State Ethics Commission Advisory Opinions

STATE ETHICS COMMISSION ADVISORY OPINION NO. 2024-06 December 13, 2024 1

QUESTION PRESENTED 2 The Indian Affairs Department usually receives appropriations from the legislature each fiscal year for specific purposes. This fiscal year, the Department received funding to support Indigenous Centers throughout the state. The Indigenous Centers are run by non-profit organizations and their purpose is primarily to provide food, clothing, and resources for housing, healthcare, and behavioral health services for those in need. The Department is interested in providing funding to the Indigenous Centers through a professional services contract or a memorandum of understanding/agreement.

1 This is an official advisory opinion of the New Mexico State Ethics Commission. Unless amended or revoked, this opinion is binding on the Commission and its hearing officers in any subsequent Commission proceedings concerning a person who acted in good faith and in reasonable reliance on the advisory opinion. NMSA 1978, § 10-16G-8(C) (2019).

2 The State Ethics Commission Act requires a request for an advisory opinion to set forth a “specific set of circumstances involving an ethics issue[.]” NMSA 1978, § 10-16G-8(A)(2) (2019). “When the Commission issues an advisory opinion, the opinion is tailored to the ‘specific set’ of factual circumstances that the request identifies.” State Ethics Comm’n Adv. Op. No. 2020-01, at 1-2 (Feb. 7, 2020), available at https://nmonesource.com/nmos/secap/en/item/18163/index.do (quoting § 10-16G-8(A)(2)). For the purposes of issuing an advisory opinion, the Commission assumes the facts as articulated in a request for an advisory opinion as true and does not investigate their veracity. On October 22, 2024, the Commission received a request for an advisory opinion that detailed the issues as presented herein. See 1.8.1.9(B) NMAC. Commissioner Bluestone requested that the advisory letter be converted into a formal advisory opinion. See 1.8.1.9(B)(3) NMAC. See generally NMSA 1978, § 10-16G-8(A)(1); 1.8.1.9(A)(1) NMAC.

The Department has previously entered into professional services contracts for similar purposes, requiring recipients to submit periodic invoices for funding on a reimbursement basis, provide information on how the services and costs expended met the scope of work under the contract, and meet general reporting requirements back to the Department on the services rendered by the recipient.

The request asks whether it would be considered a violation of the anti-donation clause for the Department to provide funding to the non-profit Indigenous Centers through a professional services contract or a memorandum of understanding/agreement where the Department sets out terms regarding how the funding can be used, how it is accessed, and when the funds will expire?

ANSWER The Indian Affairs Department (“IAD”) would not violate Article IX, Section 14 of the New Mexico Constitution (“the Anti-Donation Clause”) by entering into an agreement with private, non-profit Indigenous Centers, so long as IAD receives some form of consideration under the agreement or the agreement meets an exception to the Anti-Donation Clause, such as providing services for the support and maintenance of sick or indigent individuals.

ANALYSIS The Anti-Donation Clause provides “Neither the State nor any county, school district or municipality, except as otherwise provided in this constitution, shall directly or indirectly lend or pledge its credit or make any donation to or in aid of any person, association or public or private corporation[.]” 3 The Anti-Donation Clause applies to IAD because it is a department “created in the executive branch” and “is a cabinet department” 4 and therefore is an “agency or instrumentality” of the State, subject to the Anti-Donation Clause.

3

4

N.M. Const. art. IX, § 14.

NMSA 1978, § 9-21-4 (2004).

Other than where an exception applies, the Anti-Donation Clause prohibits two types of transactions. 5 First, the Anti-Donation Clause prevents both the State and local governments from pledging their credit in favor of a private enterprise by, for example, guaranteeing the repayment of a private company’s loans or issuing bonds (backed by future tax revenue) to raise funds for a private company. 6 But there is nothing indicating IAD intends to pledge the State’s credit to Indigenous Centers. Rather, it is the second type of transaction that is relevant to the question presented; that is, the Anti-Donation Clause prohibits “donations” of property or money by a government entity to a private person for which the government entity receives nothing of value in return. 7 The first question under this type of transaction is whether the transfer is a “donation” at all. If the governmental entity receives something of value in exchange for its provision of public funds—which, in the language of contract law, is called “consideration”— then there is no donation and, thus, no application of the Anti-Donation Clause. 8 If the governmental entity does not receive something of value in exchange for the provision of public funds, and thus is considered a “donation” under the Anti-Donation Clause, the next question is whether the transaction meets the terms of an exception under the Anti-Donation Clause, as the Clause does not prohibit all donations of public funds from a governmental entity to a private person. The Anti-Donation Clause itself enumerates several specific categories of transfers of

5 See City of Raton v. Ark. River Power Auth., 600 F. Supp. 2d 1130, 1147 (D.N.M. 2008) (Browning, J.) (citing N.M. Att’y Gen. Op. 85-27, at 3 (Oct. 22, 1985)).

