This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

BONDS AND NOTES -- Permissible Uses (pre-payment of certain employer retirement contributions) -- Referendum Requirements (for pre-payment of certain employer retirement contributions)

MUNICIPAL FUNDS -- Appropriations and Expenditures (need to use appropriation of current funds when bonds may be issued)

PUBLIC OFFICERS AND EMPLOYEES -- Retirement Benefits (authority to issue bonds to pre-pay certain employer retirement contributions)

SCHOOL DISTRICTS -- Powers and Duties (authority to issue bonds to pre-pay certain employer retirement contributions)

LOCAL FINANCE LAW, §§11.00(a)(85), 37.00(a)(3); RETIREMENT AND SOCIAL SECURITY LAW, §§17, 17-a; EDUCATION LAW, §521(2): The issuance of bonds by a non-city school district is subject to a mandatory referendum when the bonds would be issued to finance the pre-payment of those contributions to the State Retirement Systems that would otherwise be amortized and paid to the Systems in annual installments. A participating employer may issue bonds to finance the pre-payment of such contributions after the employer has recorded the amount as a "current liability".

You ask whether the issuance of bonds by a non-city school district is subject to referendum when the bonds would be issued to finance the pre-payment of amounts due the State Employees' Retirement System and the State Teachers' Retirement System, respectively, pursuant to chapter 62 of the Laws of 1989 and chapter 175 of the Laws of 1990. You also ask whether a participating employer may issue bonds to finance the pre-payment of such amounts after the employer has recorded the amounts as a "current liability".

Chapter 62 of the Laws of 1989 amended section 17 of the Retirement and Social Security Law, and added a new section 17-a to that law, for the purpose of eliminating a lag in retirement contributions by participating employers in the State Employees' Retirement System. Chapter 175 of the Laws of 1990 made analogous amendments to Education Law, §521(2) in connection with employer contributions to the State Teachers' Retirement System (see Board of Education of West Islip Union Free School District, et al. v New York State Teachers' Retirement System, et al., Supreme Court, Albany Co., RJI No. 019028049, May 26, 1992). In essence, these provisions permit employer contributions to the Retirement Systems for certain fiscal years to be amortized and paid to the Systems, with interest, in annual installments over a prescribed number of years. These provisions also provide employers with the continuing option of pre-paying the contributions (id.) and, subject to certain restrictions,authorize employers to issue debt for the purpose of financing the pre-payment (see Local Finance Law, §§10.00[a], 11.00[a][85]).

Local Finance Law, §37.00(a) generally provides that, with certain exceptions, the finance board of a non-city school district may not adopt a bond resolution unless a tax to be collected in installments has been voted for the object or purpose for which the resolution authorizes the issuance of obligations. In this instance, the only exception to the referendum requirement that might be relevant is the one set forth in section 37.00(a)(3) which is applicable in the case of:

[a] bond resolution or capital note resolution which authorizes the issuance of bonds or capital notes for the payment of judgments, or compromised or settled claims against such a school district, or awards or sums payable by such a school district pursuant to a determination by a court, or an officer, body or agency acting in an administrative or quasi-judicial capacity.

Since the contributions to be amortized and paid to the Retirement Systems are not "judgments", "compromised or settled claims" or "awards", the exception to the mandatory referendum requirement is applicable only if the amounts needed to pre-pay the contributions are "sums" payable pursuant to an administrative or quasi-judicial determination.

It is well established that, in the absence of a clear expression of legislative intent to the contrary, when a general term in a statute is preceded by specific phrases which are all of the same nature, the general term must be limited to matters within that class (see, e.g., Schmitt v Review Committee, 179 AD2d 959, 579 NYS2d 217; Lawrence v Town of East Fishkill, 167 AD2d 447, 562 NYS2d 130; Barsh v Town of Union, 126 AD2d 447, 513 NYS2d 875). The terms "judgments", "compromised or settled claims" and "awards" precede the term "sums" in section 37.00(a)(3) and all connote to varying degrees an involuntary payment made to resolve a controversy involving a school district and another party. In this instance, however, the pre-payment of the contributions is authorized by statute and completely voluntary (see Board of Education of West Islip Union Free School District, supra) and is not in any way related to the resolution of a controversy.

