PAYMENT SCHEDULES

OFFICES AND OFFICERS ‑- STATE ‑- DATA PROCESSING AUTHORITY ‑- APPROPRIATIONS ‑- PAYMENT SCHEDULES

(1) It would be legal under the state constitution and applicable statutes for the Washington state data processing authority to agree to a proposed revision in the payment schedule provided for in an existing contract for the purchase of a computer whereby certain payments due during the remainder of the current (1975-77) biennium would be deferred until the next (1977-79) biennium.

(2) In the event of such a revision in the payment schedule, the data processing authority may, in theory, change the charges made to users of the computer involved to reflect its own new payment schedule; it may, however, only pass on the new cost figures to those user agencies funded through legislative appropriations to the extent that the revised charges still reflect the actual "true and full value" of the facilities and services received by that user agency in exchange.

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                                                                November 2, 1976

Honorable Clinton De Gabrielle
Executive Director
Washington State Data
Processing Authority
Olympia, Washington 98504                                                                                                               Cite as:  AGLO 1976 No. 64

Dear Sir:

            By letter previously acknowledged you have requested an opinion of this office on two questions which we have paraphrased as follows:

            (1) Would it be legal under the state constitution and applicable statutes for the Washington state data processing authority to agree to a proposed revision in the payment schedule provided for in an existing contract for the purchase of a computer whereby certain payments due during the remainder of the current (1975-77) biennium would be deferred until the next (1977-79) biennium?

            (2) If question (1) is answered in the affirmative, would it likewise be legal for the data processing authority to change the charges made to users of the computer in order to reflect the resulting, new, payment schedule called for by the purchase contract?

            We answer question (1) in the affirmative and question (2) in the manner set forth in our analysis.

                                                                     ANALYSIS

            The Washington state data processing authority was created, as a state agency, by chapter 219, Laws of 1973, 1st Ex. Sess., (chapter 43.105 RCW) to provide:

            ". . . for the efficient and coordinated utilization of data processing equipment, techniques, and personnel to achieve optimum effectiveness and economy in collection, storage, interchange, retrieval, processing, and transmission of information; . . ."  (RCW 43.105.010.)

             [[Orig. Op. Page 2]]

            Question (1):

            Your first question involves a proposal to change the payment schedule provided for by a certain contract, entered into by the data processing authority in 1975, covering the purchase of a computer for a facility which you have referred to as data processing service center No. 3.  As originally consummated the agreement called for 84 monthly payments all of which are to be made to the vendor from the data processing revolving fund.  Accord, RCW 43.105.080 which provides that:

            "For the purposes of distributing and apportioning the full cost of data processing and data communication to its users and for the purpose of extending the useful life of state owned data processing and data communication equipment, and for such other purposes as may be necessary or convenient to carry out the purposes of this chapter, there is hereby created within the state treasury a revolving fund to be known as the 'data processing revolving fund' which shall be used for the acquisition of data processing and data communcation services, supplies and equipment handled or rented by the Washington state data processing authority or under its authority by any Washington state data processing service center designee, and the payment of salaries, wages and other costs incidental to the acquisition, operation and administration of acquired data processing services, supplies and equipment.  The data processing revolving fund shall be credited with all receipts from the rental, sale or distribution of supplies, equipment and services rendered to governmental agencies.  The data processing moneys presently held in, or hereafter accruing to, the present central stores revolving fund created by RCW 43.19.1923 are hereby transferred to the data processing revolving fund created by this section.  As used in this section, the word 'supplies' shall not be interpreted to delegate or abrogate the division of purchasing's responsibilities and authority to purchase supplies as described in RCW 43.19.190 and 43.19.210."

            Now, however, both the authority and the vendor desire to revise the payment schedule called for by the original contract in order, particularly, to defer certain payments due  [[Orig. Op. Page 3]] during the current (1975-77) fiscal biennium until the next ensuing (1977-79) biennium.  The reason for this proposed change in the contract, according to your letter, is as follows:

            "Data Processing Service Center #3 is a new consolidation of resources to serve the needs of the Department of Motor Vehicles and the Department of Social and Health Services.  Each of the Departments pays for the service it receives on the basis of its use of the center and in so doing completely pays the cost of operating the center.

