Untitled Texas Attorney General Opinion

ATTORNEYGENERAL OF TEXAS
GREG ABBOTT

March 13,2003

Mr. Albert Hawkins Opinion No. GA-0033
Commissioner
Texas Health and Human Services Commission Re: Whether the Texas Community Health
P.O. Box 13247 Center Revolving Loan Fund exists as a trust
Austin, Texas 78711 fund outside the state treasury; whether loan
income is the property of the Fund; and
whether chapter 136 of the Human Resources
Code, which establishes the Fund, violates
article III, sections 1, 50 and 5 1 of the Texas
Constitution (RQ-0602-JC)

Dear Commissioner Hawkins:

Chapter 136 of the Human Resources Code, as enacted by the Seventy-seventh Texas
Legislature in House Bill 2574, establishes the Texas Community Health Center Revolving Loan
Fund (“the Fund”). Your predecessor in office asked about the status of the Fund in light of House
Bill 3088, a bill enacted later in the same session that abolished certain funds, and about the
ownership of chapter 136 loan income and the constitutionality of chapter 136.’

I. Human Resources Code, Chapter 136

Chapter 136 creates the Fund as “a trust fund outside the state treasury held by a financial
institution” and administered by the Health and Human Services Commission (“the Commission”)
“as trustee on behalf of community health centers in this state.” TEX. HUM. RES. CODE ANN. 5
136.003(a) (Vernon Supp. 2003). Section 136.003 provides that the Fund is composed of:

(1) money appropriated to the fund by the legislature;

(2) gifts or grants received from public or private sources; and

(3) income from other money in the fund.

‘See Letter from Don A. Gilbert, Commissioner, Texas Health and Human Services Commission, to Honorable
John Cornyn, Texas Attorney General (Aug. 23,2002) (on file with Opinion Committee) [hereinafter Request Letter].
Mr. Albert Hawkins - Page 2 (GA-0033)

Id. 8 136.003(b). The Commission is authorized to “accept on behalf of the fund gifts and grants
for the use and benefit of the program.” Id. § 136.003(c).

Chapter 136 requires the Commission to “contract with and award money to a development
corporation to carry out the purposes of this chapter.” Id. 9 136.004. The term “development
corporation” is defined in chapter 136 to mean a “nonprofit corporation” that:

(A) provides revolving loan funds to community health
centers;

(B) accepts gifts and grants;

(C) seeks funding from various government and private
sources; and

(D) associates with a broad-based organization serving
community health centers.

. . .
Id. 9 136.002(3). Before contracting with a development corporation, the Cornmrssron must require
the development corporation “to establish an investment committee to approve loan requests of
community health centers.” Id. 8 136.005(a); see also id. 5 136.005(b) (“The investment committee
must consist of seven members as follows: (1) at least two members with lending experience; (2)
at least two members who receive health care services from a community health center; and (3) at
least one member who represents the Texas Association of Community Health Centers, Inc.“).

“The development corporation may make a loan to a community health center only with the
approval of the investment committee.” Id. 5 136.006(a). The development corporation is required
to use “at least 60 percent of the money received under the program for loans to community health
centers in existence for at least one year before the loan date.” Id. 5 136.006(b). “The development
corporation may make a loan under the program through a partnership or joint investment with one
or more financial institutions or federal or state programs.” Id. 5 136.006(d). Chapter 136 provides
that payments on community health center loans shall be made to the development corporation. See
id. § 136.006(e). “The development corporation shall use the loan payment money received from
community health centers to make new loans as provided by” chapter 136. Id.

Chapter 136 also provides that the development corporation may “make grants to eligible
community health centers from money other than money that is received from the fund and that was
derived from a legislative appropriation” and may “seek funds from state or federal agencies or
private sources to supplement and complement the funds received under the program” under rules
adopted by the Commission. Id. 9 136.009(b). We understand that the Commission has not yet
entered into a contract with a development corporation or adopted rules implementing chapter 136.2

*Telephone Conversation with Steve Aragon, General Counsel, Texas Health and Human Services Commission
(Dec. 17,2002).
Mr. Albert Hawkins - Page 3 (GA-0033)

II. The Status of the Fund in Light of House Bill 3088

Your predecessor asked about the status of the Fund in light of House Bill 3088. First, he
asked if the Fund “or any of its components exist or function as trust funds outside of the treasury.”
Request Letter, supra note 1, at 1 (Question 1).