Moreover, in language similar to that used in section 37.00(a)(3), Local Finance Law, §11.00(a)(33) establishes a period of probable usefulness for, inter alia, "sums" payable by a school district pursuant to an administration or quasi-judicial determination. Section 11.00(a)(33), however, pre-dates the enactment of chapter 62 of the Laws of 1989 and chapter 175 of the Laws of 1990 which, respectively, added and amended section 11.00(a)(85) to provide a specific period of probable usefulness for "[p]ayment of the amortized amounts outstanding pursuant to section seventeen-a . . . of the retirement and social security law and section five hundred twenty-one of the education law . . .". Thus, the addition and amendment of section 11.00(a)(85) suggests that the Legislature did not consider the amounts needed to pre-pay the contributions to the Retirement Systems to be "sums" payable pursuant to an administrative or quasi-judicial determination within the meaning of section 11.00(a)(33).

Accordingly, in our opinion, the amounts needed to pre-pay the contributions to the Retirement Systems are not "sums" payable pursuant to an administrative or quasi-judicial determination within the meaning of section 37.00(a)(3). Therefore, it is also our opinion the issuance of bonds by a non-city school district to finance pre-payment of the contributions is subject to a mandatory referendum.

With respect to issuing bonds to finance pre-payment of the contributions after recording the total amount thereof as a "current liability", your staff has advised us that, in this instance, recording the contributions as a current liability required an appropriation financed from available fund balance. Also, under generally accepted accounting principles as prescribed by this Office for most local governments (see General Municipal Law. §36), the full amount of the appropriation is considered "expended" when the current liability is recorded, even though no portion of the contributions has actually been paid.

Although not specifically raised in your inquiry, we note that the appropriation for the payment of the contributions would not lapse at the end of the fiscal year in which the appropriation is made. As a rule, an appropriation for a purpose other than a "capital project" lapses at the close of the fiscal year for which made to the extent that the appropriation has not been "expended", or "obligated" or "encumbered" (see County Law, §368; Town Law, §111; Village Law, §5-522). In this instance, even if the full amount of the appropriation is not "expended" within the meaning of the statutory term (cf. People v Kane, 43 App Div 472, 61 NYS 195 [ordinary signification of "expenditure" is "payment"]), we believe the appropriation is fully "obligated" or "encumbered" because the contributions are unpaid obligations chargeable against the full amount of the appropriation (cf. Town Law, §110; see also County of Ontario v Faculty Association of Community College of Finger Lakes, 57 AD2d 189, 392 NYS2d 111; 1968 Opns St Comp No. 68-77, unreported).

As to the authority to issue obligations, in 1981 Opns St Comp No. 81-122, p 124, we concluded that when a municipality has paid current funds to finance unanticipated capital expenditures which results in a shortage of funds needed to pay operating expenses, the municipality may not subsequently issue bonds to finance the same capital expenditures. We reached this conclusion because instead of being used to finance capital expenditures, the bond proceeds would be used to finance operating expenses and there is no authority to issue bonds to finance operating expenses (cf. Local Finance Law, §§10.00, 11.00; Hurd v City of Buffalo, 41 AD2d 402, 343 NYS2d 950, affd 34 NY2d 628, 355 NYS2d 369).

In this instance, however, although the appropriation to pre-pay the contributions has already been financed from fund balance, no moneys have actually been paid to the Retirement Systems. Thus, unlike the situation in Opn No. 81-122, supra, the bond proceeds would be used to finance the pre-payment of the contributions and not to finance operating expenses.

Moreover, we have previously concluded that when current funds have been appropriated to pay debt service and there are surplus bond proceeds which are also available to pay the debt service, the surplus bond proceeds may be used to make the payment (1988 Opns St Comp No. 88-7, p 11). We reached this conclusion, in part, because there are no constitutional or statutory provisions which require an appropriation of current funds for debt service to be used for that purpose when surplus bond proceeds are available to pay debt service. Similarly, in this instance, we are aware of no statutory prohibition against changing the source of funding for an appropriation to pre-pay the contributions.

Accordingly, it is our opinion that a participating employer may authorize the issuance of bonds to finance the pre-payment of the contributions due the Retirement Systems at any time prior to the actual payment of the contributions.

April 5, 1993
Cornelius F. Healy
Deputy State Comptroller