Could Washington invest university and college permanent funds in the full teachers’ retirement investment list in 1965?

Plain-English summary

In 1965, the Washington Attorney General concluded that the state constitution’s permanent school fund investment restriction also covered the permanent funds for the university, agricultural college, normal schools, and scientific school to the extent those funds came from educational grant lands. The AG said such money could be invested only in general obligation governmental bonds, even though a new statute referenced the wider investment choices available to the teachers’ retirement system. (Official opinion)

The opinion expressly assumed that the four funds at issue came from sales or leases of educational grant lands. Its answer was tied to that source.

Currency note

This opinion was issued in 1965. 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

Did the restriction cover only common-school money?
The AG said the constitutional phrase also covered the described higher-education grant-land funds.

Could those funds use every teachers’ retirement investment?
No. The opinion limited them to investments on that list that also satisfied the constitutional bond restriction.

Did the AG establish the source of every dollar in the funds?
No. It made an express assumption that the funds at issue derived from educational grant lands.

Background and statutory framework

The state finance committee asked about a 1965 law directing investment of four educational permanent funds in obligations authorized for the teachers’ retirement system. The AG compared that law with Article XVI, § 5 and traced the phrase “permanent school fund” through the Enabling Act and state constitutional history.

Citations and references

• The opinion limits the funds “to the extent they are derived from this source.”
• It concludes that such money "may only be invested in such securities available to the teachers' retirement system under RCW 41.32.200 as are included within the express scope of Article XVI, § 5"

Subject

FUNDS ‑- AGRICULTURAL COLLEGE PERMANENT FUND ‑- NORMAL SCHOOL PERMANENT FUND ‑- SCIENTIFIC SCHOOL PERMANENT FUND ‑- UNIVERSITY PERMANENT FUND ‑- INVESTMENT ‑- CONSTITUTIONAL LIMITATION

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/funds-agricultural-college-permanent-fund-normal-school-permanent-fund-scientific

Original opinion text

Attorney General John J. O'Connell

FUNDS ‑- AGRICULTURAL COLLEGE PERMANENT FUND ‑- NORMAL SCHOOL PERMANENT FUND ‑- SCIENTIFIC SCHOOL PERMANENT FUND ‑- UNIVERSITY PERMANENT FUND ‑- INVESTMENT ‑- CONSTITUTIONAL LIMITATION

Article XVI, § 5, of the state constitution applies to (and thereby inhibits the investment of) the agricultural college permanent fund, normal school permanent fund, scientific school permanent fund and the university permanent fund.

September 15, 1965

State Finance Committee
Room 110 Public Health Building
Olympia, Washington 98502

Cite as: AGO 65-66 No. 39

Attention: !ttMr. Roy A. Pitt, Jr.
Secretary

Gentlemen:

By letter previously acknowledged you have requested an opinion of this office on a question which we paraphrase as follows:

Does Article XVI, § 5, of our state constitution apply to (and thereby inhibit the investment of) the agricultural college permanent fund, normal school permanent fund, scientific school permanent fund, or the university permanent fund?

We answer your question in the affirmative for the reasons set forth in our analysis.

ANALYSIS

You advise that your question arises by reason of the enactment of § 1, chapter 104, Laws of 1965, Ex. Sess., which provides as follows:

"Whenever there are surplus moneys available for investment in the agricultural college permanent fund, normal school permanent fund, scientific school permanent fund, or the university permanent fund, the state finance committee shall invest such moneys in bonds, notes, or other obligations now or hereafter authorized as an investment for the funds of the teachers' retirement system."

[[Orig. Op. Page 2]]

The constitutional provision, Article XVI, § 5 (Amendment 1), which is involved in your question, provides as follows:

"None of thepermanent 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 district bonds." (Emphasis supplied.)

As interpreted by the Washington court, this section of the constitution prohibits investment of the permanent school fund in anything except general obligation government bonds. State ex rel. Port Townsend v. Clausen, 40 Wash. 95, 82 Pac. 187 (1905); followed inState Capitol Com. v. State Board of Finance, 74 Wash. 15, 132 Pac. 861 (1913), andGruen v. State Tax Commission, 35 Wn.2d 1, 211 P.2d 651 (1949). On the other hand, funds of the state teachers' retirement system (referred to in § 1, chapter 104, Laws of 1965, Ex. Sess., supra) may be invested not only in general obligation government bonds but also in many other types of both governmental and corporate obligations. See RCW 41.32.200.

Accordingly, the basic constitutional question to be determined is whether the permanent funds of the state university, scientific school, agricultural college, and colleges of education which are referred to in § 1, chapter 104, Laws of 1965, Ex. Sess., supra, constitute a part of the "permanent school fund" referred to in, and governed by, Article XVI, § 5 (Amendment 1), of the constitution, supra.

Though the statutes on this point are rather obscure (see RCW 43.79.060, 43.79.110, 43.79.130, and 43.79.160), for purposes of your question we shall assume (as you have done in your request) that all of the permanent educational funds in question are derived from the proceeds of leases or sales of educational grant lands; i.e., lands granted to the state by §§ 14, 16 and 17 of the state's Enabling Act (25 U.S. Statutes at Large, chapter 180, p. 676). See, AGO 63-64 No. 113, copy enclosed.