Chapter 136 was enacted by the Seventy-seventh Legislature as House Bill 2574 on May 23,
2001 .3 Two days later, on May 25,2001, the legislature enacted House Bill 3088,4 which abolished
certain funds, accounts, and dedications of revenue enacted during the same legislative session,
including the Fund. To the extent the two bills conflict, House Bill 3088, the later enacted provision,
prevails. See TEX. GOV’T CODE ANN. 4 3 11.025(a) (Vernon 1998) (“[IIf statutes enacted at the same
or different sessions of the legislature are irreconcilable, the statute latest in date of enactment
prevails.“), (d) (“In this section, the date of enactment is the date on which the last legislative vote
is taken on the bill enacting the statute.“); see also supra notes 3 & 4 (dates of enactment for House
Bill 2574 and House Bill 3088).

Most of House Bill 3088 was not codified but can be found in the historical and statutory
notes to section 403.095 of the Government Code. SeeTEX. GOV’T CODE ANN. 6 403.095 historical
and statutory notes (Vernon Supp. 2003). Section 2 of House Bill 3088, the bill’s primary operative
provision, states:

Except as otherwise specifically provided by this Act, all funds and
accounts created or re-created in the state treasury by an Act of the
77th Legislature, Regular Session, 2001, that becomes law, and all
dedications or rededications of revenue in the state treasury or
otherwise collected by a state agency for a particular purpose by an
Act of the 77th Legislature, Regular Session, 200 1, that becomes law,
are abolished on the later of August 27, 2001, or the date the Act
creating or re-creating the fund or account or dedicating or
rededicating revenue takes effect.

Act ofMay 25,2001,77th Leg., R.S., ch. 1466,§ 2,200l Tex. Gen. Laws 5216 (emphasis added).

Section 8 of House Bill 3088 addresses the status of trust funds in general and the Fund in
particular. Under section 8(a), trust funds created by the Seventy-seventh Legislature are, as a
general matter, not abolished under section 2, but must be held in the state treasury, with the
Comptroller as trustee, or outside the state treasury with the Comptroller’s approval:

3See Act of May 23,2001,77th Leg., R.S., ch. 878,200l Tex. Gen. Laws 1759,176l; S.J. OFTEX., 77th Leg.,
R.S. 2951 (2001).

4SeeAct ofMay25,2001,77thLeg., R.S., ch. 1466,200l Tex. Gen. Laws 5216,522l; S.J.OFTEX.,~R~L~~.,
R.S. 3655 (2001).
Mr. Albert Hawkins - Page 4 (GA-0033)

Section 2 of this Act does not apply to trust funds or dedicated
revenue deposited to trust funds created under an Act of the 77th
Legislature, Regular Session, 2001, except that the trust funds shall
be held in the state treasury, with the comptroller in trust, or outside
the state treasury with the comptroller’s approval.

Id. 5 8(a), 2001 Tex. Gen. Laws at 5218. Significantly for our purposes, however, section 8(a) does
not apply to the Fund. Section 8(d) expressly addresses the Fund, providing that “[nlotwithstanding
Subsection (a) of this section, Section 2 of this Act applies to the community health center revolving
loan fund created by House Bill No. 2574 and to revenue dedicated to the fund.” Id. 9 8(d), 2001
Tex. Gen. Laws at 5219.

Thus, the Fund does not exist as a trust fund outside the state treasury as provided in House
Bill 2574. See Act of May 23,2001, 77th Leg., R.S., ch. 878, 5 1, sec. 136.003,2001 Tex. Gen.
Laws 1759, 1760 (enacting Human Resources Code section 136.003); see also TEX. GOV’T CODE
ANN. 8 3 11.025(a), (d) (V emon 1998) (to extent two bills enacted in the same session conflict, the
later enacted provision prevails). Furthermore, under House Bill 3088, the Fund may not be held
in the state treasury, with the Comptroller as trustee, or outside the state treasury with the
Comptroller’s approval as provided in section 8(a). Rather, the Fund is abolished by operation of
section 2 of House Bill 3088 and does not exist as a separate fund or account either inside or outside
the state treasury. In sum, the Fund has no legal existence separate and apart from other undedicated
monies in the state treasury.

