96-996 GOV
(6 p.)

Louis Fisher, Senior Specialist in Separation of Powers
Government Division

December 12, 1996

Summary

State and Federal Constitutions

Level of Itemization

Unofficial and Informal Documents

Bundling

Apportionments and Directions

Transfer of Funds

Amendments to Appropriations

Nonappropriation Bills

Severability

Conditions and Provisos

The Line Item Veto Act of 1996 (P.L. 104-130) authorizes the President to cancel discretionary budget authority, new entitlements, and limited tax benefits. This authority became available on January 1, 1997; will Congress now resort to a variety of techniques and strategies to circumscribe the President's power? Legislators and legislative committees at the state level have used various tactics to counteract, blunt, or neutralize the governor's item-veto power.

There are a number of basic differences between the item veto exercised in most states and the cancellation authority now available for the federal budgeting process. First, governors can delete items from a bill that is before them. Presidents from George Washington to Bill Clinton must either sign the entire bill or veto the entire bill. The Line Item Veto Act does not alter that constitutional requirement. Presidents have no opportunity to strike particulars from a bill. The procedures in the Line Item Veto Act become available only after the President signs a bill into law. (For procedural details, see CRS Report 96-973, The Line Item Veto Act.)

Second, state constitutions are much more detailed about the budget process than the U.S. Constitution. It is not unusual for state constitutions to distinguish between authorizations and appropriations, prohibit legislation in appropriations bills, specify the style and format of appropriations bills, direct that appropriations bills shall embrace nothing but appropriations, and require a single subject for each bill. Under the U.S. Constitution, such matters are left entirely to the discretion of Congress and its internal rules.

Third, because much of the budget procedure is spelled out in state constitutions, state judges are more likely to be involved in monitoring the budget process and the item veto to assure that they comply with the state constitution. Federal judges deal with budget issues and legislative processes only on rare occasions. Moreover, since the state item veto is granted by constitution rather than by statute (as with the Line Item Veto Act), state judges may feel a special responsibility for scrutinizing the budgetary and legislative processes.

With these differences in mind, here are some typical techniques used at the state level to define and, in many cases, restrict the governor's authority to veto items. When the executive and legislative branches are in the hands of different political parties, the resort to such stratagems increases. This report incorporates several conversations held with budget analysts in the states.

Presidential actions to cancel spending and tax benefits depend on the extent to which Congress itemizes projects and tax provisions in bills and committee reports. At the state level, legislatures have attempted to limit the governor's item veto by placing funds in large, lump-sum accounts. When this is contrary to language and intent in state constitutions, state judges have at times instructed legislators to itemize appropriations bills. Even without constitutional requirements, state courts sometimes insist on itemization to protect the governor's exercise of the item veto.

In 1939, for example, a New York court said that the "whole spirit" of the state constitution providing for an item veto was "against lump sum appropriations and in favor of appropriations showing the items of expenditure." People v. Tremaine, 21 N.E.2d 891, 893-94 (N.Y. 1939). State courts have told legislators that they may not blunt a governor's item veto by "subtle drafting" of appropriations language. State ex rel. Sego v. Kirkpatrick, 524 P.2d 975, 980 (N.M. 1974). Federal judges may be less likely to direct Members of Congress on the degree of itemization that is required in federal legislation.

States vary widely on how much they itemize appropriations. A budget analyst in Kansas said that governors do not object to lump sum funding, even though it limits their opportunity to exercise item-veto authority. The executive branch recognizes that aggregate funding gives agencies valuable flexibility throughout the course of a fiscal year to shift funds within the lump sum. Itemization would add a rigidity to agency actions and possibly force agencies to return to the legislature to seek corrective statutory action. The same point was made by budget analysts in Michigan and Washington.

