LAVENDER, J., with whom Opala, Wilson and Waff, JJ., join, dissenting.

¶ 1 In construing the provisions of the Oklahoma Constitution we must give effect to the intent of its framers and of the people who adopted it. Boswell v. State, 181 Okla. 435, 74 P.2d 940, 942 (1937). In my view, the intent of OKLA. CONST. art. 10, § 23, coupled with art. 10, § 25, is that Oklahoma State government — including highway projects — are to be funded on a cash, or pay-as-you-go basis, i.e. on a fiscal year plan, and that long-term debt reaching beyond the fiscal year may only be incurred by a vote of the people at the polls. In other words, the requirements of our Constitution, in plain and simple language, mandate that the Oklahoma Legislature provide for an annual balanced budget and that multi-year debts are prohibited unless approved by the citizens of this State at a general election.

¶ 2 The majority opinion, contrary to this clear mandate, upholds as constitutional a proposed three hundred million dollar ($300,000,000.00) bond issue on the basis the State has no legal obligation to repay bondholders, even though the holders of the bonds will have conferred a $300,000,000.00 benefit upon all of our State's citizens by providing the funding for construction and improvement of Oklahoma's highway/road transportation system. In my opinion, the majority is allowing State officials to circumvent art. 10, §§ 23 and 25 by mistakenly accepting the view that future Legislatures will not be bound to appropriate sufficient revenues to repay the bondholders. Future Legislatures will not be able, in good faith, to refuse to appropriate the money needed to pay this obligation because failure to do so, as Justice Watt has forcefully pointed out, "would be devastating to Oklahoma's credit worthiness and [would] cripple our ability to finance any project by future bond issues." From a realistic perspective, then, the State will, in fact, be obligated to repay the bonds and interest thereon, and if it does not a valid enforceable obligation would exist by virtue of the benefit conferred upon the State. To rule otherwise, as the majority does, simply ignores the economic reality of the situation and, at a minimum, permits violation of the spirit of our fundamental law, something I am unwilling to sanction.

¶ 3 If I were writing for the Court in this case, I would hold that before this obligation of $300,000,000.00 in multi-year debt be incurred, it must be submitted to the people for their approval at a general election and such authorization must be accompanied by a provision providing for a direct annual tax sufficient to pay the interest and principal on such debt, as art. 10, § 25 of the Oklahoma Constitution requires. Because the majority places its stamp of approval on the proposed bond issue without demanding compliance with this essential requisite of our fundamental constitutional law, I must respectfully dissent to the majority opinion in this matter.

OPALA, J., with whom LAVENDER, WILSON, and WATT, JJ., join, dissenting.

¶ 1 This case is Inot about the lenders' willingness to advance money to the State for a loan that may not be enforceable on default as a "debt". Rather, it is about the State's constitutional authority to accept — sans an antecedent approval by a vote of the people — the proceeds of a loan that will not pass muster as a "self-liquidating" project's obligation. While today's pronouncement gives a green light to the proposed bonded indebtedness, I would declare that the transaction is fraught with a fatal constitutional infirmity.

I.

THE CONSTITUTION OF THE STATE OF OKLAHOMA COMMANDS THAT THE STATE SHALL NOT BORROW WITHOUT AN ANTECEDENT VOTE OF THE PEOPLE.

¶ 2 The Legislature has authority over the fiscal affairs of the State to the extent its power is exercised within the bounds set by fundamental law. The Constitution of the State of Oklahoma prohibits the State (its agencies and institutions) from Iborrowing or contracting debts without a vote of the people, regardless of whether the duty to repay constitutes merely a moral or a legally enforceable obligation.

¶ 3 The State cannot contract debts, other than those necessary to repel invasion, without a vote of the people. To contract a debt does not mean necessarily to create (against the State) a legally enforceable obligation. The fundamental law's concern is not with legally enforceable debts stricto sensu. In the constitutional sense, "to contract a debt" means simply to make an agreement for borrowing money.

II.

THE PROPOSED OBLIGATION MAY NOT BE HELD TO BE SELF-LIQUIDATING BECAUSE THE BONDS ARE TO BE RETIRED SOLELY FROM LEGISLATIVE APPROPRIATIONS OF STATE REVENUE.

¶ 4 This court has approved bonds that provide funds — Isans an antecedent vote — for acquisition or construction of Iself-liquidating projects. That kind of obligation, the court held, does not create a debt because the bonds so issued are to be retired Isolely from revenues derived from the project itself. See IApplication of Bd. of Regents of Univ. of Okla, 161 P.2d 447 (Okla. 1945); IApplication of Bd. of Regents for Okla. Agric. Mechanical Colleges, 196 Okla. 622, 167 P.2d 833; IBaker v. Carter, 165 Okla. 116, 25 P.2d 747 (dormitory bonds to be retired from rents and fees paid by student users); IApplication of Okla. Turnpike Auth., 303 Okla. 335, 221 P.2d 195 (toll road bonds to be retired from tolls and fees paid by motorist users); IApplication of Okla. Capitol Improvement Auth., 1960 OK 207, 355 P.2d 1028 (office building bonds to be retired from rents paid by office renters); IApplication of Okla. Capitol Improvement Auth., 1966 OK 6, 410 P.2d 46 (building bonds to be retired from rents paid by space lessees).

¶ 5 In order for there to be a self-liquidating obligation, four basic criteria must be met. IFirst, all proceeds from the sale of bonds must go toward a defined project. ISecond, the project must generate funds dedicated solely toward retirement of the bonded indebtedness. IThird, the funds must be created by the terms of the obligation, and not from preexisting revenue. IFinally, the stream generated by project funds must be placed beyond legislative control and dedicated to the retirement of bonds.

