April 29, 1952
Hon. Robert S. Calvert Opinion No. V-1442.
Comptroller of Public Accounts
Austin, Texas Re: Status of adminis-
trative fund es-
tablished by the
Social Security
Act passed by the
Dear Sir: 52nd Legislature.
You have requested the opinion of this office
on the following questions:
“1. Does the second paragraph of
Section 12 of House Bill No. 603, Regu-
lar Session of the Fifty-second Legis-
lature, create a special fund & the
state treasury?
“2. The last sentence in Section
12 reads: ‘These funds will not be
State funds and will not be subject to
legislative appropriation.’ Is this a
valid provision?
"3. If you should answer question
number 2 in the negative, then does Sec-
tion 13 of House Bill NO. 603, Acts of
the Regular Session of the Fifty-second
Legislature, appropriate the monies col-
lected under the provisions of the Act to
the Social Security Administrative Fund?”
House Bill 603, Acts 52nd Leg., R.S. 1951, ch.
500, p. 1480, title “Social S,ecurity - County and Muni-
cipal Employees,” (Article 695g, V.C.S.) was passed for
the purpose of allowing county and municipal employees
to participate In the Federal Social Security program.
Under the federal act only the State, and not individual
counties and municipalities, may enter into social secur-
ity agreements with the Federal Agency. In order to com-
ply with the requirements of the Federal Social Security
Act the State Department of public Welfare was designated
Hon. Robert S. Calvert, page 2 (v-1442)
as the State agency to administer this act on behalf
of the participants. This office held House Bill 603
constitutional against a contention that the payments
required by the participating counties or municipali-
ties were gifts or grants of public money In violation
of the Constitution. Att’y Gen. Op. V-1198 (195’1).
The specific questions now before us were not involved
in that opinion and hence were not considered.
The provisions of House Bill 603 which give
rise to your questions are the following:
“Sec. 10. The respective governing
bodies of the various counties or munici-
palities of this State which enter into
agreements under this program are hereby
authorized to pay to the State Agency, out
of any available funds not otherwise dedi-
cated, such amounts, separate and apart
from employees’ contributions and matching
contributions,~ as mav be agreed between the
P
res e t ve a d h State
Aaencv to be necessary to finance the coug-
ty’s or municioalitPs orooortionate share
$n the administrative cost of this oroar-
at the State level, The State Asencv shall,
reauire soecific undertakings to defray a
r,ro or 0 at
exoenses at the State level in agreements
negotiated with counties and municioalitieg
n any basis mutually nreeable between t&
&ate Agency and the okticinatinz countv or
municioality, whether as an annual fee for
each participating county or municipality,
an annual fee per employee covered, a per-
centage based upon the contributions to the
Federal authorities, or any other equitable
measure. Annually at the close of each fis-
cal year, the State Agency shall pay from
the Social Security Adminlstratlon FWnd to
the State Treasurer for deposit to the Gen-
eral Revenue Fond of the State of Texas an
~amount not less than ten per cent (10%) of
these contributions during the preceding
year to defray administrative expenses until
such time as the amount appropriated to the
State Agency from funds of the State for ad-
ministrative purposes has been reimbursed in
full, at which time such payments shall cease.
Hon. Robert S. Calvert, page 3 (V-1442)
llSec. 12. . The State Agency shall
deposit all mone;s’collected under the provi-
sions of this Act from participating counties
and municipalities to defray the cost of, ad-
ministering this program at the State level
In a special fund to be known ashih; Fcial
Security Administration Fund. T t te Treas-
ure shal 1 be treasurer and custodian o f thq
:$.,;kich shall be held secarate and ao $
m DU lit m nevs or funds of this S&q
The State Tieasurzr shall administer this fund
in accordance with the directions of the State
Agency. Moneys deposited in either, of these
special funds shall be disbursed upon warrants
issued by the Comptroller of Public Accounts
pursuant to sworn vouchers executed by the
State Agency acting through the executive di-
rector of personnel of the agency to whom he
expressly delegates this function.
will not be State funds and will not%?%!@
to leaislative aacrooriatio~.
