Could Maryland move money out of the Transportation Trust Fund to bail out savings and loan depositors without the legislature passing a new law first?

Plain-English summary

During the 1985-86 Maryland savings and loan crisis, the Governor proposed moving certain unanticipated money out of the Transportation Trust Fund into the State of Maryland Deposit Insurance Fund Corporation, so that fund could make cash payments to savings and loan depositors facing insured losses. A state senator asked the Attorney General whether that transfer required a new law from the General Assembly, or whether it could be done through the existing administrative budget amendment procedure instead.

The Attorney General concluded that a new statute was not required. The opinion reasoned that the funds involved, unestimated bond exchange proceeds and revenue collected above the amounts the 1986 budget bill had projected, were already subject to the budget amendment procedure under the budget bill itself and the State Finance and Procurement Article. Because the Trust Fund and the Insurance Fund sat in two different principal departments, the transfer also had to fit within one of the limited exceptions to the general ban on moving money between departments by budget amendment. The opinion concluded that the Governor had broad discretion to determine that the hardship facing savings and loan depositors qualified as an "emergency" under that exception, so the transfer could proceed by budget amendment rather than new legislation.

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 Maryland legislature have to pass a special law to let the state's S&L bailout fund receive money from the highway trust fund?
No, according to this opinion. The Attorney General concluded that the transfer could be accomplished through the existing statutory budget amendment procedure, since the relevant funds were already made subject to that procedure by the budget bill itself, without needing a separate act of the General Assembly.

Why wasn't a simple budget amendment blocked by the rule against moving money between different state departments?
Because the Transportation Trust Fund and the Deposit Insurance Fund Corporation belonged to two different principal departments, the opinion recognized that the general ban on interdepartmental budget-amendment transfers would normally apply. It concluded, however, that the transfer fit the exception for transfers "needed to protect the health, welfare or property of the public" because of a Governor-declared emergency, reasoning that the hardship facing savings and loan depositors could reasonably support such a finding.

Could the Governor really just declare an "emergency" to move funds between agencies without any legislative check?
The opinion did not suggest the Governor's discretion was unlimited. It described the "emergency" exception as one Maryland courts had historically treated with deference to the branch invoking it in analogous constitutional contexts, and it also noted that the Legislative Policy Committee was later given an approval role over this kind of Trust Fund transfer once the transportation statute was amended in 1987.

Background and statutory framework

The Transportation Trust Fund, established under §3-216 of the Transportation Article, holds the taxes, fees, and other revenues collected by the Department of Transportation, and at the time of this opinion could not be transferred to the state's general funds except by statutory amendment. The opinion distinguished a transfer to the state's general funds, which §3-216(f) barred without new legislation, from a transfer to another special fund such as the Deposit Insurance Fund Corporation, which the same provision did not address.

The budget amendment procedure itself, codified at §7-209 of the State Finance and Procurement Article, lets an executive branch officer or unit amend an appropriation schedule with the Governor's approval, but bars amendments that exceed appropriation limits or that transfer funds between principal departments, subject to listed exceptions. The opinion found that the funds proposed for transfer, being unestimated bond exchange proceeds and revenue in excess of budgeted estimates, were made subject to the budget amendment procedure by the 1986 budget bill (Chapter 106, Laws of Maryland 1985) itself. Because the Trust Fund and the Insurance Fund sat in different principal departments, the opinion turned to the exception in §7-209(e)(2)(iii) for transfers necessitated by a Governor-declared emergency to protect public health, welfare, or property, and concluded that the unanticipated hardship facing savings and loan depositors could support such a finding.