¶ 6 None of the money to be realized through the sale of the bonds in contest here would be used to acquire or construct property that is capable of generating funds for retirement of the bonds. The loan to be incurred is not for a true self-liquidating project. The bonds in suit are to be retired solely from legislative appropriations which are to be made from available revenues of the State. Unlike toll roads, office buildings, and dormitories, highways dedicated to free public use can neither be leased nor rented unless originally built by, or otherwise placed under the charge of, the Oklahoma Turnpike Authority.

¶ 7 The bond obligation proposed here for the court's approval closely resembles the transaction considered in Application of Okla. Educ. Television Auth., 1954 OK 219, 272 P.2d 1027. There, the bonds tendered were to fund the construction and operation of educational television facilities. They were to be retired with the use of legislative appropriations made from revenue accruing to the Public Building Fund. The proposed transaction was held violative of Art. 10 § 23, Okla. Const., because it created a debt against the Public Building Fund of Oklahoma.

¶ 8 Neither in Application of Okla. Educ. Television Auth. nor in the case at bar did the people vote on the proposed transaction. In both cases (1) the bonds to be approved are to be repaid solely from funds accruing to existing permanent funds of the State, and (2) no funds would be derived from the project itself.

¶ 9 The revenue funds to be used for repayment of the obligation proposed here are already in existence. In a true self-liquidating scenario, the fund source and the stream feeding money for repayment would not have been in existence at all but for the project-generated revenue.

¶ 10 The undeniable fact in the scheme used here for repayment is that there is total reliance on legislative appropriations. The project cannot generate any tangible revenue of its own. There is no possibility of repayment without dependence on annual legislative appropriations. This alone prevents the proposed transaction from qualifying as a "self-liquidating" project's obligation.

¶ 11 In short, the project itself will not generate revenue that would be sufficient to repay the bonds to be issued. For the obligation's repayment there is nothing more than reliance on legislative appropriations to be made from existing streams of State revenue. Nothing has been specifically committed toward repayment of the obligation to be incurred. The revenue stream designed for this case differs markedly from the criteria critical to the birth of a self-liquidating obligation. The latter model must create a purely circular fund flow — from loan proceeds to construction or acquisition and from project-generated revenue to the obligation's repayment — with absolutely no need for legislative intervention or for infusion of funds from dehors the project.

SUMMARY

¶ 12 The proposed transaction is more than a "modern method of financing." By the provisions of 73 O.S.Supp. 1997 § 168.6[ 73-168.6], the State has indeed been authorized to "contract debt" without an antecedent vote by the people. The commands of Art. 10, §§ 23, 24, and 25, Okla. Const., which prohibit the State from borrowing money for repayment — sans an approval of the electorate — are clearly offended.

¶ 13 The Constitution recognizes but two methods for the State to borrow money: (1) where there has been an antecedent vote of approval by the electorate or (2) where the transaction creates a "self-liquidating" obligation. Neither of these has been employed for this bond issue. I hence dissent from the court's mischaracterization of the transaction in contest as a constitutionally authorized loan of money.

APPENDIX REVENUE STREAM TYPICAL SELF-LIQUIDATING OBLIGATION

¶ 14 To be used for repayment are available sources other that those generated by the project itself; the quantum of legislative appropriations is uncertain; there is nothing in the authorizing statute that commits some definite percentage of total revenue to the repayment of the bonds. 73 O.S.Supp. 1997 § 168.6 [ 73-168.6] (E), (G) (H).

ALMA WILSON, J., with whom LAVENDER, OPALA, and WATT, JJ., join, dissenting:

¶ 1 Today's judicial confiscation of art. 10, §§ 23 and 25 annuls the right of the people to approve or disapprove multi-year deficit financing of an essential governmental function. For the first time, this Court gives its imprimatur to deficit spending by our legislative and executive officers. I cannot participate in the demise of our conservative fiscal management that is the hallmark of the Oklahoma Constitution. Since statehood, we have strictly adhered to the constitutional dictate that the people's resources be managed on a pay-as-you-go basis, leaving to the people their constitutionally preserved right to control the costs of borrowing and deficit spending. The Legislature and the Executive Branch should reconsider the evils of today's course of state expenditure.

¶ 2 The Oklahoma Capitol Improvement Authority (OCIA), a state agency comprised of the Governor, Lieutenant Governor, State Treasurer, and five appointed executive department heads, filed its application for approval of a proposal to borrow approximately $325 million dollars through a ten-year bond issue. The net proceeds, in the amount of $300 million dollars, are to be utilized to partially fund the statewide highway system improvement projects listed in the Legislature's five-year plan. The paperwork submitted by the OCIA to this Court would create an obligation on the part of OCIA to repay the borrowed money. In the proposed bond form, the OCIA promises to repay the borrowed money to the bondholders at maturity, in ten years, and to pay interest on the principal on a semiannual basis on the first day of May and November of each year commencing May 1, 1998. The funds pledged to the payment of the principal and interest on the bonds, in the bond form, are payments to be made to OCIA by the Oklahoma Department of Transportation (ODOT). The payments from ODOT to OCIA are subject to annual appropriation to ODOT. Incorporated as part of the OCIA resolution to issue the bonds is the agreement between OCIA and ODOT whereby ODOT agrees to lease highway improvement projects from OCIA for monthly payments as may be appropriated by the Legislature for that purpose.

