of the activity, this fact is evidence of inclusion within the State entity. If the activity's governing authority alone makes that decision, that designation process is evidence of exclusion. Reporting Standards §2100.110b, at 69-70; State Entity at 4.

Although the Bay Trust statute does not expressly authorize the Trust to hire those who actually carry out the Trust's functions, the Trust does have the broad power to "[t]ake any ... action necessary to carry out the purposes of the Trust." However, the General Assembly evidently anticipated that the staffing would ordinarily be provided by the State: "The State agencies represented on the Trust shall provide staff, supplies, and office space, utilizing existing resources." NR §8-1904(e).

Inconclusive.

3. Ability to significantly influence operations

"Where a constitutional officer or body possesses the ability to significantly influence the ultimate result of operations in the normal course of events, there is a strong possibility that the activity should be within the [State entity]." State Entity at 5. Influence over operations is manifested by matters like the signing of contracts, personnel decisions, and "determin[ing] the outcome of the services being provided." Reporting Standards §2100.110c, at 70.

The Trust makes its own operational decisions. It is expressly empowered, among other things, to provide grants, develop projects, and execute contracts. NR §8-1905(a)(2),(3), and (5). It is exempt from the laws on budgetary administration and public works, the State Procurement Law, the Merit System Law, and the pension laws. NR §8-1909(a).12 Moreover, it "may carry out its corporate purposes without obtaining the consent of any department, board, or agency of the State." NR §8-1909(a).

Evidence of exclusion.

B. Accountability for Fiscal Matters

These criteria look to "lines of fiscal responsibility", that is, whether the fiscal condition of an activity is a State responsibility. Reporting Standards §2100.110d, at 70. In the context of determining an activity's status for purposes of "moneys of the State," these criteria are no doubt somewhat circular. For example, if the activity is covered by the "moneys of the State" requirement, its authority to spend money will be subject to State budget procedures; if it is not covered, it will not be constitutionally subject to budget procedures.13 Nevertheless, to the extent that the statute creating an activity itself delineates lines of fiscal responsibility, these criteria are pertinent in determining legislative intent. The General Assembly's understanding of, and intent about, an activity's place in the State's overall fiscal affairs is significantly reflected in provisions that absolve the activity from, or, conversely, require its compliance with, the specific fiscal procedures applicable to most State agencies.

1. Budgetary authority

This criterion considers whether State officials make decisions about the preparation of, and revisions to, the activity's budget.

The Trust is expressly exempted from statutory provisions on budgetary administration, except "to the extent of State appropriations, if any." NR §8-1909. The Trust has received small, and declining, amounts of appropriated funds.14

Evidence of exclusion.

2. Responsibility for surplus or deficit

"Who is responsible for funding deficits and operating deficiencies? Is this responsibility a legal or a moral one? Who governs or controls the use of surplus funds? How are surplus funds disposed of?" Reporting Standards §2100.110d(2), at 70; State Entity at 6. In addition, State "guarantees or 'moral responsibility' for debt" indicates financial interdependency. Reporting Standards §2100.109c, at 69.

If the Trust has a surplus from State appropriations, the surplus reverts to the State General Fund.15 If the Trust has a surplus from non-State sources, the surplus does not revert, because the Trust's broad exemption from State fiscal procedures, contained in NR §8-1909(a), means that it is exempt from the general requirement for reversion in §7-302 of the State Finance and Procurement Article.16 On the other hand, "[t]he Trust shall terminate on July 1, 1989," at which time any surplus "shall be held by the State Treasurer until legislation is enacted providing for the disposition of the funds."

The grant of powers to the Trust does not authorize it to incur or insure a debt.

Inconclusive.

3. Fiscal management

This factor deals with control of collection and disbursement of funds, title to assets, and authority to require audits.

The Trust has authority to manage its assets independently. NR §8-1908(a), (b), and (c). Its "books, records, and accounts" are expressly made "subject to audit by the State." NR §8-1908(d). However, this express provision indicates the General Assembly's view that the Trust is not a part of the State's ordinary fiscal management process, because "each unit of the State government" is already subject to regular audit. §2-1215(a) of the State Government Article.

Evidence of exclusion.

4. Revenue characteristics

"Where revenues are derived by means of a public levy or charge, in contrast to being grant receipts, there should be the presumption to include the [activity's] revenues or expenditures within the reporting entity." Reporting Standards §2100.110d(4), at 70; State Entity at 6. Even if an activity's source of revenue is not State taxes or fees, the revenue characteristics may nevertheless evidence inclusion, if, for example, the activity receives through appropriation federal grants that are themselves "moneys of the State." See 68 Opinions of the Attorney General at 88-89. The point of this criterion, we believe, is to inquire whether, as a matter of legislative intent and actual operation, the activity largely derives its revenue outside the ordinary State funding channels.

