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AGO 1957 No. 51 - April 22, 1957
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John J. O'Connell | 1957-1968 | Attorney General of Washington

SCHOOLS ‑- DISTRICT REORGANIZATION

(1) If an order adjusting assets and liabilities of school districts affected by a transfer of territory is entered after March 1 of a given year, the order may properly transfer to the district to which the territory is transferred, a sum of money equivalent to the money raised by tax levies for the ensuing school year on property within the territory transferred.  (Subject to limitations)

(2) If money is transferred from one district to another by reason of a transfer of territory money transferred from the general fund, the building fund and the bond redemption fund must be credited to the general fund, building fund and bond redemption fund, respectively, of the receiving district.

(3) An order transferring territory from one school district to another entered after March 1 of a given year cannot be given a retroactive effect so as to circumvent RCW 84.08.160.

(4) After an order transferring territory and adjusting assets and liabilities has been entered, it may not be reconsidered and modified.

                                                                   - - - - - - - - - - - - -

                                                                   April 22, 1957

Honorable John J. Lally
Prosecuting Attorney
Spokane County
Spokane, Washington                                                                                                                Cite as:  AGO 57-58 No. 51


Attention:  !ttMr. Donald N. Olson, Civil Deputy

Dear Sir:

            You have requested an opinion from this office on certain questions relating to school district reorganization.  We paraphrase your questions as follows:

             [[Orig. Op. Page 2]]

            (1) After an order transferring territory and adjusting assets and liabilities has been entered, may it be reconsidered and modified one year later to convey to the district to which the territory is transferred, an amount of money equivalent to the money raised by tax levies for the ensuing school year on the property within the territory transferred?

            (2) May an order transferring territory from one school district to another entered after March 1 of a given year be given an effective date prior to March 1 of the same year?

            (3) If an order adjusting the assets and liabilities of two school districts affected by a transfer of territory is entered after the first day of March in a given year, may the order transfer to the district to which the territory is transferred, a sum of money equivalent to the money raised by tax levies for the ensuing school year on property within the territory transferred?

            (4) If the answer to question three is affirmative, to which account or accounts of the receiving district should the money be credited?

            Questions (1) and (2) are answered in the negative.  Question (3) is answered in the affirmative subject to certain qualifications discussed in the analysis.  Question (4) is answered as follows; Money transferred from the general fund, building fund, and bond redemption fund must be credited to the general fund, building fund and bond redemption fund, respectively, of the receiving district.

                                                                     ANALYSIS

            Your first question arises out of the following factual situation: On April 11, 1956, an order was entered transferring a portion of the territory of Freeman School District to Fairfield School District and adjusting the assets and liabilities of the two districts.  When property taxes for school purposes were levied in October, 1956, the levies were extended as if no change in boundaries had occurred, because RCW 84.08.160, quoted below, provides that the boundaries of all taxing districts, including school districts, shall be fixed as of March 1 each year.  Consequently, the Freeman School District is receiving the taxes for school purposes collected on the property within the transferred territory and is expending the same during the 1956-57 school years, while the Fairfield School District is providing the educational facilities for the residents of the transferred territory during the same school year.  The order adjusting  [[Orig. Op. Page 3]] assets and liabilities entered on April 11, 1956, failed to make any adjustment to compensate for this apparent inequity.  Although approximately one year has elapsed since the entry of the order, the county committee on school district organization (hereinafter referred to as the county committee) desires to reconsider the order and modify it by transferring funds equivalent to the amount of money raised by taxes on the transferred territory from the Freeman School District to the Fairfield School District.

                        Question (1)

            The statutes creating the county committee and defining its powers and duties do not specifically authorize it to reconsider and modify an order previously entered adjusting assets and liabilities of school districts involved in or affected by a transfer of territory.  In the absence of express statutory authority, the courts will gather from the statutes governing the administrative agency whether the legislature contemplated that an administrative determination should be final or subject to reconsideration and modification.  In so doing, particular attention is given to the nature of its proceedings, the effect of its orders, and the provisions for notice, hearing and judicial review.  Central Home Trust Co. v. Gough, 5 N.J. Super. 295, 68 A. (2d) 848, 850;Olive Proration Program etc. v. Agricultural Proration Commission, 17 Cal. (2d) 204, 109 P. (2d) 918, 921.

            If the administrative proceedings are of a quasi-judicial nature and statutory provision is made for judicial review, courts are reluctant to find a legislative intent that a continuing jurisdiction exists to reconsider and modify an order after its entry.  Robinet et al. v. School District No. 83, 63 Kan. 1, 64 Pac. 970, 971;Magma Copper Co. v. Arizona State Tax Commission, 67 Ariz. 77, 191 P. (2d) 169, 175;Olive Proration Program etc. v. Agricultural Proration Commission, 17 Cal. (2d) 204, 109 P. (2d) 918, 921.

            It becomes necessary, therefore, to review the statutory procedures leading up to the entry of an order adjusting assets and liabilities between districts affected by a transfer of territory.

