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Charitable Contributions By Localities: Is It Lawful?

By Greg L | 19 May 2011 | Virginia Politics | 27 Comments

Is it legally permissible for a locality in Virginia to donate taxpayer dollars to a little league?  Is it OK for a locality to provide taxpayer funds to a charity as a gift?  Are localities appropriating discretionary funds or General Fund revenues in ways that violate the Constitution or the Code of Virginia?  That’s been a nagging question in my mind for some time that got answered by Attorney General Ken Cuccinelli today, and the response is fascinating.

In January the Attorney General issued an official opinion in response to a question posed by Delegate O’Bannon about the constitutionality of the General Assembly’s longstanding habit of earmarking funds to non-state entities in apparent contravention to Article 4, Section 16 of the Virginia Constitution.  The opinion strongly argues that the plain language “to prohibit the appropriation of public funds … for charitable purposes” regardless of how noble the intent of the exercise is expressly prohibited, and brought to a screeching halt all sorts of dubious diversions of taxpayer dollars.

Since localities in Virginia only have the authorities expressly granted to them by the General Assembly, I wondered whether this Constitutional restriction applied to localities as well.  So I asked my local member of the House of Delegates, Bob Marshall, if he could request guidance from the Attorney General on this point, and rather quickly I got an answer.

The Attorney General replied that this question was addressed within a footnote of that January opinion, which reads:

The General Assembly has enacted enabling legislation that permits such donations by localities. VA. CODE ANN. § 15.2-953 (Supp. 2010) (authorizing counties to make appropriations and donations to charities located within their jurisdiction).

That code section (click here to read it) narrowly identifies several circumstances under which a locality can appropriate funds to a charity or non-governmental organization.  Recipients cannot be affiliated with a religious organization unless the organization is providing services to the county, for example.  A locality can give money to a Chamber of Commerce, it can fund colleges and universities, it can give money to a 501(c)(3) organization for the purposes of promoting energy efficiency.  Localities are not authorized to hand out public money to anyone it thinks is worthy or noble, even if it is a 501(c)(3), unless it meets some strictly defined criteria.

So most of the money localities hand out to private entities would appear to fall outside of these legal guidelines.  Not good.

This raises another question, however.  If the General Assembly is prohibited by the Constitution from appropriating funds to non-state entities, where exactly does it get the power to provide localities an authority it does not itself have?  It would seem to me that another question about the constitutionality of VA Code § 15.2-953 itself is in order, because the General Assembly likely does not have the legal authority to authorize localities to engage in behavior it itself is prohibited from engaging in under the Constitution of Virginia.

So here’s my follow up to the Attorney General:

If Article 4, Section 16 of the Constitution of Virginia prohibits the General Assembly from appropriating public money to non-state entities, did the General Assembly exceed their constitutional authority in enacting VA Code 15.2-953?  It would appear to me that if the General Assembly does not have the legal authority to engage in a behavior they similarly lack the legal authority to authorize a locality to engage in that same prohibited behavior.

The response to that question is going to be very interesting, and the implications are pretty significant.

In the meantime, assuming that VA Code Section 15.2-953 is constitutional, there are a lot of localities consistently engaging in legally prohibited behavior with taxpayer money.

UPDATE: After further research it would seem that VA Code Section 15.2-953 is constitutional because of the following language in the Constitution of Virginia appearing in Article 3, Section 16.  The relevant portion is emphasized:

The General Assembly shall not make any appropriation of public funds, personal property, or real estate to any church or sectarian society, or any association or institution of any kind whatever which is entirely or partly, directly or indirectly, controlled by any church or sectarian society. Nor shall the General Assembly make any like appropriation to any charitable institution which is not owned or controlled by the Commonwealth; the General Assembly may, however, make appropriations to nonsectarian institutions for the reform of youthful criminals and may also authorize counties, cities, or towns to make such appropriations to any charitable institution or association.

Still, a quick review of the recently passed budgets of several counties and cities suggest a number of appropriations made that are not compliant with 15.2-953, including several millions of dollars given to charities by Fairfax County in support of “affordable housing.”  I hope some readers in Fairfax County and elsewhere start asking for explanations of how these appropriations meet the requirements of the law and demand, if the appropriations are unlawful, that they be suspended and the money returned to the taxpayers.



