E Amro~wmf GENERAL
OPTEkAS
AT-rORNEY CI-RAL
August 14, 1967
Honorable~R. L. Coffman
Admlhistratpr : -
Texas Etiployment Commiesion
TJX Building
Austin, Texas 78701 Re: Whetha?~ the ‘Texas
Employaieiit~Commi~slon
may pay a~ptirtion bf
the premluW3 ??or group
insurance’under the:
provlsloka o,f Subsection
(a) of Section 1 of
Article 3.51 of the In-
fnxance Code, as amended
by S.B. 294, Acts oflithe
Dear Mr. Coffman: 60th Legislature.
,Referenoe Is made to. yqur ‘letter in which you requested.
an opinlon.,from ‘this office (pertaining to the captioned ~makter.
We quote froti your lett’kir in part,as~.follovq3: :‘,
‘Presently the TeXas: Public Employ&s Aeriod.atlon
‘iti’ thb’~olicyh6ld& fdti tiur g$oup insurance. The law.
now provides that’,.policies may be issued to an*aaaocSa-
tion.of.public employees.. Accordingly, ‘the.qquestions
we would like for’ your office to answer’*are at3.follolrs:
“(1) Whether TEC may cbntribute to the pretiqms
of Its emplojreee for group inmwanaa.
“(2) Whether suoh oontrlbutlona cap bwtmde under
our present arrangement with TPlM and our
insurance carrier, BepubUo JWionaL Liie
Insurance Company. L<
“We feel thati there woihd’be muoh adranta&e to con-
tinulng with our present arrangement sinca lt:would avoid
the necessity of making a new contract lnvolrigg only<
TEC employees and would probably be a better. contract than
we could nbgotlate separately.’
It is assumed that question number (1) Is governed, by your;
captioned questlon, i.e,, the contributions by ?$Ic to the premiums
of Its employeesfor those types of group Insurance ooverad by
Article 30510 You~wlll~note that Senate Bill 294, 60th Legisla-
ture> Regular Session, p. 1007, Chapter 437, also amends Article
3.50 of the Insurance Code. It is this Article that 1% applicable
to group life Insurance a
Subsection (a), Section 1, Article 3.51 of the Feeias ,Insurance
Code, as amended by Senate Bill 294 is as follows:
“(a) The State of Texas and each of its political,
governmental and administrative subdivisions, departments,
agencies, assooiatlons of public employee%, and the
governing boards and .authorltiea of each ntatq uiiiverfifty,~
colleges, common ‘and Independent school districts or of
any other,agency or subdlvislon of the public School
system of the State of Texas are authorized to procure
oontracts insuring their respective employees or any class
or classes thereof under a policy or policies of group,
health, accident, accidental death and dlsmemborment,
disability income replacement and hospital, surgical and/or
medical expense insurance. The dependents of any such
employees may be insured under group policies which provide
hospital, surgical and/or medical expense insurance. The
employees contributions to the premiums for such Insurance
leeued to the.employer or to an association of public em-
ployees as the policyholder may be deducted by t,he employer
irom the employee% salaries,, when ,authorlze~d in nrlting. by.
the respeatlve. employees so to do* .The~ premium for;~fhe
pol9cy may be pa3d’ 3n whole or in part fromfunds contrfbuted
by the employer or in whole or fn part from funds oontributed
by the insured employees 0”
.The Texas Employment Commfesion Is a state agency and Its
em loyees are state employees (Attorney General’% Opinion Ro. V-427,
19 k 7) * As you intimate in your letter, the fund% utlllxed by
the -Texas Employment Commfssion in the admXnistration of the
Texaia Unemployment Compensation Act are’furnished by the federal
government 0 See 42 U,S,C,A,, Section 502. The applicable Texas
%tatute pertaining to these funds, Artfcle 522lb, Vernon’s Civil
Statutes, provides in Seetfon ll:therecf, in part, the followings:
“(a) Special Fund: There Is hereby created In the
State Treasury a special fund to be known as the Unem-
ployment ‘Compensation Adm%nistration Fund., . , . Ally
moneys fn th%s fund shall be deposited, adlainidttered and
Honorable R. L. Coffman, Page 3 Opinion Ilo, M-125
disbursed, in the same manner and under the .same con-
‘ditions and requirements as if provided \y law for other
special funds in the State Treasury. .
Inasmuch as these federal funds are deposited in the State
Treasury, they are state funds (Attorney Genera,l’r Opinion No.
c-530, 1965). With reference to these public funds or ,moneys
and the expenditure of same, .Sectlon 51 of,Article III; Consti-
tution of Texas, provides, in part, as follows:
“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 corparatlons what-
aoever. . . .’
The Supreme Court of Texas, In the case of
of Austin, 160 Tex. 348, 331 S .W,2d 737 (1960),
Section 31, of Article III, Constitution of Texas, said in part:
II
e 9 . the purpose of this section q , . of f&e Con-
stitution Is to prevent the appllcatlon of public funds
to private purposes. . . .n
It ‘would therefore appear that your’ QU~estion ‘nwB%ber(1)
resolves itself into this query: Is the use of pabldo moneys
for TEC employees group insurance premium payments violative
of the Constitution because It constitutes an application of.
: public funds to a private purpose? We think that it is not.
In Attorney General’s Opinion No. v-1067, (@5V), this
office ‘said in part:
“In determining whether an expenditure of ]Irubilc
moneys constitutes a gift or a’grant of public momeys,
“‘the primary guestion Is whether the fund@ arcI US@13
for a “public or a ‘private” parpose, ,The bentrilts
of the State from an expenditure for: a “publiti PUrPOse”
is. in the nature of consideration and the funds expended
are therefore not a gift even though pr%vate persona
.. are benefited therefrom,‘”
..
