Can a Maryland regional planning council keep unspent local government contributions as its own reserve fund?

Plain-English summary

The Regional Planning Council, the multi-county planning body for the Baltimore metropolitan area, wanted to know whether it could roll over unspent contributions from Baltimore City and its member counties into a reserve fund, to cover unanticipated costs in a later year. The Council argued that the Legislative Auditor was wrong to insist that leftover special-fund money be returned to the contributing jurisdictions each year. The Attorney General disagreed with the Council, concluding that neither the Council's funding statute nor any budget exception let it hold onto unspent local contributions as a standing reserve. The opinion found that Article 78D's ratio between State and local funding was actually undermined by any such reserve fund, since it depended on local contributions matching actual annual spending rather than accumulating idle balances.

Currency note

This opinion was issued in 1987. 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

Could a Maryland regional agency hold unspent local government contributions in reserve for future emergencies?
Not under this opinion's reasoning. The Attorney General concluded the Regional Planning Council's statute did not "dedicate" local contributions to a specific purpose in a way that would exempt them from being returned to the contributing counties at the end of the fiscal year.

What was supposed to happen to the Council's leftover local funds instead?
The opinion concluded unspent local contributions should be forwarded to, and credited against, the amounts the member jurisdictions would owe in the following fiscal year, rather than kept by the Council.

Background and statutory framework

The Regional Planning Council, created by Chapter 753 of the Laws of Maryland 1963, coordinates planning for Baltimore City and Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties. Article 78D, §18 required the member jurisdictions to pay annual budgeted contributions capped at twice the amount of the State's own contribution to the Council. Separately, Article 78D, §20 let the Council collect special-fund reimbursements from local units for specialized planning services, which the opinion treated as genuinely "dedicated" funds not subject to the general reversion rule.

The opinion applied the general reversion requirement in SF §7-302, which sends the unspent balance of most state appropriations to the General Fund at the close of the fiscal year unless another law "otherwise provides." The opinion surveyed the specific statutory exceptions to reversion in SF Title 7 (for unpaid obligations, dedicated special funds, capital expenditures approved by the Board of Public Works, certain higher-education balances, and the Dedicated Purpose Account) as well as exceptions outside Title 7, such as the Transportation Trust Fund and the Maryland Automobile Insurance Fund. It also reviewed a line of prior Attorney General opinions addressing when a specific statutory dedication, or language in the annual Budget Bill, has been found sufficient to exempt a fund from reversion. The opinion concluded none of those exceptions covered the Council's local budget contributions, and that letting the Council bank unspent local dollars would break the two-to-one local-to-State funding ratio the Legislature had built into Article 78D, §18(c).

Citations

Statutes:

• Article 78D, §§1, 12, 16, and 17 (Regional Planning Council, generally)
• Article 78D, §3A (Council as independent unit)
• Article 78D, §18 (local government budget contributions)
• Article 78D, §18(a) (State contribution formula)
• Article 78D, §18(c) (local contribution ratio cap)
• Article 78D, §20 (specialized planning services reimbursement)
• SF §7-301(a)(2) (units of State government subject to reversion)
• SF §7-302 (general reversion requirement)
• SF §7-303 (exception for unpaid obligations)
• SF §7-304 (exception for dedicated special funds)
• SF §7-305 (exception for capital expenditures)
• SF §7-306 (exception for higher-education balances)
• SF §7-310 (State Reserve Fund)
• SF §7-310(e) and (f) (Dedicated Purpose Account reversion to Revenue Stabilization Account)
• SF §7-311 (Revenue Stabilization Account purpose)
• SF §§7-202, 7-205, and 7-209 (budget amendment procedures)
• Transportation Article, §3-216 (Transportation Trust Fund reversion exemption)
• Article 48A, §243A (Maryland Automobile Insurance Fund)
• Chapter 753, Laws of Maryland 1963 (creating the Regional Planning Council)
• Chapter 109, Laws of Maryland 1986 (FY1987 Budget Bill provision)
• Chapter 655, Laws of Maryland 1986 (creating the State Reserve Fund)

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/1987/Volume72_1987.pdf

Original opinion text

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

BUDGETARY ADMINISTRATION

Regional Planning Council—Special Funds—Reversion—Council May Not Supplement Annual Appropriation with Prior Year's Unexpended Local Contributions.

March 3, 1987

Mr. Alfred P. Gwynn
Executive Director
Regional Planning Council

You have requested our opinion concerning the disposition, at the end of a fiscal year, of certain unexpended special fund balances of the Regional Planning Council. Specifically, you ask whether the Council may carry over from one fiscal year to the next a pool of unexpended contributions from the member subdivisions. This reserve fund would be available to supplement the next fiscal year's appropriation of State and local funds in order to meet unanticipated funding requirements.