¶ 3 OCIA urges that its obligation to repay the borrowed money is not a constitutional debt because: 1) ODOT's payments under the agreement are contingent upon annual appropriations; 2) future legislative bodies are not legally obligated to make the appropriations, even though they may be morally obligated; and 3) ODOT's payments are the only funds pledged to retire the bonds. In approving these so-called "appropriation-risk" bonds as not a debt, in the constitutional sense, the majority opinion, first, excludes the state highway system from the people's reserved legislative powers, and then, implicitly adopts the "expanded special fund" exception which this Court expressly rejected more than sixty years ago.

¶ 4 First, the majority opinion seriously confines the legislative powers reserved to the people to legislative subject areas not specifically mentioned in the Constitution. Citing the art. 5, § 36, art. 16, § 1, and art. 21, § 1, the majority opinion concludes that the Legislature, and not the people, have the power to determine policy for the state highway system. Never before has this Court read the constitutional provisions imposing specific duties on the Legislature to provide for public schools, public welfare, public roads, and the myriad of other subjects, as limitations on the people's constitutionally reserved legislative powers.

¶ 5 As early as 1924, this Court recognized the importance of the state's highway system to the people: "Aside from the building of institutions for education and religious training, probably no civic improvement is of greater necessity to our people than the construction of an adequate system of public highways." And in 1937, this Court recognized the people's reserved power to determine whether a debt should be incurred through the issuance of bonds for highway improvement. Today, however, the majority opinion removes the public highway system from the power of the people.

¶ 6 Second, the majority opinion again departs from established law and adopts the "expanded special fund" exception to our constitutional debt limitation provisions. The state debt limitations are set out in art. 10, §§ 23, 24, and 25. Section 23 prohibits the state from creating or authorizing the creation of a debt or paying a deficit, regardless of the form or source of the payment, except as provided in the annual budget balancing provisions of § 23 and the provisions of §§ 24 and 25. Section 25 prohibits state officials from contracting multi-year debts, unless the debt is authorized by law. It also prohibits a law authorizing the contracting of multi-year debts from becoming effective until it has been approved by a majority vote of the electorate.

¶ 7 The Legislature has observed the prohibitions in art. 10, § 25, whether authorizing state officials to contract debts for ordinary governmental expenses or for economic development through creative financing. Legislative intent in not referring 73 O.S.Supp. 1997 § 168.6[ 73-168.6] to a vote of the people can only be speculated. However, it is noted that § 168.6 [ 73-168.6] was considered and enacted in the press of the final days of the legislative session and the failure to refer § 168.6 [ 73-168.6] to a vote of the people could have been an inadvertent omission in drafting. The people have not approved § 168.6 [ 73-168.6].

¶ 8 This Court has held that the constitutional debt limitations are expressed in plain and ordinary terms preserving to the people the right to know how much is available for appropriation and the right to control the creation of debts in excess of the cash on hand. In ordinary terms, a debt is a thing owed to another. Notwithstanding the clear expressions, this Court has defined "debt" within the constitutional debt limitations as an obligation for the payment of which resort may be had to state revenues.

¶ 9 A public obligation is a constitutional debt where the obligation will be paid in a subsequent fiscal year and the payment will be derived, in whole or in part, directly or indirectly, from revenues raised through the taxing powers or from state owned property. Pursuant to this legal standard, we have recognized two exceptions to the constitutional debt limitations: 1) the restricted special fund or self-liquidating exception; and, 2) the future installments for future services exception.

¶ 10 The special fund exception was adopted in Baker v. Carter, 1933 OK ___, 25 P.2d 747, wherein application was made for approval to issue and sell bonds to build dormitories at the Oklahoma Agricultural and Mechanical College at Stillwater. The Court found that the dormitory bonds would be retired out of a special fund consisting of rentals of dormitory rooms; there would be no fixed liability of the state, nor direct obligation on behalf of the state; and, there was no showing of a strong reason for believing any contingency, immediate or remote, would ever arise whereby the debt would fall on the state. The Court concluded there is no constitutional or statutory inhibition against the issuance of dormitory bonds payable out of a special fund inasmuch as the rentals would belong to the college without an appropriation by the legislature and only the rentals were placed in the sinking fund pledged to payment of bonds and no state property would be pledged to pay the rentals. Baker v. Carter adopted the special fund exception: the constitutional debt limitation is not violated by an obligation which is payable out of a special fund, if the state is not liable to pay the same out of its general revenues should the special fund prove to be insufficient and the transaction by which the indebtedness is incurred cannot in any event deplete the resources of the state.

¶ 11 The Baker v. Carter special fund doctrine was "restricted" in Boswell v. State, 1937 OK ___, 74 P.2d 940. In Boswell, the State Highway Commission sought approval of a bond issue authorized by statute. Motor fuel taxes were pledged to pay the obligation, but as herein, the bond provided that it was not a debt of the state. Boswell observed that whether the bond would be a state debt is a judicial question and not legislative or executive question; that the people reserved to themselves control over creation of debt; that the money raised by issuance of the bonds would be used for maintenance and construction of highways, ownership which is in the state by virtue of the sovereignty and no other legal entity can claim ownership; that whether one or another part of the state revenue is drawn upon is immaterial, so long as the revenue could be available for any public purpose which the Legislature may designate; and, that the special fund created by imposition of motor fuel taxes is not a "special fund" within the meaning of the special fund doctrine. Boswell explained that the special fund doctrine is a test to determine if any part of the special fund is raised under the state's taxing power — if so, then the "restricted special fund doctrine" does not come into play, and, if not, then the obligations are self-liquidating and the "restricted special fund doctrine" applies.