6 See, e.g., Hutcheson v. Atherton, 1940-NMSC-001, 44 N.M. 144 (invalidating a statute purporting to authorize counties to issue bonds for construction of auditoriums to be used by the New Mexico Fourth Centennial Coronado Corporation, a private entity). But see Village of Deming v. Hosdreg Co., 1956-NMSC-111, ¶¶ 36-37, 41 (rejecting challenge to issuance of revenue bonds to finance the construction of industrial facilities where ownership of the facilities and project remained with the government entity, and a private corporation leased the facilities, which payment was used to finance the interest and principal repayment at maturity).

7 See, e.g., State ex rel. Mechem v. Hannah, 1957-NMSC-065, 63 N.M. 110 (invalidating state-backed certificates issued to cattle ranchers to defray cost of hay during drought).

8 See City of Raton, 600 F. Supp. 2d at 1161 (“The Court does not believe that the Anti-Donation Clause is implicated when there is true consideration—money exchanged for a real product.”); State ex rel. Office of State Engineer v. Lewis, 2007-NMCA-008, ¶¶ 50-52, 141 N.M. 1 (concluding an appropriation to purchase and retire water rights not a violation of the Anti-Donation Clause because the state received water rights in return for payment).

public funds that the Anti-Donation Clause does not prohibit. Importantly, however, there is no exception for donations simply because the donation furthers a public purpose, “[t]he constitution makes no distinction as between ‘donations,’ whether they be for a good cause or a questionable one. It prohibits them all.” 9

The request notes IAD is considering professional services contracts with the Indigenous Centers, which are run by private non-profit organizations. Given the foregoing analysis, in order to provide funds to these private organizations the agreements must either contain sufficient consideration such that the exchange of funds does not constitute a “donation” or the transfer of funds must meet an applicable exception.

In order for a contract to be valid, it must have sufficient legal consideration. By entering into professional services contracts with the Centers, IAD would necessarily receive consideration in the agreements in order for them to be valid contracts. As such, the transfer of funds to the Indigenous Centers pursuant to such an agreement would not constitute a “donation” under the Anti-Donation Clause. 10 The request for guidance did not include a copy of a draft agreement or the parameters of the contemplated contracts, but did explain that prior contracts include reporting requirements, periodic invoicing and reimbursements, and that the recipients provide information on how they have performed within the scope of work identified in the contract. Government grant agreements often include the essential elements of a contract (including consideration) and establish what is ordinarily regarded as a contractual relationship between the government and a

9

See State ex rel. Sena v. Trujillo, 1942-NMSC-044, ¶ 30, 46 N.M. 361.

10 In City of Raton, the Court observed that a review of contracts for consideration is often part of an analysis for conformity with the Anti-Donation Clauses:

New Mexico courts, and the New Mexico Attorney General’s Office, have generally, in analyzing the state’s Anti-Donation Clause, scrutinized contracts for consideration. If the courts or the Attorney General’s office finds consideration, the courts and the Attorney General’s office generally end their review. Courts and third-party lawyers are reluctant to wade into the thicket of determining whether the consideration is adequate or fair.

City of Raton, 600 F. Supp. 2d at 1160.

grantee. In exchange for grant funds, grantees ordinarily agree to: (i) performance of a specific project that the government desires; (ii) prudent management of grant funds; and (iii) satisfaction of conditions required by the grant award instrument, including reports to the government on the use of grant funds. 11 That set of promises by the grantee is value that government receives in exchange for the grant funds, and the formation of a contract between the government and grantee allows the government, if necessary, to sue to enforce the conditions of a grant agreement. 12 Where the contemplated agreements meet the requirements of a contract, IAD would receive something of value in exchange for the funds, and therefore the exchange would not be a “donation” violative of the Anti-Donation Clause. 13

If the agreements do not contain sufficient consideration and thus the transfer of funds is a “donation,” it is likely that the “care and maintenance of sick and indigent persons” exception to the Anti-Donation Clause nevertheless applies. 14 As noted, the request does not specify what parameters IAD contemplates proposing in agreements with Indigenous Centers, but in reviewing the services such centers provide, there are many services that would fall under this exception such that if IAD agreed to payment of the funds for the provision of those services the exchange would not violate the Anti-Donation Clause. Indigenous Centers provide services that include resources for housing and healthcare, food distribution, clothing drives, and school drives for children. The Santa Fe Indigenous Center, for example, lists its programs to include community food distributions for individuals experiencing food insecurity issues, emergency financial assistance for those experiencing financial hardships, clothing distribution, a resource center which offers information on organizations providing

11

See generally, e.g., Henke v. U.S. Dept. of Commerce, 83 F. 3d 1445, 1450 (D.C. Cir. 1996).