In light of House Bill 3088, your predecessor also asked whether the Fund exists “in a
manner consistent with the intent of chapter 136?” Request Letter, supra note 1, at 1 (Question 1).
As a result of House Bill 3088, the Fund does not exist as a trust fund outside the state treasury. This
significantly affects the authority of the Commission to expend money under chapter 136. Because
the Fund does not exist as a trust fund outside the state treasury, any money appropriated to the Fund
by the legislature would be held in the state treasury. Furthermore, the Commission would have to
deposit any other monies the Fund receives, such as grants or gifts from other sources, in the state
treasury. See TEX. HUM. RES. CODEANN. 8 136.003(c) (Vernon Supp. 2003) (Commission “may
accept on behalf of the fund gifts and grants for the use and benefit of the program”).

Funds in the state treasury may not be expended without a legislative appropriation.See TEX.
CONST. art. VIII, 8 6 f”No money shall be drawn from the Treasury but in pursuance of specific
appropriations made by law . . . .“); see also Bullock v. Calvert, 480 S.W.2d 367,370 (Tex. 1972)
(“The appropriation of state money is a legislative function.“). We understand that the Seventy-
seventh Legislature did not make a specific appropriation for the purpose of carrying out chapter 136
or otherwise authorize the Cornmission to spend money for this purpose in an appropriations act?
With no legislative appropriation, the Commission is effectively precluded from expending state
funds in the state treasury to carry out the purposes of chapter 136. And, if the Commission were

‘Telephone Conversation with Steve Aragon, General Counsel, Texas Health and Human Services Commission
(Dec. 17,2002).
Mr. Albert Hawkins - Page 5 (GA-0033)

to receive gifts or grants from other sources on behalf of the Fund under chapter 136, it would be
required to deposit those monies in the state treasury and could not spend them due to the lack of a
legislative appropriation, with the two exceptions noted below.

The Commission may have authority to spend certain gifts and federal funds granted to the
Commission for the purpose of carrying out chapter 136. First, section 8.01(a) of the general
provisions of the 2001 General Appropriations Act provides that a gift or bequest of money to a state
agency “that has specific authority to accept gifts is appropriated to the agency designated by the
grantor and for the purpose the grantor may specify.” 2001 General Appropriations Act, 77th Leg.,
R.S., S.B. 1, art. IX, 8 8.01(a), at IX-65. Because the Commission is authorized by section 136.003
of the Human Resources Code to accept gifts on behalf of the Fund, this rider would provide
authority for the Commission to use such money for the purpose specified by the grantor. We note,
however, that section 8.01 limits the authority of an agency to transfer a gift or bequest to “a private
or public development fund or foundation.” Id. 5 8.01(c). We do not determine here whether this
would limit the authority of the Commission to transfer a gift or bequest to the development
corporation.

Second, Rider 34 to the Commission’s appropriation provides in pertinent part as follows:

Notwithstanding the General Provisions of this Act, the Health and
Human Services Commission is hereby authorized to receive and
disburse in accordance with plans acceptable to the responsible
federal agency, all federal moneys that are made available (including
grants, allotments, and reimbursements) to the state and retain their
character as Federal Funds for such purposes[,] . . . and such moneys
are hereby appropriated to the specific purpose or purposes for which
they are granted or otherwise made available.

2001 General Appropriations Act, 77th Leg., R.S., S.B. 1, art. II, rider 34, at II-57! To date,
however, the Commission has not received any federal money for the purpose of carrying out chapter
136.7 Whether this rider would apply to any particular federal grant is beyond the scope of your
predecessor’s query.

Finally, we have received a brief suggesting that the development corporation rather than the
Commission holds the Fund and arguing that House Bill 3088 “does not limit the Fund’s operation

%is rider appears to supersede the more general rider regarding federal funds and block grants in Article IX
of the 2001 General Appropriations Act. See 2001 General Appropriations Act, 77th Leg., R.S., S.B. 1, art. IX, $ 8.02,
at 1X-65-66.

‘Telephone Conversation with Steve Aragon, General Counsel, Texas Health and Human Services Commission
(Dec. 17,2002).
Mr. Albert Hawkins - Page 6 (GA-0033)

to the extent that it collects revenue through federal and private sources, or even through state
grantsY8 We disagree.

First, the development corporation does not hold the Fund. Section 136.003 provides that
the Fund is held outside the state treasury by a financial institution and that the Comrnission
administers the Fund “as a trustee on behalf of community health centers in this state.” TEX. HUM.
F&s. CODEANN. 6 136.003(a) (Vernon Supp. 2003). The development corporation has no authority
to hold the Fund and merely receives money from the Fund pursuant to a contract with the
Commission. See id. § 136.004.