For the reasons given below, we conclude that the Council does not have the authority to carry over a reserve fund of unexpended appropriations from year to year and with it to supplement the next year's appropriations. Rather, in our view, such sums are to be carried over and credited to the subdivisions so as to reduce their contribution for the next fiscal year.

I
Council Funding

The Regional Planning Council, established by Chapter 753, Laws of Maryland 1963, serves an important role in coordinating the planning and development process in the region comprising Baltimore City and Anne Arundel, Baltimore, Carroll, Harford, and Howard Counties. See Article 78D, §§1, 12, 16, and 17 of the Maryland Code. The Council affords a means by which the member jurisdictions may work together with State and private agencies in dealing with common problems and planning for the future development of the Baltimore metropolitan area.

The Council receives general, federal, and special fund appropriations. The Council derives its special fund income from two sources. Article 78D, §18 of the Maryland Code requires the participating political subdivisions to pay annual budgeted contributions to the Council. The statute specifies the required level of local funding:

"(c) On or before April 15 of each year, the Council shall certify to each of the several budget officers or governing bodies of the city and the several counties comprising the area, the portion of the budget of the Council, as enacted by the General Assembly, payable respectively by each, which portion shall be in the same ratio to two thirds (2/3) of the budget that the assessed value of all real property in the respective city or county, as the case may be, for the preceding taxable year, bears to the assessed value of all such real property in the area; . . . and provided further . . . that this contribution of the city and several counties comprising the area shall not exceed twice the amount of the State's contribution."1

These funds are deposited in the State Treasury and are expended in accordance with an appropriation contained in the State Budget.

The Council receives additional special funding pursuant to Article 78D, §20. This provision authorizes the Council to contract with local units "to provide specialized planning services for appropriate reimbursement. ..." Reimbursements received by the Council for these specialized services are recorded as special funds and may be used for operating expenses. See Chapter 109, Laws of Maryland 1986 (Budget Bill for Fiscal Year 1987, item 27.02.00.024). This special fund reimbursement revenue is separate and distinct from local government contributions for general planning services and is not the subject of your opinion request.

The Council has taken the position that unspent contributions may be carried over to the ensuing fiscal year to meet unanticipated fund requirements, such as unbudgeted demands made by changes in State law or regulation. The Legislative Auditor, however, maintains that budget law requires excess special funds derived from units of local government to be returned or credited to those units at the close of the fiscal year.

II
Reversion of Unspent Balances

The disposition of unspent appropriations is governed by Title 7, Subtitle 3, of the State Finance and Procurement Article ("SF" Article). SF §7-302 sets forth the general requirement for reversion:

"Except as otherwise provided by law, at the end of a fiscal year, the unspent balance of each appropriation that was made for that fiscal year to an officer or unit of the State government or to an institution reverts to the General Fund of the State."

This reversion requirement has broad application, encompassing all units of the State government that receive an appropriation for operating expenses or have expenses paid out of fees collected by the unit. SF §7-301(a)(2).2 Furthermore, SF §7-302 includes "not only the General Funds appropriated and included in the budget, but also all Special and Federal Funds the State anticipates receiving from other sources which are included in the budget." 52 Opinions of the Attorney General 481, 482 (1967).3

However, if a procedure for handling unexpended funds is "otherwise provided by law," the general reversion requirement in SF §7-302 does not apply. The various statutory provisions establishing specific exceptions to the reversion requirement exempt either certain appropriations or certain units. SF Title 7 itself exempts several categories of unspent balances from reversion to the General Fund:

1. unspent appropriations "needed to meet unpaid obligations incurred during that fiscal year," SF §7-303;
2. unspent special funds "dedicate[d]" by State or federal law "to a specific purpose," SF §7-304;
3. with the approval of the Board of Public Works, unspent appropriations for capital expenditures, SF §7-305;
4. certain unencumbered appropriations to institutions for higher education, SF §7-306; and
5. unspent appropriations to the Dedicated Purpose Account, which revert to the Revenue Stabilization Account instead of to the General Fund. SF §7-310(e) and (f).4

Exceptions outside SF Title 7 include §3-216 of the Transportation Article, which provides that "[n]o part of the Transportation Trust Fund may revert or be credited to the general funds of this State";5 Article 48A, §243A, which specifies that funds of the Maryland Automobile Insurance Fund are not part of the State Treasury; and restrictive language of similar import included in the annual Budget Bill.