Citations

Statutes:

• §3-216(b), (d)(1), (d)(2), and (f) of the Transportation Article (Transportation Trust Fund and restrictions on its transfer)
• Chapter 62, Laws of Maryland 1983 (prior statutory amendment permitting a limited Trust Fund transfer)
• §10-110(a)(1) of the Financial Institutions Article (Deposit Insurance Fund Corporation as a special nonlapsing fund)
• §7-209 of the State Finance and Procurement Article (budget amendment procedure)
• §7-209(a), (b), (c), (e)(1), and (e)(2)(iii) of the State Finance and Procurement Article (budget amendment mechanics, limits, and emergency exception)
• §7-210(a) of the State Finance and Procurement Article (bar on substantive changes via budget amendment)
• §2-201(b) and (c) and §7-217(a) of the State Finance and Procurement Article (unestimated and unanticipated receipts)
• Article III, §52(13) of the Maryland Constitution (Executive Budget Amendment power)
• Article III, §52(6) and §52(14) of the Maryland Constitution (budget bill enactment and emergency appropriations)
• Chapter 106, Laws of Maryland 1985 (fiscal year 1986 budget bill)
• Chapter 11, Laws of Maryland 1985 (repeal of Article 15A, §6)
• Article 15A, §8(e), (f), and (g) of the Maryland Code (predecessor budget amendment procedure)
• Article 41, §15B-3(a)(2) of the Maryland Code (Governor's emergency powers over savings and loan associations)
• Chapter 291 of the Laws of Maryland 1987 (subsequent amendment to §3-216(f), noted in the opinion's editor's note)

Cases:

• First Continental Sav. & Loan Ass'n v. Director, State Dept. of Assessments, 229 Md. 293, 302 (1962)

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

Budget Amendment - Transportation Trust Fund - A Transfer From The Transportation Trust Fund To The Maryland Deposit Insurance Fund May Be Accomplished by Budget Amendment.

February 6, 1986

The Honorable Howard A. Denis
Senate of Maryland

You have requested our opinion on whether certain funds in the Transportation Trust Fund ("Trust Fund") may be transferred by the Governor to the State of Maryland Deposit Insurance Fund Corporation ("Insurance Fund") by budget amendment, or whether such a transfer may be accomplished only by enactment of a statute authorizing it.

Previously, a transfer from the Trust Fund to the general funds was accomplished through the enactment of a statute expressly authorizing the transfer. A comparable statutory amendment could, of course, be used to effect the proposed transfer from the Trust Fund to the Insurance Fund. However, it is our opinion that the proposed transfer may also be accomplished pursuant to the budget amendment procedure.

I
Background

As part of a financing plan under which the Insurance Fund would provide cash payments to savings and loan depositors in anticipation of insured losses, the Governor has proposed transferring certain funds in the Trust Fund to the Insurance Fund. According to a statement issued by the Governor's office, the funds to be transferred are accruals from an increase in receipts over the projected estimate for fiscal 1985, a revised estimate of receipts for fiscal 1986, and proceeds from the exchange of certain securities. Administration's Savings and Loan Financing Plan at 7-8 (Jan. 10, 1986).

II
Transportation Trust Fund

The Trust Fund is composed of "all taxes, fees, charges, and revenues collected or received by or paid, appropriated, or credited to the account of the Department [of Transportation] or any of its units." §3-216(b) of the Transportation Article ("TR" Article). The Trust Fund may be used by the Department, after meeting its debt service obligations, "for any lawful purpose related to the exercise of its rights, powers, duties, and obligations." TR §3-216(d)(1) (emphasis added). Expenditures for these purposes are to be made in accordance with "any applicable budget bill or supplementary appropriation bill." TR §3-216(d)(2).

Moreover, no portion of the Trust Fund may be transferred to the general funds of the State, in aid of depositors or for any other purpose, except pursuant to an amendment to the Trust Fund statute. TR §3-216(f) expressly provides that: "No part of the Transportation Trust Fund may revert or be credited to the general funds of this State." In order to accomplish a transfer of $29 million from the Trust Fund to the general funds for fiscal year 1984, the General Assembly amended TR §3-216(f) to direct that particular limited transfer. Chapter 62, Laws of Maryland 1983. A comparable amendment would, of course, be a legally certain means of accomplishing the proposed transfer.

However, the prohibition in TR §3-216(f) applies to transfers "to the general funds"; it does not prohibit transfers to special funds.1 The Insurance Fund is "a special nonlapsing fund." §10-110(a)(1) of the Financial Institutions Article ("FI" Article). Hence, transfers to it are not prohibited by TR §3-216(f).2

III
Budget Amendments

A. Introduction

The budget amendment procedure is established by §7-209 of the recently enacted State Finance and Procurement Article ("SF" Article).3 The predecessor of SF §7-209 was first enacted in 1939 as an aspect of the General Assembly's power to implement the Executive Budget Amendment. See Article III, §52(13) of the Maryland Constitution. See also 34 Opinions of the Attorney General 105, 106 (1949).