¶ 12 Boswell further explained that the "expanded special fund doctrine" applies to obligations that provide for the extension or improvement of state property, which obligations are payable out of the future net income of the property as improved. Boswell expressly rejected the "expanded special fund doctrine." Boswell disapproved the proposed bonds because the highway improvement project was in no sense self-liquidating. That is, the special fund was created from specific taxes which constitute a part of the state's general revenue and could otherwise be devoted by the Legislature to any legitimate public use, and the existing roads would be used by those purchasing gasoline the same as any new construction. Boswell cautioned that confusion between the "special fund doctrine" and special funds, such as the highway maintenance and construction fund in the State Treasury, could lead to unwarranted extension of the "restricted special fund" exception to the constitutional debt limitation provisions.

¶ 13 The "restricted special fund doctrine" established in Boswell has remained the law, until today. If a multi-year obligation for a construction project is to be paid from a special fund, the moneys of which are generated solely from the project and not from any state revenues that could be distributed to another public function, then the bond issue and the project are self-liquidating. The "restricted special fund" doctrine, however, was further restricted in Application of Oklahoma Educational Television Authority, 1954 OK ___, 272 P.2d 1027, holding that the language in the 1941 amendment to art. 10, § 23 — without regard to source of money to be paid — means all public revenue whether derived from the taxing power or from other sources, such as land rentals. The bonds in that case were to be paid from the revenues accruing to Public Building Fund from lands granted to state by federal government, hence, the "restricted special fund" or self-liquidating doctrine was not applicable.

¶ 14 Because the proposed bonds, as contemplated by 73 O.S.Supp. 1997 § 168.6[ 73-168.6], would be repaid by legislative appropriation, the restricted special fund or self-liquidating exception does not apply. However, finding that the improved highways will generate additional motor fuel taxes, the majority opinion implicitly adopts the "expanded special fund doctrine." The confusion of special funds of self-liquidating transactions and special funds for deposit of dedicated taxes by the majority is now insignificant, inasmuch as the debt limitation provisions are also of little or no significance with today's pronouncements.

¶ 15 Under the guise of stare decisis, the majority opinion strikes down our constitutional debt limitations. It is obvious from the established legal principles set forth above, the majority opinion does not rest on stare decisis. Rather, stare decisis requires this Court to hold that 73 O.S.Supp. 1997 § 168.6[ 73-168.6] falls squarely within the plain language of art. 10, § 25 that a "debt shall be authorized by law" and "No such law shall take effect until it shall, at a general election, have been submitted to the people and have received a majority of all the votes cast for and against it at such election." Until 73 O.S.Supp. 1997 § 168.6[ 73-168.6] shall take effect and have the force of law, there is no effective authorization for the Oklahoma Capitol Improvement Authority to borrow money for improvement of the highway infrastructure through a bond issue as proposed herein.

¶ 16 True to my oath to uphold the Constitution of the State of Oklahoma, I will not participate in the demise of our clear constitutional requirement that the state maintain a balanced annual budget unless the people have given, at the ballot box, their prior approval of deficit spending. Today, this Court rules that a proposed ten-year highway bond issue would not create a state debt and therefore Oklahomans have no constitutional right to approve or disapprove of the bond indebtedness. The ruling is unmistakable — our state constitution no longer protects unsuspecting Oklahomans from the fiscal irresponsibility of state officials.

WATT, J., dissenting, with whom LAVENDER, OPALA, and WILSON, JJ., join.

¶ 1 Through decades of constitutional jurisprudence, this Court has consistently guarded against the State's attempted use of long-term debt financing. In sanctioning the bond issue before us, the majority's decision flies in the face of our prior case law, runs afoul of the plain language of our Constitution, and sounds the death knell to Oklahoma's constitutional balanced budget provisions. I cannot accede to such a radical departure from our prior precedents, nor can I endorse the demise of this State's balanced budget. Contrary to the majority's assertions, these bonds will not be "self-liquidating" and will create a legally binding debt against the State without a vote of the people in violation of the Oklahoma Constitution. Furthermore, approval of the current bond issue is not mandated by stare decisis. Rather, as demonstrated below, stare decisis requires the opposite result.

¶ 2 In this original action, the Oklahoma Capitol Improvement Authority seeks this Court's approval for the issuance of $300,000,000.00 in bonds to fund various construction and improvement projects, including maintenance and repair, on state highways and bridges. The bonds are to be retired over a ten year period through annual payments to the Authority from the Oklahoma Department of Transportation, which will receive the entirety of the repayment funds via annual appropriations from the Oklahoma Legislature. Furthermore, the statute authorizing the bond issue, 73 O.S.Supp. 1997 § 168.6[ 73-168.6], was not submitted to the citizens of Oklahoma for their consideration. The objections to the proposed bond issue filed by the various opponents urge that the proposed bonds would create state debt in violation of Article 10, §§ 23 and 25 of the Oklahoma Constitution. I agree.

¶ 3 Title 73 O.S. 1991 § 160[ 73-160] confers upon this Court exclusive original jurisdiction to determine the validity of bond issues proposed by the Authority. In passing on such applications, we are to determine whether "the bonds have been properly authorized in accordance with [the Oklahoma Capitol Improvement Authority Act, 73 O.S. 1991 § 151[ 73-151] et seq.] and the Constitution of Oklahoma, and [whether] when issued they will constitute valid obligations in accordance with their terms, . . ." None of the opponents object to the manner in which the bonds were authorized and I detect no procedural infirmities. However, for the reasons set forth below, I would declare the proposed bond issue unconstitutional.

