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January 20, 1970
Honorable Robert F. Goldsworthy
State Representative, District 9-A
Olympia, Washington 98501
Cite as: AGLO 1970 No. 10
This is written in response to your recent request for our opinion on several questions pertaining to the availability of revenues derived from state excise taxes on the sale of cigarettes to fund the payment of bonuses to the veterans of the current conflict in Viet Nam, as contemplated by a bill (House Bill No. 9) which is currently pending before the legislature. Reading your request with the provisions of this bill in mind, we may paraphrase the questions raised by your request as follows:
(1) Can the revenues derived from the cigarette excise taxes currently being levied pursuant to RCW 82.24.020 and RCW 73.32.130 be used for general purposes other than the payment of veterans' bonuses?
(2) When all of the bonds issued pursuant to chapter 180, Laws of 1949, to fund bonus payments to veterans of World War II and the Korean conflict have been retired, will all of the cigarette tax revenues currently committed to meet debt service requirements on these bonds then be available for the payment of bonuses to veterans of the Viet Nam conflict as provided for in House Bill No. 9?
(3) Will the state's present authority to impose excise taxes upon the sale of cigarettes, as provided for in RCW 82.24.020, RCW 73.32.130 and RCW 28.47.440, automatically continue after redemption of all of the outstanding state bonds for the payment of which these taxes are currently committed?
We answer questions (1) and (3) in the affirmative, and question (2) in the negative, for the reasons set forth in the body of this opinion.
The payment of bonuses to bona fide citizens or residents of the state of Washington who served in the armed [[Orig. Op. Page 2]] military or naval forces of the United States during World War II (i.e., between December 7, 1941, and September 2, 1945) was authorized by the legislature through its enactment of chapter 180, Laws of 1949 (codified as chapter 73.32 RCW). Similar bonuses for veterans of the Korean conflict (service between June 27, 1950, and July 26, 1953) were authorized by chapter 292, Laws of 1955 (codified as chapter 73.33 RCW).
Under both of these acts, the bonuses provided for therein were made payable out of a single fund, the "war veterans' compensation fund," which was created by § 8 of the 1949 act (RCW 73.32.120). This fund was derived from the proceeds of an $80,000,000 limited obligation bond issue payable, exclusively, from revenues obtained through state excise taxes on the sale of cigarettes. All of these bonds are scheduled to be retired by January 1, 1972, and we understand your questions to be keyed to the availability, after that date, of these cigarette excise tax revenues as a source of payment of veterans' bonuses to persons serving in the military or naval forces of the United States during the current conflict in Viet Nam (i.e., a period commencing August 5, 1964, according to § 2 of House Bill No. 9).1/
[[Orig. Op. Page 3]]
Chapter 180, Laws of 1949, under which the veterans' bonus bonds in question were issued, provided for payment of these bonds from two separate cigarette excise tax sources; (1) all of the proceeds received from the excise tax imposed by,
". . . chapter 180, Laws of 1935, as now or hereafter amended, . . ."2/
and (2) an additional one mill tax specifically provided for in the 1949 act.3/ In considering your first question, the important thing to be noted about both of these two revenue sources is that while the bonds authorized by this 1949 act were declared to be exclusively payable out of revenues derived from these excise taxes, nothing contained in the act purported to set these revenues aside as special revenues to be used only for the funding of veterans' bonuses.
In fact, notably, § 9 of this 1949 act (RCW 73.32.130) contained an express authorization to make any revenues obtained from these taxes which were not necessary for debt service on the bonds available for any general state purposes ‑ to the following extent:
"Whenever the receipts into the War Veterans' Compensation Bond Retirement Fund during any year shall exceed four million five hundred thousand dollars ($4,500,000), all sums received above that amount shall be transferred by the State Treasurer to the State General Fund, and whenever there shall have accumulated in the War Veterans' Compensation Bond Retirement Fund four million one hundred thousand dollars ($4,100,000) [[Orig. Op. Page 4]] in excess of the amount required in any year, as determined by the State Finance Committee, to meet obligations during that year for bond retirement and interest, the State Treasurer shall transfer from said Fund to the General Fund all money in excess of said amounts. . . ."
We shall have occasion shortly, in considering your second question, to note the extent to which this portion of chapter 180, Laws of 1949, has been impliedly amended by certain subsequent legislation pertaining to the issuance of limited obligation bonds to finance the construction of public school facilities. However, these subsequent enactments only fortify the basic conclusion which is evidenced by this provision; namely, that the cigarette excise tax revenues in question were, and are presently, by no means earmarked to be used only for the funding of veterans' bonuses. Hence, we answer your first question in the affirmative.