The Trust is authorized to accept "any gift, grant, legacy, or endowment of money from the federal government, State government, local government, or any private sources in furtherance of the Trust." NR §8-1905(a)(1). Although the Trust is also authorized to "[r]eceive appropriations as provided in the State budget" [NR §8-1905(a)(6)], the legislative history suggests an expectation that the Trust's resources would largely come from sources other than tax and fee revenues.17

Evidence of exclusion.

C. Scope of Public Services

"If the program of public service is generally available to all citizens within the geographical bounds of the governmental jurisdiction there is a strong possibility that the program should be included in the [reporting entity.]" Reporting Entity at 7.

The work of the Trust benefits the citizens of Maryland generally, not merely some small or discrete segment of the population. Its purpose "is declared to be of general benefit to the citizens and charitable in nature." NR §8-1902. The Trust's major grants to date have supported, among other things, citizen participation in the Critical Areas program, a pamphlet on reducing domestic sources of water pollution, beach improvement projects, and a training program for teachers. These examples illustrate the diverse public benefits of the Trust's activities.

Evidence of inclusion.

D. Special Financing Relationship

This factor takes account of any unusual financial support given to the activity by the State, or vice versa, for example, the lease of State-owned land to an activity for a nominal charge. See Reporting Standards §2100.605, at 82.

The Trust has no special financing relationship of this kind, although the State does provide a direct subsidy in the form of "staff, supplies, and office space." NR §8-1904(e).

Inconclusive.

E. Summary

The criteria discussed above are obviously not an exercise in arithmetic. Their application will usually lead to judgment calls instead of precise outcomes. Nevertheless, we believe that they provide a useful framework for analyzing an activity's status under Article VI, §3. If an activity is intended by the General Assembly to function autonomously, most of these criteria will point to the activity's having been excluded from the forms of oversight and accountability to which State agencies are subject. Likewise, if an activity is created by the General Assembly as a component of local government, most of these criteria would point to local, rather than State, oversight and accountability procedures.18 But if neither is true, then the activity is subject to the "moneys of the State" requirement.

We conclude that the Bay Trust is not a State agency for purposes of the "moneys of the State" requirements in Article VI, §3 of the Constitution. Most of the criteria, especially those that directly address the Trust's key fiscal operations, point to the Trust's autonomy. See Part IV A 1 and 3; Part IV B 1, 3, and 4. They reflect an apparent legislative intent, underscored by the broad, express exemption of the Trust from the statutes governing the fiscal, procurement, and personnel functions of State agencies, that the Trust carry out its tasks with fiscal independence and not be linked to the State's integrated fiscal process.

V
Conclusion

In summary, it is our opinion that the Chesapeake Bay Trust is not subject to the "moneys of the State" requirements in Article VI, §3 of the Maryland Constitution. Therefore, it is not subject to the Executive Budget Amendment, Article III, §52 of the Constitution.19

Stephen H. Sachs
Attorney General
Jack Schwartz
Chief Counsel
Opinions and Advice

1 Article VI, §3 reads as follows, in pertinent part: "The 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."

2 An activity that is not subject to Article VI, §3 might nonetheless be subject to specific statutory procedures for fiscal accountability, as the Trust is, with respect to any State appropriations that it receives. See note 19 below.

3 This latter possibility is not pertinent to the status of the Bay Trust and is therefore not discussed in this opinion except, briefly, at note 18 below and accompanying text.

4 70 Opinions of the Attorney General 35 sets forth several factors pertinent to determining whether funds held by a State agency are "moneys of the State." We do not depart from this aspect of that opinion; although we anticipate exploring the issue further in a future opinion, we believe that these factors remain useful benchmarks.

5 For example, the Commercial Casualty Underwriting Association is funded by assessments from its members. Article 48A, §601(d). See 71 Opinions of the Attorney General 160, 164-66 (1986).

6 The pertinent, though scant, case law from other jurisdictions likewise indicates that questions of this kind are to be resolved by examining the precise nature of the relationship between the activity and the state, in light of the particular provision at issue. See Kentucky Region Eight v. Commonwealth, 507 S.W.2d 489, 491 (Ky. 1974) (certain charitable, nonprofit corporations are not "such integral parts of state government as to come within regular patterns of administrative organization and structure," for purposes of pension statute applicable to state agencies); Matter of Wash. State Bar Ass'n, 548 P.2d 310, 314 (Wash. 1976) ("traditional purposes" of state audit not served by audit of bar association; association not a "state agency" under audit statute).