            "Due to a series of circumstances the funds originally anticipated to be available from the two Departments and the Data Processing Authority, to support the costs of Service Center #3, are short approximately one million dollars from the original plan for the current biennium."

            More specifically, in response to our request for additional information, you have subsequently explained the shortage alluded to above in the following manner:

            "In determining sources of funds to meet the total costs associated with operating Service Center #3, we had been informed by DSHS in July of 1974 that the Federal matching funds available from DSHS to meet their share of the cost would be at 40%.  This resulted in a calculation of Federal matching funds in a total amount of $1,180,137.  In February of 1976, we were informed by DSHS that the Federal matching funds would be calculated at 25% of the DSHS share.  This resulted in the total Federal matching funds available being reduced to $779,960, thus causing a $400,000 deficit.  A mathematical error was made in our office in calculating both cash flow in the Revolving Fund and the physical computation of the Federal matching funds resulted in a $600,000 difference.  These two figures represent the total $1,000,000 that has been the basis for our negotiations with Univac and the basis for our request for an opinion from the Attorney General's Office."

             [[Orig. Op. Page 4]]

            In responding to your question regarding the legality of a solution to this problem through a change in the payment schedule called for by the purchase contract, we must first make note of Article VIII, § 4 (Amendment 11) of our state constitution which provides that:

            "No moneys shall ever be paid out of the treasury of this state, or any of its funds, or any of the funds under its management, except in pursuance of an appropriation by law; nor unless such payment be made within one calendar month after the end of the next ensuing fiscal biennium, and every such law making a new appropriation, or continuing or reviving an appropriation, shall distinctly specify the sum appropriated, and the object to which it is to be applied, and it shall not be sufficient for such law to refer to any other law to fix such sum."

            Also to be noted is RCW 43.88.130, a part of the state budget and accounting act, which complements the foregoing constitutional provision by stating that:

            "No agency shall expend or contract to expend any money or incur any liability in excess of the amounts appropriated for that purpose: . . ."

            Under these constitutional and statutory provisions a contract contemplating payments beyond the end of a fiscal biennium must normally contain a provision allowing the state to cancel at the end of any given biennium with no damage or loss to the state.  In the case of the particular contract with which we are here concerned, however, that rule appears to us to be inapplicable because of the fact that all of the payments by the state, in this case, are to be made from the data processing revolving fund provided for by RCW 43.105.080,supra.

            RCW 43.99.180, which is also a part of the budget and accounting act, says that:

            "Appropriations shall not be required for refunds, as provided in RCW 43.88.170, nor in the case of payments other than for administrative expenses or capital improvements to be made from trust funds specifically created by law to discharge awards, claims, annuities and other liabilities of the state.  Said trust funds  [[Orig. Op. Page 5]] shall include, but shall not be limited to, the accident fund, medical aid fund, retirement system fund, Washington state patrol retirement fund and unemployment trust fund.  Appropriations may be required in the case of public service enterprises defined for the purposes of this section as proprietary functions conducted by an agency of the state.  An appropriation may be required to permit payment of obligations by revolving funds, as provided in RCW 43.88.190."  (Emphasis supplied.)

            RCW 43.88.190, in turn, provides that:

            "Revolving funds shall not be created by law except to finance the operations of service units, or units set up to supply goods and services to other units or agencies.  Such service units where created shall be self-supporting operations featuring continuous turnover of working capital.  The regulations issued by the governor pursuant to this chapter shall prescribe the procedures to be employed by agencies in accounting and reporting for revolving funds and may provide for the keeping of such funds in the custody of the treasurer."

            In this instance the data processing revolving fund is clearly such a revolving fund as is contemplated by this last quoted statute.  Bearing that in mind we next note that RCW 43.88.180, supra, is permissive in the sense that it does not require appropriations for revolving funds but merely says that theymay be required.  And, in the case of the data processing revolving fund, the legislature, according to our research, has chosen not to make an appropriation.