Second, monies received by the Commission on behalf of the Fund are part of the Fund and
are within the Commission’s control. Under section 136.003, the Commission may accept gifts and
grants from public or private sources on behalf of the Fund, which are part of the Fund. See id. §
136.003(b)(2), (c). Chapter 136 does not give the development corporation authority over such gifts
or grants. Section 136.009(b) requires the Commission to adopt a rule permitting the development
corporation to seek other funding: “Under rules adopted by the commission, the development
corporation may. . . seek funds from state or federal agencies or private sources to supplement and
complement the funds received under the program.” Id. 5 136,009(b)(2). The fact that the
development corporation may seek supplemental funding does not change the fact that gifts and
grants accepted by the Commission on behalf of the Fund under section 136.003(c) are expressly
made part of the Fund itself, see id. 4 136.003(b)(2) (including “gifts or grants received from public
or private sources” as part of the Fund), are subject to the Commission’s control, see id. 8 136.003(a)
(Fund “administered by the commission as trustee on behalf of community health centers in this
state”), and must be deposited in the state treasury.

III. Ownership of Loan Income under Chapter 136

Although House Bill 3088 changes the legal nature of the Fund and significantly affects the
funding of the chapter 136 program, House Bill 3088 did not repeal chapter 136. Therefore, we
address your predecessor’s questions about ownership of loan income and the constitutionality of
chapter 136.

With respect to the ownership of loan income, section 136.008 provides that income on loans
made under the program, including interest and administrative fees, is the property of the
development corporation: “All income received on a loan made with money received under the
program is the property of the development corporation. Income received on a loan includes the
payment of interest by a borrower and the administrative fees assessed by the development
corporation.” Id. 5 136.008 (emphasis added). In addition, section 136.006(e) provides that
payments on community health center loans shall be made to the development corporation, which
must use the money to make new loans. See id. 4 136.006(e). Clearly, the development corporation
is vested with ownership of loan income.

‘Brief fromDavid L. Ralston and Raymond B. Walker III, Jenkens & Gilchrist, P.C., to Honorable John Cornyn,
Texas Attorney General at 3 (Oct. 15,2002) (on file with Opinion Committee).
Mr. Albert Hawkins - Page 7 (GA-0033)

Your predecessor suggested that section 136.008 conflicts with section 136.003(b)(3),
see Request Letter, supra note 1, at 6, and asked: “Are the provisions of chapter 136 regarding
the ownership of loan income irreconcilably in conflict?” Request Letter, supra note 1, at 1
(Question 5).

Section 136.003(b) provides that the Fund is composed of “money appropriated to the fund
by the legislature,” TEX. HUM. RES. CODE ANN. 8 136.003(b)(l) (Vernon Supp. 2003); “gifts or
grants received from public or private sources,” id. 9 136.003(b)(2); and “income from other money
in the fund,” id. 9 136.003(b)(3) (emphasis added). The Commission interprets “income from other
money in the fund” in section 136.003(b)(3) “to include the proceeds from loans to community
health centers.” Request Letter, supra note 1, at 6. This interpretation of section 136.003(b)(3) is
incorrect. It is clear from the plain language of chapter 136 that the reference to “income from other
money in the fund” in section 136.003(b)(3) does not include income from loans.

First, section 136.003(b)(3) allocates income from money in the Fund itself. It merely
reiterates the common-law rule that interest follows principal, see Sellers v. Harris County, 483
S.W.2d 242,243 (Tex. 1972)’ and is consistent with the intent of House Bill 2574 to establish the
Fund as a trust fund outside the state treasury. See TEX. HUM. RES. CODE ANN. 8 136.003(a)
(Vernon Supp. 2003).9 Section 136.003(b)(3) does not address the ownership of income on money
that is not part of the Fund. Under chapter 136, the Commission administers the Fund pursuant to
section 136.003, and, under section 136.004, awards money from the Fund to the development
corporation to make loans. Money awarded to the development corporation passes from the
Commission to the development corporation, and the money is no longer part of the Fund.

