Could a Washington school district move interest earned by its building reserve fund into another fund?

Plain-English summary

The Washington Attorney General concluded in 1983 that a school board could transfer interest earned on a building reserve or building and capital projects fund to another school district fund. Under the statute the AG applied, the transferred earnings could be spent only for instructional supplies, equipment, or capital outlay.

The opinion addressed an ambiguity in the investment statute. The AG relied on the long-standing interpretation of the State Auditor's Office and earlier AG advice that the statute itself authorized designating a different fund for the earnings.

Currency note

This opinion was issued in 1983. 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 interest have to stay in the fund that earned it?
The AG said no. The board could designate another lawful school fund under the statute it analyzed.

Could the district then spend the transferred interest for any purpose?
No. The opinion identified instructional supplies, equipment, and capital outlay as the permitted uses.

Why did the AG change its answer from an earlier letter?
The earlier letter relied on a general rule crediting interest to the source fund. The later request pointed the AG to a separate investment statute and its established administrative interpretation.

Background and statutory framework

A senator asked about moving investment earnings from a school building fund. The AG considered RCW 28A.58.440 together with a statute governing building reserve funds. It also noted that a 1983 enactment would replace the old fund names with “capital projects fund” later that year.

Citations and references

• Statutes discussed: RCW 28A.58.440; RCW 28A.58.441(2).

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/interest-earinings-school-district-building-reserve-fund

Original opinion text

Attorney General Ken Eikenberry

DISTRICTS ‑- SCHOOLS ‑- FUNDS ‑- INVESTMENT INCOME ‑- INTEREST EARININGS FROM SCHOOL DISTRICT BUILDING RESERVE FUND

RCW 28A.58.440 allows the transfer of interest earnings from a school district building reserve fund or building and capital projects fund to another school district fund so long as expenditures from such transferred interest earnings are restricted to instructional supplies, equipment or capital outlay purposes.

May 31, 1983

Honorable George W. Clarke
State Senator, 41st District
3835 West Mercer Way
Mercer Island, Washington 98040

Cite as: AGO 1983 No. 10

Dear Sir:

By recent letter you requested our opinion on a question which we paraphrase as follows:

Does RCW 28A.58.440 allow the transfer of interest earnings from a school district building reserve fund or building and capital projects fund to another school district fund so long as expenditures from such transferred interest earnings are restricted to instructional supplies, equipment or capital outlay purposes?

We answer this question in the affirmative.

ANALYSIS

In posing the above question you also noted, interalia, our letter opinion of February 15, 1983 to State Representative Emilio Cantu regarding this same general matter. There, after reviewing the provisions of RCW 28A.58.441(2) relating to the establishment and maintenance of school district building reserve funds, we said:

". . .

"An examination of the subject statute reveals that it is silent on the question of how investment income arising from this particular fund‑-the building reserve fund‑-is [[Orig. Op. Page 2]] to be utilized. Therefore, in our opinion, the applicable principle of law is as stated in a prior opinion of this office, AGLO 1981 No. 3, a copy of which is enclosed for your immediate reference, at page 3. In essence, what that principle of law says is that in the absence of any provision to the contrary, all interest earned through the investment of given public funds is to be credited to the fund (in this case, the school district building reserve fund) from which the monies being invested came."

Notwithstanding the foregoing, however, you have now directed our attention to another statute, RCW 28A.58.440, which relates to the investment of school district funds by the various county treasurers and provides, in part, that:

". . . All earnings and income from such investments shall inure to the benefit of any school fund designated by the board of directors of the school district which such board may lawfully designate: Provided, That any interest or earnings being credited to a fund different from that which earned the interest or earnings shall only be expended for instructional supplies, equipment or capital outlay purposes. . . ."

The issue which is thus raised, in turn, is whether that language of RCW 28A.58.440,supra, itself authorizes a school board to direct investment earnings to be credited to a fund other than the one from which the particular investments were made. Or, instead, does that provision merely assume the existence of such authority based upon some other, separate, statutory provision?

The above‑quoted language of RCW 28A.58.440 is, in our judgment, ambiguous on that count. Accordingly, it is appropriate to refer to, and consider, long-standing administrative construction in determining its proper meaning. Cf.,State v. Houck, 32 Wn.2d 681, 203 P.2d 693 (1949). And see, also,Morin v. Johnson, 49 Wn.2d 275, 300 P.2d 569 (1956) and cases cited therein. In this instance we note both from your letter and from our own independent research that RCW 28A.58.440,supra, has long been administratively construed‑-by both this office in informal opinions and by the Division of Municipal Corporations of the State Auditor's Office‑-to be itself an authorization. Thus, in an official bulletin issued on July 19, 1972, the Auditor's Office advised, generally, as follows:

[[Orig. Op. Page 3]]

"Whenever monies in any school district fund, except the Building Fund, are invested, the earnings and income from such investments shall be placed in the investing fund except when the board of directors of the school district has directed that such earnings and income be placed in a different fund, as authorized by RCW 28A.58.440. When the interest or earnings are placed in a fund different from that which earned the interest or earnings, such income shall only be expended for instructional supplies, equipment or capital outlay purposes."

Likewise, in a memorandum opinion dated May 1, 1978 to Educational Service District No. 101‑-based upon an earlier memorandum opinion dated September 28, 1972 to the State Auditor's Office‑-we similarly said that:

". . . surplus in the building fund may be invested and its earnings and interest credited to another fund consistent with the terms of RCW 28A.58.440."

In the meantime, the legislature has met on numerous occasions without having repudiated that administrative construction of the statute. Accordingly, based thereon, we now answer your present question (as above paraphrased) in the affirmative.1/

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

Very truly yours,
KENNETH O. EIKENBERRY
Attorney General

PHILIP H. AUSTIN
Senior Deputy Attorney General

*** FOOTNOTES ***

1/We note, in passing, that with the enactment of chapter 59, Laws of 1983, effective September 1, 1983, the terms "building fund" and "building reserve fund" will both be replaced by the term "capital projects fund." See, § 13, chapter 59,supra, amending RCW 28A.58.441.