AUSTIN 11.T&x&s
WILL WILSON
ATTOHN- OLZNEHAI.
March 6, 1959
Honorable William S. Fly Opinion No. W-565
Chairman
Senate Finance Committee Re : Whether the Employees
RetirementSystem and
Honorable William S. Heatley and the Teachers Retire-
Chairman ment System are adminis-
House AppropriationsCommittee trative agencies of the
State for which adminis-
Capitol Station .; tration.expensesshould
Austin, Texas be appropriatedby the
Legislature,Andyrelated
Gentlemen: questions.
In y0ur.reques.tfor an opinion yourecite that the
LegislativeBudget Board has raised a question as'to whether
it isnecessary for,the .Legislatureto make biennial appro-
riations covering the administrationexpenses of the Employees
4 etirement System and the Teachers RetirementSystem of Texas.
You further advise that the Senate Finance Committee and the
House Appropriations.Committeedesire.,theo,pinionof the Attor-
ney General as to the legal,:statusof the.variousfunds of
these two retirementsystems,, in order,,,that
the Legislature
might act in the manner prescribedby law in making appropria-
tions for these two agencies.
The answer to the questions submitted is dependent
upon the constructionof the,provisionsof the statutesre-
lating to the creation and administrationof the two retire-
mentsystems. The statutory provisionsrelating to the
Teacher RetirementSystem are embodied in Article 2,922-l~of
Vernon's Civil Statutes,while ,theprovisions.relatingto the
Employees Reti.rementSystem are containedin Article 6220-a.
If the various funds of the two retirement systems are required
'to be deposited in ,theState Treasury it must follow, pursuant
~to Section 6 of Article VIII of the Constitutionof Texas that
such funds cannot be expended or drawn from the Tre;y;nk.ein
pursuance of specif'icappropriationsmade by law.
other hand, such funds are in reality trustfunds and: hence,
not required to be deposited in the State Treasury, then the
same may be expended by the Board of Trustees of each Retire-
ment System in accordancewith the general statutes pertaining
to the Systems without prior specific appropriationsby the
Legislature.
Honorable Willlam S. Fly, HonorableWilliam'S. FleathY,
page 2, W-565)
gectlon‘2 of Artlcl\e'&2-1 speaks of the %orpora~te
of ,theEeachers RetirementSystem. It further re-
exlstence*f;
cites that the RetirementSystem shall have the power and
privileges of's corporationand shall transact all of its busi-
ne~ssin thenname of the Teachers~Retirement,System of Texas.
Section 10 creates and describes the various funds of the Teach-
ers Retirement System including the ,Expense~ Fund from which
bll expenses of~admi&tration and .maintenanceare paid. The
Expense.Rund is constitutedby membership payments contributed
annually by each member of the.RetirementGvstem inthe amount
of,Two and'no/lOO ($2.00)Dollars,abut it is provided that if
the expenses of the State Board of Trustees are in excess of
Two and no/100 ($2.00)Dollars~.per contributor:for.theyear,
., ‘:
the Board:of Trustees shall transfer to the Expense Fund from
the Interest Fu@an amount:necessar'y~to cover theexpenses as
.P.
esti,mated::for'theyear;,but in no ‘evcn~t~sh&llthe,amount.trans-:' :
ferred exceed in.any:one.yearFifty Cents ($.50) per member
of .recordas. af~.August.31~
of that year. .~Section12 .places"'the..~~
general admlhistration~and~~res'ponsibility~for the proper opera-
tion.of.the',.~tirem~nt-.System.'in
a~.Boardof Trustees and fur- :
ther autho?izes'theBoard to ~establish'rules and regulations
for the administration.ofthe:.'ftkds created by.theeAct.and,for~ ':
the transactionof~its:.businegs~, This Section further provides'.' :
that:
11..
. . ersonsengaged by the State Board of
*Trustees,fan x allyother expenses of .the.Board
..'necessary ~forthe,~operation.of the Retirement Sys-
.~tern,shall.be Raid at such rates and insuch 'f.
amounts as.the,StateBoard..of.lVus,tces. shalla&~~.
prove,~providedthat in no.&8 ,sh@lthey'be
~greater. than that'.paid~for~~l%keor:s$.mZlarservice .'
..of"theState .ofTexas;".~ .,...,
: :.Sectioli:,13,pr~~des::tha~"the
Stat& Board of Trustees
shail.be;thee%rustees~of:.the. by the Act
'several'.,fun8g.,'created
and.@11 seo~lties, ~motii'es;'and :theRetire& i
othex.aagets..qf
System;'~and~~have
full power to invest~&dre-invest same sub-
ject to ~the~limitatlonsand restri&ic~s:th&ei.n contained.
