DEDUCTIONS FROM FUTURE STATE FUNDS AVAILABLE TO SCHOOL DISTRICTS.

SCHOOLS ‑- EMERGENCY SCHOOL CONSTRUCTION FUND ‑- INTERPRETATION AS "REVOLVING" OR NON-REVOLVING FUND ‑- TIME OF DETERMINATION -- DEDUCTIONS FROM FUTURE STATE FUNDS AVAILABLE TO SCHOOL DISTRICTS.

The emergency school construction act of 1953 does not create a "revolving" fund; the question of deductions from future state funds available to school districts which have received emergency allotments is to be determined ten years after such allotments are made.

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                                                                   June 30, 1953

Honorable Pearl A. Wanamaker
State Superintendent of Public Instruction
Old Capitol Building
Olympia, Washington                                                                                                                Cite as:  AGO 53-55 No. 77

Attention:  G. W. Van Horn
Consultant on Administrative Problems

Dear Mrs. Wanamaker:

            By letter of June 25, 1953, you ask our opinion on the following questions:

            "1. Does Chapter 7, Laws of 1953 (Ex. Session) authorize the establishment of a revolving fund which includes the entire net proceeds of the $20,000,000 bond issue provided for by that Chapter?  In other words, is the Commission required, when an allocation is made to a school district, to advise the district that the amount or amounts allocated will be deducted later (after ten years) 'from any state funds under state control which might otherwise be provided to such district'?

             [[Orig. Op. Page 2]]

            "2. If question number 1 is answered in the negative, is the Commission empowered to make variations among districts in the amounts to be deducted, deducting the total amount in some cases, fractional amounts in other cases, and none at all in still other cases?  If so, is the Commission required to advise each district, at the time the allocation is made, respecting the extent of the deduction that will be made later, or should the Commission advise each district at the time of the allocation that the extent of the deduction, if any, will be determined ten years thereafter?"

            It is our conclusion that:

            1. Your first inquiry must be answered in the negative.

            2. Your second inquiry is answered in the affirmative, and school districts receiving allocations should be advised that the question of deductions from future state funds which may be provided for such districts and the amount thereof, if any, will be determined ten years after the emergency allocations.

                                                                     ANALYSIS

            A revolving fund is defined as

            "* * * a contingent fund created by the government from which loans may be made for some specific period and purpose, * * *‑-so called because the fund 'revolves,' or completes in the course of time the circuit between loans and repayments."  Webster's New International Dictionary (2d ed.)

            In the case ofU.S. v. Butterworth-Judson (1924), 297 Fed. 971, at page 979, the U.S. Circuit Court of Appeals, Second Circuit, defined the term as follows:

            "'Revolving fund' is a brief expression of recent coinage which usually refers to a renewable credit over a defined period.  In simple parlance, it relates usually to a situation where a bank or merchant extends credit for a certain amount which can be paid off from time to time, and then credit is again given not to exceed the same amount.  * * *"

             [[Orig. Op. Page 3]]

            The basic element of such a fund therefore appears to be that the balance on hand, together with the credits due the fund, keep the original amount of the fund intact for re‑use.

            The title to chapter 7, Laws of 1953, reads in part as follows:

            "AN ACT providing funds for the emergency construction of public school plant facilities; authorizing the issuance and sale of limited obligation bonds of the state and providing ways and means to pay said bonds; * * *"

            After authorizing and providing for the sale of a $20,000,000 bond issue through the state finance committee, the act, in Sec. 2, provides that the funds

            "* * * shall be deposited in the school emergency construction fund which shall be held by the state treasurer as ex officio custodian * * *."

            Sec. 3 of the act appropriates $20,000,000 from the emergency construction fund to the state finance committee to be expended for the payment of expenses of the bond issue

            "* * * and through allotments made to the state board of education at the direction of the school emergency construction commission for the purpose of carrying out the provisions of this act."

            Sec. 7 creates the school emergency construction commission.  Sec. 8 provides that allocation shall be made on an emergency basis by the school emergency construction commission.  Sec. 9 provides that such allotments to qualified school districts shall be made by the emergency construction commission through the state board of education.

            Sec. 10 of the act expressly provides that

            "A school district receiving an emergency allotment under this chapter shall be underno obligation whatsoever to repay or return any portion thereof."  (Emphasis supplied).

             [[Orig. Op. Page 4]]

            Nowhere in the title or the body of the act is the emergency construction fund referred to as a "revolving fund."  Nor is there any provision in the act which can be interpreted as securing repayments to the fund so as to keep the original net amount thereof intact and available for reallocation to the school districts.  On the contrary, Sec. 10 above quoted, specifically excludes any obligation on the part of school districts to which allotments are made, to repay any part of the funds allocated to them.

            Sec. 11 provides that

            "Ten years after an allocation to a school district, the commissionmay, on such terms, conditions and installments as it deems proper or necessary, deduct the amount of the allocation or any portion thereof, without interest, from any state fund or funds under state control which might otherwise be provided to such district.  Funds required by the constitution of this state or the constitution or laws of the United States to be made available to school districts shall not be subject to this deduction.  The amounts so deducted shall be placed into the school emergency construction fund to be available for further allocations for school construction pursuant to the provisions of this act."  (Emphasis supplied).

            However, the provisions of this section with regard to future state funds which may or may not be available to a district to which an allocation of emergency construction funds has been made, are permissive and not mandatory.  The commission is given discretion to determine, ten years after any allocation has been made, whether or not at that time any deduction should be made from any state funds then provided for the district to which the emergency allocation has been made.  It is entirely a matter of speculation as to whether or not conditions and circumstances existing ten years after emergency allocations are made, will be such as to cause the commission to determine that such deductions shall be made.  There is only a possibility that the emergency construction fund will be replenished, wholly or partially, at some future date.

            Under these circumstances we are of the opinion that chapter 7, Laws of 1953, does not create a revolving fund.  We are also of the opinion that the determination by the commission as to whether or not deductions shall be made from state funds hereafter available to a school district, is to be made ten years  [[Orig. Op. Page 5]] after any allocations of the emergency construction fund.  Although there is no statutory provision directing the commission to do so, it would appear to be good practice and policy to advise the school districts at the time allocations are made to them that the question of such deductions will be determined as above indicated.

Very truly yours,

DON EASTVOLD
Attorney General

FRED L. HARLOCKER
Assistant Attorney General