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27 Comments

  1. Yin Yang said on 19 May 2011 at 2:45 pm:
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    Good work! A lot of people have been “uncomfortable” about our BOCS giving taxpayer dollars to private entities. It is obviously a way to “buy” political favor and perhaps votes. I don’t need a Supervisor deciding which worthwhile cause he or she should give my money to. I can do that… Without the “overhead”… And get a tax deduction to boot! The BOCS should shut down this practice immediately. I’m liking our AG more every day.

  2. Jonathan Way said on 19 May 2011 at 3:15 pm:
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    You raise an excellent point which is worth exploring. The Manassas City Council did confirm recently what we can and cannot do with respect to our relatively small charitable and cultural contributions within the current law, but we did not question the validity of the law.

  3. Greg L said on 19 May 2011 at 3:49 pm:
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    I’m impressed the City Council got out ahead of the curve on this, as the PW BOCS members are still at the point they’re referring the question to the county attorney.

    What was the guidance given to the City Council on this subject?

  4. Anonymous said on 19 May 2011 at 8:00 pm:
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    Go to court and get shot down by the judge whos wife is a board member of one of those charitys. You must be very very naive to think that since you have a point a judge will listen to you. HA ha ha. Have you ever seen a definition of a preponderance of evidence? There is none, is what ever the judge thinks it ought to be.

    Dude , I have told you how the construction industry works in this state, do u think the judicial here is any better?

    Ha HA HA HA HA!!!!!!!

    Victum of J nDR court not of record.

  5. pprados said on 19 May 2011 at 9:07 pm:
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    First, I agree that the power to appropriate directly to charitable institutions from the G.A. is prohibited by Va. Const. Art. IV § 16.

    For localities: Localities only have those powers granted to them by the General Assembly. The questions asked by Greg are valid and unanswered by the January AG opinion. Va. Const. Art. VII § 3 governs the scope of authority that can be granted to localities, and states in part:

    “The General Assembly may provide by general law or special act that any county, city, town, or other unit of government may exercise any of its powers or perform any of its functions. . .”

    There is a distinct absence of case law analyzing Va. Const. Art. VII § 3, meaning we are left with nothing to analyze but the actual text of Va. Const. Art. VII § 3. In my opinion, this necessarily excludes the ability to grant to localities powers the G.A. itself does not possess. In short, Va. Code § 15.2-953 is unconstitutional to the extent the locality is attempting to exercise the authority to give money to a charity that could not qualify for receipt off funds under the narrow factors of Va. Const. Art. IV § 16. Even shorter: Va. Code § 15.2-953 is unconstitutional.

    Remember, it is still appropriate for a charity to provide services pursuant to government appropriations as long as the appropriation is to a government agency that subsequently farms out the payments to non-profits and for-profits to provide social services. A prime recent example in public discussion is the provision of adoption placement services in Virginia by charities. Nonetheless, direct contributions to charities by Counties, Cities, and Towns appear to be unconstitutional.

    Way to blow the lid off this one Greg.

    Cross-posted at http://northernvirginialawyer.blogspot.com/2011/05/are-virginia-counties-utilizing.html

  6. Raymond Beverage said on 19 May 2011 at 10:03 pm:
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    Greg, I hope someone from Manassas City Council comes back to give a quick overview of what guidance they received. I do know, having attended the Budget Worksession where the Council looked at nonprofits, it was seperated out into two groupings: (1) Health & Welfare (NVFS, ARC, ACTS, PMAH, and other nonprofits providing support either in Housing or Human Services areas) and (2) Cultural Enrichment (St Pat’s Day Parade, Christmas Parade, and the known nonprofits of music, theatre and ballet).

    As I read the OAG Memo and the Code, the Housing & Human Services which “provide services to residents of the locality” fall within the intent of performing DIRECT services (key word) to the residents of a locality. These services are either ones the government would have a higher expense for, cannot perform the direct service, or insufficent appropriations so the government agency could perform the service.

    The public benefit of a Cultural Enrichment is one to ponder. I do know from the years the City has funded the two parades, there are crowds in Old Town, and if a study was done, I would expect there may be a spike in sales tax receipts, which one could say there is a DIRECT benefit to the City. Not sure if the same could be said for ballet, theatre and music in terms of a cash receipt - especially with the shift to the venue of the Hylton Center at GMU-PW Campus. Under a holistic view, supporting these venues could be said to be an element in attracting residents or businesses. Without a study though, hard to analyze the benefit.