There are, of course, various ways in which the General Assembly might "otherwise provide" for the disposition or use of unexpended "special fund" appropriations.6 In 45 Opinions of the Attorney General 27 (1960), the Attorney General advised that a specific statutory provision that funds be retained as special funds constitutes a dedication of moneys, exempting these funds from reversion. However, 55 Opinions of the Attorney General 260 (1970) pointed out that a statutory provision permitting, but not requiring, that funds be used exclusively for a certain purpose does not constitute a dedication of funds so as to permit retention of unexpended amounts in a reserve fund. Other opinions have found an exemption from the reversion requirement on the basis of language in the annual Budget Bill relating to the specific special fund in question. See, e.g., 40 Opinions of the Attorney General 288, 291 (1955); 34 Opinions of the Attorney General 105, 108 (1949); 8 Opinions of the Attorney General 197 (1923).7

III
Application to the Council

The relevant statutory provisions and the prior interpretations of them indicate that the Regional Planning Council is not authorized to retain unspent special fund balances to establish a reserve fund from funds contributed by local governments under Article 78D, §18. Neither the Budget Bill nor any other provision of law provides for the carrying forward of these balances.8 Nor, in our view, are these local contributions "dedicated" by law "to a specific purpose," within the meaning of SF §7-304. We do not think that this language was intended to reach funds that merely support the Council's ordinary operational funding requirements.9

Indeed, the retention of these funds by the Council for unanticipated operating expenses is inconsistent with the policy underpinnings of the Council's funding provision, Article 78D, §18. Article 78D, §18(c) specifies that the contribution of the local jurisdictions "shall not exceed twice the amount of the State's contribution." The "State's contribution" is the amount of state General Fund appropriations determined under the formula (and ceiling) in Article 78D, §18(a). Presumably, the General Assembly anticipates that its appropriations will be expended. The Council's funding scheme contemplates that no more than two local dollars actually will be spent for every State dollar spent. But because unspent portions of the Council's General Fund appropriation revert to the General Fund at the close of the fiscal year pursuant to SF §7-302, the ratio of local to State expenditures in fact would be greater than two-to-one if unspent local contributions from one year are simply carried forward to the next.

The intent underlying Article 78D, §18(c) requires that, at the end of each fiscal year, actual costs be determined and appropriate adjustments made. If there are unspent contributions from local governments, such sums should be forwarded to and credited to amounts payable in the succeeding fiscal year by the subdivisions.10

IV
Conclusion

In summary, it is our opinion that the Regional Planning Council does not have the authority to maintain a reserve fund of unexpended local appropriations.

J. Joseph Curran, Jr., Attorney General
Gail Cohn, Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions and Advice

1 Article 78D, § 18(c) also sets a ceiling on local contributions of the dollar amount equivalent of "an ad valorem tax of one half of one cent (½¢) per $100" of assessed value in the jurisdiction.

2 The Council is described in its statute as "an independent unit [that] may not be placed by the Governor in any principal department." Article 78D, §3A. Moreover, given that Article 78D, §18 expressly subjects the Council to the ordinary budgeting process, we have no doubt that the Council is properly viewed as a "unit of State government" for purposes of statutory budget procedures. Cf. 71 Opinions of the Attorney General 10, at notes 2 and 10 and text accompanying note 18 (1986).

3 All State expenditures are made pursuant to the appropriations in the annual budget, as amended from time to time by budget amendment. The various units of State government may, with the Governor's approval, amend the appropriations for particular programs in their individual budgets funded from the General Fund, provided they do not exceed their total General Fund appropriations as contained in the annual budget. See SF §§7-202, 7-205, and 7-209.

4 The Dedicated Purpose Account and the Revenue Stabilization Account constitute the "State Reserve Fund," established by Chapter 655, Laws of Maryland 1986. SF §7-310. The Dedicated Purpose Account retains appropriations for certain major, multi-year expenditures. The Revenue Stabilization Account was established "to retain State revenues for future needs and reduce the need for future tax increases by moderating revenue growth." SF §7-311.

5 See generally 71 Opinions of the Attorney General 3 (1986) (amenability of Transportation Trust Fund to transfer through statutory budget amendment).

6 Special fund appropriations are distinguished from general fund appropriations chiefly by revenue source. General funds are raised through general State taxation for use in meeting general State expenses. By contrast, special funds are usually generated through the imposition of special taxes or fees, or through the rendition of special services, "for the exclusive support of particular State activities." 46 Opinions of the Attorney General 185 (1961).

7 In addition, 58 Opinions of the Attorney General 41 (1973) recognized a narrow exception to the general requirement for reversion if an agency, the Comptroller, the Department of Budget and Fiscal Planning, and the General Assembly have consistently, over a course of years, treated a specific item of appropriations to a special fund as authorizing an exception to the general reversion requirement. 58 Opinions of the Attorney General at 45-46.

8 Nor are we aware of any consistent, long-standing, and universally accepted practice of the Council's carrying forward these balances. Cf. note 7 above.

9 By contrast, we believe that the local funds received by the Council under Article 78D, §20 for "specialized planning services" are dedicated to that purpose and are consequently within the exception to reversion in SF §7-304.

10 In our view, the ratio of State to local funds set in Article 78D, §18(c) "otherwise provide[s] by law" that the unexpended local contributions do not themselves revert to the General Fund, but instead are to be credited against the ensuing local contributions.