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In re Karcher

Decided: August 6, 1984.

IN THE MATTER OF ALAN J. KARCHER, INDIVIDUALLY AND AS SPEAKER OF THE GENERAL ASSEMBLY OF THE STATE OF NEW JERSEY, AND CARMEN A. ORECHIO, INDIVIDUALLY AND AS PRESIDENT OF THE SENATE OF THE STATE OF NEW JERSEY, APPELLANTS AND CROSS-RESPONDENTS,
v.
THOMAS H. KEAN, GOVERNOR OF THE STATE OF NEW JERSEY, RESPONDENT AND CROSS-APPELLANT



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 190 N.J. Super. 197 (1983).

For affirmance in part; reversal in part -- Chief Justice Wilentz and Justices Clifford, Schreiber, Handler, Pollock and Garibaldi join in this opinion. Opposed -- None. The opinion of the Court was delivered by Handler, J.

Handler

[97 NJ Page 486] This appeal requires our consideration of the nature and extent of the Governor's constitutional power to veto line-items

in the state budget that are encompassed in the annual appropriations act. The instant controversy was triggered by the Governor's exercise of this constitutional veto power with respect to matters included in the Appropriations Act for fiscal year 1983.

I

On June 30, 1982, the last day of fiscal year 1982, Governor Thomas H. Kean signed Senate Bill 1600 into law, L. 1982, c. 49 (generally, Appropriations Act, Act, or Senate Bill 1600). Although the Governor indicated in his message to the Senate that he had "seriously considered vetoing the entire budget," he had "resolved that this course would not be prudent and that the resulting fiscal crisis would severely damage the State." Accordingly, Governor Kean exercised his line-item veto power, pursuant to N.J. Const. (1947) art. V, § I, para. 15, appending to the bill a statement in which he deleted and reduced certain items of appropriation, and also deleted several general provisions that he determined to be in violation of constitutional principles.*fn1

The Legislature did not exercise its constitutional power, pursuant to N.J. Const. (1947), art. V, § I, para. 15, to override any part of the Governor's line-item veto of the Appropriations Act. However, on August 13, 1982, Alan J. Karcher, Speaker of the General Assembly, and Carmen A. Orechio, President of the Senate, filed with the Appellate Division a Notice of Appeal from the final action of the Governor approving the Appropriations Act as modified by the line-item veto, contending generally that the Governor had exceeded the constitutional authority vested in him.

The Appellate Division ruled that the Governor had properly exercised the line-item veto power with respect to several of the controverted provisions. 190 N.J. Super. 197 (1983). It upheld the Governor's veto of part of the appropriation for municipal state aid and the veto of several general provisions in the Appropriations Act that arguably were unconstitutional and were not items of appropriation or sufficiently related to any specific appropriation. The court, however, overruled the Governor's veto of several appropriations for specific highway projects encompassed in a larger appropriation for highway capital projects. Appellants then filed with this Court a notice of appeal as of right, in response to which the Governor filed a cross-appeal as of right. (We have generally referred to the legislative parties as appellants.) See R. 2:2-1(a)(1).

II

Our Constitution mandates that withdrawals of monies from the state treasury can be accomplished only by legislative appropriation, and, further, that there shall be "one general appropriation law covering one and the same fiscal year." Its exact terms in this respect are:

No money shall be drawn from the State treasury but for appropriations made by law. All moneys for the support of the State government and for all other State purposes as far as can be ascertained or reasonably foreseen, shall be provided for in one general appropriation law covering one and the same fiscal year. * * * [ N.J. Const. (1947) art. VIII, § II, para. 2.]