Some states take details out of public laws and place them in unofficial and informal documents, such as committee or subcommittee reports. The purpose of these documents is to give guidance to agencies on how a lump sum should be spent. Although the documents are advisory and legally non-binding, agencies normally comply. In Michigan, after the governor threatened to veto a provision granting a waiver for college tuition to Native Americans, the legislature rolled the funds into another account and reached an understanding with the agency head, by letter, that it use the funds to waive the tuition. There was no legislative language for the governor to veto. Because the Line Item Veto Act allows the President to cancel items in committee reports, committees may decide to itemize programs elsewhere, such as in the Congressional Record or on plain paper, with the understanding that agencies will comply with this nonstatutory control or risk sanctions imposed in subsequent legislation.

In some situations, state courts have deferred to legislators on the drafting of appropriations bills, allowing them to bundle a number of sums within a single item. The Texas legislature originally drafted a two-year appropriation for the Attorney-General's Department to contain 18 separate and distinct items. Those details were eventually collapsed to produce a single appropriation of $83,160. In deciding the case, one of the justices of the Supreme Court of Texas remarked: "With the wisdom of grouping many items of appropriation into a single item, it is not our province to determine, even if it could be assumed that it was purposely and deliberately done, so as to deny to the Governor the right to prune or cut out any part or portion of the amount appropriated, because it was within the power of the Legislature to make the appropriation in this manner, and same was not subject to any constitutional or legal objection." Fulmore v. Lane, 140 S.W. 405, 421 (Tex. 1911).

In 1914, an Illinois court examined the constitutional requirement that appropriations bills should provide specific amounts to facilitate the governor's item veto. But the bill in dispute, combining the building and maintaining of state roads in a single item, was permitted by the court. It was not necessary to have one item for road construction and another for maintenance, because those functions were too closely related to insist on discrete items. Martens v. Brady, 106 N.E. 266, 271-72 (Ill. 1914). State legislators sometimes lump two items together, providing a single sum for a program the governor wants with one the governor dislikes. Bundling forces the governor to make a painful decision: either agreeing to the combined amount (swallowing funds that were never requested) or exercising a veto and losing funds for a favored program.

State legislatures have tried other strategies to restrict the item veto. In one case, after a legislature appropriated $285,810.23 for the state university and then "apportioned" the total to specific purposes, the governor item vetoed the smaller amounts. The court held that item-veto authority applied only to the aggregate number, because that was the "item." The apportionment, said the court, was not an appropriation or an item but rather a direction by the legislature as to how the aggregate should be spent. Regents of State University v. Trapp, 113 P. 910, 913 (Okla. 1911). Under the court's ruling, the legislature could blunt the governor's item veto authority by structuring appropriations bills with aggregated sums supplemented by more detailed apportionments.

Other courts allowed the governor to veto smaller sums within an item. In a 1917 case, the Illinois legislature had passed an appropriation bill containing the sum of $153,150 for a two-year period. The bill then listed 44 purposes and established a specific amount for each. The governor vetoed some of the purposes. The court denied that the specific amounts were merely an apportionment or direction as to how the single item of $153,150 should be spent. To hold that the aggregate amount was the only item would "nullify the power given by the Constitution to the Governor to withhold his approval from distinct items." People v. Brady, 115 N.E. 204, 207 (Ill. 1917). Similarly, in 1923 an Arizona court held that the legislature could not blunt the governor's item veto by calling specific sums a "direction" instead of an item. Fairfield v. Foster, 214 P. 319, 323 (Ariz. 1923).

In 1991, the Supreme Court of Minnesota held that the governor could item veto a total appropriation but not the smaller amounts that the legislature had "estimated" for certain expenditures. The court regarded the latter as estimates derived from "legislative working papers," not as "items of appropriations." Inter Faculty Organizations v. Carlson, 478 N.W.2d 192 (Minn. 1991).

When legislatures transfer funds from one account to another, can such sums be item vetoed or canceled? An Arizona bill directed the transfer of various sums of money from 61 different special funds to the state's general fund. The Supreme Court of Arizona sustained the governor's item veto of five of these transfers, reasoning that a transfer from a previously-made appropriation constituted an "item of appropriation" subject to the line-item veto. To permit such transfers without the check of an item veto would permit the legislature to enact an appropriation bill with a level of funding that met the governor's approval, but then later transfer money to another fund, thereby eviscerating the governor's item veto. Rios v. Symington, 833 P.2d 20, 26 (Ariz. 1992).

