Attorney General: The Honorable Linda Schwartz, Department of Veterans' Affairs, 2004-021 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

December 15, 2004

The Honorable Linda Schwartz
Department of Veterans' Affairs
287 West Street
Rocky Hill, CT 06067

Dear Commissioner Schwartz:

You have raised several questions concerning the statutes governing the establishment and activities of the Soldiers', Sailors' and Marines' Fund (&quo;Fund"), as well as the current operation of the Fund. In particular, you have inquired whether: i) these statutes' apparent delegation of public functions to a private agency, in this instance the American Legion, violates constitutional principles; ii) whether current law restricts expending Fund assets for administrative expenses; and iii) whether the law would permit the Department of Veterans' Affairs ("DVA") to conduct the intake and processing of veterans' applications for benefits from the Fund.

An additional question has arisen, as reflected in a letter from Gerald Dierman, Administrator of the Fund, to Assistant Attorney General Thomas Clifford. In the letter Mr. Dierman asks whether Conn. Gen. Stat. 27-140, which, among other things, allows the Fund to pay for the funeral expenses of honorably discharged veterans, requires that such expenses be paid for all such veterans, or only those deemed "in need" of such assistance.

I

While the power to enact state laws resides in our State's General Assembly, the General Assembly may carry out its legislative purposes and policies by delegating to other entities, and even allowing those entities to "fill in the details." Town of New Milford v. SCA Services of Connecticut, Inc., 174 Conn. 146 (1977). However, the legislative power to delegate is not unlimited. Kellems v. Brown, 163 Conn. 478, appeal dismissed 409 U.S. 1099 (1972). In its delegation, the statute must provide sufficient guidance to the entity to which the authority has been delegated. Rudy's Limousine Service, Inc. v. Department of Transportation, 78 Conn. App. 80, 91 (2003); Wilson v. Connecticut Product Development Corp., 167 Conn. 111, 120-123 (1974); Gohld Realty Co. v. City of Hartford, 141 Conn. 135, 148-149 (1954). In Rudy's Limousine Service the Court held that the legislature had provided sufficient guidance to the Department of Transportation to determine to whom livery licenses should be issued. In Wilson, the Court held that the legislature had provided sufficient guidance to delegate to a quasi-public corporation the distribution of public funds to Connecticut enterprises developing and exploiting Connecticut inventions. In Roan v. Connecticut Industrial Building Commission, 150 Conn. 333, 343-344 (1963), the Court upheld the constitutionality of a statutory scheme whereby the Building Commission insured mortgages on industrial projects based on reports and recommendations from a private corporation which reviewed all applications. The Roan Court held that the Commission could constitutionally rely on the "know how" of the corporation. In Gohld the Court found a redevelopment agency had received sufficient guidance from the legislature. In each of these challenges to the constitutionality of the statutes at issue, the courts reiterated that plaintiffs in these challenges bear the burden of establishing unconstitutionality beyond a reasonable doubt.

Delegations to private entities are permissible if the action to be taken by the private entity is subject to the approval of a governmental entity and the legislative guidance is sufficiently specific. Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940); Pittson Co., et al v. Holland, et al., 368 F.3d 385 (4th Cir.2004); corrected 2004 U.S. App. LEXIS 16730 (4th Cir.2004) As set forth more fully below, in this instance our state legislature has placed the Fund principal in the custody of the State Treasurer, as trustee of the Fund, and has allowed the American Legion to disperse only the interest earned on the Fund. The types of expenditures from the Fund interest that can be made by the American Legion are specifically described in the enabling legislation, and the American Legion's bylaws implementing the legislative directive are subject to the review and approval of the State Treasurer. Additionally, a party aggrieved by a denial of Fund benefits by the American Legion may seek review by the administrator of the Soldiers, Sailors and Marine's Fund, file an appeal to a board comprised of state officials, and obtain review by the Connecticut courts. Conn. Gen. Stat. 27-138b, 27-138c.1

