OFFICES AND OFFICERS ‑- STATE ‑- STATE EMPLOYEES INSURANCE BOARD ‑- FUNDS ‑- APPROPRIATIONS ‑- INSURANCE
It is not legally necessary for the legislature to make an appropriation from the state employees' insurance revolving fund in order to permit expenditures therefrom; where, however, an appropriation from this fund is made it constitutes a limitation upon the amount that may be expended during the period covered by the appropriation.
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November 20, 1973
Honorable Leonard A. Nord
Chairman, Washington State
Employees' Insurance Board
P.O. Box 1789
Olympia, Washington 98504
Cite as: AGLO 1973 No. 109
By letter previously acknowledged you requested our opinion with respect to the necessity for an appropriation in order to expend funds from the state employees' insurance revolving fund under RCW 41.05.030.
In requesting our opinion on this question you have advised us of the following factual background:
"In the past, the Board has always submitted a regular budget and obtained a legislative appropriation before expending funds. Although our legal question has always been present, we have taken the course of obtaining an appropriation to be on the safe side. However, it is conceivable that the Board may wish to expend funds to increase benefits or stave off a premium increase, for example, at some time when the Legislature is not in session and an appropriation cannot be obtained. Furthermore, since dividends available for expenditure by the Board are not useable for any other governmental purpose, and appropriation by the Legislature is largely a formality.
"Our present question to you is submitted because the Board's current appropriation is $130,100 and we have funds in excess of the appropriation which we may wish to expend for the purposes outlined in RCW 41.05.030 (2). We are trying to determine whether a supplemental appropriation from the Legislature is required in order to spend these funds."
[[Orig. Op. Page 2]]
We answer your question in the manner set forth in the following analysis.
The state employees' insurance fund was created by § 4, chapter 39, Laws of 1970, Ex. Sess. (now codified as RCW 41.05.040) which reads as follows:
"There is hereby created a fund within the state treasury, designated as the 'state employees insurance fund', to be used by the trustee as a revolving fund for the deposit of contributions, dividends and refunds, and for payment of premiums for health care benefit contracts entered into in accordance with instructions of the board and payments authorized by RCW 41.05.030 (2). Moneys from the state employees insurance fund shall be disbursed by the state treasurer by warrants on vouchers duly authorized by the trustee."
RCW 41.05.030 designates the director of the department of personnel as trustee for this revolving fund and authorizes him to make expenditures from the fund as follows:
"(1) The director of the department of personnel shall be trustee and administrator of all health benefit and insurance contracts awarded by the board and shall have power to employ a benefits supervisor and such other assistants and employees as may be necessary subject to the jurisdiction of the state civil service law, chapter 41.06 RCW. The director of personnel shall provide any other personnel and facilities necessary for assistance to the board. He may delegate his duties hereunder to the benefits supervisor.
"(2) The director of personnel, as trustee, shall transmit contributions for health care and other insurance plans in payment of premiums and receive and deposit contributions and dividends or refunds into the state employees insurance revolving fund, which shall be used for payment of premiums, administrative expenses as provided in RCW 41.05.030 (1), to reduce employee contributions or to increase benefits in accordance with instructions of the board.
[[Orig. Op. Page 3]]
"(3) Every division, department, or separate agency of state government shall fully cooperate in administration of the plans, education of employees, claims administration, and other duties as required by the trustee or the board."
The state constitutional provision which relates to appropriations is contained in Article VIII, § 4 (Amendment 11) as follows:
"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."
While this constitutional provision, on its face, appears to require an appropriation in order to make any expenditure from the state treasury, its actual scope has been significantly qualified by judicial construction over the years. See, in particular, Yelle v. Bishop, 55 Wn.2d 286, 347 P.2d 1081 (1959); State ex rel. Employees' Retirement Board v. Yelle, 31 Wn.2d 87, 195 P.2d 646 (1948); State ex rel. Washington Toll Bridge Authority v. Yelle, 195 Wash. 636, 82 P.2d 120 (1938); State ex rel. Shuff v. Clausen, 131 Wash. 119, 229 Pac. 5 (1924); State ex rel. Davis v. Clausen, 160 Wash. 618, 295 Pac. 751 (1931); and State ex rel. Sherman v. Pape, 103 Wash. 319, 174 Pac. 468 (1918).
By its decisions in this line of cases our state supreme court has established three distinct rules with regard to the necessity for appropriations from particular categories of funds. As summarized on pages 2 and 3 of AGO 59-60 No. 4 [[to Cliff Yelle, State Auditor on January 21, 1959]]copy enclosed, these rules are as follows:
(1) State funds derived from the general revenue of the state, which are required by the Constitution to be deposited in the state treasury, may be expended only pursuant to a specific appropriation as required by the Constitution.
[[Orig. Op. Page 4]]
(2) Likewise, funds which are not required by the Constitution to be deposited in the general fund but which are, nevertheless, by legislative direction made a part of the general fund may only be expended pursuant to a legislative appropriation.
(3) But an appropriation is not necessary when the legislature has created a special fund of a "proprietary nature" with funds not required by the Constitution to be placed in the general fund.
Consistent with these principles our state legislature, as part of the state budget and accounting act (chapter 328, Laws of 1959), has provided in § 18 of that act (RCW 43.88.180) that:
"Appropriations shall not be required for refunds, as provided in RCW 43.88.170, nor in the case of payments to be made from trust funds specifically created by law to discharge awards, claims, annuities and other liabilities of the state. A trust fund is defined for purposes of this chapter as a fund consisting of resources received and held by an agency as trustee, to be expended or invested in accordance with the provisions of the trust. Said funds 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. Nor shall appropriations 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. It shall not be necessary for an appropriation to be made to permit payment of obligations by revolving funds, as provided in RCW 43.88.190." (Emphasis supplied.)
By virtue of the underscored final sentence of this statute it will readily be seen in the abstract that since the state employees' insurance fund is a "revolving fund" within the meaning of this section of the budget and accounting act, no appropriation is legally necessary in order to permit moneys to be expended from that fund.
This answer to your general question, however, should not be taken to mean that expenditures may be made from the state employees' insurance fund during the current [[Orig. Op. Page 5]] fiscal biennium in amounts which would exceed the $130,100 appropriation referred to in the portion of your letter which we have quoted above. Another section of the budget and accounting act, RCW 43.88.070, expressly states that:
"Appropriations shall be deemed maximum authorizations to incur expenditures . . ."
This means that even though no appropriation is legally necessary in the first instance in order to permit an expenditure of moneys from a revolving fund or one of the other categories of special funds referred to in RCW 43.88.180, supra, where an appropriation is, in fact, made by the legislature with respect to such a fund that appropriation does establish an effective limitation upon the amounts which may be expended from that fund during the fiscal period covered by the appropriation.
We trust that the foregoing will be of some assistance to you.
Very truly yours,
PHILIP H. AUSTIN
Deputy Attorney General