January 1, 1900

by Patrick D. Kennedy and Len F. Collett

During the four-week period prior to the end of the reign of Acting Governor Donald DiFrancesco, over one hundred and fifty new pieces of legislation were passed by the legislature. Many of these bills contained requirements for additional State expenditures prior to the end of the 2001 fiscal year, June 30, 2002. During this same period, Governor-elect James McGreevey's transition experts postulated dire forecasts for the State's revenue picture, and the frantic public demanded that the Acting Governor not commit to the expenditure of any additional monies.

While the soon to be inaugurated Governor projected revenue losses of up to $1.9 billion, appropriation bills piled up on the Acting Governor's desk. Predicting doom, the McGreevey team also argued that the State Constitution required that the Governor certify that he had sufficient funds prior to signing any act which would appropriate funds for the remainder of the fiscal year. Acting Governor DiFrancesco refused to so certify. Although he admitted the fiscal outlook was diminished, he downplayed the public's fears that there would not be sufficient funds.

Into the fray came tax advocate Simeon Larson, represented by Hill Wallack, who filed suit seeking to enjoin the Acting Governor from additional spending without the constitutionally required certification of fund sufficiency. The matter was heard by the Honorable Judge Neil Shuster on December 26, 2001.

A Simple Concept ö Don't Spend What You Don't Have and a Seemingly Clear Constitutional Mandate

Article VIII, section 2, paragraph two of the New Jersey Constitution states that:

. . . No general appropriation law or other law appropriating money for any State purpose shall be enacted if the appropriation contained therein, together with all prior appropriations made for the same fiscal period, shall exceed the total amount of revenue on hand and anticipated which will be available to meet such appropriations during such fiscal period, as certified by the Governor. (Emphasis added).

As enacted, the Constitutional provision applies to all appropriation acts, including laws that call for supplemental appropriations. Despite its seemingly clear wording, before Judge Shuster, the State argued that it need only certify as to funds at the beginning of each year, that no further certifications would be required, and thus that supplemental appropriations could go unchecked.

Larson maintained that if the State's argument is correct, citizens will have no remedy to protect themselves from indiscriminate spending. Citizens are unable to overturn specific appropriations on the basis that there are unavailable funds because citizens have no access to all of the budgetary data available to the Governor. Moreover, when the reality of insufficiency of funds becomes evident and the need for new taxes arises, the offending enactments will be long past approved and funds expended.

Thus, a citizen must be able to challenge an offending appropriation and seek an injunction before it is signed into law to assure relief. Allowing relief only after the offending bill is signed will subject the process to a chaotic "run for the money" where citizens run to court to try to stop the expenditure of funds, and the beneficiaries of the bills run to spend the money.

The framers clearly did not wish the Courts to have to "balance" vested interests with the overriding concern relating to over-expenditure of taxpayer money. Therefore, a mechanism was created requiring certification prior to enactment. Under this mechanism, the Courts would then never need to face the task of actually determining if there are sufficient funds or balancing equities in overturning the offending enactment; the Governor would be required to do so for them.

Lastly, if citizens were required to wait until the end of the fiscal year, or until a budget crisis exists to challenge these supplemental appropriations, the Court would be unable to determine which prior appropriations actually threw the budget into a deficit in violation of the Constitution. Most importantly, by the end of the fiscal year, the money would already be spent. The framers provided for a certification procedure to avoid this chaos. If the Governor cannot certify that the State has sufficient revenues to cover new spending, then he is required to wait until new tax revenues are available to cover the shortfall.

Separation of Powers or Executive Anarchy?

On its face, the Constitution mandates a certification from the Governor, coincident with the enactment of a statute containing an appropriation, as to the ongoing and anticipated availability of revenues to meet that appropriation during the fiscal year. In other words, the only individual with the complete picture of the State's current fiscal situation, the Governor, must certify that the appropriation will not result in a deficit.

Nevertheless, the State argued that an injunction would violate the Separation of Powers doctrine in that the order would infringe upon the Governor's "Constitutional Authority to decide which bills to enact into law" even though the suit did not seek oversight of the Governor's executive authority. Incredibly, the State argued that the only remedies for Mr. Larson were draconian; ". . . [i]f the Governor exercises his bill approval authority in a manner inconsistent with his Constitutional mandate, he must answer either to the electorate or the impeachment process." Neither the Court nor anyone present at the hearing gave credence to either of these remedies.

In support of his position, Larson argued that the "Powers" doctrine did not apply as it merely serves to ban one branch of government from interfering with the exclusive functions of another branch. Larson did not seek to compel the Governor to sign, veto, conditionally veto, or take no action on any particular bill. Nor did Larson ask the Court to dictate the manner in which the Governor certifies as to availability of funds and anticipated funds in enacting supplemental appropriations. Larson asked only that the Governor follow the Constitutional imperative to certify, in some manner, the sufficiency of revenue to cover supplemental appropriations.

Post Mortem

The Honorable Judge Shuster refused to dismiss the case as requested by the State, but he would not enjoin the Governor from signing bills containing appropriations, ruling that Constitutional separation of powers prevented him from doing so. He also ruled that he would not prejudge the actions of the Acting Governor, reasoning that he might not act on the appropriation bills on his desk after all, and if he did, perhaps would only do so while certifying as to the sufficiency of funds.

Although Mr. Larson and Hill Wallack were not successful on that day, by Friday, December 28, it became clear that their actions had not been totally in vain. Acting Governor DiFrancesco signed 17 bills on that Friday, including only two that contained appropriations. But, in so doing, he line-item vetoed those appropriations, indicating that while he would enact the laws, the Departments would be required to find the funds for the enactments in their existing budgets.

History may reflect that the Acting Governor would have protected the taxpayers and vetoed those appropriations regardless of Simeon Larson and his lawsuit. But we know that Simeon Larson made a small but important difference.

The case was subsequently dismissed as Governor McGreevey acknowledged and agreed to the certification process upon taking office.