SubGectlon.3 of Sectlcn:U reads as'foll.c+s: :
Yl'heTreasurerof ,theState of'Texas shall be
cu todu of all bonds ~s6curitiesand funds :
%~&entsfrom saidfunds s&l be ma&by h&
on:war.raptsdrawn bythe,State .Com&xoller:of,pUb-.'.~.~
~1li.c
&coantq: supported~a upcq:vo~che~ti~~signed~~. ~.~
by the Rxe~cutive.
Seoretary,of:~the,Ret.~ement.,Sy~~,
."tem:,.;Aduly:attdstedcopyoi ti+ +++int+o?l of ,thc '
,. :
Honorable William S. Fly, Honorable William S. Heatley,
3 (WW-565)
State Board of Trusteesdesignating such person
shall be filed with said Comptrolleras his au-
thority for issuing such warrants." (Emphasis
added.).
Subsection 2 of Section 16 directs that the Treasurer
of the State of.Texas shall upon becoming custodian of the
,RetirementFund give a bonL!in the sum of Fifty Thousand and
no/100 ($5O,OOOjDollars.
In the interest of brevity we will not set out in de-
tail the various provisionsof the Employees Retirement Act
(Article6228a of Vernon's Civil Statutes)which we consider
pertinent to your ~inquiry,but it seems sufficient to say that
said Act.containsprovisions substantiallythe same as those
pravisions of the Teacher Retirement Act above described. In
this connection,we call attention to the following sections
of Article 6228a: Subsection6 of Section 6, Sections 7A,and
7C, and Subsections5 of Section 8.
In the case of New
&&, et al.d~151 S.W.2d ~$l~*t~,k$%rn~?%&% ;ixas
was concerne with the status of the Employees CompensationFund
and the necessity for speoific~legislativeappropriationprior
to the expenditure.of'thefund in the payment of unemployment
benefits. In concludingthat legislativeappropriation‘wasnot
necessary, the Court stated;.
%ubdivision b of Section 7 of Article 5221b
constitutes the State ~$reasurertreasurer and cus-
todian of the UnemploymentCompensationF'und. Un-'
der the provisions of th$s subdivisionthe mone$
collected for such fund 1s never paid into the
State Treasury nor is it contemplated, that such
shall ever be Ii
one. The officer who fills the
office of State Treasurer:issimply given an added
duty or responsibility. It 'ismade the duty of
such officer to act as custodian of the Unemploy-
ment CompensationFund, and to pay it over as pro-
;zd.by the Act. The money collectedfor such
,--thoughlevied and collected in the form of
excise taxes,--isnot levied or .collectedto become
a fund of the State, as such. To the contrary it
is levied and collected under statutory provislons~
that set it apart for the purpose for which it was
collected, and it can be used for no other purpose.
Simvlr stated& he fund created bv the Act in its
Y ry incemon ~Eecomes the urocertv of a t usk.'
c:eated for the benefit of a cl.ass:ofcitiiens of
.,'
,
Honorable William S. Fly, HonorableWilliam S. ,Heatley,
page k W-565) II
this State,--theunemployedwhose employers have
created it. The taxes are levied and collected
for such fund. and not for the State in Its soy-
greisn canacitv. The statute wermanentlvauuro-
. +
la,es this fund to be used for the euruoses
or which it was collectedwithout the necessitv
pf an auurouriationbv the Lesislatureeverv two
years:" (Emphasisadded.)
See also: Manion v. Lockhart. State Treasurer 131
Tex. 175, 114 S.W.2d 218; Smith v. Paschal, 1 S.W.2d lo&,
(Tex.Comm.App);Tatum v. Wheeless,180'~iss. 800, 178 So. 95;
108 A.L.R. 595; Attorney General's+Op%nionW-241 (1957).
The applicabilityof.the holding of the-SupremeCourt .'
of Texas in the Friedman case a, to the question here pre-
sented is readily apparent. it leads us here to the same co&
elusion reached by the,SupremeCourt to the effect &at the
funds provided for in both the Teacher Retirement and the Em- R
ployee Retirement Acts become the property of a trust created
for the benefit of ,a~classof citizens of this State,---the
employees and the teachers of the State, respectively whrlcon-
tri.?utein a large measure to the respectivefunds. $he funds'
so received by the two systems are held in trust by the State
and may be expended for no purpose other than that for which
received. We do not believe from a careful study of the va-
rious 'statutoryprovisionsrelating to the administrationof
the two systems that the Legislatureeither contemplatedor
ks required that there must be a specific appropriationof
these funds before the same may be expended for the purposes
received; but on the contrarywe believe that the effect of
the language used when consideredin light of the purposes
of the two acts, 1s to constitutea permanent and continuing
appropriationof the funds accruing to each system, thereby
eliminating'the necc:sity of recurring legislative appropria-
tions cnch two years, As in the Friedman case suura, the
State Treasurer has been constituted the custoK ian of each of
the two funds. The funds are not required to be paid into the
State Treasury but the applicable statutes require that they
be placed in the hands of the State Treasureras custodian.
