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December 18, 1972
Honorable Robert S. O'Brien
Olympia, Washington 98504
Cite as: AGLO 1972 No. 93 (not official)
By letter previously acknowledged you have requested our opinion on several questions pertaining to the computation of "general state revenues" under the provisions of the recently adopted constitutional amendment contained in H.J.R. No. 52. In essence, you have asked whether this term includes or excludes monies derived from each of the following revenue sources:
(1) Such revenues of the state liquor control board as are distributable to the state general fund under RCW 66.08.190;
(2) Property taxes collected by the state for the support of local school districts under the two mill school levy provided for in RCW 84.52.050;
(3) Public utility district privilege tax revenues collected by the state under RCW 54.28.020;
(4) Revenues payable into each of some fifty-six "dedicated" accounts within the state general fund; and
(5) Monies paid into state bond redemption funds.
We answer each of the several parts of this question in the manner set forth in our analysis.
By their approval of H.J.R. No. 52 at the November 7, 1972, state general election, the voters adopted a comprehensive amendment to Article VIII, § 1 of our state Constitution dealing with the limitation upon state indebtedness. Its basic [[Orig. Op. Page 2]] thrust is to strike the preexisting $400,000 ceiling upon state general obligation bonds issued without voter approval under § 3 of this article and to replace it with a new provision allowing the legislature (by a three‑fifths majority vote in both houses) to provide for the incurrence of debt through the issuance of such bonds to the extent (as explained on p. 51 of the 1972 official voters' pamphlet),
". . . that the aggregate of all such debts (exclusive of certain limited obligation, debts to pay current expenses, and refunding obligations) would not require annual debt service payment (i.e., principal and interest) to exceed nine percent of the average amount of general state revenues for the period of three fiscal years immediately preceding the contracting of the particular debt. . . ." (Emphasis supplied)
Your questions all involve the meaning of the term "general state revenues" for the purposes of this constitutional amendment, and they are asked because of your duty, under subsection (b) of the amendment, to certify, annually, the total1/ amounts of such revenues for the three preceding fiscal years.
As you have noted in submitting this request, this term is expressly defined in subsection (c) of the amendment itself, as follows:
"(c) The term 'general state revenues' when used in this section, shall include all state money received in the treasury from each and every source whatsoever except: (1) Fees and revenues derived from the ownership or operation of any undertaking, facility, or project; (2) Moneys received as gifts, grants, donations, aid, or assistance or otherwise from the United States or any department, bureau, or corporation thereof, or any person, firm, or corporation, public or private, when the terms and conditions of such gift, grant, donation, aid, or assistance require the application and disbursement of such moneys [[Orig. Op. Page 3]] otherwise than for the general purposes of the state of Washington; (3) Moneys to be paid into and received from retirement system funds, and performance bonds and deposits; (4) Moneys to be paid into and received from trust funds including but not limited to moneys received from taxes levied for specific purposes and the several permanent and irreducible funds of the state and the moneys derived therefrom but excluding bond redemption funds; (5) Proceeds received from the sale of bonds or other evidences of indebtedness."
As you have also correctly concluded, the proper analytical approach to be taken in making the computations required of you is, first, to treat all monies paid into the state treasury as includable revenues and then, secondly, to subtract from the total thus arrived at such revenues as come within the scope of one or more of the five exceptions set forth in this definition. You have indicated to us that you have a general understanding as to the meaning and proper application of exceptions (2), (3) and (5) but are in need of clarification with respect to exceptions (1) and (4) ‑ following which you have identified or described several specific revenue sources selected so as to afford us a vehicle for the explanation of these two exceptions.
(1) State liquor control board revenues:
First you have made reference to such revenues of the state liquor control board as are distributable to the state general fund under RCW 66.08.190.
This section must be read in conjunction with the two code sections which immediately precede it, RCW 66.08.170 and 66.08.180. The first of these provides as follows:
"There shall be a fund, known as the 'liquor revolving fund', which shall consist of all license fees, permit fees, penalties, forfeitures, and all other moneys, income, or revenue received by the board. The state treasurer shall be custodian of the fund. All moneys received by the board or any employee thereof, except for change funds and an amount of petty cash as fixed by the board within the authority of law shall be deposited each day in a depository approved by the state treasurer and transferred to the state treasurer to be credited to the liquor revolving fund. Disbursements from the revolving fund shall be on authorization of the board or a duly authorized representative thereof. In order to maintain an effective expenditure and revenue control the liquor revolving fund shall be subject in all respects to chapter 43.88 [[chapter 43.88 RCW]]but no appropriation shall be required to permit [[Orig. Op. Page 4]] expenditures and payment of obligations from such fund."