¶ 4 In construing the constitutionality of a statute, this Court is not authorized to consider the statute's propriety, desirability, wisdom or its practicality as a working proposition. Those questions are clearly and definitely established as functions of the Legislature. The function of this Court is limited to the determination of the validity of the statute. There is a presumption that the act is constitutional. The Legislature, unless prohibited by the Constitution, has the right to declare fiscal policy, and the question as to the wisdom of the policy is not within the scope of this Court's authority. We must, therefore, sustain statutes where possible and nullify them only when they are clearly unconstitutional. Application of Okla. Capitol Improvement Auth., 1960 OK 207, 355 P.2d 1028, 1031.

¶ 5 Article 10, § 23 of the Oklahoma Constitution states in relevant part:

The state shall never create or authorize the creation of any debt or obligation, or fund or pay any deficit, against the state, or any department, institution or agency thereof, regardless of its form or the source of money from which it is to be paid, except as may be provided in this section and in Sections 24 and 25 of Article X of the Constitution of the State of Oklahoma. . . .

Article 10, § 25 provides that no debt may be allowed against the state for some work or project unless the law authorizing the same "shall impose and provide for the collection of a direct annual tax to pay" for it, providing further that no such law shall take effect until approved by the people in a general election. The issue in this proceeding is whether the State, through the enactment of 73 O.S.Supp. 1997 § 168.6[ 73-168.6], has authorized the creation of a state "debt" in violation of Article 10, §§ 23 and 25.

¶ 6 In Smith v. State Bd. of Equalization, 1981 OK 57, 630 P.2d 1264, this Court described the purpose underlying § 23. We held:

Article 10, § 23 was adopted by the people in 1941 to provide for budget balancing in this state. There is no room for construction or provision for further inquiry when the Constitution plainly speaks. A constitutional amendment should be construed in consideration of its purpose and be given practical interpretation to carry out the plainly manifested purpose of the people who adopted it. The fiscal responsibility shown by Oklahoma has become an enviable example for the nation. This policy of fiscal restraint and control can only be applauded in a time of monetary crisis. We do not find this constitutional requirement to be unduly burdensome nor to be a vain endeavor. The citizens of this state, as well as the Legislature, have a vested constitutional right to know how much money is available for appropriations to the General Revenue Fund and special funds which are supported by direct taxes, fees, and other revenue.

Id., 1981 OK at ¶ 9, 630 P.2d at 1267 (footnote omitted).

¶ 7 Also instructive is the following language from Boardman Co. v. Board of Comm'rs of Ellis County, 1929 OK ___, 276 P. 474. Although the Court there was referring to § 26 of Article 10, which governs indebtedness of political subdivisions, the Court's rationale applies equally to § 23:

We hazard the opinion that there can be found in our Constitution no provision couched in clearer or more comprehensive terms than this section. There is not even the possibility of ambiguity or misunderstanding as to what is meant. . . . What was uppermost in the minds of those who wrote this document, which is our fundamental law? The one purpose was to safeguard the citizens and taxpayers of the state against the . . . [mis-] handling of public moneys. That provision is subject to no exigency, pays no heed to convenience, expediency, or emergency. It is safe, sane, unconditional, and, so far as human documents can be regarded, should be held sacred in its observance, interpretation, and enforcement. Once this clear protecting mandate is whittled away, reasoned around, or disregarded, for any cause, the chief guaranty of our orderly municipal progress, whether in state, county, city, town, township, or school district, is threatened.

Id., 276 P. at 477.

¶ 8 With these directives in mind, I first address the majority's false assertion that stare decisis dictates approval of the proposed bonds. In Application of Okla. Capitol Improvement Auth., 1960 OK 207, 355 P.2d 1028, this Court addressed the question of whether proposed bonds created a state debt in violation of §§ 23, 24 and 25. We noted:

This Court has approved statutes creating "self-liquidating" projects and the bonds issued to construct them as not creating a state debt, where only the revenue therefrom was usable for retirement of the bonds and no recourse was had to the revenue of the state for that purpose. Application of Oklahoma Turnpike Authority, 203 Okla. 335, 221 P.2d 795; Application of Board of Regents for Oklahoma Agricultural Mechanical Colleges, 196 Okla. 622, 167 P.2d 883; Baker v. Carter, 165 Okla. 116, 25 P.2d 747.

Application of Okla. Capitol Improvement Auth., 355 P.2d at 1031.

¶ 9 This Court approved the bonds at issue in 1960, which were to be issued to purchase state agency office space and which were "to be retired solely from the revenues from the office buildings." Id. at 1030. Regarding the cases cited above, in Application of Okla. Turnpike Auth., 1950 OK ___, 221 P.2d 795, the proposed bonds were to be issued for the purpose of building a toll road and were to be retired "solely from the revenues to be derived from the operation of the toll road in question." 221 P.2d at 804. In both Application of Bd. of Regents for Okla. Agric. Mech. Colleges, 1946 OK ___, 167 P.2d 883, and Baker v. Carter, 1933 OK ___, 25 P.2d 747, the proposed bond proceeds were to be used to construct dormitory buildings and the bonds were to be retired solely from "rents and fees to be received from the students using the dormitory. . . ." 167 P.2d at 883; 25 P.2d at 753 (exact language used in both opinions). See also Application of Okla. Capitol Improvement Auth., 1966 OK 6, 410 P.2d 46 (bonds to be used to construct state office buildings and to be retired by rents derived from such projects); Application of Bd. of Regents of Univ. of Okla., 1945 OK ___, 161 P.2d 447 (dormitory bonds to be retired through rentals, fees and charges to students using dormitories).