We note from our reading of the provisions of § 7 of House Bill No. 9, that the financing approach which is provided for in this proposal to pay bonuses to veterans of the Viet Nam conflict assumes the total availability for this purpose of all cigarette excise tax revenues derived from the tax imposed by chapter 82.24 RCW, once all of the 1949 veterans' bonus bonds have been redeemed. This section of the bill would amend RCW 73.32.130, supra, which refers only to these 1949 bonds, by addition thereto of the following paragraph:
"When all bonds herein authorized and all interest thereon have been fully paid, all proceeds thereafter received from the excise tax on cigarettes imposed by chapter 82.24 RCW as now or hereafter amended, shall be paid into the war veterans' compensation fund for distribution to veterans who served during the Viet Nam conflict as provided by this 1970 amendatory act: PROVIDED, That, whenever the receipts into the war veterans compensation fund during any year exceed four million five hundred thousand dollars, all sums received above that amount shall be transferred to the state general fund." (Emphasis supplied.)
However, we must advise you (thereby answering question (2), supra, in the negative) that this amendment would not be constitutional.
[[Orig. Op. Page 5]]
It is true (as we have just noted in considering your first question) that under § 9, chapter 180, Laws of 1949, those receipts into the war veterans' compensation bond retirement fund during any year which exceeded a stipulated amount were to be transferred to the state general fund, where they would then be available for any general state purposes. However, subsequent to the enactment of this 1949 law the legislature on three separate occasions made other arrangements with respect to these excess cigarette excise tax revenues, as follows:
(1) First, in 1955, as part of an act providing for the issuance of $30,000,000 in limited obligation bonds to provide for state assistance in the financing of public school plant facilities, the legislature, after authorizing the imposition of an additional one‑half mill cigarette excise tax4/ to fund these bonds, went on to provide that:
"As additional security for the payment of the bonds herein authorized, all revenues derived from the tax imposed by RCW 82.24.020 over and above the amount required by RCW 73.32.130 to be paid into and retained in the war veterans' compensation bond retirement fund shall be paid into the public schools building bond redemption fund and shall be devoted exclusively to the payment of interest on and to retirement of the bonds authorized by this act: Provided, That whenever the receipts into the public schools building bond redemption fund from all sources during any one year exceed two million two hundred and fifty thousand dollars, all sums received above that amount shall be transferred by the state treasurer to the state general fund."5/
(2) Secondly, in 1957, the legislature authorized the issuance of another limited obligation bond issue for school construction ‑ this one in the amount of $52,000,000. See, chapter 234, Laws of 1957. These bonds were made payable, first, from revenues derived from the state motor vehicle excise tax (chapter 82.44 RCW) and then, in addition, as follows:
[[Orig. Op. Page 6]]
". . . In addition, the state treasurer shall transfer to the bond redemption fund created by this act all revenues accruing to the public schools building bond redemption fund in conformity with the requirements of RCW 28.47.440 enacted by the 1955 legislature whenever such revenues from all sources during any one year exceed two million two hundred fifty thousand dollars, said sum being the amount required to be retained in the aforesaid public schools building bond redemption fund under the provisions of RCW 28.47.440. The amounts so deposited in and transferred to the bond redemption fund created by this act shall be devoted exclusively to the payment of interest on and to the retirement of bonds authorized by this act: Provided, That whenever the receipts into said bond redemption fund from all sources during any one year exceed the amount needed during that year to meet interest payments on and retirement of bonds authorized by this act, all receipts above said amount shall be transferred by the state treasurer to the state general fund."6/
(3) Lastly, in 1959, the legislature authorized a third limited obligation bond issue for public school construction. See, chapter 8, Laws of 1959, Ex. Sess., which contained a $34,000,000 bond authorization. Debt service on these bonds was provided for in § 3 of this act (RCW 28.47.590) as follows:
"The public school building bond redemption fund of 1959 is hereby created in the state treasury which fund shall be exclusively devoted to the retirement of the bonds and interest authorized by this act. The state finance committee shall, on or before June thirtieth of each year certify to the state treasurer the amount needed in the ensuing twelve months to meet interest payments on and retirement of bonds authorized by this act. The state treasurer shall thereupon deposit such amount [[Orig. Op. Page 7]] in the public school building bond redemption fund of 1959 from the receipts from the taxes on cigarettes imposed by RCW 82.24.020, RCW 73.32.130, and RCW 28.47.440. The amount certified to the state treasurer by the state finance committee as aforesaid shall be a first and prior charge, subject only to amounts previously pledged for the payment of interest on and retirement of bonds heretofore issued, against all cigarette tax revenues."
