B-208985 L/M, OCT 29, 1982

B-208985 L/M, OCT 29, 1982

PRECIS-UNAVAILABLE

DANIEL PATRICK MOYNIHAN, UNITED STATES SENATE:

THIS IS IN RESPONSE TO YOUR LETTER OF SEPTEMBER 7, 1982, IN WHICH YOU ASKED FOR OUR VIEWS REGARDING THE DEPARTMENT OF DEFENSE PAYMENT OF MILITARY PAY AND ALLOWANCES NOTWITHSTANDING A PRESIDENTIAL VETO OF A SUPPLEMENTAL APPROPRIATIONS BILL NEEDED FOR THIS PURPOSE. YOU REFERRED TO A WASHINGTON POST REPORT ON AUGUST 28TH WHICH STATED THAT THE AUGUST 31 MILITARY PAYROLL WOULD BE MET ANYWAY. THE NEWSPAPER ACCOUNT INDICATED THAT THE ATTORNEY GENERAL HAD APPROVED OF THE DELAY IN TRANSFERRING TO THE TREASURY OF ABOUT $600 MILLION IN INCOME TAX WITHHOLDING AND SOCIAL SECURITY PAYMENTS.

YOU ASKED TWO SPECIFIC QUESTIONS:

"FIRST, DOES THE ADMINISTRATION HAVE AUTHORITY TO DO THIS: WHAT IS THAT AUTHORITY?" SECOND, WILL THE SOCIAL SECURITY TRUST FUND LOSE ANY INTEREST BECAUSE IT WON'T HAVE FICA TAX COLLECTIONS FROM THE DEFENSE DEPARTMENT TO INVEST? HOW MUCH INTEREST?"

WE HERE ADDRESS THE LEGAL CONSIDERATIONS RAISED BY YOUR FIRST QUESTION. WE WILL SUPPLY YOU WITH THE REQUESTED INFORMATION CONCERNING THE SOCIAL SECURITY TRUST FUND SEPARATELY.

THE ADMINISTRATION'S ACTION WAS TAKEN BECAUSE THE PRESIDENT'S VETO OF THE SUPPLEMENTAL APPROPRIATION BILL (WHICH WAS SUBSEQUENTLY ENACTED) LEFT INSUFFICIENT FUNDS REMAINING IN MILITARY PAY APPROPRIATION ACCOUNTS TO MEET THE AUGUST 31, 1982, NET PAYROLL AND ALSO TO TRANSFER TO THE TREASURY THE AMOUNTS NECESSARY FOR FEDERAL INCOME AND OTHER TAX WITHHOLDINGS. THE SECRETARY OF THE TREASURY THEN CHANGED THE DUE DATE FOR PAYMENT OF THE TAXES FROM AUGUST 31 TO SEPTEMBER 30, 1982, THUS FREEING SUFFICIENT FUNDS TO MEET THE NET MILITARY PAYROLL ON AUGUST 31. THE ACTING ATTORNEY GENERAL CONCLUDED THAT THERE WAS NO LEGAL BARRIER TO KEEPING THE MILITARY PERSONNEL ON THE JOB AND TO PAYING THEM THEIR FULL TAKE-HOME PAY WITH FUNDS WHICH, BUT FOR THE POSTPONEMENT OF THE DUE DATE, WOULD OTHERWISE HAVE BEEN REQUIRED TO BE TRANSFERRED TO THE INTERNAL REVENUE SERVICE. HIS LETTER OF AUGUST 25, 1982, TO THE SECRETARY OF DEFENSE, THE ACTING ATTORNEY GENERAL INDICATED THAT THERE WAS NO LEGAL REQUIREMENT THAT AGENCIES HAVE IN HAND OR TRANSFER TO THE TREASURY ANY FUNDS "'WITHHELD' FROM AN EMPLOYEE'S PAYCHECK UNTIL SUCH TIME AS UNDER PERTINENT TREASURY REGULATIONS, THOSE PAYMENTS ARE ACTUALLY DUE AT THE TREASURY."

WE AGREE WITH THIS POSITION BUT ONLY TO THE EXTENT THAT THE MILITARY PERSONNEL RETAINED ON THE JOB FIT WITHIN AN EXPLICIT EXCEPTION TO THE STATUTORY PROHIBITIONS FOUND IN 31 U.S.C. SEC. 665, OTHERWISE KNOWN AS THE ANTIDEFICIENCY ACT. UNDER PUB.L. NO. 97-258, 96 STAT. 877, 923, 924, SEPTEMBER 13, 1982, SEC. 665(A) IS NOW CODIFIED AS SEC. 1341, AND SEC. 665(B) IS NOW CODIFIED AS SEC. 1342 OF TITLE 31.

