by Ed DeCecco

Sadly, “Maximum Reserve” is not the name of the next Jerry Bruckheimer summer blockbuster. Nor is it even an oft used term. By last count, it appears in a measly .0000003% of sampled books. That makes your odds of randomly picking up a book with this phrase about the same as winning the lottery.  Unless, that is, your book shelf possesses three feet of handsome red volumes, known as the Colorado Revised Statutes. Then this is indeed your lucky day because “maximum reserve” is a defined term in section 24-75-402, Colorado Revised Statutes, and is at the heart of the statutory limit on the uncommitted reserves in a cash fund.

The “maximum reserve”¹ is defined as “sixteen and five-tenths percent of the amount expended from a cash fund during the fiscal year” and is used to create a limit on the uncommitted reserves in a cash fund at the end of a fiscal year. So, if a state agency spends $1,000,000 from a cash fund during a fiscal year, then the maximum amount that can be left in the cash fund at the end of the year is $165,000, which is roughly equal to two months of its spending.

Except if it is not. Sometimes an alternative limit is appropriate. To address this, the General Assembly created the cleverly named “alternative maximum reserve,”—side note: also a good name for the movie sequel—which is a maximum reserve balance established in the constitution, by law, or Joint Budget Committee (JBC) waiver (more on that later) that is different from 16.5% of the amount expended. For example, the General Assembly could establish an alternative maximum reserve of 25% of the amount expended or even a specific dollar amount.

If a state agency exceeds the applicable reserve limit for a fiscal year, then it is required to reduce the fees the agency collects in the next year so that it won’t do so again. The agency may subsequently raise a fee, but only if doing so won’t cause it to have excess uncommitted reserves. And if there are excess uncommitted reserves for three or more years, then the agency must deliver a hostage to the State Controller’s office until it complies. (Sorry, I’ve been binge watching Game of Thrones.) The real penalty is that the State Controller will restrict the amount of money available to be spent from the cash fund.

Now, a statutory requirement without exceptions is like an Elvis impersonator without a sequin jumpsuit, and the limitations on uncommitted reserves are replete with them. The limit only applies to a “cash fund,” which in this context means “any fund that is established in law for a specific program or purpose and that includes moneys from fees,” but excluding the state general fund, any federal fund, and a fund used by a state institution of higher education. So, you’ll be happy to know that the state is free to have a general fund surplus that exceeds the maximum reserve.

In addition, a cash fund is a depository for “fees,” which, for purposes of the maximum reserve, are any money collected or received by an entity but excluding, among other things:

• Revenue that is not state fiscal year spending;
• Fines or other criminal penalties;
• Money transferred from the state general fund;
• Non-discretionary charges or assessments;
• Interest and income; and
• Gifts or donations. (Everybody loves gifts. C’mon, who would want a cap on those?)

So if a cash fund consists entirely of non-fee revenue, then the maximum reserve does not apply, and if a cash fund is a mix of fee and non-fee revenue, then the non-fee revenue is proportionally excluded from the uncommitted reserves.

But wait! That’s not all! The limit on uncommitted reserves also doesn’t apply to cash funds established to fund capital construction, cash funds with uncommitted reserves that are less than $200,000, cash funds only used for a program that is less than two years old, and a bunch of cash funds that are expressly excluded from the limit.

Finally, a state agency can solicit the JBC for a waiver from the maximum reserve based on specific circumstances. The JBC can, for up to three years, grant an exemption or establish an alternative maximum reserve for the agency. Given that state agencies sometimes have perfectly good reasons to exceed the maximum reserve, this seems like an efficient alternative to enacting legislation to specifically exempt a single cash fund. And fewer bills to be drafted means fewer bill drafters…hey, wait a minute!

Admittedly, there are numerous exceptions. But considering that there are scads of cash funds,² it still has a broad application. Plus, these exceptions can be better understood when viewed in light of the avowed purpose of the limit on uncommitted reserves. Because fees contribute to the TABOR fiscal year spending limit, it is necessary to keep them in check by establishing a reasonable reserve derived from fee revenue.

And don’t think that the limit on uncommitted reserves was created and then immediately forgotten—like this legislative staff blog article, for example. The State Controller is required to annually prepare a report to be delivered to the JBC and the Office of State Planning and Budgeting identifying the uncommitted reserves for each state cash fund, and the State Auditor is required to audit the report.

Well, that’s probably about all you want to read about limits on uncommitted reserves for cash funds, and I need to start work on my screenplays for the “Maximum Reserve!” movie franchise, so I bid you adieu.