            A proposal for adjustment of assets and liabilities between districts is prepared by the county committee and approved by it after a public hearing of which notice has been given.  The proposal, together with a statement of the reasons for the adjustment, is then submitted to the state board of education (hereinafter referred to as the state board) for review.  RCW 28.57.050.  The state board is authorized to either approve the proposal or, if the board finds the proposed adjustment unsatisfactory or inequitable, to return the proposal  [[Orig. Op. Page 4]] to the county committee for revision.  When revision are required the revised proposal must be resubmitted to the state board.  RCW 28.57.060.  Upon final approval of the proposal by the state board notice is given to the county superintendent of schools who enters an order establishing all approved adjustments.  RCW 28.57.070.  An appeal may be taken to the superior court on any question of adjustment of assets and liabilities in the manner provided by law, and if the court finds the adjustment inequitable, the court may make an adjustment that is equitable.  RCW 28.57.120.

            The proceedings leading up to the entry of the order are of a quasi-judicial nature.  The county committee exercises discretionary powers and determines substantial rights and obligations based on existing facts after notice and hearing.  Magma Copper Co. v. Arizona State Tax Commission, 67 Ariz.  77, 191 P. (2d) 169, 174;Anderson v. Hadley, 245 Iowa 550, 63 N.W. (2d) 234, 240;State ex rel. Tharel v. Board of Commissioners of Creek County, 182 Okl. 184, 107 P. (2d) 542, 549.  In addition, the statutes provide for a review of the terms of adjustment by an administrative agency (the state board) prior to the entry of the order and a review by the superior court after the order is entered.  These statutory provisions negate the existence of a legislative intent to authorize a reconsideration and modification of the order under the present facts.  Whether authority to reconsider and modify an order would exist under a different factual situation is a matter which we need not determine at this time.

            We conclude, therefore, that an order transferring territory and adjusting assets and liabilities having been entered, it may not be reconsidered and modified one year later to transfer to the district to which the territory is transferred, an amount of money equivalent to the money raised by tax levies for the ensuing school year on the property within the territory transferred.

            In order to prevent a recurrence of the problem which we discussed in question (1) you have asked that we answer questions (2), (3) and (4) for the future guidance of the county committee.

                        Question (2)

            The statutes necessary for a determination of question (2) read in pertinent part as follows:

             [[Orig. Op. Page 5]]

            RCW 28.57.070 "Upon receipt by the county committee of such notice from the state board as is required in RCW 28.57.060 (2), the county superintendent shall make an order establishing all approved changes involving the alteration of the boundaries of an established school district or districts and all approved terms of adjustment involving an established district or districts the boundaries of which have been or are hereafter altered in the manner provided by law . . ."

            RCW 28.57.090 "The county superintendent may, if he deems such action advisable, fix, as the effective date of any order or orders he is required by this chapter to make, the first day of July next succeeding the date of final approval of any change in the organization and extent of school districts or of any terms of adjustment of the assets and liabilities of school districts."

            RCW 84.08.160 "For the purposes of property taxation and the levy of property taxes the boundaries of counties, cities and all other taxing districts shall be established official boundaries of such districts existing on the first day of March of the year in which the levy is made, and no such levy shall be made for any taxing district whose boundaries were not duly established on the first day of March of such year . . ."

            RCW 84.04.120 "'Taxing district' means . . . school district . . ."

            It is obvious that in the instant case, the purpose of entering an order transferring territory after March 1, but effective prior to that date is to circumvent the effect of RCW 84.08.160, quoted above, which establishes the boundaries of all taxing districts, including school districts, as of March 1 of each year.

            RCW 84.08.160 is essential to the orderly process of listing and assessing property for the purpose of ad valorem taxation and an exception limiting its application would seriously impair the proper listing and assessing of property.

            We find no express authority for the entry of a retroactive order in the  [[Orig. Op. Page 6]] statutes governing school district organization and in our opinion, such authority cannot be implied for the purpose desired.  RCW 28.57.070 and RCW 28.57.090 clearly limit the authority of the county superintendent to the entry of prospective orders.  Authority to enter retroactive orders cannot be added to the statutes, by implication, merely because it would be beneficial in certain cases.  State ex rel. Eastvold v. Maybury, 149 Wash. Dec. 513 [[49 Wn. 2d 533]], 519.  This is particularly true when to do so would destroy the effect of another statute.

                        Questions (3) and (4)

            The statutes necessary for a determination of the questions (3) and (4) are in pertinent part as follows:

            RCW 28.57.050 "The powers and duties of the county committee shall be:

            ". . . (2) (a) To make among the old school districts and the new district or districts, if any, involved in or affected by a proposed change in the organization and extent of school districts an equitable adjustment of the property and other assets and of the liabilities, including bonded indebtedness, of all districts involved or affected; and (b) to make among all of the school districts involved in or affected by any change heretofore or hereafter effected, an equitable adjustment of the bonded indebtedness outstanding against any of the aforesaid districts whenever in its judgment such adjustment is advisable . . . In making the adjustments herein provided for, the county committee shall consider the number of children of school age resident in and the assessed valuation of the property located in each district and in each part of a district involved or affected; the purpose for which the bonded indebtedness of any district was incurred; the value, location, and disposition of all improvements located in the districts involved or affected; and any other matters which in the judgment of the committee are of importance or essential to the making of an equitable adjustment."