THE ANTIDEFICIENCY ACT FORBIDS ANY OFFICER OR EMPLOYEE OF THE UNITED STATES TO OBLIGATE OR EXPEND FUNDS IN ADVANCE OF OR IN EXCESS OF APPROPRIATIONS MADE FOR THAT PURPOSE, UNLESS OTHERWISE AUTHORIZED BY LAW. 31 U.S.C. SEC. 665(A). ON EVERY DAY THAT AN AGENCY REMAINS OPEN FOR BUSINESS, NUMEROUS OBLIGATIONS ARE AUTOMATICALLY INCURRED; FOR EXAMPLE, WHEN EMPLOYEES ARE PERMITTED TO REPORT FOR WORK, THERE IS AN OBLIGATION TO PAY THEM, TO MAKE RELATED CONTRIBUTIONS FOR RETIREMENT AND HEALTH BENEFITS, TO TRANSFER WITHHELD INCOME TAXES, AND SO FORTH. IN THE ABSENCE OF A STATUTORY EXCEPTION, THERE MUST BE SUFFICIENT FUNDS TO COVER ALL OF THESE OBLIGATIONS AT THE TIME THEY ARE INCURRED, REGARDLESS OF THE DATES ON WHICH ANY PARTICULAR OBLIGATION MUST ACTUALLY BE PAID. B-197841, MARCH 3, 1980. THE SECRETARY OF DEFENSE, HOWEVER, FELT THAT ALL HIS UNIFORMED PERSONNEL COULD CONTINUE TO WORK, IN SPITE OF THE FUNDING SHORTFALL, BECAUSE THE ANTIDEFICIENCY ACT ITSELF CONTAINS AN EXCEPTION FOR PERSONNEL USED "IN CASES OF EMERGENCY INVOLVING THE SAFETY OF HUMAN LIFE OR THE PROTECTION OF PROPERTY." 31 U.S.C. SEC. 665(B). HE CERTIFIED TO THE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET ON AUGUST 24, 1982, THAT ALL HIS MILITARY PERSONNEL FIT WITHIN THIS EXCEPTION.

WHILE SUBSECTION (B) OF THE ACT PROVIDES THE NECESSARY STATUTORY AUTHORITY TO INCUR OBLIGATIONS FOR SERVICES OF EMPLOYEES EVEN WHEN THERE ARE INSUFFICIENT FUNDS AVAILABLE TO PAY FOR THESE SERVICES AT THE TIME THEY ARE PERFORMED, THE SERVICES MUST FIT WITHIN THE STATUTORY EXCEPTION; THAT IS, EACH EMPLOYEE COVERED MUST ACTUALLY BE ASSIGNED TO EMERGENCY DUTY "INVOLVING THE SAFETY OF HUMAN LIFE OR THE PROTECTION OF PROPERTY," TO DUTIES REASONABLY NECESSARY TO SUPPORT THOSE SO ENGAGED. WE ARE NOT CONVINCED THAT EVERY MAN AND WOMAN IN UNIFORM IS NECESSARILY PERFORMING EMERGENCY PROTECTION DUTY. WE RECOGNIZE THE ADMINISTRATIVE DIFFICULTIES OF MAKING FINE DISTINCTIONS BETWEEN ONE MEMBER'S DUTIES AND ANOTHER'S, PARTICULARLY WHEN BOTH SERVE OVERSEAS AND ARE ASSIGNED TO A COMBAT UNIT. WE QUESTION ONLY THE BLANKET ASSUMPTION THAT ALL MILITARY PERSONNEL FIT WITHIN THE EXCEPTION.

AUTHORITY TO OBLIGATE BOTH PAY AND ALLOWANCES DOES NOT NECESSARILY MEAN THAT THERE IS ALSO AUTHORITY TO PAY THOSE OBLIGATIONS. THERE MUST ALSO BE SUFFICIENT FUNDS REMAINING IN THE APPLICABLE APPROPRIATION TO COVER ANY PAYMENTS MADE. SUFFICIENT APPROPRIATIONS WERE AVAILABLE IN THE DOD SITUATION TO COVER ALL REQUIRED PAYMENTS EXCEPT FOR THE WITHHOLDING DEPOSITS. FOR THESE, THE SECRETARY OF DEFENSE WAS GRANTED A SPECIAL EXTENSION OF THE DEPOSITS' DUE DATE BY THE SECRETARY OF THE TREASURY. EFFECTIVE AUGUST 28, 1982, THE SECRETARY OF THE TREASURY AMENDED HIS REGULATIONS TO EXTEND THE TIME TO SEPTEMBER 30, 1982, FOR THE DEPARTMENT OF DEFENSE TO MAKE DEPOSITS OF WITHHELD INCOME TAXES, FICA TAXES, RAILROAD RETIREMENT TAXES, AND FEDERAL UNEMPLOYMENT TAX ACT (FUTA) TAXES, WHICH, WITHOUT THE AMENDMENT, WOULD HAVE BEEN REQUIRED TO BE DEPOSITED BEFORE THAT DATE. IT WAS STATED THAT THIS WAS DONE TO AVOID THE POTENTIAL FOR DISRUPTION OF VITAL DEFENSE AND NATIONAL SECURITY FUNCTIONS OF THE DEFENSE DEPARTMENT. THIS WAS THE REASON FOR NOT ISSUING THE AMENDMENT IN ACCORDANCE WITH NOTICE AND PUBLIC PROCUDURES UNDER 5 U.S.C. SEC. 533(B). THE USUAL NOTICE REQUIREMENT FOR REGULATIONS OR AMENDMENTS UNDER 5 U.S.C. SEC. 533(B)(3), INCLUDING PUBLICATION IN THE FEDERAL REGISTER, DOES NOT APPLY:

