Missouri Supreme Court Rules on Governor’s Ability to Withhold Funds During Year

The Missouri Supreme Court just ruled on a lawsuit regarding the Governor’s ability to withhold money appropriated for a fiscal year.  For a recent example, during the run up to the legislative veto session in September, Governor Jay Nixon announced that he would be withholding nearly $400 million from the state’s 2014 budget due to concerns over the misguided tax cut bill that he had vetoed earlier in the year.  The lawsuit stemmed from a similar withholding that occurred after the Joplin tornado.  Hit the jump for a walkthrough of the facts and an explanation of what the Governor’s withholding powers really are…

Shortly after the devastating Joplin tornado on May 22, 2011, Governor Nixon announced that he would be withholding $172 million from the 2012 budget to prepare for the costs associated with the tornado.  Of this total withholding, three in particular were at issue in the lawsuit: $600,000 from the legislatures budget, $300,000 from the Auditor’s office budget, and $6 million from the judiciary.  Once these withholds were announced, the Auditor initiated an audit of the Governor’s office and then filed a suit alleging that the withholdings were unconstitutional.

After a series of cross-motions at the trial court, the matter came before the Missouri Supreme Court with two unanswered questions: 1) does the Auditor have the legal right to challenge withholds to other departments? 2) are the withholds from the Auditor’s own budget unconstitutional?  While this case turns on issues as exciting as “standing” and “ripeness” that have the tendency to put even stout legal theorists to sleep, there are real consequences that flow from this decision so we will try to focus on the important stuff while minimizing the legal-speak.

The Court quickly dealt with 2/3 of the Auditors claims by finding they did not have the legal authority (known as “standing”) to bring the suit.  Essentially, the Court held that the Auditor’s duties are limited to those explicitly set forth in the Missouri Constitution (Art. IV §13 for those of you playing along at home) and that those duties do not include the ability to audit the Governor’s actions for a year that has not yet concluded (remember that the Governor had announced withholds for the following fiscal year).  Therefore, the Auditor could not challenge withholds that did not directly affect the Auditor’s office, so the challenge to two of the three portions of the withholdings were dismissed.  The court did include an interesting footnote that specifically stated the Attorney General’s office was not subject to the same restrictions, indicating that it might have had the authority to challenge any part of the withholdings.

Moving then to determine whether the Auditor could challenge the portion of the withholdings related to its own office, the Court’s analysis was focused on the powers that the Missouri Constitution gives to the Governor to control expenditures (Art. IV § 27).  At issue here was the interaction of two parts of this section: one portion gives the Governor the power to “control the rate at which any appropriation is expended”; the second portion allowed the Governor to reduce expenditures “whenever the actual revenues are less than the revenue estimates upon which the appropriations were based.”  The Auditor argued that by withholding part of its budget, the Governor had reduced expenditures without demonstrating that actual revenues were less than the revenue estimates.  The Court disagreed.

The Court basically found that the Auditor had filed suit too soon.  The court noted that because the Missouri Constitution gives the Governor the right to control the rate of expenditures, the only way to determine that expenditures had been reduced would be to look at the budget numbers end of the fiscal year.  The Auditor had filed this suit before the conclusion of the 2012 fiscal year and so it could not show that its total expenditures for the year had been reduced.  Therefore, the Court dismissed the remaining claims.

While it is easy to get lost the technical aspects of this case, the final take away message is both clear and important: the Governor can modify expenditures to almost any extent during a fiscal year.  The decision potentially gives the Governor the right to pay out a department’s entire appropriation on the first day of the year or the last, without any way to challenge it.  Realistically, if a Governor did try to get overly active in appropriations the Court could take exception and some legislators are already talking about modifying the constitution to roll back some of this authority but for now the Governor’s authority to make appropriation decisions has been upheld by the Missouri Supreme Court.

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