In this same case, the Supreme Court of Arizona examined a bill that amended over one hundred items in the general appropriations bill. The governor vetoed ten of the items and the court held that all of the vetoes were valid. To prevent the governor from vetoing an amendment to an appropriation would allow the legislature to "circumvent the Governor's veto power and encroach upon the Executive's constitutional right to participate meaningfully in the appropriations process." Rios v. Symington, 833 P.2d 20, 28 (Ariz. 1992).

Legislatures fund programs not only through appropriation bills but through a variety of other budgetary techniques. Because the creation of such funds may jeopardize the governor's item-veto power, state courts have scrutinized nonappropriation bills to determine when the governor may exercise an item veto. An Arizona court ruled that because the governor's item veto authority was restricted to appropriations items, he could not disapprove a gasoline tax. Black & White Taxicab Co. v. Standard Oil Co., 218 P. 139 (Ariz. 1923). Similarly, a Wisconsin court held that the governor could not exercise his item veto on a revenue bill that contained a revolving fund, even if it impaired his item veto authority. State v. Dammann, 264 N.W. 622, 624 (Wis. 1936). The court treated taxation and appropriation as "more nearly antonyms than synonyms." Id.

This kind of reasoning can encourage lawmakers to dilute item-veto authority by financing programs indirectly through the revenue system rather than through a direct appropriation. In 1972, a court in Ohio ruled that a governor's item veto extended to a section that did not contain a specific appropriation. Instead, it was a reimbursement procedure to compensate legal counsel. The legislature, said the court, had funded an activity indirectly that could have been covered directly through an appropriation. State ex rel. Brown v. Ferguson, 291 N.W.2d 434 (Ohio 1972). In 1975, a Montana court noted that its previous rulings had limited the scope of "appropriation" to the general fund covering the basic operating costs of the state. But as a result of statutory changes, as well as provisions in the state constitution, the court found it necessary to reexamine the definition of appropriation. The court now extended the term to cover the general fund, the earmarked revenue fund, and most of the federal and private revenue funds. Excluded from this new definition of appropriation were six funds: the sinking fund, the federal and private grant clearance fund, bond proceeds and the insurance clearance fund, revolving funds, trust and legacy funds, and agency funds. Board of Regents of Higher Education v. Judge, 543 P.2d 1323 (Mont. 1975). Other courts have allowed governors to veto nonappropriation items. City of Camden v. Byrne, 411 A.2d 462, 469 (N.J. 1980); In re Karcher, 462 A.2d 1273, 1284-85 (N.J. 1983); Junkins v. Branstad, 448 N.W.2d 480 (Iowa 1989).

A 1993 case in Minnesota involved a provision in an appropriation bill that assigned revenue from a taconite tax increase to a new higher education program. Although the provision did not identify a sum of money, the court used a functional test to conclude that the provision was an "appropriation" and therefore subject to the governor's item veto. Johnson v. Carlson, 507 N.W.2d 232 (1993).

The ability of a governor to item veto an amount sometimes depends on a court's judgment whether the amount is separable or inseparable. For example, an Arizona decision in 1915 allowed item vetoes to the extent that the sections of a bill were "distinct and separable parts" of the appropriation bill. Callaghan v. Boyce, 153 P. 773, 782 (Ariz. 1915). Two cases in Washington upheld the governor's veto of a section because the language was a separable item. Cascade Telephone Co. v. State Tax Commission, 30 P.2d 976 (Wash. 1934); City of Tacoma v. State Tax Commission, 33 P.2d 899 (Wash. 1934). The courts decided that a section was severable when it was only "negative" in effect. A dissenting judge disputed this analysis, regarding the governor's veto as affirmative "because it actually creates a result different from that intended, and arrived at, by the Legislature." Cascade Telephone Co. v. State Tax Commission, 30 P.2 at 979 (Steinert, J., dissenting). Other courts upheld a governor's item veto if the elimination of the language left "a complete, consistent and workable scheme and law." State v. Henry, 260 N.W. 486, 492 (Wis. 1935).

