OFFICES AND OFFICERS ‑- STATE ‑- LEGISLATURE ‑- AUTHORITY TO USE PRINCIPAL ASSETS OF CERTAIN FUNDS FOR CAPITAL OUTLAY OR CURRENT OPERATIONS

OFFICES AND OFFICERS ‑- STATE ‑- LEGISLATURE ‑- AUTHORITY TO USE PRINCIPAL ASSETS OF CERTAIN FUNDS FOR CAPITAL OUTLAY OR CURRENT OPERATIONS.

The legislature may not provide for the use of the principal assets of the permanent common school fund, scientific school permanent fund, university permanent fund, normal school permanent fund, agriculture college permanent fund, Millersylvania Park fund and C. E. P. & R. I. fund for capital outlay or current operations.

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                                                                 January 19, 1959

Honorable Paul W. Ellis
Legislative Auditor
Legislative Building
Olympia, Washington                                                                                  Cite as:  AGO 59-60 No. 2

Dear Sir:

            You have requested a formal opinion of this office on two questions which we paraphrase as follows:

            (1) May the legislature by appropriate legislation provide for the use of the principal assets of any or all of the following funds for capital outlay or for current operations?

                        (a) permanent common school fund

                        (b) scientific school permanent fund, university permanent fund, normal school permanent fund, agriculture college permanent fund

                        (c) Millersylvania Park fund

                        (d) C.E.P. & R.I. permanent fund

            (2) What action would be necessary in order to make these funds, if not now available, available for  [[Orig. Op. Page 2]] appropriations for capital outlay and for current operations?

            We answer your questions as follows:

            The principal assets of the permanent common school, scientific school, university, normal school, and agricultural college funds may not legally be used for capital outlay or current operations.  To authorize such expenditures would require an amendment to 25 U.S. St. at Large, chapter 180, commonly referred to as the "Enabling Act" and in the case of the common school fund it would require an amendment of Article IX, § 3 of the Washington State Constitution.

            The Millersylvania Park fund may not be so used except insofar as a trust may be legally modified, as indicated below.

            The principal assets of the C. E. P. & R. I. fund may not be used for capital outlay and current operational needs at state charitable, penal, educational, and reformatory institutions, without amending the Enabling Act.

                                                                     ANALYSIS

            A ‑PERMANENT COMMON SCHOOL FUND

            The permanent common school fund principal may not be utilized for any other purpose than the creation of income.  In order to provide for the appropriation of the principal of this fund an act of congress amending the Enabling Act, 25 U.S. Statutes at Large, chapter 180, ratification of such amendment by the state of Washington, and a constitutional amendment would be necessary.

            This fund is created by the express terms of the state's Enabling Act.  Section 10 of the Enabling Act reads in part as follows:

            "That upon the admission of each of said States into the Union sections numbered sixteen and thirty-six in every township . . . are hereby granted to said States for the support of common schools . . ."

            Section 11 reads in part as follows:

            "That all lands herein granted for educational purposes shall be disposed of only at public sale, and  [[Orig. Op. Page 3]] at a price not less than ten dollars per acre, the proceeds to constitute a permanent school fund, the interest of which only shall be expended in the support of said schools."

            Section 13 reads as follows:

            "That five per centum of the proceeds of the sales of public lands lying within said States which shall be sold by the United States subsequent to the admission of said States into the Union, after deducting all the expenses incident to the same, shall be paid to the said States, to be used as a permanent fund, the interest of which only shall be expended for the support of common schools within said States, respectively."

            This language is clear and unambiguous, and was intended to create a permanent and irreducible fund, the principal of which could not be expended.  Article IX, § 3 of the Washington State Constitution reads in part:

            "The principal of the common school fund shall remain permanent and irreducible . . ."

            Pursuant to the last line of section 13 of the Enabling Act, Article IX, § 2 of the Washington State Constitution provides:

            ". . . the entire revenue derived from the common school fund . . . shall be exclusively applied to the support of the common schools."

            After a state has accepted the terms of the enabling act by framing and passing a constitution, each government is bound by the provisions of that enabling act.  Boeing Aircraft Co. v. Reconstruction Finance Corporation, 25 Wn. (2d) 652, 171 P. (2d) 838 (1946).  On this basis, it must be concluded that the permanent common school fund must be maintained in its permanent and irreducible state, pursuant to the present terms of the Enabling Act and the Washington State Constitution.

            B ‑SCIENTIFIC SCHOOL PERMANENT FUND, UNIVERSITY PERMANENT FUND, NORMAL SCHOOL PERMANENT FUND, and AGRICULTURAL PERMANENT FUND

            The principal assets of the enumerated funds may not be presently used for capital outlay or current operations.

             [[Orig. Op. Page 4]]

            As previously indicated, section 11 of the Enabling Act provides in general terms that the proceeds of all lands granted for "educational purposes" are to constitute a permanent school fund, the interest of which only shall be expended in the support of said school.  Our Supreme Court has interpreted this language as applicable to all of the land grants made, throughout the act, for educational purposes.  State ex. rel. Heuston v. Maynard, 31 Wash. 132, 71 Pac. 775 (1903).

