Can the Arkansas Workers' Compensation Commission have its surplus trust fund money invested in securities other than certificates of deposit?

Plain-English summary

The chief executive of the Arkansas Workers' Compensation Commission asked four related questions about where the agency's surplus money could be invested. Under the State Treasury Management Law, specifically Ark. Code Ann. § 19-3-518, the State Treasurer normally has to park surplus trust fund money in bank certificates of deposit to the extent feasible, and only any remainder can go into securities with the trust fund administrator's approval. AWCC wanted to direct surplus into securities that would earn more than CDs.

The Attorney General concluded that, for the fiscal year running July 1, 2015 through June 30, 2016, the AWCC could do so. The AWCC's 2015 appropriation act (Act 969 of 2015, Section 8) contained unusual language saying that all such investments as the Treasurer is authorized to use would be available to the three AWCC funds, with movement of money into and out of investments directed by the AWCC's chief executive. That language was both more recent and more specific than § 19-3-518 with respect to AWCC money, so it controlled. The opinion stressed that the displacement of the CD-first rule lasted only as long as the appropriation act, which by its own terms expired at the end of fiscal year 2016.

The opinion also noted that this appropriation-act language appeared unique to AWCC at the time, and warned that the substantive grant of investment authority was permissible in an appropriation act only because the act met the constitutional "unity of subject" requirement of Ark. Const. art. 5, § 30.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is special about how Arkansas treats surplus money in state trust funds?

The State Treasury Management Law in effect in 2015 told the Treasurer to invest surplus trust fund moneys first in CDs at eligible banks and savings and loans, and to invest a remainder in securities only with the trust fund administrator's approval. The administrator certifies the amount of estimated surplus and the period for which it is not needed.

How did the AWCC get around the CD-first rule?

Section 8 of the agency's 2015 appropriation act (Act 969 of 2015) said funds in the Death and Permanent Total Disability Trust Fund, the Second Injury Trust Fund, and the Workers' Compensation Fund "shall be invested and reinvested to the extent feasible," and "all such investments as authorized for use by the Office of the Treasurer shall be available to the listed funds." It also said movement of those funds into and out of investments would be directed by the AWCC's chief executive. That removed the CD-first preference for those three funds, but only during the appropriation year.

Why did the appropriation act trump a permanent statute?

The opinion applied two standard canons of construction. A more specific statute controls a more general one, and a more recently enacted statute controls an older one. The appropriation language was both more specific to AWCC funds and more recently enacted than § 19-3-518, so it governed during its effective period.

Can the legislature put substantive policy inside an appropriation act?

The opinion said yes, so long as the act "embraces but one subject," as required by Ark. Const. art. 5, § 30, citing Arkansas Motor Carrier Ass'n v. Pritchett. Act 969 of 2015 met that test because each section related to appropriating money for AWCC personal services and operating expenses.

What happened after June 30, 2016?

The opinion is explicit that the broader investment authority expired with the appropriation act. Unless the legislature re-enacted similar language in a later appropriation, the default rule of § 19-3-518 would again require CDs first.

Background and statutory framework

The Arkansas Workers' Compensation Commission administered three statutory funds in 2015: the Workers' Compensation Fund, the Second Injury Trust Fund, and the Death and Permanent Total Disability Trust Fund, all identified at Ark. Code Ann. § 11-9-301(a).

Investment of trust fund money sat under the State Treasury Management Law, Ark. Code Ann. § 19-3-501 et seq. Section 19-3-518(a)(2)(A) defined the "amount certified" as estimated surplus moneys exceeding the immediate requirements of the trust fund account. Section 19-3-518(b) and (c) directed the Treasurer to invest the certified surplus in CDs at eligible banks and savings and loan associations, with a residual securities option only if the Treasurer could not place the full amount in CDs.