The second, RCW 66.08.180, then provides that:
"Moneys in the liquor revolving fund shall be distributed by the board at least once every three months in accordance with RCW 66.08.190, 66.08.200 and 66.08.210: Provided, That the board shall reserve from distribution such amount not exceeding five hundred thousand dollars as may be necessary for the proper administration of this title: And provided further, That all license fees, penalties and forfeitures derived under this act from class H licenses or class H licensees shall every three months be disbursed by the board to the University of Washington and to Washington State University for medical and biological research only, in such proportions as shall be determined by the board after consultation with the heads of said state institutions: And provided further, That when the allocations in any biennium to the University of Washington and Washington State University shall amount to a total of one million dollars, the entire allocation for the remainder of the biennium shall be transferred to the general fund to be used by the department of health solely to carry out the purposes of RCW 70.96.085, as now or hereafter amended: And provided further, That twenty percent of the total amount derived from license fees pursuant to RCW 66.24.320, 66.24.330, 66.24.340, 66.24.350, 66.24.360, and 66.24.370, as such sections are now or hereafter amended, shall be transferred to the general fund to be used by the department of health solely to carry out the purposes of RCW 70.96.085, as now or hereafter amended. The budget director shall prescribe suitable accounting procedure to insure that the funds transferred to the general fund to be used by the department of health and appropriated are separately accounted for."
Thereupon, RCW 66.08.190, which you have cited, states that:
"When excess funds are distributed, all moneys subject to distribution shall be disbursed as follows:
"Fifty percent to the general fund of the state, ten percent to the counties of the state, and [[Orig. Op. Page 5]] forty percent to the incorporated cities and towns of the state."2/
Although you have spoken of this group of revenue sources as primarily giving rise to a question regarding the scope of the first exception from the definition of "general state revenues," above, we think that the fourth exception is involved here as well. Of course, to the extent that the income of the "liquor revolving fund" established by RCW 66.08.170, supra, is derived from the state's operation of its own liquor stores (see, chapter 66.16 RCW), it is clearly excluded from the definition of "general state revenues" by the first of these two exceptions; i.e., "fees and revenues derived from the ownership or operation of any undertaking, facility, or project." However, even such other revenue sources of this revolving fund as do not come under this exception will be excludable from general state revenues under exception (4) where they are earmarked either for distribution to counties or cities or are committed to specific state purposes by the governing statutes. Repeated for ease of reference, this exception covers
". . . Moneys to be paid into and received from trust funds including but not limited to moneys received from taxes levied for specific purposes and the several permanent and irreducible funds of the state and the moneys derived therefrom but excluding bond redemption funds; . . ."
Coincidently, we have only recently had occasion to consider the meaning of the term "trust fund" in another, but related context; i.e., § 18 of the state budget and accounting act (chapter 328, Laws of 1959), now codified as RCW 43.88.180. See our opinion dated November 28, 1972, to State Senator Frank Atwood, copy enclosed, at pages 9-10 where we first quoted with approval the following definition of this term from Black's Law Dictionary, 4th Ed.:
"'A fund held by a trustee for the specific purposes of the trust; in a more general sense, a fund which, legally or equitably, is subject to be devoted to a particular purpose and cannot or should not be diverted therefrom. . . .'"
Then, in elaboration of this concept, we went on to state that:
"In general decisional law respecting state finances, a special fund held for a special [[Orig. Op. Page 6]] purpose outside the general fund is typically called a 'trust fund,' with the terms 'special' and 'trust' often being used interchangeably. See, 81 C.J.S., States, § 158. The same is true in municipal law. As a principal text authority on that subject explains:
"'Special funds are often created for the payment of a particular class of claims, or for a particular class of expenditures or for a particular purpose, and in such case the general rule is that they cannot be used for any other purpose, . . . Irrespective of statute, a fund raised by a municipality for a special purpose is a trust fund, . . .' 15 McQuillin, Municipal Corporations, 1970 Rev. Vol., § 39.45, page 132."
Thus, in direct answer to your first question, it is our opinion that the only revenues of the state liquor control board under RCW 66.08.170, supra, which may be counted as "general state revenue" for the purposes of H.J.R. No. 52 are those which:
(a) Are not derived from the operation of state liquor stores; and
(b) are not committed by statute either to a specified state purpose by RCW 66.08.180, supra, or made distributable to counties or cities under RCW 66.08.190 through 66.08.210.
