September 3, 1975
The Honorable Leonard Prewitt Opinion No. H- 681
Executive Secretary
Teacher Retirement System of Texas Re: Authority of the
1001 Trinity Street Teacher Retirement
Austin, Texas 78701 System to purchase
liability, property
and workmen’s com-
Dear Mr. Prewitt: ensation insurance.
You have requested our opinion concerning the following question:
May the Teacher Retirement System of Texas
enter into contracts and pay premiums from
its expense account for general liability
insurance, for insurance on its building and
contents, for valuable papers insurance or
for worlanen’s compensation insurance?
Article 16, section 67 of the Texas Constitution, which establishes
the Teacher Retirement System, provides in subsection (a)(3):
.%ach statewide benefit system must have a
board of trustees to administer the system and to
invest the funds of the system in such securities
as the board may consider prudent investments.
In making investments. a board shall exercise
the judgment and care under the circumstances
then prevailing that persons of ordinary prudence,
discretion, and intelligence exercise in the manage-
ment of their own affairs. not in regard to specu-
lation, but in regard to the permanent disposition of
their funds, considering the probable income there-
from as well as the probable safety of their capital.
The legislature by law may further restrict the
investment discretion of a board.
p. 2964
The Honorable Leonard Prewitt. page 2 (H-681)
Section 3. 59(a) of the Education Code provides in part:
General administration of and responsibility for
proper operation of the reti,rrment system in . .
are vested in a State Board of Trustees . . .
Section 3.60(a) provides in part:
The State Board of Trustees shall be the trustee
of all funds, securities, money, and other assets
of the retirement system with full power to invest
and reinvest them as authorized by Article III,
Section 48b of the Texas Constitution.
While article 3, section 48b was repealed by article 16, section 67 of
the Texas Constitution, the powers of the Board of Trustees under
section 3.60(a) of the Education Code are to be measured by the terms
of the repealed constitutional provision, since it is incorporated by
reference into section 3.60. The repealed section 48b established the
same investment standard as the presently operative article 16. sec-
tion 67(a)(3), and speciIical.ly empowered the Board,
to invest. e . in home office facilities to be
used in administering the Teacher Retirement
System including, land, equipment, and office
building . s e
-See Attorney General Opinion M-644 (1960).
Pursuant to this authorization such an office building has been erected.
You ask whether insurance on the building, its contents., and valuable
papers may be purchased by the System.
In Senate Concurrent Resoluti~on No. 3. Acts 1921, 37th Leg., 2nd Called
Session, p* 369, the State’s policy in this regard is expressed as follows:
the State shall carry it,s own insurance upon
State buildings and contents, and that no in-
surance policies shalY be t,aken out upon any
of the public buildings of the State, nor upon
the contents thereof 0 e .
p. 2965
.
The Honorable Leonard Prewitt, page 3 (H-681)
The Resolution additionally provides for a sinking fund in the amount of
ten percent of the total value of all State buildings, such fund to be
accumulated from biennial appropriations. However, the Comptroller’s
Annual Reports indicate that no such fund has ever been in existence.
Article 16, section 67 (a)(3) establishes a prudent person standard
with regard to investments of the Board. However, that subsection
additionally provides that “the Legislature by law may further restrict
the investment discretion of [the] board. I’ (Emphasis added) Assuming
without deciding that the office building of the Teacher Retirement
System is a “state building” within the meaning of the aforementioned
resolution, it is in either event our opinion that the Board’s investment
discretion is not thereby limited, for a “resolution cannot be given the
.effect of a law. ” Mosheim v. Rollins, 79 S. W. 2d 672 (Tex. Civ. App. --
San Antonio 1935, writ dism’d. ); see also Commercial Standard Fire
& Marine Co. v. Commissioner of Insurance, 429 S. W..2d 930 (Tex. Civ.