    I am not a Constitutional Scholar or a Lawyer, just an old Federal Comptroller and Contracting Officer looking at the issue through those “lenses” so to speak.

    As for PWC, as a result of the FY2011 Budget discussions, a MOU was created for all area-wide nonprofits (Health & Welfare and Cultural Enrichment) to complete for funding in FY2012. I have placed the link below to the agenda item “Community Partners Donation Policy” from April 12th where this was discussed and approved by the BOCS:

    http://www.pwcgov.org/documents/bocs/agendas/2011/0412/5-D.pdf

  7. Maureen said on 19 May 2011 at 10:19 pm:
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    Greg,

    Good post! It will be very interesting when the AG renders an opinion on this. Can’t wait to see what it is.

  8. AndyH said on 20 May 2011 at 9:25 am:
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    This is an interesting question although I’m unsure of the practical impact. For instance, I believe the Volunteer Fire Department in Manassas is a non-profit. The city funds them via contribution of public funds…..

  9. Greg L said on 20 May 2011 at 9:38 am:
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    Under current law there is a specific authorization for municipalities providing money to volunteer fire and rescue:

    “B. Any locality may make gifts and donations of property, real or personal, or money, to … (ii) any association or other organization furnishing voluntary fire-fighting services; (iii) any nonprofit lifesaving crew or lifesaving organization, or rescue squad, within or outside the boundaries of the locality;…”

    (ref: http://lis.virginia.gov/cgi-bin/legp604.exe?000+cod+15.2-953)

    If this section of the code is struck down as unconstitutional, one way the City could avoid problems would be to organize the volunteer fire and rescue services as an agency of local government. I’m not perfectly clear on what the city’s reorganization of fire and rescue services involve but I get the impression this is where it is headed.

  10. Andy H said on 20 May 2011 at 10:32 am:
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    That isn’t where it’s headed…:) The volunteer fire department is keen to remain a seperate entity and that’s the way our code is now written as well. Can’t predict the future though.

    I don’t know a heck of a lot about this so it’ll be interesting to see where it shakes out. Wouldn’t the end of Section 16 allow localities to do this?

    “the General Assembly may, however, make appropriations to nonsectarian institutions for the reform of youthful criminals and may also authorize counties, cities, or towns to make such appropriations to any charitable institution or association.”

    or am I just late to the party?…..

  11. Greg L said on 20 May 2011 at 10:44 am:
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    I think arguing that volunteer rescue squads are a program to reform youthful criminals would be badly received by the department. I know the professional folks are somewhat suspicious of them, but I doubt that suspicion extends quite this far.

    Anyways, under Section B in the current law it’s pretty clear that funding volunteer fire and rescue is authorized. If that law is declared unconstitutional it’ll just take another round of restructuring. Easy-peazy, right?

  12. Andy H said on 20 May 2011 at 11:13 am:
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    Lol…what I’m referring to is “and may also authorize counties, cities, or towns to make such appropriations to any charitable institution or association.” The language there seems to indicate that this is a seperate grant of authority and seems to say that it’s appropriate - however, I’m not a constitutional scholar either…:)

    If we have to do another round of restructuring, I’m going to jump out a window…:)

  13. Dave Core said on 20 May 2011 at 11:19 am:
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    Greg, I do recall that a year ago during the Budget Work Sessions the City Council had decided to develop a process for reviewing and approving grants/requests for taxpayer funding and I am not sure if that process had been developed. In any case, if the City provides “significant” funding to a local nonprofit, it should be clearly shown how that funding assists City residents. For example, City residents could receive a discount on the nonprofit organization’s services, if applicable, or receive a complimentary service of some sort. As a minimum, the organization receiving the funding should track how many City residents have benefited specifically from the nonprofit services (Zip Code 20110 would mostly work for these purposes).

    My concern is the lack of accountability and of the direct connection to City residents who support the charitable organizations through tax dollars.

  14. Raymond Beverage said on 20 May 2011 at 11:30 am:
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    @David - interesting point about City Residents receiving a discount. One of the things I have stood up about is how, for the four days in July, I as a 17 year member of the Manassas Musuem Associates must pay $20 a day to ride a shuttle around the City.

