H.J.R. H (S-2) & S.B. 380: FIRST ANALYSIS MICHIGAN VETERANS TRUST FUND
[Please see the PDF version of this analysis, if available, to view this image.]
House Joint Resolution H (Substitute S-2 as passed by the Senate) Senate Bill 380 (as enrolled)
Sponsor: Representative Allen Lowe (House Joint Resolution H) Senator Mike Rogers (Senate Bill 380)
House Committee: Senior Citizens and Veterans Affairs (House Joint Resolution H) Senate Committee: Human Resources, Labor, and Veterans Affairs
Date Completed: 3-20-95
The Michigan Veterans Trust Fund (MVTF) was created by Public Act 9 of the First Extra Session of 1946, and initially was funded by a post-war reserve fund that had been established in 1943 to assist veterans and their widows and dependents. In 1966, the MVTF became responsible for administering a tuition grant program for the children of deceased, disabled, or missing-in- action veterans. According to some people, the various laws concerning the MVTF limit it to a tuition grant program for children of veterans, an emergency educational loan program for veterans and their dependents, and a program to provide for the needs of veterans and their families. Further, they maintain that, since the governing law specifies that the "fund shall be excluded in determining any surplus or deficiency in the general fund of the state", the MVTF should not be used to fund projects or programs that are not specifically within its purview and for which General Fund money otherwise would be used. Apparently, however, the MVTF has been used to fund a variety of programs and projects other than programs administered by the MVTF board of trustees. In addition, the MVTF reportedly has been liquidated twice despite a requirement in Public Act 9 that $50 million be held in trust.
Many have long contended that the MVTF should be restored to, and maintained at, the full amount of the original trust to enable it, once again, to earn the income necessary to continue to support what many believe are vital assistance programs for Michigan s veterans and their families. In 1994, with the State s General Fund showing a healthy surplus, Public Act 288 was enacted to provide for the transfer of approximately$11.5 million from the
General Fund to the MVTF to bring it up to its statutorily mandated base amount. What is needed now, some believe, is a constitutional guarantee that the MVTF cannot be used again to fund programs not authorized by the MVTF trustees. (See BACKGROUND for more information about the MVTF s enabling legislation and history.)
House Joint Resolution H (S-2) proposes an amendment to Article 9 of the State Constitution of 1963, which concerns the State s financing and taxation powers and responsibilities, to establish constitutionally the Michigan Veterans Trust Fund and the Michigan Veterans Trust Fund board of trustees. All money in the Michigan Veterans Trust Fund established by Public Act 9 of the First Extra Session of 1946 would have to be transferred to the Trust Fund established by the joint resolution. The Trust Fund also could receive appropriations, money, or other things of value. The State Treasurer would have to direct the Trust Fund s investment and credit its interest and earnings back to the Fund. Except for the State Treasurer s investment actions, an expenditure or transfer of an MVTF asset, interest, or earnings could be made only upon the authorization of a majority of the members of the MVTF board of trustees.
The board of trustees would consist of veterans honorably discharged from the armed services and appointed by the Governor as prescribed by law. The board would have to administer the Trust Fund and could not authorize the expenditure or transfer of Trust Fund assets, interest, or earnings
unless the board determined in its discretion and by a majority vote that the expenditure or transfer was for the benefit of veterans or their spouses or dependents.
The proposed amendment would have to be submitted to the people of the State at the next general election.
Senate Bill 380 would amend Public Act 9 of the First Extra Session of 1946, to specify that the MVTF board of trustees would have to administer the Trust Fund established in the Constitution by House Joint Resolution H. The bill also would repeal, one year after its effective date, the section of Public Act 9 that created the Trust Fund in statute. Senate Bill 380 could not take effect unless House Joint Resolution H became part of the State Constitution of 1963 after its approval by two-thirds of the members elected to and serving in the Senate and the House of Representatives and by a majority of the State s electors.
Proposed MCL 35.604b (S.B. 380)
The Senate Human Resources, Labor, and Veterans Affairs Committee adopted a substitute (S-2) to House Joint Resolution H that specifies that the MVTF would be established in the Department of Treasury and that the State Treasurer would have to direct investment of the MVTF and credit its interest and earnings to the Trust Fund.
