AGO 2003-07.

Case DateAugust 12, 2003
CourtIndiana
Indiana Attorney General Opinions 2003. AGO 2003-07. August 12, 2003OPINION NO. 2003-7Mr. Charles Johnson, III, C.P.A.State Examiner State Board of Accounts302 West Washington Street 4th Floor, Room E418Indianapolis, Indiana 46204-2765 RE: Political Subdivision Establishment of Rainy Day FundsDear Mr. Johnson: You requested an advisory opinion concerning the application of Indiana Code Sections 36-1-8-5 and 5.1 concerning the establishment of rainy day funds by political subdivisions. Our office withheld issuing an advisory opinion pending the outcome of legislative action taken in 2003. As you may be aware, two separate acts were passed during the 2003 legislative session which amended Section 36-1-8-5.1. First, Public Law 173-2003 (House Enrolled Act 1242) was signed by Governor O'Bannon on May 7, 2003. Subsequently, Public Law 267-2003 (Senate Enrolled Act 166) was signed by the Governor on May 8, 2003. Pursuant to the established rule of statutory construction, when two inconsistent acts are passed by the same session of the legislature, the more recently passed statute is controlling. [1] Therefore, because Public Law 267-2003 was passed subsequent to Public Law 173-2003, it is effective. This advisory opinion focuses on the questions that you originally submitted which still appear to be relevant even with the 2003 legislative changes to the pertinent statutes. Please contact my office should you have additional questions or concerns with respect to the 2003 legislative changes or regarding the information included in this opinion. This letter is our response to your request for an opinion on the following issues: 1. Whether the sources of a rainy day fund established by a political subdivision under Indiana Code Section 36-1-8-5 and -5.1 are limited to funds raised by a general or special tax levy. 2. Whether, pursuant to Indiana Code Section 36-1-8-5(b), the fiscal body of a political subdivision is required to transfer the entire balance of an unused fund or whether the fiscal body may transfer only a portion of the fund. 3. Whether Indiana Code Section 36-1-8-5.1(c) allows a political subdivision to transfer ten percent (10%) of the total budget for each fund or ten percent (10%) of the total budget for all funds combined. 4. Whether the reference to "intent" in Indiana Code Section 36-1-8-5.1(b) is a reference to the intent of the fund from which the balance was transferred or the intent of the rainy day fund. In addition, you asked how rainy day funds may be used or whether there are limits to such use. 5. Whether a political subdivision that has transferred money from a statutorily created fund with specific statutory restrictions into a rainy day fund is able to make disbursements for a purpose other than as provided by the originating fund's statutory restrictions. 6. How the requirement of Indiana Code Section 36-1-8-5(b), indicating the purpose of a tax levy be "fulfilled," may be applied to transfers to the rainy day fund under Indiana Code Section 36-1-8-5.1 BRIEF ANSWERS 1. The sources of a rainy day fund established by a political subdivision are limited to funds raised by a general or special tax levy under Indiana Code Section 36-1-8-5, or supplemental distributions made by the Indiana Department of Revenue from various county accounts under Indiana Code Section 36-1-8-5.1(a)(2)-(4). 2. The fiscal body of a political subdivision is required to transfer the entire balance of an unused fund under Indiana Code Section 36-1-8-5 to either its general fund or a rainy day fund, but certain limitations apply. Per fiscal year, the amount transferred to a rainy day fund may not exceed ten percent (10%) of the political subdivision's total budget. The transfer may occur only when no other statute provides that the unused funds are to be transferred elsewhere. 3. The statutory reference to "ten percent (10%) of the political subdivision's total budget" in Indiana Code Section 36-1-8-5.1(c), indicates the capped amount a political subdivision may transfer into a rainy day fund (under Indiana Code Section 36-1-8-5) is ten percent (10%) of the total budget for all of the political subdivision's funds combined. 4. The reference to "intent" in Indiana Code Section 36-1-8-5.1(b) is a reference to the intent of the rainy day fund. Rainy day funds are intended to be used during times of economic downturn in order to stabilize a political subdivision's budget so that spending may be maintained without increasing taxes. Therefore, any appropriation consistent with that general intent would be proper. 5. Indiana Code Section 36-1-8-5(b) indicates that unused balances of funds may be transferred to the rainy day fund "unless a statute provides that it be transferred otherwise." Therefore, the original statute creating the fund from which the transfer may come is controlling as to any limitations or directions concerning the transfer of the unused funds. Once appropriately transferred to the rainy day fund, disbursements need only be for a use that is consistent with the intent of the rainy day fund...

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