;Lsthe Su'premeCourt pointed out in the Friedman case, "the
officer who fills the office of State Treasurer is simply
given an additional duty or responsibility."
It must follow from what we have said that it is our
opinion that the respective.funds of the two retirement systems
here involved may be expended in accordancewith the general
laws governlng~theoperation of the two,systemswithout prior
Honorable William S. Fly, Honorable William S. Reatley,
page 5 (W-565)
specific appropriationby the Legislatureof Texas. This is
true because the two retirementActs do not contemplatethat
funds of either system shall be placed in the4tate Treasury,
and Section 6 of Article VIII of the Constitutionof Texas,
requires specific legislativeappropriationonly for funds
expended or drawn from the Treasury.
The two retirement systems, however, may not expend
any portion.of the unexpended balances of the funds now on
deposit in the State Treasury~withoutspecific appropriation
of said funds made by th'eLegislature,even though it is our
view that it was error, under existing statutes for the funds
to h&ve been so deposited. Section 6, krticle $111, Constitu-
tion of Texas. We suggest, therefore,that thenbiennial ap-
propriationsbill appropriateany unex;?ended balances of funds
belonging to the systems, now on deposit in the State Treasury,'
and direct and authorize the transfer of such balances to a
special .trustaccount with the Sta$e Treasurer acting as cus-
todian. When this is accomplishedit will not be necessary
for the Legislature to make further.appropriatiohs'of these
funds before they may be legally.expendedby the governing
board of each retirement system.forthe pur~osea for which re:
ceived. The Biennial AppropriationsAct should also appro-
priate to the Employees Retirement'Systemand Teachers Retire-
ment System the State~'smatching contribution. In the case
of the Teachers RetirementSystem the State contributionshould
be appropriatedfrom.the allocations of the,Om@bus~Tax Fund,
while the State's matching contributionfor theEmployees Re-
tirement System should be made from the respective funds from,;:
which the employees,benefitedby the Act,receive their respeo-
tive ~salaries. This statementrests on the assumption that
the Legislaturewill desire to continue to provide matching
funds for the two retirement systems from the same source.5
as in the current Biennial AppropriationsAct (H.B. 133, Acts ;,
of the 55th Legislature,Regular Session, 1957).
By way of summary, the Biennial AppropriationsAct
for the ensuing biennium should~containtwo items for each '~
retirement system. One item should appropriateand authorize
. -the transfer int0.a special trust account in the hands of the
.J . State Treasurer the unexpended balances of the funds now cred-
ited to the account of the respectiveretirement systems
which are deposited in the State Treasury. The other item
should appropriate to each system the State's matching contri-
bution for the ensuing biennium.
We wish to emphasize,however, that the Legislature
has full authority, if it so desires, to amend the existing .
#o;:orableWilliam S. Fly, Honorable William-S. Heatley,
pace 6 (WW-565)
statutes so as to provide that all funds of the two retirement
systems be carried in special.accountswithin the State Treas-
ury. Should this be accomplishedno portion of said funds
could be expended without specific,prior appropriationby the
Legislatureand in accordancewith such appropriations. Even
if the funds of the two systems are not deposited in the State
Treasury, thereby eliminatingthe necessity of legislativeap-
propriations the'Legislature~may,by general statute, impose
such restrictionsupon the expenditureof the funds as it may
deem necessary so long as such restrictionsdo not result in a
diversion of the funds to unauthorizedpurposes.
SUMMARY
The~respectivefunds of the Teachers Retire-
ment System and of the Employees Retirement System
are trust funds received by the State for a special
purpose and under existing statutes should be
placed h the hands of the State Treasurer as cus-
todian 'butout of the State Treasury.
The Biennial'Appropriations .Act.forthe ensu-
ing biennium should appropriate the State's match-
ing contributionsfor each system and should also
appropriate the unexpended balances of funds depos-
ited to the credit of each system now in the estate
Treasury and authorize and direct the trarisferof .
such balances to said special trust account!' Funds
hereafter accruing to each retirement system should
be deposited in such trust account.
Yours very truly,
WILL WILSON
* Attorney General of Texas
B
onard Passmore
LP:mfh:wb Assistant
.
Honorable William S. Fly, HonorableWilliam S. HeatleY,
page 7 (W-565)
APPROVED:
OPINION COMMITTEE
Geb. P. Blackburn, Chairman
Dean Davis
William E. Allen
Riley Eugene Fletcher
John !B,.
Webster
RJXLEWEDFOR TBEATTORNEYCENERAL
BY: W. V. Geppert
,.,, .