COUNTIES ‑- FINANCE COMMITTEE ‑- TREASURER ‑- CURRENT EXPENSE FUND ‑- UNBUDGETED CASH BALANCE ‑- INVESTMENT ‑- REDEEMABLE IN CASH ON DEMAND

COUNTIES ‑- FINANCE COMMITTEE ‑- TREASURER ‑- CURRENT EXPENSE FUND ‑- UNBUDGETED CASH BALANCE ‑- INVESTMENT ‑- REDEEMABLE IN CASH ON DEMAND.

The "unbudgeted cash balance" which counties under RCW 36.40.090 are authorized to retain in their current expense funds must at all times remain in the form of cash or that which is redeemable in cash upon demand as a matter of fixed right.

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                                                                   May 10, 1962

Honorable Cliff Yelle
State Auditor
Legislative Building
Olympia, Washington

                                                                                                              Cite as:  AGO 61-62 No. 132

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:

            Is the "unbudgeted cash balance" which counties, under RCW 36.40.090, are authorized to retain in their current expense funds, available for investment under the provisions of RCW 36.33.180?

            We answer your question in the manner set forth in our analysis.

                                                                     ANALYSIS

            The statutory provisions specifically to be considered with regard to your question are RCW 36.33.180 and RCW 36.40.090, providing, respectively, as follows:

            RCW 36.33.180:

            "The county treasurer of every county shall call the attention of the county finance committee to any inactive fund or funds in excess of the current needs of the county.  The committee may by order authorize him to invest such inactive or excess funds in bonds of the United States government, if prior to making the order, they have applied for and received from the state finance committee its approval of such investment."

             [[Orig. Op. Page 2]]

            RCW 36.40.090:

            "The board of county commissioners shall then fix the amount of the levies necessary to raise the amount of the estimated expenditures as finally determined, less the total of the estimated revenues from sources other than taxation, including such portion of any available surplus as in the discretion of the board it shall be advisable to so use, and such expenditures as are to be met from bond or warrant issues:  Provided, That no county shall retain an unbudgeted cash balance in the current expense fund in excess of a sum equal to the proceeds of a five mill levy against the assessed valuation of the county.  All taxes shall be levied in specific sums and shall not exceed the amount specified in the preliminary budget."

            Thus, it is either an "inactive fund" or "funds in excess of the current needs of the county" which may be invested pursuant to RCW 36.33.180.  This section is the codification of § 1, chapter 161, Laws of 1951, amending § 1, chapter 209, Laws of 1937.

            RCW 36.40.090,supra, codifies the last paragraph of § 1, chapter 145, Laws of 1943, amending § 4, chapter 164, Laws of 1923, as amended by § 1, chapter 99, Laws of 1941.

            The question of whether the "unbudgeted cash balance" authorized under RCW 36.40.090 may be invested as provided in RCW 36.33.180 was first considered by this office in an opinion dated September 23, 1943, to the prosecuting attorney of Lincoln County [[1943-44 OAG 138]].  The reasoning and conclusion of this opinion may be summarized as follows:

            (1) Under § 4, chapter 164, Laws of 1923 (prior to amendment by the 1941 and 1943 legislative sessions) any surplus remaining in a county current expense fund at the beginning of a fiscal year, after payment of all outstanding obligations against the fund, was available to reduce the amount of levies necessary to raise the amount of estimated expenditures for the fiscal year.  In Weyerhaeuser Timber Co. v. Roessler, 2 Wn. (2d) 304, 97 P. (2d) 1070 (1940), our state supreme court expressed its views as follows:

            "We take the fair import of the budget law to be that it does not contemplate the accumulation in the current expense fund of a  [[Orig. Op. Page 3]] surplus in excess of the current needs as reflected by budgeted expenditures.  We need not go far afield for a definition of the term 'available surplus.'  In the light of the budget plan, its obvious meaning is that any cash surplus remaining in the current expense fund at the beginning of the fiscal year, after payment of all outstanding obligations against the fund, is available."  (Emphasis supplied.)

            (2) In reaction to this court decision, the legislature in 1941 amended § 4, chapter 164, Laws of 1923, to permit the county commissioners in determining "available surplus" to

            ". . . withhold and keep on hand in the County Current Expense Fund for working capital to maintain said fund on a cash basis such amounts of the Current Expense Fund surplus as shall equal thirty per cent (30%) of the last tax levy for said fund in Class A and First Class counties and fifty per cent (50%) of the last tax levy for said fund in all other counties; . . ."