In general terms, SF §7-209 allows the various schedules of appropriations for units within the Executive Branch to be amended with the approval of the Governor. The procedure is as follows:

(1) "[W]henever an officer or unit of the Executive Branch of the State government wants the schedule for an appropriation to the officer or unit amended, the officer or unit shall submit a proposed amended schedule to the Secretary of Budget and Fiscal Planning.

(2) The Secretary of Budget and Fiscal Planning shall endorse on or attach to the proposed amended schedule a recommendation and send the schedule and recommendation to the Governor.

(4) Whenever the Governor approves a proposed amended schedule, the Governor shall endorse it as 'approved'." SF §7-209(b).4

These budget amendments "may not exceed the limits of an appropriation." SF §7-209(c). Moreover, "[a] budget amendment may not change any language or substantive provision in the State budget." SF §7-210(a).

B. Scope of budget amendment procedure

An initial question is whether the procedure for budget amendments applies only to funds that are the subject of an existing appropriation schedule. Such a reading is suggested not only by the use in SF §7-209(a) and (b) of the term "schedule for an appropriation" but also by the prohibition in SF §7-209(c) on amending a schedule to "exceed the limits of an appropriation." The funds the Governor proposes to transfer are not the subject of an existing schedule and are essentially unanticipated funds.

However, so limited a reading of the scope of SF §7-209 would be inconsistent with provisions in the current budget bill that broadly appropriate unanticipated funds and that provide for the expenditure of these funds through the budget amendment procedure. Section 5 of Chapter 106, Laws of Maryland 1985, the budget bill for fiscal year 1986, provides as follows:

"Amounts received pursuant to [SF §§2-201(b) and (c) and 7-217(a)] may be expended by approved budget amendment." (Emphasis added).5

The term "approved budget amendment" clearly refers to the procedure now embodied in SF §7-209. See 46 Opinions of the Attorney General 13, 14 (1961).

A portion of the funds contemplated for transfer are "unestimated receipts", that is, receipts from sources not included in the budget, under SF §7-217(a), which provides as follows:

"Subject to [appropriation by an appropriation act], an officer or unit of the State government may spend money that is paid into the State Treasury for the use of the officer or unit and that is derived from a source not estimated or included in the State budget:

(1) for the specific purpose to which the money is dedicated by State law or act of Congress."

Although SF §7-217(a) does not itself refer to the possibility of dedicated funds being transferred by budget amendment for a different purpose, unestimated receipts under SF §7-217(a) are explicitly made subject to the budget amendment procedure by Section 5 of Chapter 106, the budget bill. Because the budget bill is itself a law, the qualification of existing law is effective. See 34 Opinions of the Attorney General 105, 110 and 112 (1949) ("there can be no doubt that the Legislature may, by the processes of the budget bill, repeal or amend an existing law.").6

Other funds intended for transfer fall within the authority of Section 7 of Chapter 106, which deals with revenue in excess of estimates from sources that were included in the budget:

"[E]xcept as otherwise provided, amounts received from sources estimated or calculated upon in the budget in excess of the estimates for any special or federal fund appropriation listed in this bill may be made available by approved budget amendment." (Emphasis added).

Again, the term "approved budget amendment" clearly refers to the procedure set out in SF §7-209, including the authority for the transfer of funds between departments.

In summary, Sections 5 and 7 of Chapter 106 and SF §7-209 permit the transfer from the Trust Fund to the Insurance Fund of unestimated bond exchange proceeds and unanticipated additional receipts.

C. Limitations on transfers between departments

Budget amendments generally may not be used to "transfer any part of an appropriation among any of the principal departments or any of the units in the Executive Branch that are not assigned to a principal department." SF §7-209(e)(1). However, there are various exceptions to the general prohibition in SF §7-209(e)(1). One of these is that the prohibition does not prevent a transfer that, "because of an emergency declared by the Governor, is needed to protect the health, welfare or property of the public." SF §7-209(e)(2)(iii).