Act 969 of 2015, Section 8, contained the special language displacing that hierarchy for AWCC funds during fiscal year 2016. The opinion described the language as "markedly different" from § 19-3-518 and found no parallel language in any other agency's 2015 appropriation act.

Citations

• Ark. Code Ann. § 19-3-518 (Supp. 2013)
• Ark. Code Ann. § 19-3-501 et seq. (Repl. 2007 & Supp. 2013)
• Ark. Code Ann. § 11-9-301(a) (Repl. 2012)
• Acts 2015, No. 969, § 8
• Ark. Const. art. 5, § 30
• Searcy Farm Supply, LLC v. Merchants & Planters Bank, 369 Ark. 487, 256 S.W.3d 496 (2007)
• Donoho v. Donoho, 318 Ark. 637, 887 S.W.2d 290 (1994)
• Steward v. Statler, 371 Ark. 351, 266 S.W.3d 710 (2007)
• Arkansas Motor Carrier Ass'n v. Pritchett, 303 Ark. 620, 798 S.W.2d 918 (1990)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS
THE ATTORNEY GENERAL
LESLIE RUTLEDGE

Opinion No. 2015-069
August 17, 2015

Barbara W. Webb, Chief Executive Officer
Arkansas Workers' Compensation Commission
324 Spring Street
Little Rock, Arkansas 72201

Dear Ms. Webb:

This is in response to your request for an opinion on the following questions concerning the investment of funds administered by the Arkansas Workers' Compensation Commission ("AWCC"):

1. Does the AWCC have the authority to invest any surplus funds in securities other than certificates of deposit?
2. To the extent those investments are handled by the Treasurer of the State of Arkansas, does the Treasurer have the authority to invest the surplus funds as designated by the AWCC in securities other than certificates of deposit?
3. Does the special language in Act 969 of 2015 (the AWCC appropriation act) modify the provisions of Ark. Code Ann. § 19-3-518 in regard to AWCC funds?
4. Are there any other rules or statutes that would restrict the Treasurer from making investments in other securities with AWCC surplus funds?

As background for these questions, you report that previously, the majority of the surplus from the AWCC funds has been invested in certificates of deposit pursuant to Ark. Code Ann. § 19-3-518. You state that the AWCC would in the future like to direct the State Treasurer to invest surplus funds in securities that would earn a greater return on investment.

RESPONSE

In my opinion, the answer to Question 1 is "yes," as a general matter, pursuant to Section 8 of Act 969 of 2015 (AWCC's appropriation act), which is effective from July 1, 2015 through June 30, 2016. It is my opinion in response to Question 2 that the State Treasurer may, at the direction of the AWCC, invest surplus AWCC funds in securities other than certificates of deposit between July 1, 2015 and June 30, 2016. The answer to Question 3 is "yes," in my opinion. With regard to Question 4, I am unaware of any specific restrictions other than those contained in Ark. Code Ann. § 19-3-518, which generally requires the Treasurer to invest surplus trust fund moneys in certificates of deposit to the extent feasible.

DISCUSSION

Question 1 — Does the AWCC have the authority to invest any surplus funds in securities other than certificates of deposit?

The answer to this question is generally "yes," in my opinion, pursuant to Act 969 of 2015 — the appropriation act for the AWCC. This act contains the following special language regarding the investment of AWCC funds:

All such funds as are held at any time in the Death and Permanent Total Disability Trust Fund, Second Injury Trust Fund, and the Workers' Compensation Fund shall be invested and reinvested to the extent feasible, all such investments as authorized for use by the Office of the Treasurer shall be available to the listed funds. The movement of these funds into and out of investments shall be by fund transfers as directed by the Chief Executive Officer of the Workers' Compensation Commission.

This language — which appears to be unique to the AWCC — is markedly different from the section of the State Treasury Management Law that generally governs the investment of trust fund accounts. Under Ark. Code Ann. § 19-3-518, the State Treasurer is required to invest surplus trust fund moneys in certificates of deposit (CDs) to the extent feasible:

The Treasurer of State shall invest the amount certified in certificates of deposit issued by eligible banks and savings and loan associations.

