Schowalter v. StateAnnotate this Case
Petitioner, the Commissioner of the Minnesota Department of Management and Budget, sought validation of certain tobacco appropriation bonds to be issued to refund, in advance of maturity, outstanding tobacco securitization bonds issued in 2011. The only disputed issue in this proceeding was whether the proposed tobacco appropriation bonds were constitutional under the Minnesota Constitution. The Commissioner argued that the bonds did not implicate Minnesota's constitutional limitations on incurring public debt. The attorney general argued that the bonds constituted a "subterfuge to evade the balanced budget requirement" of the Minnesota Constitution. The Supreme Court concluded (1) the proposed tobacco appropriation bonds did not constitute public debt for which the state's full faith, credit, and taxing powers have been pledged under the plain language of Minn. Const. art. XI, 4; and (2) therefore, the restrictions imposed by Minn. Const. art. XI, 5 do not apply to the bonds.