Daniel Butts, 23, is accused of shooting Chief Ralph Painter in January 2011.
Doctors at the state hospital decided there was no reason to keep Butts at the secure facility and no reason to force him to take anti-psychotic medication, the Longview Daily News reported. He was returned Thursday to the Columbia County Jail.
District Attorney Stephen Atchison said a third competence hearing is likely to be scheduled.
Judge Ted Grove had ordered that Butts, who was refusing medication, be forcibly medicated at the state hospital to help confirm whether he had a mental illness.
Hospital officials challenged Grove's ruling, saying it wasn't legally sufficient to force medication, Atchison said.
"They said, `We don't need to keep him here, there's nothing we can do,"' Atchison said.
Defense psychiatrists say Butts is possibly schizophrenic, citing erratic behavior and a family history of mental problems. He has refused to speak through much of his incarceration.
In late 2011, Grove found that Butts was faking mental illness. At a second hearing in February, Grove ruled that Butts was mentally impaired and couldn't assist with his defense. State doctors testified there was no evidence of mental illness. Atchison argues Butts is trying to avoid a possible death penalty.
Butts, who was from Kalama, Wash., is accused of shooting 55-year-old Chief Ralph Painter after the chief responded to a report of a suspicious person at a Rainier car stereo shop. Investigators say Butts wrestled Painter's gun away and shot him in the head.
Butts is also charged with shooting at responding officers and people in a nearby church.
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