"(B) WHEN THE AGENCY FOR GOOD CAUSE FINDS (AND INCORPORATES THE FINDING AND A BRIEF STATEMENT OF REASONS THEREFOR IN THE RULES ISSUED) THAT NOTICE AND PUBLIC PROCEDURE THEREON ARE IMPRACTICABLE, UNNECESSARY, OR CONTRARY TO THE PUBLIC INTEREST."

SINCE THE CHANGE OF REGULATIONS OCCURRED BEFORE AUGUST 31, 1982, AND APPEARED TO BE IN ACCORDANCE WITH APPLICABLE STATUTES, THE CHANGE IN TREASURY REGULATIONS APPEARS EFFECTIVE TO DELAY THE REQUIRED DATE OF DEPOSIT INTO THE TREASURY UNTIL SEPTEMBER 30, 1982. HAD THE DATE OF DEPOSIT NOT BEEN POSTPONED, AS THE ACTING ATTORNEY GENERAL HIMSELF RECOGNIZED, THE MILITARY PAYROLL COULD NOT HAVE BEEN FULLY MET. WHATEVER LIMITED FUNDS REMAINED IN THE APPROPRIATION WOULD HAVE HAD TO BE APPLIED TO PARTIAL PAYMENT OF THE MEMBERS' TAKE-HOME PAY AND EQUIVALENT CONTRIBUTIONS FOR TAXES, RETIREMENT, ETC.

THIS DISPENSATION WAS NOT AVAILABLE TO THE PRIVATE SECTOR OR TO OTHER FEDERAL AGENCIES. WITH RESPECT TO THE PRIVATE SECTOR, WE THINK THERE IS AN IMPORTANT DIFFERENCE IN THE FISCAL IMPACT SUCH A DISPENSATION WOULD HAVE ON THE FEDERAL TREASURY HAD IT BEEN GRANTED ACROSS THE BOARD TO ALL EMPLOYERS. WITHHELD FUNDS FROM PRIVATE SECTOR EMPLOYMENT BECOME AVAILABLE TO THE TREASURY ONLY WHEN THEY ARE TURNED OVER TO THE INTERNAL REVENUE SERVICE. FEDERAL AGENCY WITHHOLDING FUNDS REMAIN IN THE HANDS OF THE GOVERNMENT, EVEN THOUGH THE FUNDS HAVE NOT YET MOVED FROM ITS RIGHT-HAND POCKET TO ITS LEFT-HAND POCKET, AS IT WERE. MOREOVER, AS MENTIONED BEFORE, THE EXTENSION WAS GRANTED ONLY AFTER THE SECRETARY OF THE TREASURY MADE A FINDING IN THE PREAMBLE TO THE REGULATIONS THAT THE EXTENSION WAS NECESSARY TO AVOID THE DISRUPTION OF THE VITAL DEFENSE AND NATIONAL SECURITY FUNCTIONS OF THE DEFENSE DEPARTMENT. WE HAVE NO BASIS TO DISAGREE WITH THIS FINDING THAT THE SPECIAL EXCEPTION FOR DEFENSE WAS CONSISTENT WITH THE PUBLIC INTEREST.

ACCORDINGLY, IT APPEARS THAT IN THE DESCRIBED CIRCUMSTANCES THERE WAS SUFFICIENT AUTHORITY TO DELAY UNTIL SEPTEMBER 30, 1982, TRANSFER BY THE DEFENSE DEPARTMENT OF AMOUNTS FOR INCOME TAX WITHHOLDING AND SOCIAL SECURITY, INCIDENT TO PAYMENT OF PAY AND ALLOWANCES TO MEMBERS OF THE UNIFORMED SERVICES ON AUGUST 31, 1982.