How may a Mississippi city spend opioid settlement funds, and can it donate those funds to a nonprofit?

Plain-English summary

The City of Gulfport's attorney asked how the city can spend money received from the national opioid litigation settlement and whether the city can donate some of that money to a nonprofit doing social services work that the settlement also authorizes. The court that approved the settlement permits a wide range of opioid-abatement uses; the question is whether Mississippi state law adds limits.

The AG's answer: settlement money paid to a Mississippi municipality is public money, full stop. The Mississippi Supreme Court said as much in Pickering v. Hood, 95 So. 3d 611 (Miss. 2012). Once it is public money, it is governed by the same state-law expenditure rules that apply to any other municipal money, regardless of what the settlement agreement permits.

The opioid settlements have a wrinkle. The State entered into the litigation, and the State's settlement agreement and the participation agreements/MOUs that local government units signed before settlement say that funds distributed directly to local government units "may be spent for opioid abatement or any purpose deemed appropriate by said County or Municipality." So the abatement requirements bind the State, not the locality. The funds in the locality's hands are no different, in legal character, from any other settlement money: they are public funds subject to state law.

State law on municipal donations is restrictive. Section 21-17-5(2) prohibits municipal donations unless specifically authorized by statute. Two statutes specifically authorize municipal contributions to nonprofits, and both are matching-fund statutes:

• Section 21-19-65 lets a city spend general-fund money to "match any other funds for the purpose of supporting social and community service programs," with examples like juvenile residential treatment centers, half-way houses, prenatal care facilities, child day care, mentally ill / alcoholic half-way houses, child and adult emergency shelters, and elderly home health aide programs.
• Section 21-17-1(8) lets a city spend money to "match any state, federal or private funding for any program administered by the State of Mississippi, the United States government or any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax."

Both statutes require matching, not outright donations. The AG concluded that any donation must comply with that matching requirement.

What this means for you

For mayors and city finance officers

The opinion holds that opioid settlement funds received by the city are public funds that must be expended in accordance with state law and any applicable public purchasing laws, subject to the State Auditor's regulations (Section 7-7-211). It states the settlement agreement's abatement requirements bind the State, not the locality, so the funds are treated like any other settlement money in the city's hands. The opinion suggests contacting the Division of Technical Assistance in the Office of the State Auditor with questions about specific expenditures.

For city attorneys

The opinion restates, citing MS AG Op., LeSure (Dec. 10, 2010), that "[a] municipality may not donate municipal funds or municipal real or personal property to a private nonprofit corporation without specific statutory authority to do so" (Section 21-17-5(2)). It identifies the only statutory authority it was asked about, Sections 21-19-65 and 21-17-1(8), and holds that any donation under either statute must comply with the matching-funds requirement.

For nonprofit organizations seeking opioid settlement funding from cities

The opinion holds that a Mississippi city may donate these funds to a nonprofit only with specific statutory authority, and that the two statutes it addresses (Sections 21-19-65 and 21-17-1(8)) authorize contributions only as matching funds, not outright donations.

For state legislators

The opinion holds that, under current law, municipal contributions of these funds to nonprofits are limited to the matching frameworks in Sections 21-19-65 and 21-17-1(8) and that Section 21-17-5(2) otherwise bars donations absent specific statutory authority. It does not recommend any change.

Common questions

Are opioid settlement funds paid to a Mississippi city public funds?

Yes. Pickering v. Hood, 95 So. 3d 611 (Miss. 2012), held that money paid to the State of Mississippi in settlement of a lawsuit is public money. The same principle applies to a city. Once received, the money is subject to state-law spending rules.

Doesn't the court's approval of the settlement let a city use the money any way the court permits?

No. The court order and the participation agreements bind the State on opioid-abatement obligations. The funds distributed to the locality are public funds subject to state law. The court order does not override state-law spending limits.

Can a Mississippi city donate to a nonprofit?

Only with specific statutory authority. Section 21-17-5(2) generally prohibits donations. Two statutes provide specific authority, and both require matching: Section 21-19-65 (social and community service programs) and Section 21-17-1(8) (programs administered by the state, federal government, or 501(c)(3) nonprofits).

What programs does Section 21-19-65 cover?

Social and community service programs "including, but not limited to, juvenile residential treatment centers; juvenile and half-way houses; prenatal care facilities; child day care facilities; mentally ill and alcoholics half-way houses; child and adult emergency shelters; elderly home health aides programs."

What does Section 21-17-1(8) cover?

"Match any state, federal or private funding for any program administered by the State of Mississippi, the United States government or any nonprofit organization that is exempt under 26 USCS Section 501(c)(3) from paying federal income tax."

So does that mean the city can never give settlement money to a nonprofit?

Under this opinion, the city can use settlement money as a matching contribution to a qualifying program under Section 21-19-65 or Section 21-17-1(8). It cannot make an outright donation, because Section 21-17-5(2) bars municipal donations absent specific statutory authority.

What if the city wants to spend the funds directly rather than through a nonprofit?

The opinion holds that the city's expenditures of the settlement funds must be in accordance with state law and any applicable public purchasing laws, and are subject to the State Auditor's regulations (Section 7-7-211). It notes the funds are public funds like any other money the city holds.

Background and statutory framework

Section 21-17-5(2) prohibits municipal donations except as specifically authorized by statute.

Section 21-19-65 authorizes municipalities to expend general-fund money to "match any other funds for the purpose of supporting social and community service programs," with non-exclusive examples.

Section 21-17-1(8) authorizes municipalities to expend money to match state, federal, or private funding for programs administered by the State, the federal government, or 501(c)(3) nonprofits.

Section 7-7-211 sets out the State Auditor's powers and duties, including review of municipal expenditures.