In the statutes at issue here, the General Assembly created the Fund and mandated that "[t]he interest accumulations of the fund so held in trust [by the State Treasurer] or so much thereof as is found necessary to carry out the purposes hereinafter stated shall be paid, upon the order of the Comptroller to the treasurer of the American Legion, who shall disperse the same [except for a minimal reserve] ." Conn. Gen. Stat. 27-138. This statute also dictates that "[n]o part of the interest accumulation of said fund shall be expended for the purpose of maintaining the American Legion." Id. In terms of what the American Legion is empowered to expend the accumulated interest on, Conn. Gen. Stat. 27-140 spells out that

[a]ll money so paid and received by the American Legion shall be expended by it in furnishing food, wearing apparel, medical or surgical aid or care or relief to, or in the bearing of funeral expenses of, soldiers, sailors, or marines who performed service in time of war who have been honorably discharged therefrom or honorably released from active service or to their spouses who are living with them . . ., or dependent children under eighteen years of age, who may be in need of the same.

This same statute prescribes that "[a]ll such payments shall be made by the American Legion under the authority of its bylaws, which bylaws shall set forth the procedure for proof of eligibility for such aid and shall be approved by the trustee [State Treasurer]." Conn. Gen. Stat. 27-138a mandates that the regulations of the Fund and applications for aid from the Fund are to be available at all town clerks' offices, while Conn. Gen. Stat. 27-138d expressly permits that "expenses incurred by the state in connection with the supervision, care and control of the premises used by the American Legion in administering the Fund can be charged against the interest accumulation of the Fund.2

These statutes represent a clear delegation of authority to a private, non-profit entity, providing sufficient guidance to the American Legion in how the interest accumulations of the Fund are to be expended, spelling out who is eligible for relief under the Fund, the nature of the veterans' expenses that can be covered, and dictating that the American Legion's guidelines ["bylaws"], are to govern distribution decisions with respect to those eligible for relief. Although the American Legion is a private entity, its bylaws must be approved by the State Treasurer and persons aggrieved by decisions of the American Legion have the opportunity to obtain review of denials of Fund benefits by the administrator of the Fund, by an appeal board comprised of state officials and ultimately by state courts. These factors, coupled with the strong presumption of constitutionality accorded state statutes, as set forth in the cases discussed above, lead to the conclusion that these statutes do not represent an unlawful delegation of authority to the American Legion.

II

Although the General Assembly has properly delegated its authority over the Fund to the American Legion and has provided guidance to the Legion on the Fund's expenditures, the American Legion's bylaws need to more adequately fulfill the statute's requirements, and the bylaws must be approved by the Treasurer as required by law.3 Referring to the 1919 Public Acts that created the Fund, the pertinent bylaws simply create a "special committee of the American Legion, Connecticut Department" consisting of the State Treasurer of the American Legion, and "two members nominated by the State Chairman and approved by the executive committee," all of whom are to serve two year terms. According to the bylaws, this committee has "full power and authority as representative of the American Legion, Connecticut Department, to make disposition of all matters under said law ." According to this bylaw, this committee is supposed to cooperate with and follow the directives of the "State Board of Control," and this committee's judgment, "cooperating with the State Board of Control, shall be final and conclusive in the management and disbursement of all moneys that may be paid to it for the purposes provided for under said Act." The bylaws further provide that each local post of the American Legion is to have a special committee "whose duty it shall be to investigate and report to the State Treasurer of the American Legion all cases falling within the purview of the Act." These special committees are to send "reports and recommendations," presumably on who should receive benefits, signed by the respective post commanders, to the American Legion's State Treasurer. Persons denied benefits by the American Legion are entitled to appeal such denials to the administrator of the Fund, to an appeal board comprised of state officials and ultimately to the courts.

