Article VIII

     Section 1.  The government may not incur public indebtedness except as prescribed by statute.

Case annotations:  Lease agreement executed by the Chuuk State is void insofar as it purports to "incur public indebtedness" without legislative authority by way of an appropriation or statute.  Billimon v. Chuuk, 5 FSM Intrm. 130, 135-36 (Chk. S. Ct. Tr. 1991).

     Section 2.  No public funds may be paid out of the treasury of the State of Chuuk except as prescribed by statute.  The appropriation of public money or property and the use of public credit, directly or indirectly, may only be for a public purpose.  No person may be made a direct recipient or beneficiary of public funds, unless pursuant to a public purpose, and no person may be made an allottee of public funds, unless pursuant to an executive capacity.

Case annotations:  A promissory note executed by a governor, not authorized by law, and for which no appropriation of funds was made, and which failed to meet the requirements of the state financial management act is unenforceable against the state.  Truk v. Maeda Constr. Co. (I), 3 FSM Intrm. 485, 487 (Truk 1988).

A promissory note executed by the governor which is unenforceable against the state is not ratified although the legislature appropriated funds for a state debt committee which included the amount of the note, since the committee is not required to pay the promisee of the note, and since the promisee is not the allottee of the appropriation.  Truk v. Maeda Constr. Co. (I), 3 FSM Intrm. 485, 487 (Truk 1988).

Although the court is powerless to compel Chuuk State to honor its lease agreement it has full power to restore unlawfully held property to its rightful owner as a remedy for forcible entry and unlawful detainer.  Billimon v. Chuuk, 5 FSM Intrm. 130, 136-37 (Chk. S. Ct. Tr. 1991).

Under Civil Rule 54(c) the court has full authority except in default judgments, to award the party granted judgment any relief to which it is entitled whether that party prayed for it or not.Billimon v. Chuuk, 5 FSM Intrm. 130, 137 (Chk. S. Ct. Tr. 1991).

Where the court cannot compel the state to honor an illegal and/or unconstitutional lease it can order the state to restore the illegally held land, with any and all public improvements removed, to its rightful owner who may also be entitled to damages.  Billimon v. Chuuk, 5 FSM Intrm. 130, 137 (Chk. S. Ct. Tr. 1991).

     Section 3.  No withdrawal, in draft or other form, may be made from any bank account of the State Government if the amount in the account, after deducting the aggregate amount of all obligations outstanding against the account, is not sufficient to cover such withdrawal.

     Section 4.  The Governor shall submit an annual budget to the Legislature at a time prescribed by statute.  The budget shall contain a complete plan of proposed expenditures, anticipated revenues, and other monies available to the State Government for the next fiscal year, and any additional information which the Legislature may require.  The Legislature may alter all or any portion of the proposed budget.

     Section 5.  No appropriation bills, except those recommended by the Governor for an urgent public purpose requiring immediate passage and those providing for the continuing operation of the State Government, may be considered until the budget has been enacted.

     Section 6.  Each fiscal year, the Legislature shall appropriate for the operation of the municipal governments at least 8 percent of the state operation funds, and shall appropriate to the municipalities for development projects at least 40 percent of the development funds that may be allocated.

     Section 7.  The State Government has the power to tax, and may delegate certain taxing powers to the municipal governments by statute.  All taxes levied by the State Government shall be prescribed by statute.

Case annotations:  Although retroactive application of a decision holding a state tax unconstitutional would impose hardship on a state where funds collected under the tax have already been committed, such a result is not inequitable where the state legislature pushed on with the tax act despite the strong resistance of business people to the tax in the form of petition and establishment of an escrow account to hold contested payments, and a veto message by the governor of the state, and there is no indication that the legislature seriously considered the constitutionality of the legislation.  Innocenti v. Wainit, 2 FSM Intrm. 173, 186 (App. 1986).

The general grant of the taxing power to the state, which allows taxing power to be delegated to the municipalities, is  not an exclusive grant preventing municipalities from levying taxes.Wainit v. Weno, 7 FSM Intrm. 121, 123 (Chk. S. Ct. Tr. 1995).

A municipality in Chuuk has the power to tax so long as the state has not preempted the area.  Wainit v. Weno, 7 FSM Intrm. 121, 123 (Chk. S. Ct. Tr. 1995).

     Section 8.  No government may levy a tax on real property.

     Section 9.
          (a)     There shall be an independent Public Auditor appointed by the Governor and confirmed by the Senate.  The Auditor shall serve for a 6 year term and until a successor is confirmed.  The Auditor shall be a certified public accountant with auditing experience.

          (b)     The Auditor shall conduct audits of all financial transactions of all branches, departments, offices, agencies and instrumentalities of the government, and of all accounts kept by or for them.  The Auditor shall certify the accuracy of all financial statements issued by the State Government.  The Auditor shall annually report findings and recommendations to the Legislature, the Governor, and the municipalities, and shall provide additional reports and information as may be required by law or as the Auditor deems appropriate.

          (c)     If the Auditor discovers that any public monies have been misused or misappropriated, the Auditor shall report such misuse or misappropriation to the appropriate prosecutor's office.

          (d)     The Auditor may be removed for cause by the vote of 2/3 of the members of the Senate.  Upon the removal, resignation, or incapacity of the Auditor, the Chief Justice of the State Supreme court shall appoint within one month an Acting Public Auditor having the qualifications required for a full term.  The Acting Public Auditor shall serve until a successor is confirmed.  The Governor shall appoint and the Senate shall confirm a successor Auditor within 6 months.