The constitutional requirement of a unitary general appropriations law covering but a single fiscal year is the center beam of the state's fiscal structure. It expresses the basic understanding that fiscal soundness and integrity are the foundations for proper governmental operations. The constitutional plan for the expenditure of public revenues for governmental purposes centralizes and simplifies state financial affairs, serving to improve the operations of government, define fiscal commitments, and clarify official responsibility. City of Camden v. Byrne, 82 N.J. 133, 146 (1980), citing Report of the Commission on Revision of the New Jersey Constitution 26-27 (1942);

G. Skillman & S. Goldmann, "The Single Budget, Single State Fund and Single Fiscal Year" (Monograph 1951), II Proceedings of the New Jersey Constitutional Convention of 1947 1668, 1669, 1680-83 [hereinafter cited as G. Skillman & S. Goldmann, "Single Budget"]; New Jersey League of Women Voters, New Jersey: Spotlight on Government 94-98 (3d ed. 1978).

The power and authority to appropriate funds are vested in the legislative branch of government. City of East Orange v. Palmer, 52 N.J. 329, 337 (1968); Fitzgerald v. Palmer, 47 N.J. 106, 108 (1966); Gallena v. Scott, 11 N.J. 231, 238-39 (1953); Amantia v. Cantwell, 89 N.J. Super. 7, 12-13 (App.Div.1965). Although this power to appropriate and expend state monies is reserved exclusively to the Legislature, the Governor nonetheless plays a vital constitutional role in the budget process. The ultimate legislative authority over appropriations is subject to checks and balances from the executive. The Governor is statutorily authorized to "examine and consider all requests for appropriations" and to "formulate * * * budget recommendations to be forwarded to the Legislature for its consideration and ultimate approval." N.J.S.A. 52:27B-20. Further, and of critical relevance in this case, the Governor is constitutionally empowered to object to any item or items included in an appropriation bill through the exercise of a selective veto. N.J. Const. (1947) art. V, § I, para. 15. The enabling constitutional clause states:

If any bill presented to the Governor shall contain one or more items of appropriation of money, he may object in whole or in part to any such item or items while approving the other portions of the bill * * * and each item or part so objected to shall not take effect.

The Governor's statutory authority to propose the State budget, and his constitutional power to exercise a selective veto over legislative appropriations, constitute significant responsibilities for the State's fiscal affairs, and are essential to an efficient, modern system of government. See City of Camden v. Byrne, supra, 82 N.J. at 150; G. Skillman & S. Goldmann,

"Single Budget," supra, at 1683-84; S. Goldmann & B. Bland, "The Governor's Veto Power" (Monograph 1951), II Proceedings of the New Jersey Constitutional Convention of 1947 1418, 1428; A. Wildavsky, Budgeting: A Comparative Theory of Budgetary Processes 175 (1975).

Reflecting the ultimate authority of the Legislature over the appropriations function, the Constitution provides that the Governor's veto may be overridden by a two-thirds vote of both the Senate and the General Assembly. The same constitutional provision that authorizes the executive line-item veto of appropriations continues:

If upon reconsideration * * * one or more of such items or parts thereof [is] approved by two-thirds of all the members of each house, the same shall become a part of the law, notwithstanding the objections of the Governor. [ N.J. Const. (1947) art. V, § I, para. 15.]

With the ultimate constitutional responsibility for appropriations vested in the Legislature, and with executive responsibilities so clearly involved in the budget process, the judiciary has accepted its own absence of authority to compel either the Legislature to make a specific appropriation or the Governor to recommend or approve one. See City of Camden v. Byrne, supra, 82 N.J. at 149 (even if amendment to appropriations act were held unconstitutional, no relief would be available through courts in absence of legislative appropriation); Doe v. Mathews, 420 F. Supp. 865, 870-72 (D.N.J. 1976); Mountain, "The Role of Judicial Activism: Neither Sword Nor Purse?," 10 Seton Hall L. Rev. 6, 11 (1979).

The claims made in this appeal focus not so much on the existence of the constitutional budgetary and appropriations authority that is both centered in and shared by the legislative and executive branches, but on the form and manner in which that authority has been exercised. The Governor takes the position that in several aspects the appropriations power of the Legislature has not been exercised correctly or lawfully in the Appropriations Act. The Legislature contends that the Governor has not properly exercised the line-item veto power. Resolution

of this controversy requires further examination of the basic features of an appropriations law.