¶ 10 The Authority argues that the present fact situation is analogous to those in the cases cited above. I disagree. The transparent, illusory nature of the proposed transaction in the present case constitutes a major distinction between the proposed bonds at issue here and those previously validated by this Court. The bonds proposed in this case are not self-liquidating; none of the money realized through issuance of the bonds will be used to purchase any property or assets that will generate funds with which the bonds may be retired. Highways dedicated to public use cannot be leased. They are constructed for the benefit of all citizens who travel upon them. The office buildings, dormitories and toll roads discussed in the cases above were capable of generating funds to retire the bonds issued to create them. Here, the bond proceeds will be used to construct or repair roads and bridges that are dedicated to the public use without any means of recoupment save annual legislative appropriations from the general revenues of the State. Patches of asphalt and concrete used to repair and maintain public roadways are simply incapable of generating the direct revenues required of a "self-liquidating" bond project. Herein lies the constitutional infirmity of the bond issue proposed here.

¶ 11 This Court invalidated a similar proposed bond issue in Boswell v. State, 1937 OK ___, 74 P.2d 940. There, the State Highway Commission also sought to secure bond funds for constructing and repairing state highways and bridges. The statute that authorized the bond issue, which similarly was not presented to the people for consideration, pledged certain tax revenues to retire the bonds. We invalidated the bond issue on the grounds that it created state "debt" in violation of the constitutional debt limits then found in Article 10, §§ 23-25.

¶ 12 Here, as in Boswell, the bond proceeds are earmarked for projects that will generate no revenues with which the bonds may be retired. Although specific funds have not been pledged toward the retirement of the bonds at issue in this case, the Boswell Court noted that the pledged tax revenues there were nonetheless "part of the general revenues of the state. . . ." The appropriations to be used to pay for the bonds in the present case will also flow from this state's general revenues. See also Excise Bd. of Carter County v. Chicago, R.I. P. Ry. Co., 1931 OK ___, 3 P.2d 1037, and Boardman Co. v. Board of Comm'rs of Ellis County, 1929 OK ___, 276 P. 474 (In both cases this Court declared unconstitutional a county's attempt to incur indebtedness, beyond the current fiscal year and without a vote of the people, to repair/rebuild public bridges).

¶ 13 The majority also holds that its conclusion is consistent with and dictated by previous opinions of this Court regarding leases. In Application of Okla. Capitol Improvement Auth., supra., 355 P.2d 1028, this Court distinguished between long-term obligations created by leases or contracts from long-term debts created by bonds. The distinction was made in the context of constitutional debt provisions. The Court noted that in a sense, any contract to pay money in the future would create a debt, but that courts generally exclude contracts payable in installments if the consideration is also to be provided in the future. Id., 355 P.2d at 1032-33. A lease has been defined as "a contract by which one owning . . . property grants to another the right to possess, use and enjoy it for specified period of time in exchange for periodic payment of a stipulated price. . . ." Black's Law Dictionary, 800 (5th ed. 1979). The leases referred to in U.C. Leasing, Inc. v. State ex rel. Bd. of Public Affairs, 1987 OK 43, 737 P.2d 1191, Indiana Nat'l Bank v. State ex rel. Dept. of Human Serv., 1993 OK 101, 857 P.2d 53, and Halstead v. McHendry, 1977 OK 131, 566 P.2d 134, relied upon by the majority, typified classic installment leases. In each case, the governmental entity made annual payments for the annual use of certain property. The majority's assertion that "there is no constitutional difference between leasing equipment and leasing roads" misses the point. Public roadways and the repairs made thereto cannot be leased in the conventional sense of that word. The law governing leases is simply inapplicable to the bond proposal at issue here.

¶ 14 In each of the bond cases approved by this Court, bondholders could rely upon some tangible asset for repayment of their investment. In each case, the assets were capable of directly generating the funds that were to serve as the sole source of repayment of the bonds. Although factually and legally incongruous with bond issues, the lease cases discussed above also involved tangible assets that constituted a type of "collateral." In the event of default by the governmental entity, the lessors in those cases could rely upon the return of their "collateral" which served as the object of the lease. In this context, no tangible asset will be available here. The maintenance and repair projects under consideration here are incapable of producing direct revenues. The bondholders are afforded no property upon which they may rely for repayment of their investments. In the event of default, the asphalt and concrete cannot be repossessed and sold to pay investors. Stare decisis requires rejection of these proposed bonds.

¶ 15 I also disagree with the majority's conclusion that the proposed bonds are self-liquidating because certain taxes and fees placed in the State Transportation Fund have been "earmarked" for the payment of highway bonds. As the majority correctly states, the Legislature has authorized the use of two different state funds for the payment of the bond debt. Subsection 168.6(E) refers to payments from the State Highway Construction and Maintenance Fund, 69 O.S. 1991 § 1501[ 69-1501], while subsections (G) (H) refer to payments from the State Transportation Fund, 69 O.S. 1991 § 1501.1[ 69-1501.1]. Both funds were in existence prior to the present bond issue and both consist of various tax and "other" revenues.

¶ 16 Initially, I find the majority's "self-liquidating" argument factually untenable. The Legislature has stated its intent in § 168.6 [ 73-168.6] (H) "to maintain the funding level of the State Transportation Fund as required in order for the Department of Transportation to fully pay any and all obligations incurred" by virtue of the proposed bond deal. Stated otherwise, the Legislature has vowed not to alter the current revenue make-up of the State Transportation Fund. However, as set forth in note 1, supra., the Legislature has also stated its intent in § 168.6 [ 73-168.6](E) to appropriate to the same fund "sufficient monies to make payments to the Authority for purposes of retiring the debt created pursuant to this section."

