OFF,CE OF THE ATTORNEV GENERAL. STATE OF TEXAS
JOHN CORNYN
November 2,200O
Mr. Donald E. Powell Opinion No. JC-0302
Chair, Board of Regents
The Texas A&M University System Re: Validity of section 661.063, Government
P.O. Box C-l Code, with regard to payment for vacation
College Station, Texas 77840-9021 balances accrued prior to September 1, 1997
(RQ-0246-K)
Dear Mr. Powell:
The Texas A&MUniversity System (“A&M”) has asked this office whether section 661.063
ofthe Government Code might abrogate the vestedvacationrights ofcertain A&M employees which
accrued prior to September 1, 1997, and therefore violate article 1, section 16 of the Texas
Constitution. Assuming arguendo that vacation entitlement is “a vested right of the employee that
cannot be destroyed or impaired by his resignation, dismissal or separation from State employment,”
Tex. Att’y Gen. Op. No. M-1075 (1972) at 2, we conclude that the right which has vested is a right
to be compensated for the time accrued, not a right to be so compensated at a particular rate or
according to a particular formula. To hold otherwise, in our view, would violate “the established
rule that all pension funds, financial assistance funds, annuities and such other benefits created by
the Texas Legislature for the benefit of employees and other personnel of this State and the political
subdivisions thereof as designated by statute or otherwise by law shall be subordinate to the right
ofthe Legislature to abolish the system, diminish the accrued benefits, increase the benefits, change
the eligibility for benefits or to otherwise alter or modify the method of payments of the benefits of
any or all such funds.” Cook v. Employees Retirement Sys. of Texas, 514 S.W.2d 329,331 (Tex.
Civ. App.-Texarkana 1974, writ ref d n.r.e.). Accordingly, the change in the method of computing
payment for vacation balances for certain state employees which became effective, pursuant to
section 661.063 of the Government Code, on September 1, 1997, does not impair any vested right
of an employee who leaves state service after that date.
As you explain the situation that gives rise to your question, prior to the amendment of
section 661.063 by the 75th Legislature, all state employees were compensated for accrued vacation
time “by multiplying the employee’s rate of compensation on the date of separation from
employment by the total number of hours accrued.“’ However, as amended, section 661.063(b)
reads in relevant part, “The payment under this subchapter to a state employee who separates from
‘Letter from Mr. Howard D. Graves, Chancellor, The Texas A&M University System, to Honorable John
Comyn, Attorney General ofTexas at 2 (June 14,200O)(on file with Opinion Committee) [hereinafterRequest Letter].
Mr. Donald E. Powell - Page 2 (X-0302)
state employment while holding a position that does not accrue vacation time shall be computed
according to this subsection. The employee’s final rate of compensation in the last position held that
accrues vacation time shall be multiplied by the employee’s total number ofhours of vacation time
determined under Section 661.064.” TEX. GOV’T CODE ANN. 5 661.063(b) (Vernon Supp. 2000).
You point out that this change in the method ofcalculating the value of accrued vacation may
significantly diminish that value for persons who transferred from positions which accrued vacation
to those which did not at some time before September 1, 1997, and who had received one or more
raises in pay in the interim. Request Letter, supra note 1, at 2-3. “[Ilfthey had separated from state
employment prior to September 1,1997 they would have received a greater amount for payment of
their accumulated vacation than they will when they ultimately leave state employment.” Id. at 3.
You note that an opinion issued by this office in 1972, Attorney General Opinion M-1075, averred
that “vacation entitlement is. . . a vested right of the employee that cannot be destroyed or impaired
by his resignation, dismissal or separation from State employment. It is a right that becomes vested
in him as it is earned and a State employee should be compensated for all vacation time duly
accrued.” Tex. Att’y Gen. Op. No. M-1075 (1972) at 2. In light of Opinion M-1075, you ask
whether, in the context ofthis particular class of employees, the amended version of section 661.063
abrogates their vested rights. Request Letter, supra note 1, at 2-3.