             [[Orig. Op. Page 7]]

            WASHINGTON STATE CONSTITUTION, Article VII, Section 5.  "No tax shall be levied except in pursuance of law; and every law imposing a tax shall state distinctly the object of the same to which only it shall be applied."

            RCW 28.57.050, quoted above, authorizes the adjustment of property and other assets and liabilities of school districts involved in or affected by a change of boundaries.  It expressly provides that in making the adjustment the county committee may consider specified factors and "any other matters which in the judgment of the committee are of importance or essential to the making of an equitable adjustment."

            In our opinion, taxes levied but uncollected at the time the order adjusting assets and liabilities is entered are an "asset" within the purview of RCW 28.57.050 and, subject to certain qualifications hereinafter discussed, may be adjusted by the county committee.  State v. Tucker, 39 N.D. 106, 166 N.W. 820, 821; Owsley County Board of Education v. Owsley County Fiscal Court, 251 Ky. 165, 64 S.W. (2d) 179; cf. Raynor v. King County, 2 Wn. (2d) 199, 208.

            Taxes not yet levied at the time the order adjusting assets and liabilities is entered are not an "asset" within the purview of RCW 28.57.050 and cannot be adjusted by the county committee.  People v. Klehn, 350 Ill. 419, 183 N.E. 454, 457.  However, in our opinion, the scope of RCW 28.57.050 is broad enough to allow the county committee to consider the fact that in some instances one school district may receive the proceeds of taxes to be levied on property within the territory transferred, while another district is obligated to provide educational facilities for the residents of the territory and to adjust other assets to compensate for this factor.  Thus, when in the judgment of the committee, a transfer of funds equivalent to the taxes to be levied and collected on property within the area transferred for the ensuing school year is equitable such a transfer may be ordered from funds presently in the accounts of the district subject to certain limitations which we now discuss.

            It is well settled that when the electors of a taxing district have authorized an indebtedness to be incurred by the sale of bonds for a specific purpose or have authorized the imposition of a tax levy for a specific purpose, the proceeds from the sale of bonds or the imposition of the tax levy cannot be expended for any purpose other than the purpose for which authorized.  Sheldon v. Purdy, 17 Wash. 135, 141; Thompson v. Pierce County, 113 Wash. 237, 341.  In this state the general rule is reinforced by Article VII, Section 5 of the state constitution, quoted above, which provides that every law imposing a tax shall  [[Orig. Op. Page 8]] state distinctly the object of the same "to whichonly it shall be applied."  (Emphasis supplied)

            It is equally well settled that money apportioned to a school district from the current state school fund must be devoted exclusively to the payment of current expenses.  Sheldon v. Purdy, 17 Wash. 135, 140.

            In adopting RCW 28.57.050, the legislature did not in express terms authorize a transfer of funds from the general, building and bond redemption funds of one school district to another district.  We must assume that in enacting RCW 28.57.050 the legislature was aware of Article VII, Section 5 of the state constitution and the cases cited above, which were decided prior to the enactment of the statute.  Under the circumstances, we conclude that the legislature authorized a transfer of funds only when such a transfer would not constitute a diversion of funds from the object or purpose for which the funds were raised.

            The general fund, building fund, and bond redemption fund of a school district are composed of the receipts from various sources, including receipts from the sale of bonds and the imposition of tax levies authorized by the electors for specific purposes.  In addition, the general fund of a school district may contain funds apportioned to the district from the current state school fund.  RCW 28.44.010.

            Whether or not a transfer of funds from the general fund, building fund, or bond redemption fund would be proper in a given case or would constitute an illegal diversion is a matter which we cannot determine without detailed information on the source of the money sought to be transferred.  In our opinion, the transfer of funds apportioned to the district from the current school fund, would not constitute a diversion if, after the transfer, the receiving district used the moneys exclusively for payment of current expenses.  A transfer of money form the building fund of one district to the building fund of another district would be permissible if the source of the money was a tax levy for a general purpose, such as constructing school buildings, and the money was used for this general purpose by the receiving district after the transfer.  School District No. 61 v. School District No. 32, 53 Ore. 33, 98 Pac. 523, 524.  However, a transfer would not be permissible if the source of the money was a tax levy for a specific purpose, such as constructing a designated school building, if the money could not be spent for that purpose by the receiving district after the transfer.  SeeThompson v. Pierce County, 113 Wash. 237.

             [[Orig. Op. Page 9]]

            Funds which are transferred from one district to another from the general fund, building fund, and bond redemption fund are impressed with a trust and must be credited to the general fund, building fund, and bond redemption fund, respectively, of the receiving district to insure that the receiving district expends the funds only for the purpose for which the funds were collected.  See School District No. 61 v. School District No. 32, 53 Ore. 33, 98 Pac. 523, 524.

            We trust that this opinion will be of assistance to you.

Yours very truly,

JOHN J. O'CONNELL
Attorney General


ELVIN J. VANDEBERG
Assistant Attorney General

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