An appropriation is an authorization, statutorily enacted by the Legislature, for the withdrawal of monies from the State treasury for governmental purposes. City of Camden v. Byrne, supra, 82 N.J. at 149; Brown v. Honiss, 74 N.J.L. 501, 521 (E. & A. 1906); Borough of Glassboro v. Byrne, 141 N.J. Super. 19, 24 (App.Div.1976), certif. den., 71 N.J. 518 (1976). There are, however, no specific constitutional standards or rules for determining the content or format of an appropriations act. Therefore, some inherent flexibility and discretion attend the fiscal-formulation process.

Items of appropriation have, historically and traditionally, been expressed in two different ways: as "budgeted revenue" and "appropriated revenue." An allocation of funds from "budgeted revenue" is a reservation or designation of a specific amount of money for a particular purpose. By contrast, "appropriated revenue" is reflected in the budget not as a specific numerical figure but by means of general language committing funds in an unspecified amount for a particular purpose.*fn2 See Hopkins v. Ford, 534 S.W. 2d 792, 795 (Ky.1976). Appropriated revenue generally includes monies collected by the State and directly utilized by a state agency or paid to a local government in the form of state aid for a specific purpose enumerated by statute. In addition to the specification of monies appropriated for governmental uses, either expressed numerically as "budgeted items" or generally as "appropriated revenues," appropriations enactments have customarily included provisions that establish conditions, restrictions, or limitations on the expenditure,

use, or application of appropriated funds. Welden v. Ray, 229 N.W. 2d 706, 710 (Iowa 1975) (all legislative appropriations are qualified to some degree: "[i]nherent in the power to appropriate is the power to specify how the money shall be spent"); In re Opinion of the Justices, 294 Mass. 616, 2 N.E. 2d 789, 791 (1936) (absent restrictive words in state constitution, legislative body can attach conditions to expenditure of money appropriated by it); see J. Burkhead, Government Budgeting 313, 324 (1963).

An appreciation of these characteristics of appropriations legislation is important to an understanding of the issues implicated by the Governor's exercise of his line-item veto power in this case. In his veto statement, appended to the Appropriations Act and filed with the Legislature, the Governor expressed his general reasons for reducing and deleting specific items of appropriations set forth both as budgeted revenue and appropriated revenue.

My veto recommendations are predicated on two issues. First, a budget totalling $6.2 billion must have an adequate surplus. Second, I feel it is inappropriate for the Legislature to increase the spending levels I initially recommended, and to fund new programs, in a budget that doesn't provide adequately for essential State services.

The Governor also deleted or vetoed general provisions in the Appropriations Act relating to the terms and conditions for the expenditure or application of appropriated funds. The veto message stated:

In addition to various specific dollar appropriations in the budget, the Legislature has inserted certain language and provisions into Senate Bill No. 1600 to direct the manner in which the Chief Executive is to execute some of his responsibilities. Some of these legislatively imposed provisos and conditions are integrally and permissibly tied to specific items of appropriation. Other provisions, however, place broad restrictions on the way in which the Executive Branch administers particular areas of the State government on a day-to-day basis and, in some cases, authorize a Legislative Subcommittee to share responsibility with the Executive in matters traditionally and inherently assigned to the Executive Branch.

The challenges raised by the parties relate to the constitutional authority of the Governor's veto in four areas: (1) funds appropriated from the franchise and gross receipts taxes of

public utilities as state aid to municipalities; (2) funds appropriated or designated for particular highway projects included in the capital construction appropriations to the Department of Transportation; (3) general provisions relating to salaries, compensation, and the status of various state employee positions; and (4) a general provision restricting the funds appropriated for capital construction by the Department of Corrections. Each of these challenges touches upon a different facet of the Governor's line-item veto power.

III

Two of the challenges raised by appellants concern the propriety of the Governor's veto of the appropriation of monies for specific governmental purposes. One such fiscal grant provides for the appropriation of public utilities' franchise and gross receipts tax revenues for municipal state aid. The other concerns specific appropriations for designated highway ...


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