As a preliminary matter, we note that, because contract questions usually involve disputed
issues of fact of the sort this office cannot determine in the opinion process, this office does not
construe such contracts in that process. Accordingly, we are not here making any conclusion about
the particular contractual relation between A&M and any of its employees. We are concerned purely
with the legal question of whether section 66 1.063 may violate the vested rights of the class of
employees under consideration. We conclude that it does not.
Attorney General Opinion M-l 075, on the basis ofwhich your question is premised, is in our
view of doubtful merit. It makes the rather broad assertion quoted above on the basis that the 1969
Appropriations Act described vacation entitlement as “accrued,” and that “Webster’s Third New
International Dictionary defines the word accrue as follows: ‘To come into existence as an
enforceable claim; vest as a right.“’ Tex. Att’y Gen. Op. No. M-1075 (1972) at 2. We are loath to
overrule an opinion which does not appear to have been seriously questioned in the intervening
twenty-eight years, but see Tex. Att’y Gen. Op. No. H-126 (1973), and accordingly we do not do
so. But assuming arguendo that a right to be compensated for accrued vacation time is a vested
right, it does not follow that an employee has a vested right to be compensated at a certain rate or
according to a certain formula.
As Attorney General Opinion M-1075 itselfnotes, “These accumulations ofrights are limited
by statute.” Tex. Att’y Gen. Op. No. M-1075 at 2. The Supreme Court of the United States noted
in a related context in Dodge v. Board of Education, “[A]n act merely fixing salaries of officers
creates no contract in their favor, and the compensation named may be altered at the will of the
Legislature. This is true also of an act fixing the term or tenure of a public officer or an employee
of a state agency. The presumption is that such a law is not intended to create private contractual
Mr. Donald E. Powell - Page 3 (X-0302)
or vested rights, but merely declares a policy to be pursued until the Legislature shall ordain
otherwise.” Dodge v. Board ofEduc. of the City of Chicago, 302 U.S. 74,78-g (1937).
The presumption of which the Supreme Court speaks is a necessary one because of the
impairment ofcontracts clauses ofboth the United States and Texas Constitutions. Article I, section
10 of the United States Constitution provides that “No State shall pass any . Law impairing
the Obligation of Contracts . .” Similarly, article I, section 16 of the Texas Constitution provides
that “No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of
contracts, shall be made.” If therefore any act of the Texas Legislature were construed to create a
contractual obligation or grant a vested right, such act might be beyond the power of a later
legislature to alter, amend, or abolish. The Supreme Court of Texas analyzed this difficulty in the
same year in which the US. Supreme Court considered the Dodge case, and in relation to the same
issue - the reduction of government pensions necessitated by the Great Depression. In City of
Dallas v. TrammelI, 101 S.W.2d 1009 (Tex. 1937), a retired policeman sued the City of Dallas,
arguing that by reducing his pension pursuant to a statute enacted by the 44th Legislature, the City
had deprived him of a vested right.
As the court framed the question presented, “[IIs the Legislature without constitutional power
to repeal the laws upon which the pension system of the City of Dallas is based, or to modify their
provisions in such way as to diminish the pensions payable to those who have become qualified to
receive them so long as any one who has been granted a pension shall live?” Trummell, 101 S.W.2d
at 1011. The court answered this question in the negative: “In our opinion, the rule that the right
of a pensioner to receive monthly payments from the pension fund after retirement from service, or
after his right to participate in the fund has accrued, is predicated upon the anticipated continuance
of existing laws, and is subordinate to the right of the Legislature to abolish the pension system, or
diminish the accrued benefits ofpensioners thereunder, is undoubtedly the sound rule to be adopted.”
Id. at 1013. In so holding the Trammel1 court quoted with approval the following language from the
Supreme Court of Illinois’ decision in the Dodge case: “A right, to be within the protection of the
Constitution, must be a vested right. It must be something more than a mere expectancy based upon
an anticipated continuance of an existing law. If before rights become vested in particular
individuals the convenience of the State induces amendment or repeal, such individuals have no
cause to complain.” Id. at 1014 (quoting Dodge Y. Board ofEducation, 5 N.E.2d 84,86 (Ill. 1936))
(emphasis added).