A Virginia court in 1940 held that the governor could not veto items that were "tied up" with other provisions. The court used a colorful analogy, drawn from the field of medicine, to distinguish between separable and inseparable items. The governor could exercise an item veto for "something which may be taken out of a bill without affecting its other purposes or provisions. It is something which can be lifted bodily from it rather than cut out. No damage can be done to the surrounding legislative tissue, nor should any scar tissue result therefrom." Commonwealth v. Dodson, 11 S.E.2d 120, 124 (Va. 1940).

In 1977, a Washington court struck down some item vetoes because they were "affirmative" and "creative" in their effect rather than "negative" and "destructive." Washington Ass'n of Apt. Ass'ns v. Evans, 564 P.2d 788 (Wash. 1977). A year later, a Wisconsin court upheld a governor's item veto of provisos or conditions "so long as the net result of the partial veto is a complete, entire, and workable bill which the legislature itself could have passed in the first instance." State ex rel. Kleczka v. Conta, 264 N.W.2d 539, 555 (Wis. 1978). A dissenting justice objected that efforts to determine the "affirmative," "positive" or "creative" effect on legislation "would be to involve this court in disingenuous semantic games. While these tests may be appealing in the abstract, they are unworkable in practice. . . . These tests are inescapably subjective." Id. at 557-58.

This dissenting opinion was later cited by a Washington court in 1984 when it announced that it was abandoning the affirmative/negative test. The court regarded the test as unworkable, subjective, and an intrusion by the judiciary into the legislative branch. In the future, said the court, the check for item vetoes would be legislative overrides. Washington Federation of State Emp. v. State, 682 P.2d 869, 874 (Wash. 1984). See also State Motorcycle Dealers Ass'n v. State, 763 P.2d 442, 446-47 (Wash. 1988).

One of the most complex legal issues in the states concerns the power of the governor to strike a condition from an appropriation item. Legislatures frequently use conditions or provisos to limit the use of funds. Through the exercise of an item veto, may governors convert a conditional appropriation to an unconditional appropriation? May governors strike the legislative language from a dollar amount or are those two elements to be considered a single item to be accepted or vetoed in whole? This issue has bedeviled state courts for nearly a century. Efforts to create reliable standards or "bright lines" for judging such disputes have not been successful.

The Line Item Veto Act attempts to prevent this issue from arising in federal budgeting. The term "dollar amount of discretionary budget authority" does not include "any restriction, condition, or limitation in an appropriation law or the accompanying statement of managers or committee reports on the expenditure of budget authority for an account, program, project, or activity, or on activities involving such expenditure." 110 Stat. 1208-09, § 1026(7)(B)(iv). The conference report explains that the President may cancel "in whole any dollar amount specified in an appropriation law." H. Rept. No. 104-491, 104th Cong., 2d Sess. 30 (1996). Thus, the authority is aimed at dollars, not legislative language. The exclusion of restrictions, conditions, or limitations is included "to make clear that the President may not use the authority delegated in section 1021(a) to cancel anything other than a specific dollar amount of budget authority." H. Rept. No. 104-491, at 31.

However, what would happen if Congress, in a condition or proviso, identified funds to be spent? Would that be a condition or an appropriation? Florida amended its constitution in an effort to take care of the problem of governors vetoing conditions: "The governor may veto any specific appropriation in a general appropriation bill, but may not veto any qualification or restriction without also vetoing the appropriation to which it relates." Fla. Const., art. III, § 8(b). Nevertheless, Florida courts have expressed concern that provisos can undermine the governor's item-veto authority by hiding an actual appropriation "inside a mass of proviso language." House of Representatives v. Martinez, 555 So.2d 839 (Fla. 1990); Brown v. Firestone, 382 So.2d 654 (Fla. 1980).