FEDERAL-AID HIGHWAY ACT OF 1956-POWER OF

PRESIDENT TO IMPOUND FUNDS

Appropriation acts are of a fiscal and permissive nature. They authorize but do not compel the executive branch to expend funds. Under the Federal-Aid Highway Act of 1956 (June 29, 1956, c. 462, 70 Stat. 378, as amended, 23 U.S.C. 101 note), the States have no inchoate right to funds apportioned to them prior to the actual approval of a project by the Secretary of Transportation.

The hortatory declaration of congressional policy set forth in 23 U.S.C. 101 (b) does not constitute a mandate to approve all qualifying projects for which funds are available.

The highway taxes imposed under the Highway Revenue Act of 1956 (June 29, 1956, c. 462, 70 Stat. 387, 397) are not paid directly into the Highway Trust Fund, and the assets in that fund are neither directly nor automatically available for the payment of Federal contributions to the States.

The President has the power to impound Federal-aid highway funds after they have been apportioned to the States but before they have become obligated as the result of the approval of a specific qualifying project.

THE SECRETARY OF TRANSPORTATION.

FEBRUARY 25, 1967.

MY DEAR MR. SECRETARY: This is in reply to your letter of February 21, 1967, requesting my opinion as to the legality of a reduction in the amount of Federal-aid highway funds which may be obligated during the Fiscal Year ending June 30, 1967.1

The facts underlying your inquiry are as follows: President Johnson's message to Congress of September 8, 1966, Transmitting Proposals for Measures for Curbing Inflation and Preserving our National Economy, announced that a reduction or deferral of lower priority Federal expenditures

1 Although the Department of Commerce is still technically responsible for the administration of the Federal-aid highway program, 23 U.S.C. 101, these functions are in the process of being transferred to the Department of Transportation pursuant to section 6(a)(1) (A)– (G) of the Department of Transportation Act, October 16, 1966, P.L. 89-670, 80 Stat. 931, 937.

by approximately $3 billion was required in order to assure the continuing health and strength of our economy (H. Doc. 492, 89th Cong., 2d sess., pp. 1, 4). Pursuant to this mandate the Director of the Bureau of the Budget by letter dated November 7, 1966, advised you, in your then capacity of Under Secretary of Commerce for Transportation, that the Federal-aid highway program would have to bear a fair and feasible share of the deferrals.

In line with subsequent discussions with and instructions from the Bureau of the Budget, the Federal Highway Administrator advised his division and regional engineers on November 23, 1966, that the Federal-aid highway program was being limited to $3.3 billion in total project obligations during Fiscal Year 1967. The instructions indicated that the limitation was in recognition of the need for reducing nonmilitary Federal expenditures in order to curb inflationary pressures.

Prior to this action it was anticipated that $4 billion would be made available for obligation during Fiscal Year 1967. The effect of the action is to defer to fiscal years subsequent to fiscal 1967 the obligation of funds in excess of $3.3 billion for Federal-aid highway projects. The reduction of funds was limited to the approval of future projects and did not affect the availability of funds for projects which already had been approved and which, pursuant to 23 U.S.C. 106(a), constitute contractual obligations of the United States.

An understanding of the legal problems raised by your inquiry will be facilitated by an outline of the pertinent provisions of the Federal-aid highway program. The program involves successive, and distinct, stages of authorizations, apportionments, programs, projects and appropriations.

The basic authorizations for appropriations for the Interstate Highway system relating to the 15-year period ending with Fiscal Year 1972 may be found in section 108(b) of the Federal-Aid Highway Act of 1956, June 29, 1956, c. 462, 70 Stat. 378, as amended, 23 U.S.C. 101 note. The funds expected to be available with respect to each fiscal year included in these authorizations are apportioned among the States on or before the first day of January preceding the fiscal year for which they are authorized to be appropriated. 23 U.S.C. 104 (a), (b). Funds so apportioned remain avail

able for obligation at any time prior to the close of the second fiscal year after the fiscal year for which they are authorized (23 U.S.C. 118 (a), (b)).

After apportionment, the States submit general programs of proposed highway projects for approval (23 U.S.C. 105). Following the approval of a program by the Secretary, the State submits "such surveys, plans, specifications, and estimates for each proposed project included in an approved program as the Secretary may require." Approval of a specific project by the Secretary "shall be deemed a contractual obligation of the Federal Government for the payment of its proportional contribution thereto." (23 U.S.C. 106(a))

Payments to the States are made pursuant to appropriation acts based on estimates of the requests to be made by the States in each fiscal year for reimbursement for work performed. We understand that there is a variable, often considerable, time lag between the approval of a project and the requests of the State for partial or full reimbursement of the Federal proportional contribution to the cost of the work performed on that project. Thus actual appropriations in any given year will include reimbursement of costs resulting from projects approved in preceding years.