Public Act 4 of 1943 created a post-war reserve fund of $50 million "for the purpose of liquidating Michigan s obligations, after the termination of the war, to its returning service men, their widows, or dependents". Public Act 4 authorized the State Administrative Board to transfer immediately $20 million from the General Fund to the reserve fund, and directed the Board and the State Treasurer to transfer from the General Fund to the reserve fund "accruing surplus revenues as promptly as accruing unappropriated revenues shall warrant, until the additional transfers shall bring the post- war reserve fund up to the total of $50,000,000". The post-war reserve fund subsequently was transferred to the MVTF when it was created in 1946. Public Act 9 of the First Extra Session of 1946 specified that $50 million of the transferred funds was to remain in the MVTF as a trust, and $200,000 of the MVTF was to be transferred to an emergency loan fund to be used for veterans or their legal dependents "who may be engaged upon
a course of instruction under any state or federal educational program". According to the Act, income accruing in the MVTF in excess of the $50 million and the $200,000 is to be used by the MVTF trustees to provide for the needs of Michigan veterans and their wives and dependents.
The MVTF trustees also are responsible for administering the tuition grant program established by Public Act 245 of 1935 and transferred to the MVTF trustees in 1966. Public Act 245 specifies that a child of a disabled or deceased veteran, or of a veteran who is missing in action, must be admitted to and may attend a State tax-supported educational or training institution of a secondary or college grade, and exempts the person from tuition and tuition-type fee requirements. The MVTF trustees are responsible for determining the eligibility of the applicant for this benefit and for determining the accuracyof the charges submitted to the trustees by the institutions.
The MVTF reportedly has been liquidated twice. The first time, pursuant to Public Act 277 of 1959, was to meet the cash requirements of the General Fund, as specified in Public Act 277. Although that Act called for complete restoration of the Trust Fund by July 1971, subsequent amendments to Public Act 9 provided for additional grants or loans from the MVTF, extended the repayment period, and, in Public Act 119 of 1976, again liquidated the Trust Fund. Public Act 119, however, also called for restoring the MVTF to the principal sum of $49 million by July 1993. This did not occur officially, though, until July 13, 1994, when Public Act 288, transferring just over $11.5 million, was signed into law.
(Please note: The arguments contained in this analysis originate from sources outside the Senate Fiscal Agency. The Senate Fiscal Agency neither supports nor opposes legislation.)
The MVTF has provided much-needed educational grants, loans, and other types of financial assistance to Michigan s veterans and their families for almost 48 years, and it is imperative that the Trust Fund continue to serve them. The MVTF reportedly has furnished almost $70 million in direct aid to more than 1.3 million veterans and dependents, and has assisted approximately 19,000 students with about $14 million in tuition grants. The practice of using the MVTF to provide expedient cures to General Fund shortfalls, however, has been especially costly for the
veterans and their families since the raids have depleted or liquidated not only the income earned on the original $50 million trust but also the principal amount of the trust itself. If the MVTF is to continue to be able to meet the financial needs of those who have sacrificed so much for their State and country, it must be restored to, and maintained at, its original complement. By granting the MVTF board of trustees the sole discretion over expenditures from the Trust Fund, House Joint Resolution H (S-2) would provide veterans and their dependents with a constitutional guarantee that the MVTF never again could be raided to fund programs and projects that are not of direct benefit to veterans and their families. In addition, preventing future raids on the MVTF would save the State considerable sums of interest payments. Since 1976, the General Fund reportedly has paid over $49 million in interest on loans from the Trust Fund.
House Joint Resolution H (S-2) would not affect State or local expenditures or the way funds are spent by the Michigan Veterans Trust Fund. Currently, the Trust Fund is at its statutorily mandated base amount of $49,000,000.
Senate Bill 380 would have no fiscal impact on State or local government.
Fiscal Analyst: L. Nacionales-Tafoya
Senate Bill 380 would complement House Joint Resolution H by providing for the repeal of the current statutory language establishing the MVTF, and specifying that the MVTF board of trustees would have to administer the constitutionally created Trust Fund. The status of the MVTF has been a source of concern to the State s veterans organizations for some time. Although the various laws concerning the MVTF limit it to assistance for veterans and their widows and dependents, it has been depleted twice over the years for other purposes. By giving the Trust Fund s board of trustees sole discretion over expenditures from the MVTF, however, House Joint Resolution H (S-2) would protect the Trust Fund from being used for unintended purposes.
Although protecting MVTF funds and limiting control over those funds are necessary, moving ahead on a constitutional amendment may be premature. Michigan s laws relating to veterans services should first be centralized in one organization so that an accurate accounting can be made of where dollars are spent for those services and who authorizes those expenditures. In addition, the higher education tuition program should be transferred back to the Department of Education as a tuition waiver, rather than continuing as a grant program administered by the MVTF board of trustees.
Response: While other areas of law governing veterans services may need to be addressed, that should not delaygiving the MVTF the constitutional protection it needs and deserves.
Legislative Analyst: P. Affholter
H9596\SHJRHA
This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.