Second, section 136.008 is more specific with respect to ownership of income received on
loans made by the development corporation and clearly governs the ownership of loan income. The
Commission’s construction of section 136.003(b)(3) conflicts with this express legislative statement
and, moreover, would render it meaningless. See Chevron Corp. v. Redmon, 745 S. W.2d 3 14’3 16
(Tex. 1987) (T exas Supreme Court “will give effect to all the words of a statute and not treat any
statutory language as surplusage if possible”) (citing Perkins v. State, 367 S.W.2d 140, 146 (Tex.
1963)); see also Tex. Workers’ Comp. Ins. Fund v. DelIndus. Inc., 35 S.W.3d 591,593 (Tex. 2000)
(“It is settled that every word in a statute is presumed to have been used for a purpose . . . .“) (citing
Perkins, 367 S.W.2d at 146), TEX. GOV’T CODE ANN. 9 3 11.02 l(2) (Vernon 1998) (in enacting a
statute, it is presumed that “the entire statute is intended to be effective”) (Code Construction Act).

IV. The Constitutionality of Chapter 136

A. Article III, Sections 50 and 51

Your predecessor asked about the constitutionality of chapter 136 under article III,
sections 50 and 5 1 of the Texas Constitution. See TEX. CONST.art. III, $5 50, 5 1.

90f course, by operation of House Bill 3088, the Fund does not exist as a trust fund outside the state treasury.
See Part II, supra; Act of May 25, 2001, 77th Leg., R.S., ch. 1466, 8 8(d), 2001 Tex. Gen. Laws 5216, 5219
(“Notwithstanding Subsection (a) of this section, Section 2 of this Act applies to the community health center revolving
loan fund created by House Bill No. 2574 and to revenue dedicated to the fund.“).
Mr. Albert Hawkins - Page 8 (GA-0033)

Article III, section 5 1 provides that the legislature “shall have no power to make any grant
or authorize the making of any grant of public moneys to any individual, association of individuals,
municipal or other corporations whatsoever.” Id. art. III, 5 5 1. Section 5 1 prevents the gratuitous
application of public funds to any individual. See Edgewood Indep. Sch. Dist. v. Meno, 917 S. W.2d
717, 740 (Tex. 1995) (citing Byrd v. City ofDallas, 6 S.W.2d 738,740 (1928)). But “[a] transfer
of funds for a public purpose, with a clear public benefit received in return, does not amount to a
lending of credit or grant of public funds” in violation of article III, section 5 1. Edgewood, 917
S. W .2d at 740. “Attorneys general long have interpreted section 5 1 not to forbid a state agency from
expending public funds in a way ‘that benefits a private person or entity if the . . . governing body
(i) determines that the expenditure serves a public purpose and (ii) places sufficient controls on the
transaction to ensure that the public purpose is carried out.“’ Tex. Att’y Gen. Op. No. JC-0484
(2002) at 4 (citation omitted).

Article III, section 50 prohibits the legislature from giving or lending, or authorizing the
giving or lending, “of the credit of the State in aid of, or to any person, association, or corporation.”
TEX. CONST.art. III, 5 50. Like article III, section 5 1 and other constitutional limitations on the use
of public funds to benefit a private individual or entity, article III, section 50 does not prohibit the
lending of state credit if the loan serves a public purpose and includes controls to ensure that the
public purpose is accomplished. See Tex. Att’y Gen. Op. Nos. JC-0489 (2002) at 6 (citation
omitted), JC-0353 (2001) at 2; see also Tex. Att’y Gen. Op. Nos. JM-942 (1988) at 6-7; H-120
(1973) at 3; Tex. Att’y Gen. LA-l 19 (1977) at 2, LA-9 (1973) at 2.

Your predecessor asked whether chapter 136 “establish[es] a sufficient public purpose to
support the lending of public funds as contemplated in the statute and in compliance with” article
III, sections 50 and 5 1. Request Letter, supra note 1, at 1 (Question 2). Chapter 136 requires the
Commission to contract with and award money to a development corporation that must, in turn, loan
monies to community health centers. See TEX. HUM.RES.CODEANN. 83 136.004,136.006 (Vernon
Supp. 2003). The development corporation must use payments made on loans to make new loans
under chapter 136. See id. 8 136.006(e). Chapter 136 contains express legislative findings regarding
the purpose of these loans:

(1) community health centers play a significant role in the
delivery of medical care and related services to the residents of this
state who cannot afford health insurance;

(2) community health centers are a cost-effective way to
provide primary and preventive health care to populations lacking
quality health care by reducing hospitalizations and the inappropriate
use of emergency rooms;

(3) the financing sources available for the capital needs of
community health centers, such as buildings and equipment, are
inadequate; and
Mr. Albert Hawkins - Page 9 (GA-0033)

(4) increasing community health centers’ access to capital
would benefit residents of this state in poor and underserved
communities and foreign-born residents who are uninsured, by
providing greater access to primary care and preventive health
services and by targeting the common health problems of these
residents.