Pickering v. Hood, 95 So. 3d 611, 619 (Miss. 2012), holds that "[m]oney paid to the State of Mississippi in settlement of a lawsuit is public money."

MS AG Op., Bailey (Oct. 12, 2007) consistently opines that money received by a governmental entity becomes public funds and may only be expended in accordance with state law.

MS AG Op., LeSure (Dec. 10, 2010) restates the donation-prohibition rule for municipalities.

Citations

• Miss. Code Ann. § 21-17-5(2)
• Miss. Code Ann. § 21-19-65
• Miss. Code Ann. § 21-17-1(8)
• Miss. Code Ann. § 7-7-211
• Pickering v. Hood, 95 So. 3d 611 (Miss. 2012)
• MS AG Op., Bailey (Oct. 12, 2007)
• MS AG Op., LeSure (Dec. 10, 2010)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2024/12/J.-Bruni-November-19-2024-Municipal-Expenditure-of-Litigation-Settlement-Funds.pdf

Original opinion text

November 19, 2024
Jeffrey S. Bruni, Esq.
City Attorney
P. O. Box 1780
Gulfport, Mississippi 39502-1780
Re:

Municipal Expenditure of Litigation Settlement Funds

Dear Mr. Bruni:
The Office of the Attorney General has received your request for an official opinion.
Background
According to your request, you are seeking clarity on the authority the City of Gulfport ("City")
to utilize monies that it receives as a result of a court settlement, in this case an approved settlement
of litigation against various manufacturers of opioid medications ("the opioid litigation"). You
specifically state that you are not asking our office to interpret or give any opinion regarding the
requirements associated with the Court's settlement terms or conditions.
Questions Presented

1. Must the settlement funds in the opioid litigation received by a municipality be expended in
   accordance with state law even if the Court permits or allows certain uses of the monies by
   municipalities?
2. May a municipality donate municipal funds (in this case, funds received as a result of the opioid
   litigation settlement) to a non-profit (generally, one that focuses on certain social services) to fund
   activities that are authorized under the settlement requirements?
3. If a municipality may make such a donation, must the City's donation to the non-profit be
   donated as matching funds or may such a donation be given outright to fund such activities?
   Notably, we are aware of Mississippi Code Annotated Sections 21-19-65 and 21-17-1(8).

Brief Response
This office does not opine on or interpret judicial orders or settlement agreements. However, for
informational purposes, we provide the following background on the opioid litigation. As a general
matter, while the opioid settlements entered into by the State include requirements for use of
certain funds on opioid abatement purposes, we refer you to the participation agreements and
MOUs into which the City and all Mississippi local government units entered prior to approval of
the settlement agreements. Those terms state that funds distributed directly to local government
units, "may be spent for opioid abatement or any purpose deemed appropriate by said County or
Municipality." The abatement requirements apply to the State, not the individual locality. Thus,
the fact that the funds in question are received as a result of these settlements does not make them
different from funds received by the City from any other settlement. The same rules for use of
appropriation of public money apply.

1. Settlement funds paid to a municipality are public funds and must be spent in accordance with
   state law.
2. Regardless of restrictions placed on the funds in any settlement agreement, municipalities are
   prohibited from granting any donation unless specifically authorized by statute.
3. Any donation made pursuant to Sections 21-19-65 and 21-17-1(8) must comply with the
   requirement for matching funds.
   Applicable Law and Discussion
   The Mississippi Supreme Court has held that "[m]oney paid to the State of Mississippi in
   settlement of a lawsuit is public money." Pickering v. Hood, 95 So. 3d 611, 619 (Miss. 2012). This
   office has consistently opined that once a governmental entity, in this case a municipality, accepts
   money, it becomes public funds and may only be expended in accordance with state law. MS AG
   Op., Bailey at 1 (Oct. 12, 2007). Accordingly, in response to your first question, expenditures of
   any settlement funds by the City must be in accordance with state law and any applicable public
   purchasing laws and are subject to any applicable regulations by the Office of the State Auditor.
   See Miss. Code Ann. § 7-7-211.
   With respect to your second question, municipalities are prohibited from granting any donation
   unless specifically authorized by statute. Miss. Code Ann. § 21-17-5(2); see MS AG Op., LeSure
   at 1 (Dec. 10, 2010) (opining that "[a] municipality may not donate municipal funds or municipal
   real or personal property to a private nonprofit corporation without specific statutory authority to
   do so."). Thus, a municipality may only donate funds received as a result of the opioid litigation
   settlement to a non-profit organization if there is specific statutory authority to do so.
   As you note in your request, Section 21-19-65 specifically grants municipalities:
   the power to expend monies from the municipal general fund to match any other
   funds for the purpose of supporting social and community service programs
   including, but not limited to, juvenile residential treatment centers; juvenile and
   half-way houses; prenatal care facilities; child day care facilities; mentally ill and
   alcoholics half-way houses; child and adult emergency shelters; elderly home
   health aides programs.
   Further, Section 21-17-1(8) grants municipalities the discretion to "expend municipal funds to
   match any state, federal or private funding for any program administered by the State of
   Mississippi, the United States government or any nonprofit organization that is exempt under 26
   USCS Section 501(c)(3) from paying federal income tax." In response to your third question, any
   donation made pursuant to either of these two statutes must comply with the requirement for
   matching funds. In summary, regardless of restrictions placed on the funds in any settlement
   agreement, those funds received by a municipality as a result of the settlement of litigation are
   public funds and must be expended in accordance with Mississippi state law. We suggest that you
   contact the Division of Technical Assistance in the Office of the State Auditor if you have any
   questions regarding specific expenditures of these settlement funds.
   If this office may be of any further assistance to you, please do not hesitate to contact us.
   Sincerely,
   LYNN FITCH, ATTORNEY GENERAL
   By:

/s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General