Marvin Mandel, Governor                         1961

The effectiveness of House Bill 363 is contingent upon the ratifi-
cation by the qualified voters of the State of an amendment to the
Maryland Constitution embodied in Senate Bill 213 (1972) authoriz-
ing State lotteries. House Bill 128 (1972) creates a State lottery
system and the State Lottery Agency and its effectiveness is also
contingent upon the ratification of the constitutional amendment
contained in Senate Bill 213. Senate Bill 213 and House Bill 128
were signed into Law on Friday, May 26,1972.

House Bill 363 provides that the proceeds from the sale of the
above-described certificates is to be deposited in a special account
to be used for the purpose of reducing the amount of "the public
debt of the State." Twenty-five percent of such proceeds is proposed
to be allocated to the Department of Economic and Community
Development (15% for low cost housing loans and 10% for low cost
industrial development loans). The bill also provides that 40% of
such proceeds shall be retained at all times for the purpose of re-
deeming outstanding certificates. Since it is a condition to the sale
of such certificates that they be payable on demand at face value,
without interest, at any time after purchase, there is created a
potential liability of the State, in the form of a redemption call by
the holders of the remaining 60% of the outstanding certificates,
for which the bill makes no provision.

Article III, Section 34 of the Maryland Constitution provides,
in part, that "No debt shall be hereafter contracted by the General
Assembly unless such debt shall be authorized by a law providing
for the collection of an annual tax or taxes sufficient to pay the
interest on such debt as it falls due, and also to discharge the
principal thereof within fifteen years from the time of contracting
the same.....". Senate Bill 3 (1972), if ratified by the qualified
voters of the State, will amend Article III, Section 34 to provide
that the required annual tax will not be collected in the event
sufficient funds are appropriated for that purpose in a given year.
However, the amendment would not eliminate the requirement for
an annual tax.

It is our opinion that House Bill 363 creates a State debt, and
that since there is no provision in the bill for the levy or collection
of an annual tax to repay the debt created, it is our further opinion
that the debt created is unconstitutional under the provisions of
Article III, Section 34. Unfortunately, this constitutional defect may
not be cured by subsequent legislation authorizing the collection of
an annual tax since the annual tax must be levied in the same bill
which creates the debt. In Balenson v. Maryland Airport Authority,
253 Md. 490 (1968) the Court of Appeals of Maryland held that
a bill providing for the collection of a tax sufficient to repay a debt
created by a separate bill did not cure the constitutional defect of
the bill creating the debt, the latter making no provision for the
collection of an annual tax. The Court said that "the tax must be
provided for in the bill which authorizes the debt."

If you should be inclined to sign House Bill 363 into law re-
gardless of the constitutional defect pointed out above we would
suggest that the Comptroller and Treasurer be notified that no cer-
tificates are to be issued until new Section 27 of Article 19 is re-
pealed and re-enacted with amendments to provide for the necessary
annual tax. In our opinion the difficulty presented by the Balenson