Id. 8 136.001. These explicit findings indicate the legislature’s determination that the Commission’s
contract with the development corporation and the development corporation’s loans to community
health centers would serve a public purpose.

Your predecessor also asked whether chapter 136 supplies “adequate controls to ensure the
fulfillment of the public purpose consistent with sections 50 and 5 1 of Article III.” Request Letter,
supra note 1, at 1 (Question 3). A contract that imposes upon a recipient an obligation to perform
a function benefitting the public may provide adequate controls for constitutional purposes. See Tex.
Att’y Gen. Op. No. JC-0439 (2001) at 2 (citing Key v. Comm ‘rs Ct. ofMarion County, 727 S.W.2d
667, 669 (Tex. App.-Texarkana 1987, no writ) (per curiam)). Because chapter 136 expressly
requires the Commission to enter into a contract with the development corporation and requires the
development corporation to enter into loan contracts with community health centers pursuant to
Commission rules, see TEX. HUM. RES. CODEANN. 55 136.004 (Vernon Supp. 2003) (requiring
Commission to “contract with and award mon[ies]” to the development corporation “to carry out the
purposes of this chapter”), 136.009(a)(2) (C ommission must adopt rules requiring a community
health center to enter into an agreement with the development corporation that states the terms of
the loan), it gives the Commission the authority to impose adequate contractual controls to ensure
that the expenditure of funds under the chapter serves the public purpose identified by the legislature.

In sum, chapter 136 on its face does not violate article III, sections 50 and 5 1. The
Commission has not yet entered into a contract with a development corporation or promulgated rules
under chapter 136. Your predecessor did not ask and we do not address whether a specific contract
between the Commission and a development corporation violates article III, sections 50 and 5 1, or
whether Commission rules impose adequate controls.

B. Article III, Section 1

Finally, your predecessor asked whether the delegation of authority to the
development corporation in chapter 136 complies with the constitution, see Request Letter, supra
note 1, at 4-6, and “whether [the Commission] may remedy any potential constitutional shortcomings
in the statute by administrative rule,” id. at 5.

Article III, section 1 of the constitution vests “legislative power” in the legislature. See TEX.
CONST. art. III, 5 1 (“The Legislative power of this State shall be vested in a Senate and House of
Representatives . . . .“); see also id. art. II, 8 1 (“The powers of the Government of the State of Texas
shall be divided into three distinct departments . . . and no person, or collection of persons, being of
one of these departments, shall exercise any power properly attached to either of the others, except
Mr. Albert Hawkins - Page 10 (GA-0033)

in the instances herein expressly permitted.“). In Texas, legislative power is defined broadly to
include “the power to set public policy” and “functions that have administrative aspects, including
the power to provide the details of the law, to promulgate rules and regulations to apply the law, and
to ascertain conditions upon which existing laws may operate.” FM Props. Operating Co. v. City
of Austin, 22 S.W.3d 868, 873 (Tex. 2000) (citing Tex. Boll Weevil Eradication Found., Inc. v.
Lewellen, 952 S.W.2d 454,466-67 (Tex. 1997)).

“[Tlhe Legislature may delegate legislative power to local governments, administrative
agencies, and even private entities under certain conditions.” Id. (citing Proctor v. Andrews, 972
S.W.2d 729, 734-35 (Tex. 1998)). “The Legislature may delegate powers to agencies established
to carry out legislative purposes as long as the Legislature establishes reasonable standards to guide
the agency in exercising those powers.” Id. (citing Boll Weevil, 952 S.W.2d at 467). The Texas
Supreme Court has held that delegations to private entities must be subject to more stringent
requirements and are entitled to less judicial deference than public delegations. See id. at 874 (citing
Proctor, 972 S.W.2d at 735; Boll Weevil, 952 S.W.2d at 469-70). To determine whether there has
been an impermissible delegation of legislative authority to a private entity, the court engages in a
two-part inquiry. First, it considers whether there has been a delegation of legislative authority to
a private entity. See id. If the court concludes that there has been a private delegation, the court then
determines whether the delegation is constitutionally permissible by analyzing the delegation under
eight factors first set forth in the Boll Weevil case. See id.

