USE OF FUNDS OF STATE EMPLOYEES' RETIREMENT SYSTEM AND STATE TEACHERS' RETIREMENT SYSTEM TO PURCHASE OBLIGATIONS GUARANTEED BY THE UNITED STATES GOVERNMENT UNDER TITLE 42...

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FUNDS - USE OF FUNDS OF STATE EMPLOYEES' RETIREMENT SYSTEM AND STATE TEACHERS' RETIREMENT SYSTEM TO PURCHASE OBLIGATIONS GUARANTEED BY THE UNITED STATES GOVERNMENT UNDER TITLE 42 U.S.C.A., § 1594, MILITARY HOUSING ACT.

The funds of the state employees' retirement system and the Washington state teachers' retirement system may be utilized to purchase obligations fully guaranteed by the United States government under the Military Housing Act (Title 42 U.S.C.A., § 1594).

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                                                                   May 18, 1959

Honorable August P. Mardesich
State Representative, 38th District
1219 Rucker
Everett, Washington                                                                                                          Cite as:  AGO 59-60 No. 35

Dear Sir:

            By a previously acknowledged letter you have requested our opinion on a question we paraphrase as follows:

            May the funds of the State Employees' Retirement System and the Washington State Teachers' Retirement System be utilized to purchase obligations fully guaranteed by the United States Government through the Secretary of Defense (or his designee) pursuant to Title 42 U.S.C.A., § 1594 (Military Housing Act).

            We answer your question in the affirmative.

                                                                     ANALYSIS

            As we pointed out in AGO 59-60 No. 9 [[to Department of Conservation on February 13, 1959]](a copy of which is enclosed), these two funds can be invested in "bonds or other obligations issued directly by or fully guaranteed by the federal government or any agency thereof."  RCW 41.40.070 and RCW 41.32.200.

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            Therefore, our only problem is to determine whether this particular investment qualifies as a "public purpose," since we recognized in our prior opinion that public funds may only be used and expended for public purposes.

            While we have not found a case holding military housing to be a public purpose, there are well reasoned cases in other jurisdictions holding that public housing is for a public purpose.  SeeCremer v. Peoria Housing Authority, 399 Ill. 579, 78 N.E. (2d) 276, (1948);In re Opinion of the Justices, 53 A.2d 194, 94 N.H. 515.

            Also, the constitutions of the State of Washington and of the United States provide for organizing and maintaining a militia and army, respectively, to suppress insurrections and repel invasions.  That the providing for the defense of this state and country is a public purpose cannot be subject to serious doubt, especially in modern times, where over half of the national budget is spent for defense purposes.  While an argument might be made that providing military housing is only a public purpose insofar as federal funds are concerned, and is not a public purpose as to state funds, the reasoning inState ex rel. Hart v. Clausen, 113 Wash. 570, 194 Pac. 793 rejects such a contention.  At page 574, the court made the following statement:

            "The question whether a tax is levied for a public purpose, is a Federal as well as a state question.  In this respect there is no difference between the powers of the legislature and that of the Congress of the United States.  That which is a public purpose, under one constitution, and will sustain the exercise of the taxing power, is a public purpose under the other.  In this respect, Congress stands upon a level with the state legislature. . . ."  (Emphasis supplied.)

            That Congress has found military housing to be a public purpose is evident since Congress provided for the spending of public funds for such housing and authorized the secretary of defense (or his designee) ". . . to guarantee the payment of notes or other legal instruments required by the Commissioner of such mortgagors; . . ."  42 U.S.C.A., § 1594.

            Therefore, we believe that the use of public funds for military housing does not violate the public purpose rule, and that the funds referred to above may be invested for this purpose where the repayment is fully guaranteed by an agency of the United States government.  However, since it  [[Orig. Op. Page 3]] appears that it is only permissive to guarantee notes and other legal instruments issued by mortgagors under this act, before any investment is made it should be determined that the note or other legal instrument is in fact fully guaranteed by the United States or an agency thereof.

            We trust this information will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

CHARLES I. McCLURE
Assistant Attorney General