To the extent that they are inconsistent with the portion of § 9, chapter 180, Laws of 1949 (RCW 73.32.130), supra, which provided for transfer to the general fund of those cigarette excise tax revenues not needed for debt service on the 1949 veterans' bonus bonds, each of these three subsequent public school bond authorization acts must be looked upon as an implied amendment to this 1949 act. Accord, Abel v. Diking & Drainage Imp. Dist., 19 Wn.2d 356, 363, 142 P.2d 1017 (1943), and cases cited therein. And clearly, their respective additional commitments of the proceeds derived from the cigarette excise taxes imposed pursuant to RCW 82.24.020 and (in the case of the 1959 act) the one mill tax under RCW 73.32.130 gave rise to contractual obligations to the bondholders once the three school construction financing bond issues authorized therein were sold. As such, these obligations are unquestionably subject to the provisions of Article I, § 23 of our state Constitution ‑ meaning that they can in no way be impaired by the legislature so long as any of the subject bonds remain outstanding. See, 16 C.J.S., Constitutional Law, § 289, and cases discussed therein; cf., Gruen v. State Tax Commission, supra.7/ Yet this is precisely [[Orig. Op. Page 8]] what the proposed amendment to RCW 73.32.130, supra, which is contained in § 7 of House Bill No. 9 (as quoted above) would attempt to do, in contravention of the Constitution.8/
Your final question inquires as to whether the state's authority to levy excise taxes on the sale of cigarettes, under the various existing statutes above noted, will continue automatically after the 1949 veterans' bonus bond issue (and in accordance with our answer to your second question, the 1955, 1957 and 1959 school construction bond issues as well) has been redeemed. This question is clearly answerable in the affirmative.
We have already seen that while each of these bond issues has its respective priorities as to the use of these excise tax revenues, as provided for in the various statutes above described, none of these tax proceeds is exclusively earmarked for debt service on these various bonds. Instead, each of these statutes in question allows transfers to the state general fund of any of the monies derived from these revenue sources which are in excess of debt service requirements.
Therefore, it follows that the state's authority to levy the cigarette excise taxes will continue in effect after all of the bonds have been retired, and, as indicated in answering your first question, the revenues derived from these sources will then be fully available for any general state purposes, and not merely the funding of veterans' bonuses.
We trust that the foregoing will be of assistance to you.
Very truly yours,
PHILIP H. AUSTIN
Assistant Attorney General
*** FOOTNOTES ***
1/Our opinion will be confined to a consideration of these specific questions, without purporting to pass upon the further issue (not referred to in your request) of whether the payment of veterans' bonuses would amount to an unconstitutional gratuity under Article VIII, § 5 of our state Constitution ‑ which states that:
"The credit of the state shall not, in any manner be given or loaned to, or in aid of, any individual, association, company or corporation."
We are, of course, aware that in Gruen v. State Tax Commission, 35 Wn.2d 1, 211 P.2d 651 (1949), the 1949 veterans' bonus act was sustained by the Washington supreme court against a challenge based upon this constitutional provision. However, subsequent court decisions have cast considerable doubt upon the continuing viability of that decision on this particular constitutional issue. See, Highway Commission v. Pacific Northwest Bell Telephone Co., 59 Wn.2d 216, 367 P.2d 605 (1961); and State ex rel. O'Connell v. Pt. of Seattle, 65 Wn.2d 801, 399 P.2d 623 (1965), both of which rejected the "public purpose" rationale of the Gruen decision and held that a gratuitous expenditure of public funds is unconstitutional regardless of the purpose of the expenditure. Because of these two recent decisions a serious constitutional question must be said to exist with respect to the payment of veterans' bonuses as contemplated by House Bill No. 9. Therefore, if this bill should be enacted, a test case would in all probability be necessary before any payments could be made.
2/Chapter 180, Laws of 1935, together with subsequent amendments thereto, was reenacted in 1961, as part of the legislature's recodification of Title 84 RCW. It is presently codified as chapter 82.24 RCW, and the rate of the tax is currently set at 4 mills per cigarette, under RCW 82.24.020.
3/See, § 9, chapter 180, Laws of 1949 (cf., RCW 73.32.130).
4/I.e., in addition to the millages authorized by RCW 84.24.020 and by § 9, chapter 180, Laws of 1949, RCW 73.32.130, supra.
5/See, § 5, chapter 3, Laws of 1955, Ex. Sess. (RCW 28.47.440).
6/See, § 3, chapter 234, Laws of 1957 (RCW 28.47.480).
Of course, as we have just seen, the revenue accruing to the 1955 public schools bond redemption fund included cigarette excise tax revenues obtained pursuant to RCW 82.24.020, to the extent that they were "over and above the amount required by RCW 73.32.130."
7/Article I, § 23, supra, reads as follows:
"No bill of attainder, ex post facto law, or law impairing the obligations of contracts shall ever be passed."
We are advised by the state finance committee that the current status of the three public school construction bond issues to which these cigarette excise tax revenues are currently committed is as follows:
Series Amount Presently Outstanding Redemption Date
1955 $ 2,956,000 Oct. 1, 1971
1957 12,975,000 Nov. 1, 1972
1959 21,725,000 Sept. 1, 1980
8/To cure this defect in the bill, an amendment to § 7 could be made whereby only those cigarette excise tax proceeds which are not necessary for debt service on any outstanding bond issues would be funneled into the war veterans' compensation fund.