AGO 1963 No. 6 - Jan 23 1963
LEGISLATURE ‑- PERMANENT SCHOOL FUND ‑- USE OF PRINCIPAL AND/OR INCOME AS BASE FOR SCHOOL CONSTRUCTION BOND ISSUE ‑- CONSTITUTIONALITY.
A legislative enactment providing for the use of the principal and/or income of the state common school fund as a base for a school construction bond issue would be unconstitutional.
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January 23, 1963
Honorable Charles P. Moriarty, Jr.
State Senator, 36th District
Cite as: AGO 63-64 No. 6
By letter previously acknowledged you requested an opinion of this office on a question concerning the common school fund established by our constitution. We paraphrase your specific inquiry as follows:
Would a legislative enactment be constitutional which would provide for the use of the principal and/or income of the common school fund "as a base1/for a bond issue for the purpose of meeting the state's obligations in the area of common school construction"?
We answer your question in the negative.
In your letter you note that the "permanent and irreducible" school fund established by our constitution has now reached a principal value of approximately $85,500,000.00. With the increasing needs of our schools not only for current support but also for assistance by the state for capital improvements your desire to know whether or not funds from the permanent state school fund or the income derived therefrom may be used for capital improvements is understandable.
[[Orig. Op. Page 2]]
When approaching any question concerning the constitutionality of any proposed legislation, we must of course recognize that the legislature may enact any law not expressly or inferentially prohibited by the state or federal constitution. State ex rel. Tattersall v. Yelle, 52 Wn. (2d) 856, 329 P. (2d) 841 (1958);Gruen v. State Tax Commission, 35 Wn. (2d) 1, 211 P. (2d) 651 (1949); AGO 57-58 No. 226 [[to R. R. (Bob) Greive, State Senator on October 31, 1958]]. As our court has said many times, ". . . the Washington constitution is a limitation upon the powers of the legislature, instead of a grant of powers, and so far as the power of the legislature is not limited by the constitution it is unrestrained. . . ." Yelle v. Bishop, 55 Wn. (2d) 286, 297, 347 P. (2d) 1081 (1959), and cases cited therein.
InGruen v. State Tax Commission, supra, page 8, the court said:
"When the constitutionality of an act is questioned, it is the solemn duty of the court to lay the act alongside the constitution and, with that instrument alone as a yardstick, decide the question according to the applicable rules of law . . .
"The question presented here is: Does the act represent a valid exercise of the legislative power?"
The proposed legislation contemplated by your question would provide, for the first time in so far as we have been able to learn, for the use of the income and/or principal from the constitutional common school fund for bonding purposes.
The importance of protecting and preserving the common school fund was recognized by the framers of our constitution in making provision for our common school system. InSchool District v. Bryan, 51 Wash. 498, 502, 99 Pac. 28 (1909), our court said:
". . . In adopting a constitution, the people of this state saw fit to devote a chapter to the subject of education. In it they were careful to emphasize the importance, as well as the distinct character, of the common school. They endeavored to protect and preserve the funds set apart by law for the support of the common school from invasion, so that they might be applied exclusively to the current uses of such schools. . . ."
[[Orig. Op. Page 3]]
The permanent common school fund was created by express terms of the state's Enabling Act.
Section 10 of the Enabling Act reads in part as follows:
"That upon the admission of each of said States into the Union sections numbered sixteen and thirty-six in every township . . . are hereby granted to said States for the support of common schools, . . ."
Section 11 reads in part as follows:
"That all lands herein granted for educational purposes shall be disposed of only at public sale, and at a price not less than ten dollars per acre, the proceeds toconstitute a permanent school fund, the interest of which only shall be expended in the support of said schools. . . ." (Emphasis supplied.)
Section 13 reads as follows:
"That five per centum of the proceeds of the sales of public lands lying within said States which shall be sold by the United States subsequent to the admission of said States into the Union, after deducting all the expenses incident to the same, shall be paid to the said States, to be used as a permanent fund, theinterest of which only shall be expended for the support of common schools within said States, respectively." (Emphasis supplied.)
This language is clear and unambiguous, and was intended to create a permanent and irreducible fund, the principal of which could not be expended.