As discussed in Part II above, the Trust Fund is within one principal department in the Executive Branch, the Department of Transportation, TR §3-216(a). The Insurance Fund is within another principal department, the Department of Licensing and Regulation. FI §10-102. Therefore, a budget amendment may be used to make the transfer between the Funds only if the "emergency" exception in SF §7-209(e)(2)(iii) applies.7

In our view, the Governor has broad discretion to determine that an "emergency" in fact exists. The term is undefined, and must be viewed as implying the flexibility that is essential if the resources allocated to the Executive Branch are to be available to meet unexpected or unusual needs. Cf. First Continental Sav. & Loan Ass'n v. Director, State Dept. of Assessments, 229 Md. 293, 302 (1962) (deferring to General Assembly as to existence of "emergency" for purposes of Article XVI of the Constitution); 52 Opinions of the Attorney General 176, 179 (1967) (emergency must be in existence for purposes of Article III, §52(14) of the Constitution).

Undue hardship on savings and loan depositors, which could not have been anticipated at the presentation and enactment of the current budget, could reasonably be said to create an "emergency," within the meaning of SF §7-209(e)(2)(iii). Indeed, the "welfare of depositors" is a key element in the Governor's exercise of emergency powers over the operation of savings and loan associations. Article 41, §15B-3(a)(2) of the Maryland Code. In our view, similar considerations may properly underlie the Governor's determination that an "emergency" requires an interagency transfer.

IV
Conclusion

In summary, it is our opinion that there is a legal basis for transferring funds from the Transportation Trust Fund to the State of Maryland Deposit Insurance Fund Corporation entirely through the statutory budget amendment procedure, to enable the Insurance Fund to reimburse savings and loan depositors.

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

Jack Schwartz
Chief Counsel
Opinions and Advice

Editor's Note: As amended by Chapter 291 of the Laws of Maryland 1987, TR §3-216(f) now directs that "[n]o part of the Transportation Trust Fund may revert or be credited to a special fund of the State, unless otherwise provided by law." TR §3-216(f) goes on to provide for a mechanism by which the Legislative Policy Committee is to approve budget amendments that transfer funds from the Transportation Trust Fund to special funds.

1 The prohibition in TR §3-216(f) has, since its original enactment, referred only to reversion or crediting "to the general funds," not to special funds. See Chapter 526, Laws of Maryland 1970. Appropriations to the various special funds are so identified in the annual budget bill. See, e.g., Chapter 106, Laws of Maryland 1985.

2 The Governor could not have diverted money from the Trust Fund to the Insurance Fund in the budget bill itself, even if the Insurance Fund had existed last January, when the budget bill was presented. 20 Opinions of the Attorney General 201, 203 (1935). However, money that is the subject of an appropriation may be expended through the budget amendment procedure for a purpose not contemplated in the budget bill. This apparent anomaly may be explained by the purpose of the budget amendment procedure, which is to provide a way to deal with the unexpected.

3 Prior to the enactment of the State Finance and Procurement Article (effective October 1, 1985), this procedure was codified in Article 15A, §8(e), (f), and (g) of the Maryland Code.

4 "An amended schedule is effective when the Governor sends the schedule to the Comptroller." SF §7-209(g).

5 Section 5 of Chapter 106 actually refers to the now-repealed predecessor provisions, Article 15A, §§5, 6, and 7. Because the recodification entailed no substantive change, the statutory cross-references in the budget bill should be read as references to the corresponding provisions of the new State Finance and Procurement Article.

6 The budget bill became law as soon as it passed the General Assembly, April 1, 1985. Article III, §52(6) of the Constitution. Although Article 15A, §6 was at that time part of the existing law, it was subsequently repealed by Section 1 of Chapter 11, Laws of Maryland 1985, which became law on April 9, 1985 and took effect Oct. 1, 1985. However, as noted, Article 15A, §6 was recodified, without substantive change, as SF §7-212(a). Accordingly, Section 5 of Chapter 106 can still be regarded as a qualification of the existing law. Moreover, as a law for a particular year, Chapter 106 can be said to qualify general provisions of law of an indefinite duration.

7 None of the other exceptions in SF §7-209(e)(2) could possibly apply.