Moreover, while this conclusion does raise a theoretical possibility of treating some portion of the excess funds distributable to the general fund under RCW 66.08.190, supra, as "general state revenues," it seems apparent as a practical matter that you will only be able to do this if, through accepted accounting procedures, you are able to segregate liquor store revenues from other income of the liquor revolving fund so as to be able to identify which monies thus distributed to the general fund are from this source (excluded under exception (1), supra) and which are from nonexempt license fees, permit fees, penalties, or forfeitures.
(2) Property taxes levied for school support under RCW 84.52.050:
Prior to its recent amendment through voter approval of Initiative No. 44 at the November general election, RCW 84.52.050 provided, inter alia,
". . . That in each of the years 1967 and 1968 and 1969 and 1970 and 1971 and 1972 the state shall levy a property tax of four mills of which two mills shall be used exclusively for the public assistance program of the state and of [[Orig. Op. Page 7]] which two mills shall be used exclusively for the support of the common schools . . ."
Clearly, the revenues derived from these property taxes must be characterized as "taxes levied for special purposes" under the terms of exception (4), supra, and thus not to be included in calculating "general state revenues" for the purposes of H.J.R. No. 52.
(3) Public Utility District privilege tax revenues:
RCW 54.28.020 provides for the imposition of an excise tax upon public utility districts ". . . for the act or privilege of engaging . . . in the business of operating works, plants or facilities for the generation, distribution and sale of electric energy. . . ." It is to be collected by the state department of revenue and deposited with the state treasurer who, in turn, is to deposit four percent thereof in the state general fund and to distribute the remainder to the various counties in which the generating facilities of the districts are located. See, RCW 54.28.040 and 54.28.050.
Consistent with the foregoing answer to question (2), it is, likewise, clear that such monies received from this revenue source as are distributable to the counties under these statutes are not "general state revenues" under H.J.R. No. 52; on the other hand, the four percent of these revenues which are distributable to the state general fund, not being legally earmarked for any specific state purpose, are.
(4) Dedicated accounts in the general fund:
Next, we shall respond to the portion of your letter which states, in general terms, that
"Washington's treasury structure contains within the general fund fifty-six accounts, each being an independent accounting entity created for a specific purpose."
"Should the fifty-six dedicated accounts, which together with the basic general fund constitute Washington's general fund, be excluded from 'general state revenues' since they parallel the 'trust fund' function and their revenues are dedicated for a specific purpose?"
It is important to note and understand in connection with this question that subsection (c) of H.J.R. No. 521, supra, in defining "general state revenues," addresses itself primarily to revenue sources and only secondarily to the funds into which the monies derived from these sources are paid. Accordingly, in line with our general discussion of trust funds, above, our [[Orig. Op. Page 8]] answer here is as follows: If the revenues credited to a "dedicated" account in the general fund are so credited because those revenues are, by law, available for expenditure only for a certain specified purpose and not for the general support of state government, such revenues should be excluded from the computation of "general state revenues" under H.J.R. No. 52.
(5) Bond redemption funds:
Finally, you have asked for our interpretation of the phrase in exception (4), supra ‑ i.e., the "trust fund" exception ‑ which reads ". . . but excluding bond redemption funds."
Simply stated, what this means to us is that a bond redemption fund is not to be treated as a "trust fund" for the purposes of this exception from "general state revenues," so that the mere fact that certain revenues are required to be paid into such a fund will not, by and of itself, result in their exclusion in the computation of such general revenues.
On the other hand, there are many instances, of course, where the monies which are paid into a bond redemption fund are monies which, in any event, can only be used for certain specified purposes (e.g., motor vehicle fuel excise fuel excise tax receipts which are earmarked for highway purposes under Amendment 18 to the Constitution); or, instead, they may be funds which are derived from the operation of some facility or undertaking (i.e., a toll bridge, or such a project as the recently constructed parking facilities here on our state capitol campus). In these instances, because of the operation of other portions of the definition of "general states revenues," it will readily be seen that these revenues are to be excluded by reason of their source ‑ irrespective of the fact that they are paid into a bond redemption fund when collected.
This completes our response to the several questions which you have presently asked. If we can be of any further assistance in regard to this matter, please advise.
Very truly yours,
PHILIP H. AUSTIN
Deputy Attorney General
*** FOOTNOTES ***
1/See, also, § 7, chapter 184, Laws of 1971, 1st Ex. Sess., which became effective with the approval of H.J.R. No. 52, and imposes this same obligation upon the state treasurer in somewhat more detailed terms.
2/The other two sections (RCW 66.08.200 and 66.08.210) cited in the opening sentence of RCW 66.08.180, supra, relate, in turn, to the distribution of the ten percent share thus provided for to counties and the forty percent share to cities.