Article IX, of the Washington State Constitution is devoted solely to "education" and the state's responsibility in respect thereto. Section 2 thereof, provides in pertinent part as follows:
". . . the entire revenue derived from the common school fund . . . shall be exclusively applied to the support of the common schools."
Section 3, reads as follows:
[[Orig. Op. Page 4]]
"The principal of the common school fund shall remain permanent and irreducible. The said fund shall be derived from the following named sources, to wit: Appropriations and donations by the state to this fund; donations and bequests by individuals to the state or public for common schools; the proceeds of lands and other property which revert to the state by escheat and forfeiture; the proceeds of all property granted to the state when the purpose of the grant is not specified, or is uncertain; funds accumulated in the treasury of the state for the disbursement of which provision has not been made by law; the proceeds of the sale of timber, stone, minerals, or other property from school and state lands, other than those granted for specific purposes; all moneys received from persons appropriating timber, stone, minerals or other property from school and state lands other than those granted for specific purposes, and all moneys other than rental recovered from persons trespassing on said lands; five per centum of the proceeds of the sale of public lands lying within the state, which shall be sold by the United States subsequent to the admission of the state into the Union as approved by section 13 of the act of congress enabling the admission of the state into the Union; the principal of all funds arising from the sale of lands and other property which have been, and hereafter may be granted to the state for the support of common schools. The legislature may make further provisions for enlarging said fund. The interest accruing on said fund together with all rentals and other revenues derived therefrom and from lands and other property devoted to the common school fund shall beexclusively applied to the current use of the common schools." (Emphasis supplied.)
Cf. RCW 28.40.010 and RCW 28.41.020.
[[Orig. Op. Page 5]]
With the foregoing provisions in mind we will, for the purpose of discussion, consider separately the use of the (1) principal and (2) the income of the permanent state common school fund.
(1)Principal of common school fund.
In AGO 59-60 No. 2, this office concluded, in part, that the legislature may not provide for the use of the principal assets of the permanent common school fund for capital outlay or current operations. This opinion, a copy of which is enclosed for your information, answers your question in respect to the use of the principal of the fund. Therein we said:
"The permanent common school fund principal may not be utilized for any other purpose than the creation of income.(2)/ In order to provide for the appropriation of the principal of this fund an act of congress amending the Enabling Act, 25 U.S. Statutes at Large, chapter 180, ratification of such amendment by the state of Washington, and a constitutional amendment would be necessary.
". . .
"After a state has accepted the terms of the enabling act by framing and passing a constitution, each government is bound by the provisions of that enabling act.
[[Orig. Op. Page 6]]
Boeing Aircraft Co. v. Reconstruction Finance Corporation, 25 Wn. (2d) 652, 171 P. (2d) 838 (1946). On this basis, it must be concluded that the permanent common school fund must be maintained in its permanent and irreducible state, pursuant to the present terms of the Enabling Act and the Washington State Constitution." (Emphasis supplied.)
See, also AGO 55-57 No. 255 [[to Paul W. Ellis, Legislative Budget Committee on May 1, 1956]].
(2)Income of the permanent common school fund.
Under the provisions of our Enabling Act and Article IX, § 2, of the Washington State Constitution,supra, the revenues of the common school fund are earmarked exclusively for the "support" of the common schools. Article IX, § 3, is even more restrictive, in our opinion, as to the use of the income of the fund. This section reads in pertinent part as follows:
". . . The interest accruing on said fund together with all rentals and other revenues derived therefrom and from lands and other property devoted to the common school fund shall be exclusively applied to thecurrent use of the common schools." (Emphasis supplied.)