The amount which may be appropriated in any given year for Federal-aid highway purposes is subject to two limitations: First, it cannot exceed the amounts provided for in the authorization act and, second, it cannot exceed the funds available in the Highway Trust Fund. See, e.g., Departments of State, Justice and Commerce, the Judiciary and Related Agencies Appropriation Act, 1967, November 8, 1966, P.L. 89-797, 80 Stat. 1479, 1495 (Bureau of Public Roads, Federal-Aid Highways (Trust Fund)).

2 While 23 U.S.C. 118 (b) uses the term "expenditure," the second sentence of the subsection indicates that the term "expenditure" is there used in the sense of "obligation."

* Section 209 of the Highway Revenue Act of 1956, June 29, 1956, c. 462, 70 Stat. 387, 397, 23 U.S.C. 120 note, established the Highway Trust Fund and appropriated into that Fund amounts equivalent to specified percentages of certain taxes received in the Treasury. Under section 209 (f), the amounts in the Highway Trust Fund are available for appropriations out of the Fund, to be made annually, for expenditures to meet the obligations of the United States under 23 U.S.C. 106(a).

It is my conclusion that the Secretary has the power to defer the availability to the States of those funds authorized and apportioned for highway construction which have not, by the approval of a project, become the subject of a contractual obligation on the part of the Federal Government in favor of a State.

I

Although your inquiry is not directly concerned with an appropriation act, but rather with the effect of legislation authorizing actions ultimately leading to appropriations, it will be useful to consider first the effect of a congressional appropriation of money. The basic function of such legislation is to furnish the formal permission required by Article I, section 9, clause 7 of the Constitution for the withdrawal of funds from the Treasury. Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937). The courts have recognized that appropriation acts are of a fiscal and permissive nature and do not in themselves impose upon the executive branch an affirmative duty to expend the funds. Hukill v. United States, 16 C. Cl. 562, 565 (1880); Campagna v. United States, 26 C. Cl. 316, 317 (1891); Lovett v. United States, 104 C. Cl. 557, 583 (1945), affirmed on other grounds, 328 U.S. 303 (1946); McKay v. Central Electric Power Cooperative, 223 F.2d 623, 625 (C.A.D.C. 1955).

Congress, of course, is fully aware of the rule that an appropriation act in itself does not constitute a mandate to spend. The classic exposition of this characteristic of appropriations legislation may be found in the House Appropriations Committee report on the General Appropriation Bill, "RESPONSIBILITY OF THE EXECUTIVE BRANCH "Economy neither begins nor ends in the Halls of Congress. *** The Congress * * * decides the maximum amounts which must be appropriated for * * * various activities, and the annual appropriation bill provides the sums so determined by the Congress.

"Appropriation of a given amount for a particular activity constitutes only a ceiling upon the amount which should be expended for that activity. *** [It is the] responsibility [of every Government official] to so control and administer

the activities under his jurisdiction as to expend as little as possible out of the funds appropriated.” H. Rept. 1797, 81st Cong., 2d sess., p. 9.

Or as the then Senator Harry S. Truman observed in 1943: "MR TRUMAN. *** When the Congress appropriates funds it gives the executive branch an authority to incur obligations. Certainly none of us hold that we give a mandate to expend the funds appropriated. We expect the funds to be used only where needed, and not in excess of the amount appropriated, to carry out some phase of law." 89 Cong. Rec. 10362.

An appropriation act thus places an upper and not a lower limit on expenditures. The duty of the President to see that the laws are faithfully executed, under Article II, section 3 of the Constitution, does not require that funds made available must be fully expended. This principle has received statutory recognition in the Anti-Deficiency Act, February 27, 1906, c. 510, sec. 3, 34 Stat. 49 (31 U.S.C. 665 (c)), which authorizes the executive branch to effectuate savings of appropriated funds, and in 31 U.S.C. 701, which provides that unexpended appropriated funds shall revert to the Treasury.

Many factors must be weighed by the Executive in determining the extent to which funds should be expended. Consideration must be given not only to legislative authorizations and appropriations but also to such factors as the effect of the authorized expenditures on the national economy and their relation to other programs important to the national welfare.

A situation analogous to the present one arose in the early 1940's when the economy of the United States shifted first to defense and later to war production. At that time President Franklin Delano Roosevelt directed that projects having a lower priority would have to be postponed or even cancelled in spite of the availability of appropriated funds. In response to complaints about the curtailment by the Bureau of the Budget of certain programs of the Agricultural Marketing Administration, President Roosevelt set forth the powers and responsibilities of the executive branch in this area:

"It should, of course, be clearly understood that what you refer to as 'the practice of the Bureau [of the Budget] of