¶ 17 The majority's theory coupled with these two stated intentions beg the question: If the current funding level of the State Transportation Fund is sufficient to retire the proposed bond debt, why has the Legislature stated its intent to "appropriate" additional monies for that purpose? The answer to this question is that the current funding level of the State Transportation Fund is sufficient only to service the State's annual roadway needs. The proposed bond issue will create an extraordinary expense that will have to be funded by extraordinary appropriations. If the Fund contained sufficient monies to pay for the bonds, as the majority intimates in its "self-liquidating" argument, this bond issue would never have been proposed.

¶ 18 Second, I find the argument advanced by the majority legally flawed as having already been expressly rejected by this Court in Application of Okla. Educ. Television Auth., 1954 OK ___, 272 P.2d 1027. There the Legislature passed a bill authorizing the Educational Television Authority to issue revenue bonds for constructing and operating public television facilities. The bonds were to be paid with monies from the Oklahoma Public Building Fund. The enabling legislation in that case was strikingly similar to that in the case at bar: The Authority could sue and be sued and it was designated "an instrumentality of the state," the Act stated that the proposed bonds "shall never become obligations of the State of Oklahoma," and it provided "that neither the faith and credit, nor taxing power of the State, or any political subdivision thereof, is pledged to the payment of the principal of or the interest on such bonds." Id., 272 P.2d at 1028. In both cases the proposed bonds were to be repaid solely from funds accruing to existing permanent funds of the State. In neither case was the bond issue submitted to a vote of the people.

¶ 19 In holding that the proposed bond issue violated Article 10, § 23, we distinguished the case from the previously sanctioned "self-liquidating" bond cases:

Those bond issues or debts [in the self-liquidating bond cases] were not created against existing permanent funds of the state, for regularly recurring use in the interest of the citizens of the state. The money realized by each of those bond issues itself created the construction or facility which in turn produced the income and funds against which the debt was a standing obligation, and the debt specifically could not be collected from any other source, nor paid with any other moneys. But for the creation or construction of the facilities in those cases, the funds against which those debts stood would never have existed. But here we have the creation of a debt against a fund which has always existed as a valuable asset and fund of the state. This fund is not created by the facility here to be constructed, or operated, nor does this facility nor this Authority add anything at all to this permanent fund of the state. If the bonds in this case were to be paid exclusively from revenue earned or received by the facility in the operation authorized by this Act, then the last cited authorities would be in point, and in keeping with such rule the transaction would not create a debt in violation of the quoted section of the Constitution.

Id. at 1031 (emphasis added).

¶ 20 Continuing, the Court held:

If [the Public Building Fund] and its proceeds did not exist and therefore was not available for use in behalf of the citizenship of the state, then the state could not have those things now purchased with that fund and its proceeds without using tax money of the state for such purpose. Therefore, while the Public Building Fund is not itself a tax revenue fund of the State, it serves purposes which if they were not served out of that fund, they must necessarily be served out of tax money, or the State must go without them. Therefore there is no fair analogy between this permanent fund of the State and the special revenue funds or self-liquidating debts involved in each of the foregoing . . . cases.

Id. at 1033.

¶ 21 As was true in the above case, there is no fair analogy between the self-liquidating bond cases and the case presently before us. The construction and maintenance projects proposed to be funded by the instant bond issue will produce no income that may be used to retire the debt. Moreover, the State Transportation Fund exists as a valuable asset and fund of the State. It was not created by the projects to be completed here, nor will the projects or the Authority add anything at all to this fund. The Fund "serves purposes which if they were not served out of that fund, they must necessarily be served out of tax money, or the State must go without them." The proposed bonds are in no sense self-liquidating.

¶ 22 Notwithstanding the above, the Authority contends the proposed bonds would not create state debt within the meaning of our Constitution because both § 168.6 and the bonds themselves contain language disavowing the creation of any such debt. However, as this Court stated in Boswell v. State, 1937 OK ___, 74 P.2d 940, 943:

[A recitation in a statute] that the notes "are not debts or general obligations of the State of Oklahoma," . . . is in no respect conclusive of the matter. The question of whether the bill authorizes a debt of the state contrary to the constitutional provisions is a judicial and not a legislative question.

¶ 23 The language of both § 168.6 [ 73-168.6] and the proposed bond issue makes clear that the Authority is "obligated" to pay the bondholders principal and interest on the bonds. Article 10, § 23 refers to a debt or "obligation." For purposes of these proceedings, the terms are synonymous. See The American Heritage Dictionary 370 (Second College Ed. 1985) ("debt" defined as "[a]n obligation or liability to pay or render something to someone else"). Moreover, § 168.6(E), n. 1 supra, specifically refers to the proposed bond deal as "the debt created pursuant to [§ 168.6]." (emphasis added). See also § 168.6(M), which discusses certain funds that may be used to pay "the annual debt service." (emphasis added).

¶ 24 Equally clear is that the Authority is a "department, institution or agency" of the State within the meaning of Article 10, § 23. Title 73 O.S.Supp. 1997 § 152[ 73-152] specifically provides that the Authority is an "instrumentality of the state" and that the exercise of its powers are "deemed and shall be held to be an essential governmental function of the state."

¶ 25 Finally, the Authority may be sued in the event of any default. Section 152 [ 72-152] states that the Authority "may sue and be sued and plead and be impleaded." Section 18(h) of the Resolution provides:

All such agreements and covenants entered into by the Authority shall be binding in all respects upon the Authority and its officials, agents and employees, and upon its successors, and all such agreements and covenants shall be enforceable by appropriate action or suit at law or in equity, which may be brought by any holder or holders of Bonds issued hereunder.

