Oregon Advisory Opinions January 01, 1980: OP 7835

Advisory Opinion Text

No. 7835 January 4, 1980 Mr. William S. Cox Director

Division of State Lands

QUESTION PRESENTED

Can expenditures which ex­ceed receipts (fees) for the ad­ministration of the Removal and Fill Permit Program, ORS 541.605 et seq, be paid out of the Common School Fund?

ANSWER GIVEN

Yes, provided that in a given biennium revenues from other non-constitutional sources are sufficient to pay the excess of expenditures over revenues.

DISCUSSION

The Division of State Lands, through its director, administers the laws governing the placing of materials in (fill) or removal of materials from (removal) waters of this state. ORS 541.605(5), (8), (10), (12) and 541.615. The waters of the state subject to the law include both navigable and non-navigable

waters. ORS 541.605(12). In order to effect a fill of or removal from waters of the state, an application for a permit and a permit are neces­sary. ORS 541.615(1), 541.620(1). The permit application requires a fee which must be credited to the Common School Fund. ORS 541.620(3) and (5).

The division collects approxi­mately $100,000 during the bienni-um in permit fees from the program but spends approximately $225,000 in administrative expenses for the program. Thus, the division takes from the Common School Fund approximately $125,000 during the biennium to support the removal-fill program. The legal issue is whether this use of the Common School Fund is proper under the Constitution.

When Oregon was admitted into the Union in 1859, it received cer­tain lands the proceeds from the sale of which were to be used for the support of a system of Common Schools. See, 11 Stat 383; Or Const art VIII, sees 2(l)(a), (e), (f) and 4; Lassen v. Arizona, 385 US 458 (1976) ; 37 Op Atty Gen 569 (1975); 38 Op Atty Gen 850, 852-854 (1977) . Or Const art VIII, sec 2(1) states the sources of the Common School Fund. In legal effect, these sources are constitutionally dedicat­ed to the purposes of the Common School Fund. Thus, section 2(2) provides:

"All revenues derived from the sources mentioned in subsection (1) of this section shall become a part of the Common School Fund. The State Land Board may expend moneys in the Common School Fund to carry out its powers and duties under subsection (2) of section 5 of this Article. Unexpended moneys in the Common School Fund shall be invested as the Legislative Assembly shall provide by law. Interest derived from the investment of the Common School Fund shall be applied to the support of primary and secondary education as provided under section 4 of this Article." (Emphasis added.) Section 5(2) referred to in the above provisions provides:

"The board shall manage lands under its jurisdiction with the object of obtaining the greatest benefit for the people of this state, consistent with the conservation of this resource under sound techniques of land management."

Thus, the authority granted by section 2(2) is essentially for the board to expend the moneys in the Common School Fund to perform its duty of managing the lands under its jurisdiction to achieve the great­est benefit for the people of this state consistent with conservation of the resource under sound tech­niques of land management.

Lands under the board's juris­diction include not only the lands mentioned in section 2(1) of Article VIII but also lands placed under the board's jurisdiction by the legis­lature. These include submerged and submersible lands which are administered by the Division of State Lands under the direction of the Land Board. ORS 273.031; 273.041; 273.045; ORS ch 274. The state is the owner of such lands in fee simple and administers them not only in its governmental capaci­ty to promote navigation, commerce and fishing, but also in its proprie­tary capacity. ORS 274.025; 274.040; 274.530; 274.615 et seq, 274.705 et seq, 274.915; Brusco Towboat v. State Land Board, 30 Or App 509, 516, 519 567 P2d 1037 (1977), affirmed as modified on other grounds, 284 Or 627, 589 P2d 712 (1978).

Proceeds accruing from the leasing of submerged and submersi­ble lands for general purposes such as for marinas or for particular purposes such as the removal of sand and gravel or oil, gas, or other minerals are deposited in the corpus of the Common School Fund. ORS 273.105(2)(c) and (3); ORS 274.040; ORS 274.530 et seq, 274.615 et seq, 274.705 etseq, 274.905 et seq.

These may be described as statutory sources of the Common School Fund as distinguished from the constitutional sources men­tioned in section 2(1) of Article VIII of the Oregon Constitution. The Division of State Lands collects approximately $1,000,000 in reve­nues during the biennium from these statutory sources.

As stated above, the authority of the State Land Board to expend moneys from the Common School Fund is for the board to perform its discretionary function of "manag­ing" the lands under its jurisdic­tion. Or Const art VIII, sec 5(2). The nature of that discretionary function is described in 36 Op Atty Gen 150, 222-224 (1972).