However, the bylaws do not set forth specific standards for who should receive benefits and who should not, but rather delegate the determination of who is in "need" to these committees. Nor do the bylaws contain eligibility criteria, or even the categories of aid available. The bylaws, therefore, must be amended to conform to the requirements of Conn. Gen. Stat. 27-140, which, as noted, mandate that the bylaws are to set forth a "procedure for proof of eligibility." The bylaws must be approved by the State Treasurer and should recite the right to appeal any denial of benefits as provided by Conn. Gen. Stat. 27-138b and Conn. Gen. Stat. 27-138c.

III

With respect to the second question you pose concerning what restrictions, if any, might apply to the expenditure of interest accumulations of the Fund for administrative expenses of the American Legion, we are guided by a venerable case that retains its legal authority. In Bissell v. Butterworth, 97 Conn. 605 (1922), the plaintiff taxpayers (who were later replaced by the State Comptroller) sued the American Legion, citing that portion of the language of the statute, which remains largely intact today, that dictated that "all moneys so paid [from the interest accumulation] shall be expended in furnishing food, wearing apparel, medical or surgical aid, care or relief, or in bearing the funeral expenses." The lawsuit alleged that Mr. Butterworth, treasurer of the Connecticut Department of the American Legion, "has not used all of the money received from this fund solely for food, wearing apparel, aid and funeral expenses ." Bissell, 97 Conn. at 6. Butterworth countered that at the time the Fund was turned over to the American Legion to be administered, it was understood that the American Legion would not incur the administrative expenses of running the Fund, but that such costs would come from the Fund itself.

The Supreme Court of Errors held that the American Legion had not violated the statutes' directives in charging administrative expenses to the Fund. The Court noted that the purposes of the Fund "are evident, and unquestionably they cannot be accomplished without expense." In its view, the General Assembly "certainly did not intend that the trust should fail for lack of provision to pay the expenses of its execution," and thus "it must be held that the General Assembly intended that its agents should be allowed out of the income of the fund all reasonable charges and expenses necessary to carry out its directions concerning the trust and to prevent its failure." Bissell, 97 Conn. at 615-616. It is, the Court stated,

a general principle of law, long prevailing in this and nearly all of the United States, that a trustee is entitled to be reimbursed for all costs which he properly incurs in the execution of a trust, and to fair compensation for his time and trouble in managing the trust fund and performing the duties of an office he has undertaken for the benefit of others .

Id. The Court further noted that it was admitted that the American Legion had agreed to perform these duties on the understanding that all necessary expenses would be taken out of the Fund itself, and notwithstanding this indication, the language of the subject statutes was not changed. The Court further noted:

[t]hat notwithstanding the voluntary services of members of the American Legion, these necessaries to the execution of the trust cannot be obtained without considerable expense, was a fact within the intelligent comprehension of the General Assembly when it passed these laws, and we assume that since it made no express provision to the contrary, it intended that out of the income of the trust which it established should be paid such charges and expenses as would be indispensable to carry on the trust in a manner which would accomplish its charitable objects . Under no other interpretation will these Acts be effective; for these burdens of administration can neither be legally nor justly imposed upon the American Legion.

Id. at 617-618.

Whether the expenditures currently being charged by the American Legion against the income of the Fund are truly "necessary" administrative costs, "properly" incurred, for which the American Legion is entitled to "fair compensation" is of course a legitimate, fact specific inquiry. The most recent reports from the State Auditors that we have been provided covered fiscal years ending June 30, 2000, 2001 and 2002. In those years, total income from the Fund, as compared to expenditures for awards to veterans was as follows:

Year      Income            Awards            %
2000      $2,882,971      $1,748,343      60.64
2001      $2,937,528      $1,822,918      62.05
2002      $2,963,358      $1,829,936      61.75

How much of the roughly 40% of Fund income remaining after the awards were made to veterans was spent on administering the Fund and whether such administration costs were reasonable and appropriate is a fact specific inquiry that is within the jurisdiction of the State Auditors of Public Accounts.