The principle underlying these decisions was clearly enunciated by Justice Marshall in
NationalRailroadPassenger Corporation v. Atchison, Topeka andSanta Fe Railway Company, 470
U.S. 45 1 (1985): “[Tlhe principal function of a legislature is not to make contracts, but to make laws
that establish the policy ofthe state. Policies, unlike contracts, are inherently subject to revision and
repeal, and to construe laws as contracts when the obligation is not clearly and unequivocally
expressed would be to limit drastically the essential powers of a legislative body.” Id. at 466.
That principle, and the Trommell case itself, have been repeatedly reaffirmed by Texas courts
in a variety of contexts. In Cook v. EmpZoyees Retirement System of Texas, the Texarkana appellate
Mr. Donald E. Powell - Page 4 (X-0302)
court denied a claim by the widow of a deceased fireman that her children were entitled to continue
to receive certain benefits until they were twenty-one years of age, despite the fact that the legislature
had lowered the age of majority to eighteen. “Appellant’s position is that Article I, Sec. 16 of the
Texas Constitution, Vernon’s Ann. St., and Article 1, Sec. 10 of the United States Constitution
forbid[] any retroactive laws from being passed which would impair the obligation under any
contract. Appellant states that the rights of the children were vested before the ‘eighteen year old
law’ became effective on August 27, 1973.” Cook, 514 S.W.2d at 330. The court rejected this
contention, reaffirming “the established rule that all benefits created by the Texas Legislature
for the benefit of employees and other personnel of this State . shall be subordinate to the right
of the Legislature to abolish the system, diminish the accrued benefits, increase the benefits, change
the eligibility for benefits or to otherwise alter or modify the method of payment of the benefits of
any or all such funds.” Id. at 33 1.
Similarly in Lack v. Lack, 584 S.W.2d 896, 899 (Tex. Civ. App.-Dallas 1979, writ ref d
n.r.e.), it was held that the inchoate contingent interest of a pensioner’s ex-wife in his death benefits
could be divested by the Legislature; and in Reames v. Police Oflicers ’Pension Board of the City
ofHouston, 928 S.W.2d 628 (Tex. App.-Houston [14th Dist.] 1996, no writ), the court held that it
was not an impairment of a vested right for a retired policeman who had been effectively re-
employed by the City of Houston when it restructured the airport police for whom he had been
working to be divested of his pension: “[A] pensioner in a statutory pension plan does not have a
vested right to his pension. He merely has an expectancy based upon anticipated continuance of
existing law. ‘The Legislature which created it can recall its bounty at its discretion.“’ Reames, 928
S.W.2d at 632 (quoting TrammelI, 101 S.W.2d at 1014).
Based on the principle and the precedents we have set forth, it is our view that, while the cash
value which might have been realized by certain A&M employees had they separated from state
service on or before August 31, 1997, was materially diminished by the amendment of section
661.063 ofthe Government Code effective September 1,1997, those employees had no vested right
to that cash value, or to the method of computing payment for accrued vacation leave by which it
was arrived at. They had a mere expectancy based upon the anticipated continuation of the old
computation formula. The Legislature had every right to change that formula, and by the
amendment of section 661.063 it exercised that right. Accordingly, the A&M employees in question
have suffered no constitutional injury by the amendment of section 661.063.
As your second question, like your first, presupposes a vested right to the former method of
computation, we do not consider it.
Mr.DonaldE.Powell - Page 5 (JC-0302)
SUMMARY
State employees have no vested right in the method of
calculating compensation for vacation benefits that pre-dated the
amendment of section 661.063 of the Government Code by the 75th
Legislature. Accordingly, such amendment abrogates no vested
rights, and does not violate article I, section 10 of the United States
Constitution or article I, section 16 of the Texas Constitution.
ANDY TAYLOR
First Assistant Attorney General
CLARK KENT ERVIN
Deputy Attorney General - General Counsel
SUSAN D. GUSKY
Chair, Opinion Committee
James E. Tourtelott
Assistant Attorney General - Opinion Committee
Untitled Texas Attorney General Opinion
Combined Opinion