INVESTMENT OF PROCEEDS OF VETERANS COMPENSATION BONDS

INVESTMENT OF PROCEEDS OF VETERANS COMPENSATION BONDS

Money in the war veterans compensation fund in excess of current requirements may be invested under the provisions of chapter 91, Laws of 1935, and United States Treasury bills are eligible for investment.

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                                                                 February 3, 1950
State Finance Committee
Legislative Building
Olympia, Washington                                                                                                              Cite as:  AGO 49-51 No. 215

Attention:  Mr. Ernest Minor, Secretary

Gentlemen:

            Receipt is acknowledged of your letter of January 27, 1950 relative to the $70,000,000 deposit soon to be made in the state treasury from the sale of war veterans compensation bonds.  Your specific questions are:

            "(1) May these funds be invested by the State Finance Committee under authority of Chapter 91, Laws of 1935?

            "(2) If your answer is yes, would you say that U. S. Treasury Bills would be eligible for purchase, even though not specifically mentioned in said Chapter 91?"

            Our conclusions may be summarized as follows:

            (1) The State Finance Committee may invest money received from the sale of war veterans compensation bonds in accordance with chapter 91, Laws of 1935.

            (2) United States Treasury Bills are eligible for such investment.

                                                                     ANALYSIS

             [[Orig. Op. Page 2]]

            Chapter 180, Laws of 1949 (Remington's 1949 Supp. 10747a, et seq.) authorizes the sale of bonds to the extent of 80 million dollars for the purpose of financing the payment of a bonus to veterans of World War II.  Section 8 of that act (Rem. 1949 Supp. 10747h) provides:

            "The money arising from the sale of said bonds shall be deposited in the State Treasury to the credit of a special fund to be known as the War Veterans' Compensation Fund, which shall be used for the payment of the compensation provided in this act, and for paying the expenses of the administration thereof.  For the purpose of carrying out the provisions of this act, there is hereby appropriated from the War Veterans' Compensation Fund the sum of eighty million dollars ($80,000,000)."

            Chapter 180, Laws of 1949, contains no special provision other than that just quoted relative to the manner of keeping the proceeds of the bond issue.  Section 1, chapter 91, Laws of 1935 (Rem. Rev. Stat. Supp. 5508-1) provides:

            "Whenever there shall be in any fund or funds or cash balances in the state treasury more than sufficient to meet the current expenditures properly payable from such fund or funds or cash balances, the state finance committee may invest such portion of such funds or cash balances as the said committee may deem necessary and expedient, in certificates, notes or bonds of the United States, in state, county, municipal or school district bonds, and in warrants of taxing districts of the State of Washington, such bonds and warrants to be none other than those found to be within the limit of indebtedness prescribed by law and to be general obligations of a county, municipality or school district:  Provided, That the state finance committee may purchase said bonds and warrants directly from the taxing district or in the open market at such prices and upon such terms as they may determine,  [[Orig. Op. Page 3]] and that they may sell the same at such time or times as they may deem necessary or expedient.  Upon such investment being made, the state treasurer shall pay to the vendor of said securities the amount so invested, and the bonds so purchased shall be deposited with the state treasurer, whose duty it shall be to collect all interest payments falling due thereon, and the principal at maturity."

            In your letter you say that the major portion of the deposit will remain in the treasurer's balance for several months.  Since these funds will be in excess of current needs of the fund, the excess may be invested in the manner prescribed in chapter 91, Laws of 1935.

            Specific authority is contained in chapter 91, Laws of 1935, to invest in "certificates, notes or bonds of the United States."  United States Treasury bills are obligations of the United States Treasury issued for periods of ninety days.  The authority for their issuance is section 754, Title 31, of the United States Code.  They are general obligations of the United States Treasury and differ from bonds, notes and certificates only in the length of time for which they are issued.  Subsection (c) of section 754, Title 31, U.S. Code, [[U.S.C.]]provides:

            "Wherever the words 'bonds and notes of the United States,' or 'bonds and notes of the Government of the United States,' or 'bonds or notes of the United States' are used in the Federal Reserve Act, they shall be held to include certificates of indebtedness and Treasury bills issued hereunder."

            It will be seen that the federal government treats treasury bills in exactly the same manner as bonds or notes.  In actual fact treasury bills are bonds of the United States in the generic sense.  Webster's New International Dictionary defines bonds as follows:

            "A writing under seal by which a person binds himself to pay a certain sum on or before a future day appointed.  * * * Such an instrument made by a government or a corporation as an evidence of debt, usually for the purpose of borrowing money; hence,  [[Orig. Op. Page 4]] loosely, any interest-bearing certificate issued by a government or corporation especially when a date is set for the payment of the principal.  * * *"

            In our opinion United States Treasury bills are eligible investments for the funds above mentioned.

Very truly yours,

SMITH TROY
Attorney General

LYLE L. IVERSEN
Assistant Attorney General