            In view of this we are compelled to conclude that the revenue derived from lands granted, by section 17 of the Enabling Act for scientific school and normal school purposes; by section 16 for the "use and support of agricultural colleges"; and by section 14 for university purposes, being for "educational purposes" within the meaning of section 11, constitute permanent and irreducible funds, the principal assets of which may not be expended without amending the terms of the Enabling Act itself.

            C ‑MILLERSYLVANIA PARK TRUST FUND

            By chapter 97, Laws of 1931, the Millersylvania Park trust fund was created pursuant to the will of Frederick Miller.  The restrictions imposed by the will are that it is to remain a permanent and irreducible fund, the interest, income and earnings therefrom to be expended by the state parks' committee for the improvement, maintenance and upkeep of said park in accordance with the terms of the will.

            By the terms of this gift the state acts as trustee in the execution of a testamentary trust, and therefore, has an unalterable obligation to execute this trust only in accordance with the terms of the will.  Union Bank & Trust Co. of Los Angeles vs. McColgan, 84 Cal.App. (2d) 208, 190 P. (2d) 42.  The principal assets of this fund may therefore not be expended for capital outlay or current operations, even by legislative mandate.

            However, under certain limited circumstances a court of equity may, upon the occurrence of emergencies, or unusual circumstances not anticipated by the settlor, authorize the trustee to deviate from the express terms of the trust.  Such action may be allowed in order to carry out the ultimate purpose of the trust where, to adhere to the express terms of the trust would defeat that purpose.  Petition of Wolcott, (N.H.) 56 A.2d 641 (1948); 54 Am.Jur. 224, § 284; 1 A.L.R. 2d 1328, and cases cited therein.

            D ‑C. E. P. & R. I. PERMANENT FUND

            There appears to be no legislation creating the above fund.  Pertinent portions of section 17 of the Enabling Act reads as follows:

             [[Orig. Op. Page 5]]

            ". . . the following grants of land are hereby made, to wit:

            ". . .

            "To the State of Washington: . . . for State charitable, educational, penal, and reformatory institutions, two hundred thousand acres."

            No constitutional provisions exist as to the disposition of these properties.

            The distribution of moneys from this fund for the use of the various types of institutions designated is a matter left to the discretion of the state legislature.  All or none of the fund may be used for any one or more of these types of institutions, and ifany of the principal assets of the fund may be used then it is not a permanent and irreducible fund.

            While it is true that the original grant was made for charitable, penal and reformatory institutions as well as for "educational purposes", nevertheless we are compelled to conclude that being available for educational purposes the rule ofState ex rel. Heuston v. Maynard, supra, is applicable and the entire fund must be considered permanent and irreducible.

            We are constrained to reach this conclusion because of the very explicit language of our Supreme Court in the Maynard case, supra.  The last sentence of section 17 of the Enabling Act reads as follows:

            "And the lands granted by this section shall be held, appropriated and disposed of exclusively for the purposes herein mentioned, in such manner as the legislatures of the respective states may severally provide."

            InState ex rel. Heuston v. Maynard, supra, the court said:

            "It is contended by the relator that the last sentence of § 17 contains the only limitation upon the legislature with reference to the disposition of the lands granted for state normal schools, and that the limitation contained in § 11 has reference only to sections 16 and 36 granted by § 10 of the enabling act for the support ofcommon schools; and a very plausible argument is made to sustain this contention.  But this argument necessarily  [[Orig. Op. Page 6]] eliminates § 11 of this act as an independent section of the act, and also limits the general words therein used, namely,'all lands herein granted for education purposes,' to mean all lands in § 10 granted for common-school purposes.  If congress intended § 11 to be only a limitation to § 10, and not apply to the whole act, it was very unfortunate in the use of words to express that intention, even if the making of § 11 an independent section was an inadvertence.  But, taking the section as we find it, an independent section, in connection with the general words used, it seems conclusive to our minds that congress intended to make it refer, not only to the preceding section, but to the whole act, and that the words'herein' and 'educational purposes' were used advisedly, and refer to all lands granted for such purposes in the whole act.  It is true that, with this construction placed upon § 11, the provision found in § 14, as follows:  'None of the lands granted in this section shall be sold at less than $10 per acre, but said lands may be leased in the same manner as provided in § 11 of this act,' was not necessary.  But this provision was evidently inserted to avoid the possibility of a construction that university lands might be sold, under provisions of the act of 1854, at less than $10 per acre.  The clause in § 17, as follows, 'And the lands granted by this section shall be held, appropriated and disposed of exclusively for the purposes herein mentioned, in such manner as the legislatures of the respective states may severally provide' refers to the manner of holding and of appropriating and of disposing of the lands, and must be construed with reference to the limitations contained in § 11 as to lands granted for educational purposes.  The manner of the disposition or the sale of such lands, and the manner of the holding or the investment of the proceeds, and the appropriation of the interest or income, is subject to the limitations contained in § 11 of the act."  (p. 139)

            To hold thatany of the principal assets of this fund may be expended would be to avoid the effect of the Maynard decision,supra, in view of the court's emphatic expression of the broad interpretation that must be given the phrase "educational purposes" appearing in section 11.

             [[Orig. Op. Page 7]]

            The principal assets of this fund may not, therefore, be expended without first amending the terms of the Enabling Act in this respect.

            We trust the foregoing will be of service to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

GERALD F. COLLIER
Assistant Attorney General