AGO 1949-51 No. 199.

• Case Date: January 19, 1950
• Court: Washington

Washington Attorney General Opinions 1950. AGO 1949-51 No. 199. January 19, 1950 [Orig. Op. Page 1]PRIVATEREGISTERED STATE WARRANTS.Outstanding warrants are not the measure of the state debt within the constitution. The state treasurer has no responsibility to limit the number of warrants endorsed "not paid for want of funds." Loans may be made from one fund to another by the treasurer with the consent of the Finance Committee but the amount shall not exceed 75% of the taxes levied which may include excise taxes levied under the revenue act of 1935 as determined by the revenue estimate in the last governor's budget. The treasurer may not permit overdrafts against funds and any borrowing must be accomplished by the actual transfer of money between funds.Honorable Tom Martin State Treasurer Legislative Building Olympia, WashingtonCite as: AGO 1949-51 No. 199Dear Sir: Receipt is acknowledged of your letter in which you propound the following questions: 1. Is the state in debt according to Article VIII, Section 1, of the State Constitution, when one fund is overdrawn and there is cash on hand to the credit of other funds? If the answer is yes, (a) Do the provisions of Article VIII, Section 1, of the State Constitution, create a responsibility upon the state treasurer to limit warrants endorsed "not paid for want of funds according to 5516 Rem. Rev. Stat."? 2. Can the state treasurer make a loan from one fund to another under 5507 Rem. Rev. Stat. based upon taxes levied under the Revenue Act of 1935 as amended. [Orig. Op. Page 2] (a) If yes, upon what basis will 75% of levied and uncollected taxes be computed? (b) Does 5507 Rem. Rev. Stat. require the loan from a specific lending fund be actually transferred to the borrowing fund? Or can the state treasurer, under 5507 Rem. Rev. Stat. honor warrants that create an overdraft in the borrowing funds without revealing in the cash balances from which fund the loan is made? 3. Can the state treasurer under any circumstances exercise discretion in permitting temporary overdrafts? Our conclusions on the questions propounded may be summarized as follows: 1. The state is not in debt under Article VIII, Section 1, of the State Constitution, when one fund is overdrawn and there is cash on hand to the credit of other funds. 2. The provisions of Article VIII, Section 1, of the State Constitution, do not create a responsibility upon the state treasurer to limit warrants endorsed "not paid for want of funds" according to section 5516 of Remington's Revised Statutes. 3. The state treasurer may, with the consent of the State Finance Committee, make a loan from one fund to another under section 5507 of Remington's Revised Statutes based upon taxes levied under the Revenue Act of 1935, as amended. 4. The 75% of taxes levied and uncollected will be computed upon the basis of the estimated revenues shown in the Governor's Budget compiled at the beginning of the current biennium. 5. When a loan is made pursuant to section 5507 of Remington's Revised Statutes an actual transfer must be made to the borrowing fund and it is not permissible for the treasurer to honor warrants that create an overdraft in the borrowing fund without revealing the cash balances from which fund the loan was made. 6. The state treasurer may not permit temporary overdrafts. [Orig. Op. Page 3] ANALYSIS The issuance of warrants which could not be paid upon presentation for want of funds has occurred many times in the history of the state. In 1895 outstanding warrants totaled $1,500,000.00. State ex rel. Jones v. McGraw, 12 Wash. 541. In 1940 unpaid warrants totaled nearly $6,000.000.00. It has never been held by the courts of this state that the constitutional debt limit is violated when unpaid warrants exceed $400,000.00. McQuillan on Municipal Corporations (2nd Ed.) Vol. 6, page 81, in speaking of a warrant says: "It is little more than a certificate of indebtedness and is not intended to constitute a new debt or evidence a new debt; and is generally held not to create of itself indebtedness as that term is used in debt limit provisions." Article VIII, Section 1, of the State Constitution, provides: "The state may, to meet casual deficits or failure in revenues or for expenses not provided for, contract debts, but such debts, direct and contingent, singly or in the aggregate, shall not at any time exceed four hundred thousand dollars ($400,000), and the moneys arising from the loans creating such debts shall be applied to the purpose for which they were obtained, or to repay the debts so contracted, and to no other purpose whatever." It could be argued that this provision of the constitution is applicable only to debts created by the borrowing of money. Indeed, the last clause of the sentence clearly contemplates the receipt of money by the state and it is possible that, if the matter were ever brought to issue, it might be determined that this section of the constitution applies only when money is borrowed and not when the state incurs obligations in the course of carrying out its ordinary governmental functions. In this connection the difference in wording should be noted between the section above quoted and section 6 relating to municipal corporations. In the latter section the language is: "No city, town, school district or other municipal corporation shall for any purpose become indebted in any manner * * *" (Emphasis supplied) [Orig. Op. Page 4] The cases applying the debt limit to all kinds of obligations of municipal corporations are not necessarily applicable to the state debt limit with its different language. However, if we assume that section 1, Article...