The meaning of the terms "support" and "current use," when applied to the public schools of this state in Article IX, of our Constitution, was determined by the supreme court of this state in Sheldon v. Purdy, 17 Wash. 135, 140, 141, 49 Pac. 228 (1897)3/ a case decided only eight years after the adoption of our constitution. The court said:
". . . The county treasurer has money in two funds‑-one arising from the apportionment of the county superintendent, which includes the money appropriated by the state and paid into the common school fund, and the other collected under a tax levied by the county commissioners under § 817, above mentioned. This fund, under the constitution, is devoted to the support of [[Orig. Op. Page 7]] the public schools. That portion coming from the irreducible common school fund is devoted to the payment ofcurrent expenses. The building of new school houses and the purchase of school house sites do not come within any authorized signification of 'current expenses.' Neither do they come within any well ‑ defined acceptation of 'support of the common schools.' Both the terms 'support' and 'current expenses,' when applied to the common schools of this state, meancontinuing regular expenditures for the maintenance of the school. Building a new school house and purchasing a site, while at times necessary and proper,are unusual and extraordinary expenditures; and the legislature, in consonance with the constitution, has evidently had this in mind. Two methods have been provided for building school houses‑-. . ." (Emphasis supplied.)4/
In 1905, the supreme court of Idaho inRoach v. Gooding, 11 Idaho 244, 81 Pac. 642, 646 (1905), cited and relied on thePurdy case, supra, as authority on the question as to the use to which the interest and income of the school fund might be devoted. The court concluded in part:
"I must therefore conclude that the Legislature had no power or authority to appropriate or set apart for the payment of the interest or principal of the bonds referred to any part of the proceeds of the permanent fund created by the sale of the whole or any part of said 72 sections of land, or the timber thereon. . . ."
[[Orig. Op. Page 8]]
InState ex rel. Republic v. Harvey, 108 Wash. 48, 182 Pac. 931 (1919), our court held that the cost of erecting a city hall could not be paid out of a "current expense" fund. One of the cases cited as defining "current expenses" wasSheldon v. Purdy, supra.
Therefore, since our court has held that income from the permanent state common school fund cannot be used to build buildings (Sheldon v. Purdy, supra), it would appear to clearly follow that such income could not be used as a base for a bond issue such as that contemplated by your question.
InSchool District v. Bryan, supra, page 505, our court said:
". . . Courts have been zealous in protecting the money set apart for the maintenance of the free schools of the country. They have turned a deaf ear to every enticement and frowned upon every attempt, however subtle, to evade the constitution. Promised benefit and greater gain have been alike urged as reasons, but without avail. They have endeavored to say in unmistakable terms that the common school fund is just what it purports to be, a fund to be used for the sole purpose of supporting the graded schools of the commonwealth under the sanction of fixed and uniform laws. . . ."
In passing, it should also be noted that the views expressed herein are consistent with those expressed in opinions rendered to the state auditor on August 15, 1946 [[1945-46 OAG 990]], and the prosecuting attorney, Snohomish county, dated September 4, 1925 [[1925-26 OAG 69]], wherein we concluded that income farom the common school fund was not available for capital expenditures.
In summary, while there may be many arguments in favor of using either the principal or the income derived from the permanent state common school fund as a base for a bond issue (the proceeds of which would be used for construction for necessary school buildings in our local school districts) it is the considered opinion of this office that such use is not authorized by the constitution as presently framed or by the decisions of our supreme court construing it; hence, any legislation providing for such use would be unconstitutional.
[[Orig. Op. Page 9]]
We trust the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
ROBERT J. DORAN
Assistant Attorney General
*** FOOTNOTES ***
1/For the purpose of this opinion "bonding base" or "base of a bond issue" shall be construed to mean the accumulation of money or revenue pledged to pay principal and interest on a bond issue when due.
2/While the principal may not be used as a base for a school construction bond issue it may be invested to produce income for the current use of the common schools. Article XVI, § 5, Amendment 1, reads as follows:
"None of the permanent school fund of this state shall ever be loaned to private persons or corporations, but it may be invested in national, state, county, municipal or school or school district bonds."
Our court in theGruen case, supra, determined it was the intent of the people to limit investment of the permanent school fund ingeneral obligation bonds of the nation, state, county, municipality or school district.
3/The Purdy case was distinguished in State ex rel. Blakeslee v. Clausen, 85 Wash. 260, 271, 148 Pac. 28 (1915), wherein the court construed the term "support" as used in the 7th Amendment to our constitution.
4/It should be pointed out that certain courts of other states have not followed our court's definition of "support" in construing their constitutional school provisions. These courts appear to have overlooked the fact that our court was construing two terms "support" and "current." The latter would be the key in distinguishingConder v. University of Utah, 123 Utah 182, 257 P. (2d) 367 (1953); and Arnold v. Board, 47 Wyo. 236, 34 P. (2d) 28 (1934).