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

Plain-English summary

The Arkansas Workers' Compensation Commission (AWCC) asked whether it could direct the State Treasurer to invest surplus funds in securities other than certificates of deposit. The Attorney General said yes during July 1, 2015 through June 30, 2016, under special language in the Commission's appropriation act, Act 969 of 2015.

Ordinarily, Ark. Code Ann. § 19-3-518 requires the Treasurer to invest surplus trust fund money in certificates of deposit to the extent feasible. Only an amount that cannot be placed in those deposits may go into securities with the administrator's approval. The AWCC appropriation language instead made all investments authorized for the Treasurer available to three named AWCC funds and gave the AWCC chief executive authority to direct transfers into and out of investments. The AG read this more specific, more recent provision as controlling for those funds during the appropriation period.

The AG said the Treasurer could act on the AWCC's direction during that period and that the special language modified the ordinary deposit-first rule for AWCC funds. Asked about other restrictions, she said she was unaware of any specific ones beyond § 19-3-518. The opinion does not address constitutional limits on what an appropriation act may contain.

Currency note

The special authority discussed here was limited to the appropriation period ending June 30, 2016. This opinion does not establish what later appropriations or current investment law permit. Check the current acts and treasury rules before directing funds.

Background and statutory framework

Act 969's quoted language names the Death and Permanent Total Disability Trust Fund, Second Injury Trust Fund, and Workers' Compensation Fund. It allows the listed funds access to investments authorized for use by the Treasurer and directs fund transfers through the AWCC's chief executive. The opinion describes that language as different from the State Treasury Management Law's ordinary treatment of surplus trust funds.

The AG applied two rules of statutory construction: a specific enactment controls a general one on the same subject, and a more recent enactment prevails over an earlier one. She said Act 969's investment language met both descriptions for AWCC funds. Its effect was temporary because the appropriation act and its special language would expire after the fiscal year.

Common questions

Could the AWCC direct investment beyond certificates of deposit?
Yes, as a general matter during July 1, 2015 through June 30, 2016. The AG said the special language did not require initial placement of AWCC funds in deposits.

Could the State Treasurer make those investments?
The AG said yes, so long as the Treasurer acted at the AWCC's direction during the appropriation act's effective period.

Which funds did the special language name?
The Death and Permanent Total Disability Trust Fund, Second Injury Trust Fund, and Workers' Compensation Fund.

Did the AG decide whether substantive investment rules may constitutionally appear in an appropriation act?
No. The opinion resolves the interaction between Act 969's special language and § 19-3-518. It does not discuss a constitutional test for appropriation acts.

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