WARRANTS, INTEREST BEARING; COUNTY HOSPITALS; BUDGETS, COUNTY HOSPITALIZATION.
Interest bearing warrants may legally be drawn upon county hospital fund provided the obligations to be met by such warrants were incurred within the limits of the appropriations as set by the county hospitalization budget.
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February 14, 1956
Honorable Charles O. Carroll
County City Building
Seattle, Washington Cite as: AGO 55-57 No. 203
Attention !ttMr. K. G. Smiles
Chief Civil Deputy
You have requested an opinion from this office concerning the question of whether or not the issuance of certain interest bearing warrants, payable from the King county hospital fund, is legal under circumstances to be outlined in our analysis below.
We conclude that under such circumstances the issuance of the warrants is legal.
The question presented for our determination arises from the administration of the state's program for the medical care of indigents and recipients of public assistance. This program must be set forth in some detail in order to establish the necessary background for a consideration of the legality of the interest bearing warrants in question.
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Under the provisions of § 1, chapter 5, Laws of 1953, (1st Ex. Sess.), the state department of health was given the "administrative responsibility for providing needful medical, dental and allied services to recipients of public assistance and medical indigents."
Section 4, chapter 5, Laws of 1953, (Ex. Sess.) provided, in part:
"(1) The department of health may utilize county hospitals and county infirmaries as determined necessary. County institutions so used shall submit a county hospitalization budget and/or infirmary budget to the state director of health not less than forty days prior to the time county budgets are finally approved and adopted by the county commissioners. He shall consider the proposed budget or budgets and return it or them to the commissioners with his recommendations within thirty days of its receipt by him. The commissioners shall be empowered to adopt as the final budget the proposed budget or budgets as submitted by the board or boards of trustees, the recommended budget or budgets of the state director of health or such budget or budgets as the county commissioners themselves determine to adopt: Provided, That if the total of the budget or budgets as finally adopted shall be in excess of the total of the budget or budgets as recommended by the state director of health, the said director may withhold from the county the amount of the excess over and above the total set forth in his recommended budget or budgets."
It is to be noted, therefore, that at the county level a budgetary relationship is set up between the amount to be expended by the county hospitals utilized in the program and the amount of state funds to be received from the state department of health.
Further clarification of the financial mechanics to be employed in covering budgeted expenditures by the county hospitals with income from the state department of health is found in § 4, chapter 256, Laws of 1951, which provides:
[[Orig. Op. Page 3]]
"Payments from the state department of health shall be made by warrant of the state auditor to the individual counties upon vouchers of the state department of health and shall be paid into the county hospital fund. At the beginning of the fiscal year the state department of health shall advance to the counties an amount equal to two months' operation based upon the average monthly cost of the last quarter of operation, which amount may be used to defray costs in the first months' operation. Reimbursements for the actual cost of operation shall be made monthly by the state department of health to the counties until the eleventh month of the fiscal year when the money advanced shall be used for the final two months' operational costs."
The King County Hospital was utilized by the state department of health in administering the medical care program. A hospitalization budget was adopted by King county containing estimates of income to be received from the health department during 1955 to cover budgeted estimates of expenditure by the hospital in pursuance of the program. An advance was made by the health department to the county hospital fund and reimbursements were made to the fund for expenditures made by the hospital during January, February, March, April, and May of 1955, in accordance with § 4, chapter 256, Laws of 1951.
King County Hospital billed the department of health in the amount of $315,684.30 for the expenditures it made during June, 1955, in order to obtain its reimbursement for that month. This bill, however, was not paid by the state health department because it had run out of funds. Moreover, at its 1955 session, the legislature transferred the responsibility for the program from the state department of health to the state department of public assistance, the transfer to be effective as of July 1, 1955. Section [[Orig. Op. Page 4]] 4, chapter 273, Laws of 1955. The bill could not be assumed by the department of public assistance, inasmuch as that department's appropriation could be applied only to reimbursements to county hospitals for expenses incurred after July 1, 1955, when the department took over responsibility for the program.
The result was that the King County Hospital was left with an account receivable against the state department of health in the amount of $315,684.30. Although there is no question that the county's expenditure of this money was within its budget, nevertheless, the unpaid item receivable from the state health department reduced the hospital's cash position and required a premature utilization of the advance which, under ordinary circumstances, would be used for the months of November and December, 1955, when no reimbursements would be made. For this reason the health department's failure to pay the county's June bill did not deplete the cash in the county hospital fund until December, 1955.
It was at this point that the county hospital had to resort to interest bearing warrants if its operational obligations were to be paid. The question is whether or not the issuance of such interest bearing warrants is legal under these circumstances.
The legality of issuing a warrant depends upon whether or not the obligation was incurred within the limit set by the estimates of expenditure in the county budget. RCW 36.40.100 provides in part:
"The estimates of expenditures itemized and classified as finally fixed and adopted in detail by the board of county commissioners shall constitute the appropriations for the county for the ensuing fiscal year; and the county commissioners and every other county official shall be limited in the making of expenditures or the incurring of liabilities to the amount of such detailed appropriation items or classes respectively: * * *"
And RCW 36.40.130 provides in part:
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"* * * The county auditor shall issue no warrant and the county commissioners shall approve no claim for any expenditure in excess of the detailed budget appropriations or as revised under the provisions hereof, except upon an order of a court of competent jurisdiction, or for emergencies as hereinafter provided. * * *"
Inasmuch as there is no question that the county's hospitalization budget was prepared and approved in accordance with the procedure provided for by § 4, chapter 5, Laws of 1953 (Ex. Sess.), and inasmuch as the obligations incurred by the hospital were within the budget estimates, warrants must be issued to cover these obligations, notwithstanding the fact that such warrants cannot be currently paid for want of funds in the county hospital fund. The warrants will be paid in the order of their issuance upon the call of the county treasurer as cash flows into the hospital fund from reimbursements made by the state department of public assistance to cover operational costs incurred in subsequent months. We are advised that the first issue of interest bearing warrants has already been called and paid in this manner. See RCW 36.29.040; RCW 36.29.050; RCW 36.29.060; and RCW 39.56.020.
We have reached the conclusion that such warrants in these circumstances are legal.
It is clear that the King County Hospital fund cannot be placed upon a truly current cash basis until the $315,684.30 receivable is paid by the state department of health. The ability of that department to pay the account depends of course upon the enactment of a deficiency appropriation for this purpose by the legislature at its next session.
Very truly yours,
J. CALVIN SIMPSON
Assistant Attorney General