7 The phrase also authorizes 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.

8 The procedures under the Executive Budget Amendment were briefly summarized in the block grants opinion as follows: "Under the Executive Budget Amendment, there are only two kinds of appropriation bills: (1) the Budget Bill, which is prepared and submitted to the General Assembly by the Governor; and (2) supplementary appropriation bills, which are initiated by the General Assembly and must provide their own revenue. Article III, §52(2), (3) and (8). ... And, under the Executive Budget Amendment, the General Assembly may only strike or reduce the Governor's proposed appropriations. Article III, §52(6). This power, however, implicitly includes the power to condition or limit the way an appropriation is to be spent. ... While the power of the General Assembly with respect to the Budget Bill itself is thus limited, the Executive Budget Amendment also authorizes the General Assembly to enact a statute that requires the Governor to include a particular level of funding in subsequent budgets for particular programs. Article III, §52(11) and (12)." 68 Opinions of the Attorney General at 93.

9 The determinations made by Coopers & Lybrand were approved by this office: "Our specific obligation, under the Revenue Sharing Audit Requirements, is to 'determine what constitutes all funds' of the State. Funds of the State are determined by what constitutes the entity of the State. We are satisfied that Coopers & Lybrand has adequately determined the components of the State." Letter from Attorney General Sachs to Chief Deputy Comptroller J. Basil Wisner (December 7, 1979).

10 The 1979 Cooper & Lybrand analysis included a "Table of Activities and Programs Considered for the State of Maryland's Financial Reporting Entity." As discussed in note 9 above, these determinations about then-existing activities were approved by the Attorney General. Only the following activities were determined to be excluded from the State reporting entity: 1. Washington Metropolitan Area Transit Commission; 2. Regional Planning Council; 3. Maryland School for the Blind; 4. Blind Industries; 5. private foundations related to State colleges and universities; 6. community colleges; 7. Maryland Health and Higher Education Facilities Authority; 8. Maryland Automobile Insurance Fund; 9. Maryland National Capital Park and Planning Commission; 10. Washington Suburban Sanitary Commission; 11. Washington Suburban Transit Commission; 12. Maryland Suburban Transit Commission; 13. Maryland State Employees Credit Union; 14. Medical Mutual Liability Insurance Company; 15. Maryland Credit Union Insurance Corporation; 16. Maryland Savings-Share Insurance Corporation; 17. Maryland Potomac Water Authority; and 18. sheriffs and State's Attorneys.

11 These officials are the President of the Senate; the Speaker of the House; and the Secretaries of Agriculture, Health and Mental Hygiene, and Natural Resources, or their designees.

12 "Except as [to State appropriations], in exercising its powers, the Trust is exempt from the provisions of Articles 15A, 21, 64A, 73B, and 78A of the Code." The pertinent provisions of Articles 15A, 21, and 78A have since been recodified in the State Finance and Procurement Article.

13 But see note 2 above.

14 In fiscal year 1986, the Trust received $41,338 in appropriated funds; in fiscal year 1987, only $31,338. The projected appropriation for fiscal year 1988 is $25,000.

15 See note 17 below.

16 We attach more significance to the Trust's broad exemption than to the mere fact that its annual surplus from non-State sources does not revert, because many activities plainly within State government have surplus funds that do not revert. See §7-304 of the State Finance and Procurement Article.

17 "The Department of Fiscal Services anticipates that grants for citizen Bay programs would total $150,000. This would be raised from corporations, local governments, environmental group[s], foundations, and the federal government[]." Senate Economic and Environmental Matters Committee, Report on Senate Bill 583, at 3 (1985). This expectation has been largely borne out. In fiscal year 1986, the Trust received $41,388 from State appropriations, of which over $36,000 was unspent and reverted to the General Fund. The Trust received $107,286 in donations during that fiscal year. See also note 14 above.

18 For example, application of the criteria to a county or multi-county sanitary commission leads to the very clear conclusion that such a commission is a component of local government not subject to the "moneys of the State" requirement. See generally Subtitle 6 of Title 9 of the Health-Environmental Article. Cf. Highfield Water Co. v. Public Serv. Comm'n, 488 F. Supp. 1176 (D.Md. 1980).

19 The Trust is subject, "to the extent of State appropriations," to the statutory implementation of the Executive Budget Amendment. NR §8-1909.