    Why? I already contribute each year to the Musuem; purchase items for gifts in the store; and pay through my tax dollars for the operations of the total Musuem network.
    Of course, the answer is pay the $20 and enjoy.

    As for the Council’s developing a process, I provided Martin Crim a copy of PWC draft MOU since I sit on the board of a local nonprofit in addition to my City appointment to a local gov’t Commission. It’s a place to at least start, and in reality, if a nonprofit is performing a service to a government (at any level), there should be either a contract or MOU/MOA in place detailing specificically the accountablility for the funds provided.

  15. Andy H said on 20 May 2011 at 11:51 am:
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    The MOU idea is a good one but is not the panacea imagined by many. Entering into a MOU requires staff time to manage those MOU’s. You need to develop service measures, reports and those require validation. Before anyone waves that away, imagine the hue and cry if we simply entered into a MOU with a non-profit and never verified that they were getting the job done. Never read the reports. People would rightlfully be angry. Now, this isn’t an arguement for or against just pointing out stuff….

    I think this is a good thread - wish we had similar discussions on state-level mandates and other spending driven by Richmond and Washington, the scale of which dwarfes this line item…..

  16. Spank That Donkey said on 20 May 2011 at 8:21 pm:
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    The usual suspects will line up to second guess the Founding Fathers…

  17. Andyh said on 20 May 2011 at 8:34 pm:
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    Indeed, and the usual suspects will cower in anonymity

  18. Raymond Beverage said on 20 May 2011 at 9:43 pm:
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    The MOU in not the panacea…I can agree on that. However, it is an element of due diligence, and also a document by which the gov’t can answer to a citizen when a questions arises.

    The County, does have the requirement of a service standard - there is the requirement the sponsoring County Agency do their work to ensure the community organization meets both the Strategic Plan goals and also Agency priorities. Much simplier, when you read that, to see Housing & Human Services are “easier” to justify funding as “X” number of citizens will receive “X” number of services - it is up to the requester to set those numbers, not the gov’t.

    This standard for the community organization is no different (at least in theroy and on paper) from the operations of the sponsoring Agency. The Agency will have to look at the organization’s mission statement, what it identifies as services to be provided, what amount the organization is requesting (and at that time looking at latest audit or Form 990). And yes, submit an invoice and report as to how that funding is spent.

    And yes, staff time will be taken to manage those reports - however, since the selected nonprofit is fulfilling a purpose/service for which the gov’t cannot provide, and since the MOU is crafted with the above described standard with the organization as an extension of the Agency, the process of monitoring can be intergrated as part of the Agency’s quarterly review. Having as a Federal Contracting Officer made full contracts or purchase orders with nonprofits to perform a service, the time taken becomes just part of the rest of the due diligence.

  19. Groveton said on 21 May 2011 at 10:11 am:
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    “The usual suspects will line up to second guess the Founding Fathers…”.

    The founding fathers?

    Today’s Virginia constitution is the seventh constitution of the Commonwealth of Virginia. It was ratified in 1971. This latest constitution was written in a state wide constitutional convention essentially required by the federal government. It replaced the 1902 Virginia Constitution which was specifically written to disenfranchise African - American residents of Virginia. From a mandate for poll taxes and literacy tests in order to vote to a requirement for segregated schools, the 1902 constitution was an overt return to racism from the 1870 constitution. The 1870 constitution established fairness and equality because it was a mandate of reconstruction. Our elected officials in Richmond returned to their racist core as soon as the Yankees left. In fact, the 1902 constitution was never ratified by the voters of Virginia. And yet it took pressure from the federal government to rewrite that racist constitution 70 years later, making the racist 1902 constitution by far the longest lasting Virginia constitution.

    We should never forget the long, incompetent, hapless and racist history of Virginia’s political class. Virginia hasn’t been run by “founding fathers” like Washington, Jefferson, Mason and Madison for well over 200 years. Today’s Virginia Constitution, held in such high esteem by some members of the GA, was forced on that same political body by the federal government’s quite correct belief that racism in America needed to be written out of state constitutions by the early 1970s!

    Please don’t confuse this hapless seventh Virginia constitution with the US Constitution. And please don’t confuse the empty suits of Virginia’s political elite with the founders of the United States.