If the Treasurer of State is unable to place the certified amount in certificates of deposit, then the remainder may be placed in securities with the administrator's approval.

This section of the Treasury Management Law is clear regarding the investment of surplus trust funds in securities. Investments in securities may only occur to the extent of any "remainder" following the investment in CDs. This limitation on securities investments is absent from AWCC's appropriation act. The appropriation's special language instead provides for "all such investments as authorized for use by the Office of the Treasurer …." Additionally, the appropriation act provides for investments "as directed by [the AWCC's] Chief Executive …." This authority on the part of the AWCC to direct the investment of AWCC funds stands in stark contrast to section 19-3-518's requirement that the Treasurer first invest surplus AWCC trust funds in CDs, with investments in securities only occurring ("with the administrator's approval") if the Treasurer is unable to place the entire surplus in CDs.

AWCC's authority over investments is echoed by several line items in the appropriation act, together with a reference to the investment of funds "as allowed by the Workers' Compensation Commission."

In my opinion, the appropriation language is controlling. It is a standard principle of statutory construction that where two statutes apparently speak to the same subject matter and one is more specific than the other, the more specific statute controls. Additionally, more recently enacted legislation will prevail over an earlier enactment, as the later expression of legislative will. These principles lead me to conclude that the appropriation act — which is both more recent and more specific than Ark. Code Ann. § 19-3-518 with respect to the investment of AWCC funds — controls.

Accordingly, it is my opinion that the answer to Question 1 above is generally "yes," during the period of July 1, 2015 through June 30, 2016, when the superseding appropriation language is in effect. I believe the AWCC is authorized during this fiscal period (after which the appropriation act, along with its special language, will expire) to direct the investment of AWCC funds. And unlike the Treasury Management Law, the appropriation act does not require the initial placement of AWCC funds in CDs.

Question 2 — To the extent those investments are handled by the Treasurer of the State of Arkansas, does the Treasurer have the authority to invest the surplus funds as designated by the AWCC in securities other than certificates of deposit?

As explained above, the AWCC is authorized under its appropriation act to direct the investment of AWCC funds. As long as the State Treasurer is acting at the direction of the AWCC, therefore, I believe the Treasurer may invest surplus AWCC funds in securities other than certificates of deposit. Such action would not be contrary to Ark. Code Ann. § 19-3-518, which otherwise constrains the Treasurer's ability to place the surplus in securities by requiring that it be placed in CDs to the extent feasible. It must be recognized, however, that this investment authority regarding AWCC funds only applies during the effective dates of the appropriation act, July 1, 2015 through June 30, 2016.

Question 3 — Does the special language in Act 969 of 2015 (the AWCC appropriation act) modify the provisions of Ark. Code Ann. § 19-3-518 in regard to AWCC funds?

Yes, to the extent the appropriation act authorizes "all such investments as authorized for use by … the Treasurer …." This relatively broad investment authority cannot be reconciled with section 19-3-518's requirement that investments in securities only occur to the extent of any "remainder" following the investment in CDs. That is why I opined in response to Question 2 above, based on standard principles of statutory construction, that the Treasurer may invest surplus AWCC funds in securities other than certificates of deposit, as long as the Treasurer does so at the direction of the AWCC.

Question 4 — Are there any other rules or statutes that would restrict the Treasurer from making investments in other securities with AWCC surplus funds?

I am unaware of any specific restrictions other than those contained in Ark. Code Ann. § 19-3-518 which I have explained generally requires the Treasurer to invest surplus trust fund moneys in certificates of deposit to the extent feasible.

Deputy Attorney General Elisabeth A. Walker prepared this opinion, which I hereby approve.

Sincerely,

LESLIE RUTLEDGE
Attorney General
LR/EAW:cyh