            (3) This 1941 enactment (chapter 99, Laws of 1941) was further amended in 1943, by chapter 145, Laws of 1943, to read in pertinent part as follows:

            "The County Commissioners shall then fix the amount of the levies necessary to raise the amount of the estimated expenditures as finally determined, less the total of the estimated revenues from sources other than taxation including such portion of any available surplus as in the discretion of the Commissioners it shall be advisable to so use, and such expenditures as are to be met from bond or warrant issues:  Provided, That no county shall retain an unbudgeted cash balance in the Current Expense Fund in excess of a sum equal to the proceeds of a five mill levy against the assessed valuation of the county.  All taxes shall be levied in specific sums and shall not exceed the amount specified in the preliminary budget."

            (4) Neither of these amendatory enactments, in and of themselves, granted authority to invest any portion of the current expense fund.  We said:

             [[Orig. Op. Page 4]]

            "The most that chapter 145, Laws of 1943, does, so far as the point herein involved is concerned, is to grant to the county commissioners the right to retain an unbudgeted cash balance in the current expense fund not exceeding an amount equal to what a five mill levy against the assessed valuation of the county would produce.  This would not be a grant of power to create a standing surplus in the current expense fund in the sense that such surplus would be available for a long term investment.  The most that such provision does is to remove the somewhat rigid restrictions placed upon the county commissioners under the principles of the Weyerhaeuser case."

            (5) We therefore concluded:

            "It is, therefore, our opinion that any unbudgeted cash balance retained in the county current expense fund under the provisions of section 1, chapter 145, Laws of 1943,must be considered as cash and not available for a long term investment under the provisions of chapter 209, Laws of 1937. . . ."  (Emphasis supplied.)

            In an opinion dated May 14, 1948, to the prosecuting attorney of Pierce county [[1947-48 OAG 100d]], we added the following refinement to this conclusion:

            "It is perhaps confusing to use the terms 'temporary' or 'long-term' investments since these are indefinite terms, but actually the distinction between these terms is not material to this discussion.  Rather the character of the investment should be examined to determine whether it can be considered as cash.  Unless it is redeemable in cash upon demand as a matter of fixed right we do not believe it may legally be so considered.

            "The conclusion is that, whether an investment be denominated 'long-term' or 'temporary,' it can only be made from current expense funds if it beredeemable upon demand in cash.  The possibility or probability of negotiability or marketability in our opinion would not meet that requirement inasmuch as those factors depend on finding a buyerwilling to purchase but  [[Orig. Op. Page 5]] not obligated to do so."  (Emphasis supplied.)

            In AGO 55-57 No. 193, dated January 30, 1956 [[to Prosecuting Attorney, Pierce County]], we purported to affirm the 1948 opinion, as follows:

            "We hereby specifically affirm the opinion of the attorney general issued on May 14, 1948, in which he ruled that funds existing in the Current Expense Fund are not excess or surplus funds because of the specific wording of the act creating the fund and because of the decision of the supreme court of the State of Washington in the case ofWeyerhaeuser Timber Co. v. O. W. Roessler, 2 Wn. (2d) 304."

            You have indicated awareness of this line of previous opinions of this office, but have asked that we give reconsideration to the views expressed therein.

            The position taken in the 1943 and 1948 opinions was that the county current expense fund must at all times remain in the form of cash (or that which is redeemable in cash upon demand as a matter of fixed right).  Consequently, notwithstanding any general grant of authority by the legislature for the investment of inactive county funds or county funds in excess of the current needs of the county, no portion of the county current expense fund, we advised, could be invested in any obligations or securities not immediately redeemable, upon demand, in cash.

            An examination of the amendatory provisions of chapter 99, Laws of 1941,supra, and chapter 145, Laws of 1943, supra (both enacted subsequent to, and in apparent response to, the supreme court decision inWeyerhaeuser Timber Co. v. Roessler, supra) reveals that the first of these two enactments authorized the county commissioners to ". . . withhold and keep on hand in the County Current Expense Fundfor working capital to maintain said fund on a cash basis such amounts of the Current Expense Fund surplus as shall equal . . ." a designated percentage of the last tax levy for said fund.  In other words, the purpose for allowing the county commissioners, in determining "available surplus," to withhold and keep on hand an amount of the current expense fund surplus, was to permit maintenance of the current expense fund on a cash basis; i.e., to overcome the practical difficulties presented by the decision of the court in the Weyerhaeuser case.

            The 1943 enactment, chapter 145, Laws of 1943, supra, repeated here for ease of reference, re‑established [[reestablished]]the formula to be followed by the county commissioners in fixing the amount of tax levies necessary,

Very truly yours,

JOHN J. O'CONNELL
Attorney General

PHILIP H. AUSTIN
Assistant Attorney General