  20. Anonymous said on 22 May 2011 at 5:49 pm:
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    How would this affect an organization such as SERVE?

  21. Tutu said on 22 May 2011 at 6:55 pm:
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    @ anonymous 5:49 pm

    I don’t know how much serve shelter gets from the City but the serve shelter is looking to expand in the City, it is on the Council agenda Monday night.

    I guess we the citizens should just roll over and just continue to welcome more deadbeats and illegals to our fair City to suck the City taxpayer dry. Where do these folks go after the serve, affordable housing and welfare I think!

    At least I can go to the Ballet and cheer up with the Arts!

  22. Anonymous said on 22 May 2011 at 8:03 pm:
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    Tutu you should learn a little before you make such an ignorant comment. While I agree with your stance on illegals, many years ago my wife left me to raise two children by myself. Imagine being a man raising an 8 year old daughter and a 5 year old son. Serve kept me going. In fact several years later I served on their board and saw first hand the good they do. They provided me a vehicle that kept me working. If not for serve assisting many of these people would be on the street. By the way, my daughter is now married with two wonderful children and my son is a law enforcement officer. As for me, I have worked for a local government for over 25 years and have never taken 1 cent of taxpayer money. One way or another we are going to have to help some people. They aren’t all bad and it isn’t always their fault.

  23. Greg L said on 22 May 2011 at 8:43 pm:
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    SERVE and other charitable entities are worthy organizations with noble goals. I don’t think anyone is credibly arguing that they should not exist and be the recipient of generous private support.

    There’s an important moral argument that money extracted from taxpayers under penalty of fines and imprisonment should not be diverted from funding essential government operations and be turned over to non-governmental entities as gifts. Government should not tax me so much they have money left over to just give away, no matter how noble the intent. The Virginia constitution specifically prohibits such behavior for this very reason.

    We either follow the law or change the law. There is no room for government to willfully ignore constitutional restrictions on their power for whatever purpose, no matter how good that purpose may sound. If government does not adhere to the rule of law, what moral power does it have to demand we follow the law?

  24. Yin Yang said on 22 May 2011 at 9:15 pm:
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    I absolutely agree ith Greg’s last comment. There’s a “cost” to washing our money through Government. I would rather donate directly to the charities of my choice so they get 100% of my money rather than pass the same donation though the Government where a good percentage of my tax dollars go to overhead, administration, etc., etc., etc. I’m guessing that Charities get pennies on the dollar relative to the taxes required to support a donation made via an elected official. I would rather donate “full value” directly.

    I also don’t like losing the tax credit I get from a direct donation. Is is yet another cost to the taxpayer when Government decides it wants to spend “our money” on discretionary causes of “it’s choosing”. The only beneficiary is the elected official who enjoys receiving “political capital” and “free publicity” at taxpayer expense while denying the rest of us the simple pleasure that comes with supporting worthy causes of OUR choosing. This is porkbarral spending, pure and simple.

    The use of taxpayer dollars to support private entities is an insult to tax payers on so many levels… It implies that “we” (the taxpayers) are too stupid to make our own choices… I think I’ll look for candidates who “get” this in the future.

    I really don’t like elected officials who treat me (us) like we aren’t smart enough to make our own choices.

  25. Raymond Beverage said on 23 May 2011 at 1:17 pm:
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    SERVE, as part of Northern Virgina Family Services, falls into that scope of providing Human Services & Housing at a lower cost than the government could operate. Besides the Homeless Shelter and the Day Care run for those extremely low, low to middle income folks so they can work, there are the Healthy Families programs and also the Healthlink and Pharmacy. Plus the Food Bank and distribution to people throughout the greater western area who are individuals and families needing help. All of this benefits the community by helping people get back on their feet while being working taxpayers.

    Never seen a freeloader out there as you cannot stay at SERVE as one. Assistance is offered to help you get back as a productive citizen.

    Thank you, Anonymous for telling your story…and Tutu…like was written, do your homework about SERVE/NVFS and you will see their value in our community.

  26. Self Serving said on 23 May 2011 at 4:25 pm:
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    Government charity is always a bad idea, let em go to the churches for help.

  27. Steve Randolph said on 24 May 2011 at 8:25 am:
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    http://www.roanoke.com/editorials/wb/287527

    An interesting editorial on this subject.

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