AGO 2003-07.
Case Date | August 12, 2003 |
Court | Indiana |
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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