            What this means, therefore, is that because the data processing revolving fund is not currently an appropriated fund it is not possible at the present time, legally or otherwise, to characterize any particular expenditures from that fund as being in excess of an appropriation and thus in any way violative of Article VIII, § 4 (Amendment 11), supra.  Compare and contrast, in that respect, the state employees' insurance revolving fund which was the subject of AGLO 1973 No. 109 [[to Leonard A. Nord, Chairman, Washington State Employees' Insurance Board, on November 20, 1973, an Informal Opinion, AIR-73609]], copy enclosed, and with regard to which the legislature had, in fact, made an appropriation.  But even more importantly (from the standpoint of your present question) the foregoing also means that the provisions of RCW 43.88.130,  [[Orig. Op. Page 6]] supra, are likewise, inapplicable in the case of a contractual liability payable solely out of the presently nonappropriated data processing revolving fund.  Because that fund is not currently covered by a limiting appropriation a contractual obligation which is payable solely from the resources thereof is simply not subject to being characterized, at the present time, as being ". . . a liability in excess of the amounts appropriated for that purpose . . ." within the meaning of this last noted statute.

            That being the case, and there being no other statute or constitutional provision which would, in our judgment, bar such action it thus follows that your initial question, as above paraphrased, may be answered in the affirmative; i.e., it would be legal, so long as only the data processing revolving fund is involved in terms of where the payments are coming from, for the data processing authority to agree (in the words of that question) ". . . to a proposed revision in the payment schedule provided for in . . . [the above described] existing contract for the purchase of a computer whereby certain payments due during the remainder of the current (1975-77) biennium would be deferred until the next (1977-79) biennium."1/

            Question (2):

            Your second question, as above paraphrased, assumes the foregoing affirmative answer to question (1) and asks if it would likewise be legal for the data processing authority to change the charges made to users of the computer involved in order to reflect the resulting new payment schedule called for by the purchase contract.

            The first statute to be noted in connection with this question is RCW 43.105.141(3) which, insofar as the powers  [[Orig. Op. Page 7]] of the data processing authority are concerned, reads as follows:

            "The authority shall have the following powers and duties:

            ". . .

            "(3) To make contracts, and to hire employees and consultants necessary or convenient for the purposes of this chapter, and fix their compensation; to enter into appropriate agreements for the utilization of state agencies and, where deemed feasible by the state data processing authority, of local government agencies, and their facilities, services, and personnel in developing and coordinating plans and systems, or other purposes of this chapter;to contract with any and all other governmental agencies for any purpose of this chapter including but not limited to mutual furnishing or utilization of facilities and services or for interagency, intergovernmental, or interstate cooperation in the field of data processing and communications;"  (Emphasis supplied.)

            In addition, note must again be made of RCW 43.105.080, supra, to the extent that this statute provides that the data processing revolving fund is created "For the purposes of distributing and apportioning the full cost of data processing and data communication to its users . . ."  From this we would conclude that at the very least the full costs of a service center must be charged to user agencies.  Moreover, this conclusion is also supported by so much of RCW 43.88.190,supra, as requires all revolving funds to be selfsupporting.

            Finally, as in the case of any interagency fiscal relationship, there is RCW 43.09.210 to be considered.  That statute reads, in pertinent part, as follows:

            "All service rendered by, or property transferred from, one department, public improvement, undertaking, institution, or public service industry to another, shall be paid for at its true and full value by the department, public improvement, undertaking, institution, or public service industry receiving the same, and no department, public improvement, undertaking, institution, or public service industry shall benefit in any financial manner whatever by an appropriation or fund made for the support of another."

             [[Orig. Op. Page 8]]

            Under RCW 43.09.210 the charges to user agencies funded by appropriations must thus meet a test of "true and full value."  In other words the amount which any such user agency is charged for data processing facilities or services under RCW 43.105.080 and 43.105.141, supra, may not in any biennium exceed the value of that which is received in return during that same biennium ‑ at least to the extent that payments are made by the user agency from appropriated funds.  And, obviously, even though the authority may alterits biennial costs through a change in the payment schedule which applies between it and the supplier or vendor, as contemplated by question (1), above, such action will not, in turn, automatically change the "true and full value" of the resulting facilities and services to be provided, in turn, to user agencies.