By § 14 of the Enabling Act, the United States gave seventy-two sections of public lands to the state for the purpose of a university. Likewise, by § 16 of the Enabling Act, the state was given an additional 90,000 acres of land ". . . for the use and support of agricultural colleges . . ." And, by § 17 of the Enabling Act there was granted to the state an additional 100,000 acres "For the establishment and maintenance of a scientific school, . . ."; and 100,000 acres ". . . for State normal schools, . . ."

[[Orig. Op. Page 3]]

In addition to the foregoing grants, which (as aforesaid) constitute the base for accumulation of the present university permanent fund, agricultural college permanent fund, normal school permanent fund, and scientific school permanent fund, there was granted to the state by § 10 of the Enabling Act sections numbered 16 and 36 in every township in the (then proposed) state (or sections in lieu thereof where said sections have previously been disposed of) for the support of the common schools. Finally, § 11 of the Enabling Act (prior to the adoption of certain amendments not material to the instant discussion) read 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 to constitute a permanent school fund, the interest of which only shall be expended in the support of said schools. . . ." (Emphasis supplied.)

InState ex rel. Heuston v. Maynard, 31 Wash. 132, 71 Pac. 775 (1903) this last-quoted section of the Enabling Act was held to be applicable to all lands granted for educational purposes (under §§ 14, 16, 17, and 10,supra) and not merely to lands granted for support of the common schools under § 10, supra. In other words, the court determined that the term "permanent school fund" as used in § 11 of the Enabling Act must be taken to include the proceeds from sale or lease of not only the common school grant lands, but also the scientific school grant lands, the state university grant lands, the agricultural school grant lands, and the normal school grant lands.

The next step in logical sequence is to correlate the term "permanent school fund" as used in the Enabling Act with the same term as it appears in Article XVI, § 5 (Amendment 1), of the state constitution, supra. In this regard, our court has held that in determining the meaning of a constitutional provision, the intent of the framers, and the history of events and proceedings contemporaneous with its adoption may properly be considered. Yelle v. Bishop, 55 Wn.2d 286, 347 P.2d 1081 (1959).

Accordingly, in order to determine the scope of the phrase "permanent school fund" appearing in Article XVI, § 5 (Amendment [[Orig. Op. Page 4]] 1), supra,1/ it is appropriate that we examine the Journal of the Washington State Constitutional Convention.2/

At page 807 of the Journal, we find that on August 20, 1889, a Mr. T. M. Reed offered the following additional section to proposed Article XVI:

"None of the permanentcommon school fund shall ever be loaned to private persons or corporations, but may be invested in national, state, county or municipal bonds." (Emphasis supplied.)

However, as Article XVI, § 5, was actually adopted by the Convention on the following day, it read:

"None of the permanent school fund shall ever be loaned to private persons or corporations, but it may be invested in national, state, county or municipal bonds."

No explanation of the reason for deleting the word "common" is reported. However, it seems at least reasonable to speculate that the change from the original proposal to the adopted language was dictated by a desire to conform the language of the constitution to the pertinent language of the Enabling Act. In this regard it is further notable that Article XVI in its entirety deals with all public lands granted to the state (§ 1) including all lands granted to the state for educational purposes (§ 2), and not merely with lands granted to the state for support of the common schools. By way of contrast, see Article IX of the constitution relating to education and, more particularly, § 3 thereof specifically establishing the permanentcommon school fund to consist, in part, of:

". . . the principal of all funds arising from the sale of lands and other property [[Orig. Op. Page 5]] which have been, and hereafter may be granted to the state for the support of common schools. . . ." (Emphasis supplied.)

We are unable to conceive of any other reasonable explanation for this crucial change (deletion of the word "common") from the original constitutional proposal to the actually adopted provision. Under the circumstances, therefore, we are constrained to conclude that the true meaning of the constitution is that none of the permanent school funds derived from the sale or lease of lands granted for educational purposes by §§ 14, 16 and 17 of the Enabling Act‑-as well as § 10‑-may be invested in other than general obligation governmental bonds. Therefore, it follows that to the extent they are derived from this source, the university permanent fund, agricultural college permanent fund, normal school permanent fund, and scientific school permanent fund referred to in § 1, chapter 104, Laws of 1965, Ex. Sess., supra, may only be invested in such securities available to the teachers' retirement system under RCW 41.32.200 as are included within the express scope of Article XVI, § 5 (Amendment 1), supra; namely, general obligation governmental bonds.

We trust that the foregoing will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

PHILIP H. AUSTIN
Assistant Attorney General

*** FOOTNOTES ***

1/Amendment 1, adopted in 1894, merely broadened the scope of permissible investments to expressly include "school district bonds"; it did not change or alter in any way the phrase "permanent school fund" as it appeared in the original constitution.

2/Published in 1962 after extensive research utilizing all available first-hand newspaper and other acocunts of the actual proceedings of the Constitutional convention of 1889.