Under chapter 136, the development corporation is a nonprofit corporation that provides
revolving loan funds to community health centers, accepts gifts and grants, seeks funding from
various sources, “associates with a broad-based organization serving community health centers,” and
has established a loan committee to approve loan requests. See TEX. HUM. REs. CODE ANN.
$3 136.002(3), 136.005(a) (Vernon Supp. 2003).

Chapter 136 vests duties in both the development corporation and the Commission, a state
agency. It delegates authority to the Commission to administer the Fund, to contract with and award
money to a development corporation, and to adopt rules to administer the chapter. See id. $5
136.003, 136.004, 136.009. The development corporation, in turn, is required to use the money it
receives under chapter 136 to make loans to community health centers. See id. $5 136.005,136.006.
Loan payments made by community health centers to the development corporation must be used to
make new loans under chapter 136. See id. $9 136.006(e), 136.007.

The functions that chapter 136 vests in the development corporation are not legislative in
nature. Under chapter 136, the development corporation is vested with the duty to make loans with
chapter 136 monies within parameters established by the Commission pursuant to contract and
agency rules. See id. 89 136.004-.006, 136.009. It may also seek funding from other sources and
make grants from other monies under rules adopted by the Commission. See id. 0 136.009(b).
Chapter 136 does not give the development corporation “the power to set public policy” or “the
power to provide the details of the law, to promulgate rules and regulations to apply the law, and to
ascertain conditions upon which existing laws may operate.” FM Props., 22 S.W.3d at 873.
Mr. Albert Hawkins - Page 11 (GA-0033)

Furthermore, any authority vested in the development corporation by chapter 136 is subject
to the control of the Commission, a state agency. The Commission is authorized pursuant to contract
and agency rules to establish the parameters of the development corporation’s authority to make
loans with chapter 136 monies. The development corporation receives money and makes loans to
community health centers under a contract with the Commission. See TEX. HUM. RES. CODEANN.
5 136.004 (Vernon Supp. 2003). Chapter 136 requires the Commission to adopt rules that impose
controls and limitations on the authority of the development corporation to make loans. See id. 8
136.009(a). These rules must require, among other things, that the Commission review the
development corporation’s lending and servicing practices and that the development corporation
provide the Comrnission with semiannual reports giving the status of each loan made under the
program. See id. § 136.009(a)(l), (3). And, significantly, the Commission “may adopt other rules
as necessary to accomplish the purposes of this chapter.” Id. 8 136.009(c).

The Commission has not yet entered into a contract with a development corporation or
adopted rules pursuant to chapter 136, and we do not consider whether any specific contract or rule
impermissibly delegates authority to the development corporation. It is sufficient for our purposes
here that chapter 136 on its face does not delegate legislative authority to the development
corporation and that it vests the Commission with authority to establish and limit the development
corporation’s powers to make loans. Given this conclusion, we need not analyze the statute under
the eight Boll Weevil factors.
Mr. Albert Hawkins - Page 12 (GA-0033)

SUMMARY

In House Bill 2574, the Seventy-seventh Texas Legislature
created the Texas Community Health Center Revolving Loan Fund
as a trust fund outside the state treasury administered by the Health
and Human Services Commission pursuant to chapter 136 of the
Human Resources Code. See Act of May 23,2001,77th Leg., R.S.,
ch. 878,s 1, sec. 136.003,2001 Tex. Gen. Laws 1759,176O (enacting
Human Resources Code section 136.003). A later enacted bill, House
Bill 3088, abolished the Fund. See Act of May 25, 2001,77th Leg.,
R.S., ch. 1466, $5 2,8(a), (d), 2001 Tex. Gen. Laws 5216,5218-19.
As a result, the Fund does not exist as a trust fund outside the state
treasury.

Pursuant to sections 136.006(e) and 136.008 of the Human
Resources Code, income on a loan made by the development
corporation under chapter 136 is the property of the development
corporation that the development corporation must use to make new
loans. See TEX. HUM. RES. CODE ANN. $$ 136.006(e), 136.008
(Vernon Supp. 2003). Chapter 136 of the Human Resources Code on
its face does not violate article III, sections 50 and 51 or article III,
section 1 of the Texas Constitution.

Very truly yours,

BARRY R. MCBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General - General Counsel

NANCY S. FULLER
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General, Opinion Committee