The determination of what constitutes a “public purpose”
for which a state may expend moneys has been held to be
primarily a legislative functlon,.subject to ravlew by the
courts when abused, and the determination of the legielatlve
1:
-572-
Honorable R. L. Coffman, page 4 Opinion No. R-125
,-
body has been held to be not sub.lect to reversal exceot in 1
,ins%ances~,where such determinati& ispalpably and manifestly
arbitrary and incorrect. State: ex rel. McClure v.~Ragertin,.
155 Ohio st. 320, 98 N~.E.2a 835 (1951) .
The Texas Sn reme Court, in the case of Byrd-v:City of '~'
Dallas,' et al, 11 T; Tex. 28, 6 S.W.2d~ 738 (19381,~ said the
following:
11
It Is academic to say the Legislature
has powei io passany law which lts'wisdom suggests
that is not forbidden by some provisions of the.Con-
stitution (federal or state). If the pension pro-
vided for In this act Is a gratuity or donation to
the beneficiary, it is clearly forbidden by the funda-
mental law. On the other hand, if it is a part of
the compensation of such employee for services ren-
dered to the city, or If it be for a public purpose,
then clearly; it is~ a valid exercise of the legisla-.
tlve power..
,You will note that Senate Bill 294 amended Subsection (a),
Section 1, Article 3.51 of the Insurance Code by striking
the language "provided, however, no state funds-shall be-used
to procure such contracts, nor shall any state funds be used
to pay premiums under said contracts oft insurance,' and in-
serting in lieu thereof the following: "the premium for the
policy may be paid in whole or in part fromfunds contributed
by the employer or in whole or in part from funds contributed
by the insured em loyees.' Yeu will further note that the caption
~of Senate Bill 29 E reads as follows:,
,
"AW ACT amending Paragraph (b) of Subsection (3)
of Section 1 of Article a 0 oft the Insurance Code
and amending Subsection a of Section
ST 1 of Artlcle,3.51
of the Inawance Code.to permit the expenditure of.state
funds to pay all or any portion of the premiums POF
certain group insurance contracts coverlhg employees of
.the..state; and declaring an emergency,"
'The Legislature had made its intention abundantly clear in 1
'Senate Bill '294, i.eap to permit the expenditure of state funds
to pay ,a11 or any portion of the premiums for certain group in-
surance contracts covering employees of the state. The Legis-
lature has the authority to provide. compensation for state em-
ployees for servlcea rendered. In the opinion of thisoffice,
.
. . I . .~...a -573-
Honorable R. L. Coffman, page 5 Opinion No.,&125
the expenditure of state funds to pay the premipmsf~or
dertain _ group
. insurance contracts of state employees~~as-a
pare of' thelr compensation is, within the realm of public
purpose.
Appleman's Insurance Law and Practice, Volume I, pages 53,
54, provides in part;
"There is no question that a private employer
may take out a group policy for the benefit of his
employees. Some question has been raised as to the
right of a social or political group to take out
such a contract on the theory that it might con-
stitute a diversion of the funds of taxpayers to
an unauthorized purpose, but such power has been'
sustained as tending to improve service, morale,
and efficiency. . e . Thereis no question but that,
in general, such insurance has a desirable effect
upon morale and mental state of the employees. . . ,I
Question number (2) as presented in your letter, "Whether
such contributions can be made under our present arrangement
with TPEA and our insurance carrier, Republic National Life
Insurance Company" Is not amenable~ to a complete answer inas-
much as the details of your 'present arrangement" are~not set
.out *
However,, in view ~of our answer to question number (l),
it must follow that certain limitations be placed upon your
arrangement with the Texas Public Employees Association. TPEA
is a private association of individuals which charges a fee for
membership, Being such, any state funds granted to this organiza-
tion are subject to Section 51 of Article III, Constitution of
Texas.
However, Subsection (a), Section 1, Article 3.51 of the In-
surance Code,as amended by Senate Bill 294 does not grant 'any
state funds to an association of public employees. The statute
merely authorizes an association of public employees to procure
contracts insuring its employees and indicates it may be a.
group policyholder when the employees' contribution's alone'are
involved, Article 3.51 .is devoid of any language, which authorizes
an association of public employees such as TPBA to procure group
insurance contracts for Its members or to be the policyholder of
same, wherein state funds are to be utilized in the payment of
the premiums.
-5;4-
. ,
,’ “~.
..
Honorable R? L. Coffmanj page, 6, ,~,,y,,
,‘. __,,:!:CpQ&n’ Ko ;1..~l/c-125, :::: ~~: :
.’
You are. therefore advised that ~when~contributions.:for ‘,
premium payments are to .be made with ,state funds,~ t&group.
policies must bye procured, by TEC. (t.he employer,) and’ the, ‘em-~’
ployer, as the policyholder, makes the contribut,Sons tqthe’
insurance coinpany a
/ S U M’M A R Y
_--d,---
1. The Texas Employment Co,mmlssion may con-
tribute with state funds to the,premiums of its
employees for roup insuranoe under the provisions
of Subsection 7 a) of Section 1 of Article 3.51 of
the Insurance Code, as amended by S.B. 294, Acts of
the 60th Legislature.
,2. When state funds are used as contributions,
to’ the premiums of group POliCieB by the Texas E&n7
ployment Commission, the Texas Employment Commission
must procure the contract of insurance, be the policy-
holder, and pay the contributions to the insuranoe~,
company 0
very truly,
rney General of Texas .’
Prepared by Ray MoGregor .I/
‘Assistant Attorney General
APPROVED:
OPINION COMMITTKE
.A. J. Carubbi, Jr *, Chairman
,
Staff Legal Assistant
Y. 0. Shultz, Co-Chairman
John Reeves
Sam Kelley
Roger Tyler
John Ranks
,.
-575-