---

1. The “maximum reserve” was formerly known as the “target reserve,” which gave the misimpression that state agencies should aspire to have that amount in reserve at the end of each year. Thanks to Alfredo Kemm, Joint Budget Committee Staff, for suggesting the sensible rebranding. ↩︎
2. Perhaps, too many? Open in a new window – https://legisource.net/2017/02/17/a-legislators-guide-to-creating-cash-funds/ ↩︎

by Jery Payne

A while back I wrote about event signs, license plates, and government speech¹. That post covered Walker v. Texas Div., Sons of Confederate Veterans, Inc.², in which the U.S. Supreme Court held that Texas could deny an application for special license plates because it didn’t like the message expressed on the plates. This bit of content discrimination did not fall afoul of the Free Speech Clause of the First Amendment because the Court decided that the content of special license plates is government speech.

Now the Court has ruled on another case where the federal government discriminated based on content. In this case involving trademark registration, the government relied heavily on the Walker case, arguing this bit of content discrimination is also government speech. But the Court struck down the law anyway.

Although people are calling it the “Slants case,” the actual case name is “Matal v. Tam³.” The Slants are a pop-rock band whose members are of East Asian descent, so the band chose the name to “reclaim” and “take ownership” of stereotypes about people of East Asian ethnicity. The band filed for trademark registration of the band name, “Slants.”

Federal law⁴, however, forbids the registration of a trademark that “[c]onsists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage … persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute….” The term “slants” has been used as a disparaging term for East Asians, so the trademark examiner refused to register the trademark.

The band took the examiner to court. The case wended its way to the Supreme Court, where the government defended the statute based on the Walker decision. They argued that trademark registration is government speech. And you can see why because the two cases have a lot in common. The messages in both cases are:

1. Benefiting from a government program;
2. Intended for private use, which often means for commercial use;
3. Placed on privately owned property; and
4. Originating from private citizens.

Despite coming from private citizens, the court held in Walker that the messages on special license plates are government speech. But when you take seriously the notion that these messages come from the government, the messages conveyed are often contradictory and frequently weird or even nonsensical. The license plates in the Walker case included the state of Texas celebrating Oklahoma football, advising that you can “get it sold” with RE/MAX, or saying “I’d rather be golfing.” Can a state government golf?

The Court pointed out in the Matal case that considering trademarks government speech is just as weird:

[W]hat does the Government have in mind when it advises Americans to “make.believe” (Sony), “Think different” (Apple), or “Have it your way” (Burger King)?

The Matal case, like the Walker case, involves speech that comes from a private citizen but seeks to benefit from a government program. In other words, the facts of both cases exist in a gray area between what is clearly government speech that doesn’t fall under the Free Speech Clause and what is clearly private speech that does fall under the Free Speech Clause. In the Matal case, the Court explained the difference:

This brings us to the case on which the Government relies most heavily, Walker, which likely marks the outer bounds of the government-speech doctrine. Holding that the messages on Texas specialty license plates are government speech, the Walker Court cited three⁵ factors … First, license plates have long been used by the States to convey state messages. … Second, license plates ‘are often closely identified in the public mind’ with the State, since they are manufactured and owned by the State, generally designed by the State, and serve as a form of ‘government ID.’ … [N]one of these factors are present in this case.

So the Court decided that (1) Walker “likely marks the outer bounds of the government-speech doctrine,” (2) the mere fact that a message may benefit from a government program does not make it government speech, and (3) the messages must be closely identified with the state “in the public mind” to constitute government speech. Trademarks are meant to identify businesses, and most people think of a business, not a government, when they see a trademark; there isn’t the same likelihood that people will think the government is sending the message.

In deciding these cases, the Court shrunk the area of uncertainty between government speech and private speech. The license-plate case had the potential to take a large bite out of First Amendment protections. Copyright law also provides a government benefit to private speech, and the government relied heavily on this idea in the Matal case. Copyright applies to virtually all books, magazines, and blogs. If the Court had determined that simply granting a benefit gives the government the ability to regulate content, then the government could regulate the content of most writings. But instead, the Court made it clear that merely bestowing a government benefit on a “speaker” does not give the government the ability to regulate the content of the speech.

---

1. https://legisource.net/2015/10/22/when-is-it-the-governments-speech-a-tale-of-two-messages/ ↩︎
2. https://supreme.justia.com/cases/federal/us/576/200/ ↩︎
3. https://supreme.justia.com/cases/federal/us/582/15-1293/ ↩︎
4. https://www.law.cornell.edu/uscode/text/15/1052 ↩︎
5. The third factor isn’t relevant to this article. ↩︎