No such discretionary function is involved in the administration of the Fill and Removal Law under 541.605 et seq by the Director of the Division of State Lands. That func­tion is exercised by the director as the delegee of the state's police powers independent of the State Land Board's proprietary authority under the constitution and ORS 273.031 and 273.041. Whether or not the board would wish to permit use of its lands for a fill or removal project is irrelevant to the criteria the director must consider in deter­mining whether or not to grant a permit. ORS 541.625(4). Moreov­er, the state does not own all the lands under navigable waters. Many fill and removal permits do not involve state-owned lands. Much of the state's tidelands has already been sold into private own­ership. In fact, the bulk of the ex­pense, but less than half of the fee revenue, comes from non-navigable waters where the state has no own­ership of the bed.

What justification then, is there for charging the unreimbursed ex­penses of the fill and removal pro­gram to the Common School Fund?

ORS 273.115 provides in part:

"The necessary expenses of the division, including but not limited to the salaries of the director and employes of the division . . . shall be paid out of the Common School Fund. The division may use so much of the Common School Fund as is necessary for:

"(1) The acquisition of lands, ease­ments, and all other interests in real property.

"(2) Improvement, operation, and main­tenance of property, crops, timber, fixtures and appurtenances whether granted or otherwise acquired at any time.

"(3) Operations required of the division by law? (Emphasis added.) This statute is clear statutory au­thority to pay expenses out of the Common School Fund for non-constitutional purposes. But is it valid?

In our opinion, the answer is yes, to the extent that statutory revenues accruing to the Common School Fund in any given biennium exceed the expenses of all non-common school fund programs.

Legislative authority is plenary except as limited by the state or federal constitutions. State ex rel Overhulse v. Appling, 226 Or 575, 585, 361 P2d 86 (1961). In this case Or Const art VIII, sec 2(2) author­izes the board "to expend moneys in the Common School Fund" to carry out the board's duties under art VIII, sec 5(2). We read this provi­sion as a grant of authority to the board, not as an explicit limitation on the authority of the legislature. In other words, art VIII, sec 2 does not purport to prohibit the legisla­ture from authorizing the payment of expenses out of statutory reve­nues placed in the constitution by legislative direction only. No con­stitutional provision requires that revenues derived from the leasing of submerged and submersible lands, from sand and gravel leases or from any other uses of state lands not constitutionally dedicat­ed, be placed in the Common School Fund. Thus, the legislature could have put all such revenues in a statutory fund and used that fund to pay the expenses of the fill and removal law and any other expen­ses of the division. The surplus in such fund after the expenses in any given biennium could have been credited to the General Fund or the Common School Fund without vio­lating the constitution.

Instead of using the device of a statutory fund, the legislature sim­ply placed most statutory revenues in the Common School Fund and provided for the payment of all the Division of State Lands' expenses out of the Common School Fund. ORS 273.105(3); 273.115. On a biennial basis, the division realizes more statutory income than expen­ses and the resulting profit shown on the books of account of the divi­sion becomes a part of the perma­nent Common School Fund. In our opinion, the constitution is not violated simply because the expenses of the fill and removal law exceed the revenues of that pro­gram and the excess expenses are paid out of the Common School Fund. On the basis of the facts given us, the excess expenses may legitimately be considered to be paid out of the statutory revenues accruing to the Common School Fund during the biennium.

In conclusion, it is our opinion that the expenses of the fill and removal law during the biennium may be paid out of the Common School Fund, if the revenues from non-constitutional sources during the biennium exceed those expenses. JAMES A. REDDEN

Attorney General

JAR:PSH

Section 2(1 )(d) describes as a source of the Common School Fund "[t]he proceeds of all property granted to the State, when the purposes of such grant shall not be stated." (Emphasis added.) It has been suggested to us that the State's Admission Act "granted" to the state its submerged and submersible lands and, therefore, such lands are constitu­tionally dedicated to the Common School Fund by virtue of section 2(1 )(d). The state's title to its submerged and submersible lands was not "granted" to the state but passed as an incident to the transfer to the state of local sovereignty. United States v. Oregon 295 US 1, 14 (1935). Title was not conferred by the Congress but by the Constitution itself. State Land Board v. Corvallis Sand and Gravel Co., 429 US 363, 374 (1977). In our opinion this acquisition of title was not by "grant" within the meaning of section 2(l)(d).

However, even if a permit to fill were granted, the permittee could not fill state-owned submerged or submersible lands unless the State Land Board consented. ORS 274.920; 35 Op Atty Gen 844, 883-884 (1971).

ORS 273.105(3) credits the revenues imme­diately to the Common School Fund. But in doing this we assume the legislature was realistic and understood that many of those revenues would quickly have to be paid out in expenses. ORS 273.115. The legislature, presumably, followed this course to earn interest for the schools immediately. Or Const art VIII, sec 2(2).

Suppose during a biennium it becomes apparent that the division's expenses from its non-constitutional activities will exceed its revenues from those activities. Can the division or the legislature appropriate the difference out of the retained profits in the Common School Fund earned from statutory sources in prior years to meet a current biennium's deficit? Since there are no facts presenting that issue, we leave this question open for a future opinion.

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