12 See generally, e.g., United States v. Marion Cnty. Sch. Dist., 625 F.2d 607, 609 (5th Cir. 1980).

13 In such a situation, of course, IAD should review and consider the applicability of the Procurement Code to such contracts. See NMSA 1978, § 13-1-90 (1984) (“Except as otherwise provided in the Procurement Code, that code shall apply to every expenditure by state agencies and local public bodies for the procurement of items of tangible personal property, services and construction.”).

14

N.M. Const. art. IX, § 14(A).

assistance with rent, food centers, low-cost housing, medical services, and services for children and babies, as well as information on various mental health and other health resources. 15

The first exception in the Anti-Donation Clause provides “Nothing in this section prohibits the state or any county or municipality from making provision for the care and maintenance of sick and indigent persons.” 16 There are two well-established points regarding the application of this exception. First, for a governmental entity to direct aid to a private person, the Constitution does not require the targeted recipient to be both sick and indigent; the targeted recipient need only be “sick” or “indigent.” 17 Second, whether a person is “indigent” within the meaning of Article IX, Subsection 14(A) depends on a current understanding of indigence and not the standard of indigence extant in 1912, when the exception came into effect. In Humana of New Mexico v. Board of County Commissioners, 18 the New Mexico Supreme Court reviewed the constitutionality of the Indigent Hospital Claims Act, 19 and concluded that the statute’s definition of “indigent patient” was consistent with the meaning of “indigent persons” in Article IX, Subsection 14(A). 20 In reaching its holding, the Supreme Court rejected an interpretation of “indigent” that anchored its application to the standard of indigence prevalent in 1912; rather, the Court made clear that the meaning of “indigent” floats with the “passage of time.” 21

15 See Santa Fe Indigenous Center, Programs, available at https://santafeindigenouscenter.org/programs/ (last accessed Dec. 2, 2024).

16

N.M. Const. art. IX, § 14(A).

17 See N.M. Att’y Gen. Op. 83-04 (July 29, 1983) (“A donation for the care and maintenance of either the sick or the indigent is not prohibited.”); N.M. Att’y Gen. Op. 58-135 (June 23, 1958) (“It is our view that such care and maintenance be extended to those who are either sick or indigent. It would not seem necessary that a person, in order to secure such assistance, be both sick and indigent.” (quoting N.M. Att’y Gen. Op. 57-26 (Feb. 14, 1957))).

18

19

20

21

1978-NMSC-036, ¶¶ 12–14, 92 N.M. 34.

NMSA 1953, §§ 13-2-12, et seq. (Repl. 1976).

1978-NMSC-036, ¶ 15.

Id. ¶ 14.

If, through conditions contained in the proposed agreements, IAD provides funds to Indigenous Centers “for the care and maintenance” of sick persons or indigent persons, including, for example, distributions of clothing and food to those in need, emergency financial assistance for those experiencing financial hardships, and providing resources for medical and mental health services, providing that funding would meet the first exception to the constitutional prohibition of the Anti-Donation Clause. 22

CONCLUSION Under the facts presented, the Indian Affairs Department’s proposed grants to Indigenous Centers would not violate the Anti-Donation Clause either because they are provided through a valid contract or because they are provided for the specific purpose of the care and maintenance of sick or indigent persons.

SO ISSUED. HON. WILLIAM F. LANG, Chair JEFFREY L. BAKER, Commissioner STUART M. BLUESTONE, Commissioner HON. CELIA CASTILLO, Commissioner HON. GARY L. CLINGMAN, Commissioner HON. DR. TERRY MCMILLAN, Commissioner DR. JUDY VILLANUEVA, Commissioner

22 See id. ¶¶ 5, 15 (holding that definition of “indigent” was not unconstitutional under the Anti-Donation Clause where it included a “person who has been admitted to a hospital for care, and who can normally support himself and his dependents on present income and liquid assets available to him but taking into consideration this income and those assets, and his requirement for other necessities of life, for himself and his dependents, is a person who is unable to pay the cost of the hospital care administered; the term includes a minor who has been admitted to a hospital for care, and whose parent or the person having his custody is normally able to support the minor on present income and liquid assets available, but, taking into consideration this income and those assets and the requirements for necessities of life for himself and for his dependents, is a person who cannot pay the hospital cost of the minor’s care” (emphasis added)); Cf. State ex rel. Mechem v. Hannah, 1957-NMSC-065, ¶ 40 (“They are not indigents or paupers, and the money is not to be given to them to prevent their becoming such . . .”).