¶ 26 Taken together, the above facts lead me to conclude that the proposed bonds would create a debt or obligation against the Authority within the meaning of the Oklahoma Constitution. Therefore, the Legislature's authorization of such debt through the enactment of § 168.6 runs afoul of Article 10, §§ 23 and 25. I am cognizant that the Authority's liability to repay the bonds is limited to the appropriations specifically pledged for that purpose. 73 O.S.Supp. 1997 § 168.6[ 73-168.6] (F). However, that the liability may be limited does not alter the fact that a "debt" has been created against the Authority. See U.C. Leasing, Inc. v. State ex rel. Bd. of Public Affairs, 1987 OK 43, 737 P.2d 1191.

¶ 27 At oral argument, the Authority asserted that the legislation at issue created merely a "moral" obligation on the part of the State to retire the bond debt. Their argument is based upon the previously quoted language of § 168.6 [ 73-168.6] and the proposed bonds which declare that the bonds would never constitute debt of the State. Therefore, they argue, future legislatures would not be "legally" bound to appropriate monies to retire the debt. However, we need not here be concerned with whether the bond issue would create a moral, rather than legal, obligation against the State itself, because the issuance of such bonds would create a legally enforceable debt against an instrumentality of the State: The Oklahoma Capitol Improvement Authority. Counsel for the Authority admitted as much at oral argument. The creation of such debt against an instrumentality of the State is prohibited by the Oklahoma Constitution to the same extent as is the creation of such debt against the State itself.

¶ 28 As the majority noted, we were informed at oral argument that the proposed bonds will undoubtedly carry an "A+" rating. The reason for such rating is simple: Financiers and investors both know that the State of Oklahoma dare not default on any of its bonded indebtedness. Regardless of whether these proposed bonds are labeled "legal" or "moral," the economic reality is that the State's failure to repay bondholders in full would be devastating to Oklahoma's credit worthiness and cripple our ability to finance any project via future bond issues. Notwithstanding the language to the contrary, these bonds will indeed be backed by the full faith and credit of the State of Oklahoma.

¶ 29 The following language, enunciated by this Court over fifty years ago, applies with equal force and effect today:

[I]t is our solemn duty to determine the intent of the framers of the Constitution and of the people in adopting it with respect to the authority of the Legislature to incur debts which the people must pay. What we have said clearly demonstrates that the interpretation and construction sought to be placed upon these constitutional provisions by the [Authority] could not have been contemplated by the framers of that document, but that the people intended that the government should be operated on a cash, or pay-as-you-go, plan. It is significant to note that in the adoption of the Constitution the people reserved to themselves all power to determine whether or not debts should be incurred, excepting only those debts which might be incurred under the specific provisions of sections 23 and 24, article 10, of the Constitution, and also fixed upon themselves the responsibility for providing the revenue for the payment of such debts.

Boswell, supra., 74 P.2d at 945.

CONCLUSION

¶ 30 The proposed bonds in this case are not self-liquidating and the statute authorizing their issuance, 73 O.S.Supp. 1997 § 168.6[ 73-168.6], was not submitted to the people of Oklahoma for their consideration. The bonds will create debt against the Capitol Improvement Authority, an instrumentality of the State of Oklahoma, to be serviced solely through legislative appropriation from the general revenues of the State while circumventing the vote of the people called for in Article 10, § 25.

¶ 31 My oath of office requires me to support, obey and defend the Constitution of the State of Oklahoma, not repeal it. Accordingly, I would hold that the proposed bond issue is in violation of Article 10, §§ 23 and 25 of the Oklahoma Constitution.

ON PETITIONS FOR REHEARING

ALMA WILSON, J., with whom LAVENDER, OPALA, and WATT, JJ., join, dissenting to denial of rehearing:

¶ 1 Oklahoma's constitutional hallmark, our balanced-budget provisions, Okla. Const., art. 10, § 23, prohibits officials in all three branches of our state government from creating multi-year debts or authorizing deficit spending. Even when it is for the laudable purpose of highway improvement to encourage economic growth which I support, the State may not become indebted without voter approval. Okla. Const., art. 10 § 25.

¶ 2 The Class of 2000 should not inherit the cost of today's highway improvements unless that is the will of their parents and grandparents expressed at the ballot box. And, this Court should not join the Legislature in authorizing our highest Executive officials to engage in deficit spending without voter approval. Accordingly, rehearing should be granted so this Court may preserve the people's constitutional right to approve the proposed highway bond indebtedness herein.

WATT, Justice, with whom LAVENDER, OPALA and ALMA WILSON, JJ., join, dissenting:

¶ 1 The majority, through its original decision and by its vote today, sanctions the State's use of long-term debt financing without a vote of the people. The actions of the Legislature — and of the majority of this Court in ratifying them — do no simply whittle away at the clear protecting mandates of Article 10, §§ 23 and 25 of the Oklahoma Constitution, their actions gut the State's balanced budget amendments. Pursuant to the majority's rational, the State will never create a legally binding obligation against itself if it issues bonds that contain certain "magic" language disavowing the creation of any such debt, regardless of the economic realities of the situation. No decision of this Court should rest upon such a fallacy.

¶ 2 What is particularly disturbing about the ratification of the current bond issue is that this is just the tip of the iceberg. Our citizenry would be well advised to prepare for future large-scale deficit financing of capital projects by State officials. Approximately two-thirds of the on-going one billion dollar road improvement legislation will be financed via these so-called "moral obligation" bonds. There is evidence in the record that suggests similar bonds for prison construction is next. The majority's decision will serve as no legal impediment for the issuance of "moral obligation" bonds for any capital improvement project. The taxpayers will eventually be called upon to foot the bill.