IV

You have also inquired whether current law would permit the DVA to conduct the intake and processing of veterans' applications for benefits under the Fund. As noted above, Conn. Gen. Stat. 27-138 mandates that the income from the Fund is to go to the American Legion for distribution, and Conn. Gen. Stat. 27-140 requires that the distribution of benefits from the Fund be governed by the American Legion's bylaws on the subject. Nevertheless, under Conn. Gen. Stat.27-102l the DVA has the obligation to staff a unit for advocacy and assistance in each congressional district. The unit must be trained in the availability of various types of veterans' benefits. Consequently, members of the unit should have knowledge of the Fund's benefits. We see nothing to prohibit DVA from conducting intake and processing of applications for benefits under the Fund, and referring the applications to the American Legion. A cooperative effort between the DVA and the American Legion could potentially be more efficient, permitting the American Legion to provide more benefits to more qualifying veterans.

V

Finally, with respect to Mr. Dierman's inquiry regarding Conn. Gen. Stat. 27-140's provision for the payment, among other things, of the funeral expenses of honorably discharged veterans from Fund proceeds, it is apparent from the wording of the statute that such expenses are to be paid for qualifying veterans (or their surviving spouses or dependents) "who may be in need of the same." This language, coupled with the later wording of the statute which mandates that "[a]ll such payments shall be made by the American Legion under the authority of its bylaws, which bylaws shall set forth the procedure for proof of eligibility for such aid and shall be approved by the trustee [the State Treasurer]," indicates that such expenses are intended to be paid to qualifying veterans who are "in need," as that term is determined by the bylaws. See, Jones v. Kramer, 267 Conn. 336, n.4 (2004) (citing P.A. 03-154 1) (If the text of a statute is plain and unambiguous, and does not yield absurd or unworkable results, one need not look beyond text of the statute.); accord, In re Fleet National Bank's Appeal from Probate, 267 Conn. 229, n.6 (2004). Therefore, need, as defined in the bylaws, is a prerequisite for these benefits.

In short, the legislative delegation of these functions to the American Legion was constitutional. The American Legion's current bylaws must be amended to provide clear eligibility criteria and those bylaws must be approved by the State Treasurer. The American Legion may legally charge its reasonable expenses in administering the Fund against the interest income of the Fund, although whether its administrative expenditures are reasonable is a fact specific inquiry for the State Auditors to make. The DVA is not prohibited by law from handling the intake and processing of applications for benefits under the Fund and referring the applicants to the American Legion. Finally, under the Fund, funeral expenses should be paid for all qualifying veterans and their families who are "in need" as determined by the Fund's bylaws.

Very truly yours,


RICHARD BLUMENTHAL
ATTORNEY GENERAL


Ralph E. Urban
Assistant Attorney General

RB/REU


1 Conn. Gen. Stat. 27-138b and 27-138c spell out procedures whereby an applicant denied aid must receive timely written notice by registered mail, and establish a review process which includes the opportunity for a hearing, the right to be represented by counsel and a further appellate-style review by a review board "composed of the Adjutant General or his designate, the Attorney General or his designate, and the Commissioner of Veterans' Affairs or his designate." This decision is reviewable in the Superior Court as an administrative appeal.

2 Conn. Gen. Stat. 27-138a's reference to the Fund's "regulations" is confusing, but presumably refers to the bylaws called for in Conn. Gen. Stat. 27-140, since the American Legion is not a state agency within the meaning of Conn. Gen. Stat. 4-166(1) and therefore is not empowered to issue regulations. The statute is most reasonably understood to require that the eligibility bylaws and applications for aid from the Fund are to be available in town clerks' offices.

3 State Treasurer Denise Nappier, in her letter of February 13, 2004 to the Auditors of Public Accounts, indicates that the State Treasurer has never approved the Fund's bylaws. Also, Conn. Gen. Stat. 27-138a requires that the "regulations" of the Fund and applications for benefits from the Fund are to be available at each town clerk's office.


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