“Sec. 13. The State Agency is authorized
to expend moneys in the Social Security Admin-
istration Fund for any purpose necessary to
carry on the administration of this program at
the State level including but not limited to
salaries, trave i lng expenses, printing, sta-
tionery, supplies, equipment, bond premiums,
postage, communications, and contingencies, and
the State Agency is authorized to employ such
personnel, purchase such equipment, incur such
expenses as may be necessary to carry out the
administration of this program at the State
level, provided all salaries and expenditures
from this fund shall be consistent with the let-
ter and spirit of comparable items and general
provisions inthe general departmental appro-
priation bill then current. (Emphasis added.)
The main question for decision concerns the
validity of the above provisions in House Bill 603 re-
lating to the safe-keeping and handling of the adminis-
trative fund. In this regard, the Supreme Court has
said:
Hon. Robert S. Calvert, page 4 (v-1442)
'I. . . It is academic to say the
Legislature has the power to pass any
law which its wisdom suggests that is
not forbidden by some provisions of the
Constitution. ad citv of
11.8Tex: 58in6 E.W.2:*738, 740
The constitutional provision drawn into con-
troversy in answering your questions is Section 6 of
Article VIII, which provides:
“Ho money shall be drawn from the
Treasury but in pursuance of specific
appropriations made by law; nor shall any
appropriation of money be made for a
longer term than two years except by the
first Legislature to assem i le under this
Constitution, which may, make the neces-
sary appropriations to carry on the gov-
ernment until the assemblage of the slx-
teenth Legislature.”
The case of piedman Am
of New York, 137 Tex. 149 151 iIW.2
that the trust fund established by t
butions of employees and employers under the Unemploy-
ment Compensation Act was not a state fund and hence
was not in the Treasury subject to appropriation by the
Legislature, although the trust fund was held by the
Treasurer. The Friedman case however, dealt only with
the main trust fund, and not ihe administrative fund
which Is the fund giving rise to the problems before us.
In order to answer your questions It is neces-
sary to analyze the Social Security Act passed by the
Fifty-second Legislature. Under the provisions of this
act, counties and municipalities enter into Social Se-
curity agreements with the State Agency on a voluntary
basis. The whole plan is based upon contracts between
the State Agency and the participating counties and muni-
cipalities. one of the contractual agreements is to the
effect that the State Agency will administer the act on
behalf of the participants, but at their expense. The
participants each agree to share a pro rata part of the
expenses of administration and in return the State
Agency acts as the liaison body between the participants
and the Federal Agency. The State Agency has been given
the authority necessary to comply with Federal require-
ments, but by contract all the counties and municipalities
. -
Hon. Robert S. Calvert, page 5 (v-1442)
participating in the plan share the administrative
expenses.
We think it is clear that the money contrl-
buted by the participants and held by the State Agency
to defray administrative expenses never becomes “State
funds” in the sense that they could be placed in gen-
eral revenue and appropriated by the Legislature. These
funds remain county and municipal property and the
State Agency holds them as trustee until they are ex-
pended, since the participants have contracted to bear
the administrative expense. If an excess were to be
established in this trust fund, the Legislature could
not appropriate it for any other use. Such an act by
the Legislature would violate the portion of Section
1.6of Article I of the Texas Constitution relating to
ImpaIring the obligation of contracts. Johnson v.
Smith, 112 Tex. 222, 246 S.W. 1013 (1922).
In light of the above analysis, you are ad-
vised that the administrative funds are not State funds,
and therefore are not subject to appropriation. The
special trust fund Is not placed In the State Treasury,
but by statute the Treasurer is made custodian of the
fund. Undoubtedly the Legislature may place such an
added duty u on the Treasurer. Eanlon v. Lockhart, 131
Tex. 175, 1l.c S.W.2d 216 (1938).
The administrative trust fund established
under the revisions of the,Social Security
Act (H.B. ‘ii03, Acts 52nd Leg., R.S. 199, ch,
500, p. 1480) is a fund provided, pnrsuant to
contract, by the. pqtlcipating .counties~ and
municipalities. lithe trust ~3’und’is not ‘a state
fund and is therefore not subject to approprla-
tion by the Legislature. The fund Is ‘not placed
in the State Treas~.~,‘~:hmt~the Legislature has
merely made the Treksurer custodian of it.
APPROVED: Yours very truly,
C. K. Richards -PRICE DAEIEL
Trial & Appellate Division Attorney General
E. Jacobson
Reviewing Assistant
Charles D. Mathews
First Assistant
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