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May 5, 1970
Honorable Robert V. Graham
Olympia, Washington 98501
Cite as: AGLO 1970 No. 75
This is written in response to your recent request for an opinion of this office with regard to the distribution of interest earned on certain short-term investments or deposits of surplus funds of the Washington public employees' retirement system and the Washington state teachers' retirement system. Your essential question is whether this interest should all be credited to the particular retirement fund whose monies earned it ‑ as is apparently required by RCW 41.40.080 in the case of the employees' retirement system and by RCW 41.32.203 with respect to the teachers' retirement system ‑ or whether an amount equal to twenty percent of this interest is to be set aside in a "reserve account" as provided for in RCW 43.84.090.
In considering this question we shall note, first, the provisions of RCW 43.84.090 ‑ together with its companion statute, RCW 43.84.080. These statutes pertain to the investment of surplus state funds by the state finance committee and provide, in material part, as follows:
"Whenever there is in any fund or in cash balances in the state treasury more than sufficient to meet the current expenditures properly payable therefrom,the state finance committee may invest such portion of such funds or balances as it deems expedient in certificates, notes, or bonds of the United States, or other obligations of the United States or its agencies, or of any corporation wholly owned by the government of the United States, or in state, county, municipal, or school district bonds, or in warrants of taxing districts of the state." (Emphasis supplied.)
[[Orig. Op. Page 2]]
"Twenty percent of all income received from such investments shall be set aside in a reserve account: Provided, That the legislature may appropriate such amounts from this account as may be necessary to pay operating expenses of the state treasurer for the servicing ofinvestments and outstanding bonded indebtedness of the state and for operating expenses of the state finance committee and the state building authority, and may transfer further amounts from the reserve account to the general fund on a periodic basis.
". . .
"Any loss sustained by selling investments for less than the amortized value of the principal may be charged to the reserve fund. . . ." (Emphasis supplied.)
Next we turn to RCW 41.40.080 and RCW 41.32.203. The first of these two statutes designates the state treasurer as custodian of all of the funds of the public employees' retirement system and then provides, in subsection (3), that:
"The state treasurer is hereby authorized and directed to deposit any portion of the funds of the retirement system not needed for immediate usein the same manner and subject to all the provisions of law with respect to the deposit of state funds by such treasurer, andall interest earned by such portion of the retirement system's funds as may be deposited by the state treasurer in pursuance of authority herewith given shall be collected by him and placed to the credit of the retirement fund or the retirement system expense fund." (Emphasis supplied.)
RCW 41.32.203, which pertains to funds of the state teachers' retirement system which are in the custody of the state treasurer under RCW 41.32.202, contains essentially the same provision with respect thereto, as follows:
[[Orig. Op. Page 3]]
". . . The state treasurer is hereby authorized and directed to deposit any portion of the funds of the retirement system not needed for immediate use in the same manner and subject to all the provisions of law with respect to the deposit of state funds by such treasurer, and all interest earned by such portion of the retirement system's funds as may be deposited by the state treasurer in pursuance of authority herewith given shall be collected by him and placed to the credit of the teachers' retirement fund or the teachers' retirement pension reserve fund." (Emphasis supplied.)
There are two critical points of distinction to be noted between these two sets of statutes. First, it is apparent that under RCW 43.84.080 ‑ 43.84.090, the acting agency is the state finance committee, whereas under RCW 41.40.080 and RCW 41.32.203, it is the state treasurer. And secondly, there is a functional distinction between these statutes, in that the first two involve "investments" of the various state funds which are subject thereto, while the second two pertain to "deposits" of ". . . funds of the [particular] retirement system not needed for immediate use. . ."1/
Unquestionably, both of the retirement boards which are involved in your question have the authority to designate the finance committee as their investment agent. In the case of the employees' retirement board, this authority is spelled out in RCW 41.40.071, while in the case of the teachers' retirement board this procedure is provided for in RCW 41.32.200. In brief summary, each of these statutes empowers the respective retirement boards ". . . to authorize the state finance committee to invest and reinvest such funds in . . ." certain designated securities2/ ". . . and not otherwise:"
[[Orig. Op. Page 4]]
Pursuant to these statutes we are advised that it has been the long-standing administrative practice since the inception of both of the subject retirement systems3/ for both boards to provide for the long-term investments of their respective funds by means of itemized selections of securities (in the case of the employees' retirement board) or through instructions to the finance committee within the confines of predetermined guidelines (in the case of the teachers' retirement b