APP. --Austin 1968, no writ); Terre11 Wells Swimming Pool v. Rodriquez,
182 S. W. 2d 824 (Tex. Civ. App. --San Antonio 1944, no writ). In light of
the constitutional limitation on the amount the State may contribute to the
Teacher Retirement System, art. 16, sec. 67(b)(3), and since the
building, its contents and valuable papers are assets of the System which
are held in trust for its members, sec. 67 (a)(l), it is our opinion that
it is within the discretion of the Board to purchase insurance to protect
these assets from loss. Due to the particular characteristics of the
Teacher Retirement System, we do not believe this determination is in
,. conflict with prior opinions of this office reaching the opposite conclusion
with respect to other state agencies and instrumentalities. See Attorney
General Opinion M-1257 (1972).
You also ask whether the System may purchase “general liability
insurance. ” It is our understanding that your question is limited to
insurance for claims under the Texas Tort Claims Act, article 6252-19.
V. T. C. S. Section 9 of that Act provides in part:
all units of government are hereby expressly
authorized to purchase policies of insurance
providing protection for such units of govern-
ment, their officers, agents and employees
against claims brought under the provisions of
this Act. . . .
p. 2966
The Honorable Leonard Prewitt, page 4 (H-681)
While article V, section 54 of the current Appropriations Act prohibits
the expenditure of appropriated funds for such insurance, Acts 1973,
63rd Leg., ch. 659, p. 2217, this prohibition does not affect the
Teacher Retirement System, for the account from which the premium
will be paid does not consist of appropriated funds. Attorney General
Opinion M-949 (1971). See also Attorney General Opinion WW-600 (1959).
Accordingly, section 9 of the Texas Tort Claims Act authorizes the
Teacher Retirement System to purchase insurance to cover claims
authorized to be bought and paid under the Act. And see Attorney General
Opinion H-70 (1973).
Your final question concerns whether the Teacher Retirement
System may purchase worlunen’s compensation insurance, Article 83098,
V. T. C. S., provides for workmenIs compensation insurance for state
employees. Section l(1) provides:
‘Employee’ means a person in the service of the
state under an appointment or express contract of hire,
oral or written, whose compensation is paid by warrant
issued by the Comptroller, except a person employed
by the State Highway Department or by an institution of
higher education subject to a separate workman’s com-
pensation law.
See also Senate Bill 829, 64th Leg. Section 2 provides that “the state is
self-insuring. ” We have ruled that compensation may be provided for
injuries to state employees occurring on or after July 18. 1975. Attorney ‘~’
General Opinion H-637 (1975). -See House Bill 169, Acts 1975, 64th Leg.,
ch. 55, p. 119, Vernon’s Texas Session Law Service No. 2. In our view
employees of the Teacher Retirement System are within the definition
contained in section l(l), for. “all payments from the accounts shall be
made . . . on warrants ~drawn by’ thk~ state comptroller . . . . ” Educa-
tion Code, sec. 3.60(c). In Matthews v. University of Texas, 295 S. W. 2d
270 (Tex. Civ. App. --Waco 1956, no writ), the court held that since the
University of Texas was the subject of a specific workmen’s compensation
statute, article 8309d. the general workmen’s compensation statute,
article 8306, was not applicable. We believe the same reasoning applies
to the Teacher Retirement System.
p. 2967
.
.
The Honorable Leonard Prewitt, page 5 (H-681)
Accordingly, Teacher Retirement System employees are eligible
for workmen’s compensation only under article 8309g. Since section 2
of article 8309g provides that the State shall be a self-insurer and
thereby limits the investment discretion of the Board of Trustees, Tex.
Const. art. 16, sec. 67(a)(3), it is our opinion the Teacher Retirement
System may not purchase workmen’s compensation insurance.
SUMMARY
The Teacher Retirement System may purchase
insurance for liability under the Texas Tort Claims
Act. Insurance on its building, its contents, and
valuable papers may also be purchased, but workmen’s
compensation insurance may not.
Very truly yours,
Attorney General of Texas
APPROVED:
DAVID M. KEN’DALL, First Assistant
C. ROBERT HEATH, Chairman
Opinion Committee
p. 2968