Untitled Texas Attorney General Opinion

February 12, 1990

Honorable Hugh Parmer Opinion No. JM-1142
Chairman
Committee on Inter- Re: Types of retirement plans
governmental Relations that appraisal districts may
Texas State Senate offer their employees
P. 0. Box 12068 (RQ-1778)
Austin, Texas. .78711

Dear Senator Parmer:

We understand you to ask essentially two questions.
First, you ask us to specify the types of retirement plans
that an appraisal district may offer its employees. Second,
you wish to know what will be the income tax consequences to
individual appraisal district employees and the proper
method of disbursing funds held in any retirement plans in
the event that any plans already in place were entered into
improperly.

Your opinion 'request is prompted.by. the issuance of
Attorney General Opinion JM-1068 (1989), which concluded
that appraisal districts were without authority to enter
into certain contracts providing retirement plans for
appraisal district employees. We construed the question
submitted in that request to ask whether an appraisal
district had the authority to create a local retirement
system, authority similar to that conferred on incorporated
cities and towns by V.T.C.S. article 6243k and on counties
by V.T.C.S. article 62283. Because no statute confers
explicit authority on appraisal districts or, for that
matter, on any other sort of.special.district to create such
a local system, we concluded that no such authority
existed.1 The opinion apparently has been misconstrued to

1. This opinion should not be construed to call into
question the legitimacy of a plan authorized by special law
creating a special district.

P. 6012
Honorable Hugh Panner - Page 2 (JM-1142)

hold that subsections (b), (c), and (d) of secti.on 67 of
article XVI of the Texas Constitution sets forth the
exclusive list of the retirement plans that political
subdivisions may provide for their employees. However, we
did not so hold; rather, we held that there was no statutory
authority to create the sort of system about which we
understood the reguestor to inquire.

We will answer your first question in three parts. We
will discuss first the legislative history and proper
construction of section 67 of article XVI of the Texas
Constitution. Then we will specify those retirement plans
or systems in which appraisal districts are authorized by
Texas statute to participate. Then we will discuss whether
appraisal districts have imnlied authority to create Iocal
systems, authority analogous to that explicitly conferred by
V.T.C.S. articles 6243k and 62283 on incorporated cities and
counties, respectively.
I

::Section 67 of'article XVI of the Texas Constitution
provides:in pertinent part:

(a) General Provisions. (11 The leais-
lature mav enact aeneral laws establishinq
>s ste s an ement nd
related
; is b' *: enefits for
.public :Financing of
benefits must be based on sound actuarial
principles. The assets of a system are held
in trust for the benefit of members and may
not be diverted.

. . . .

(4) General laws establishing retirement
systems and optional retirement programs for
public employees and officers in effect at
the time of the adoption of this section
remain in effect, subject to the general
powers of the legislature established in this
subsection.

[(b) State Retirement Systems.]

. . . .

p. 6013
Honorable Hugh Parmer - Page 3 (JM-1142)

(c) Local Retirement Systems. (1) The
legislature shall provide by law for:

(A) the creation by any city or county of
a system of benefits for its officers and
employees;

(B) a statewide system of benefits for
the officers and employees of counties or
other political subdivisions of the state in
which counties or other political
subdivisions may voluntarily participate; and

(C) a statewide system of benefits for
officers and employees of cities in which ..~
cities may voluntarily participate.

. . . .

(e) Anticipatory Legislation. Legislation
enacted in anticipation of this ,amendment is
not voids because it is anticipatory.
(Emphasis added.)

Section 67 was enacted at the same time that several
other sections of the constitutions were repealed. Acts
1975. S.J.R.~ 3~.2 The ,Bill Analysis prepared. for,S.J.,R. No.
3 stated:

2. Section 48a of article III, adopted in 1936, and
granted the legislature the authority to establish a
retirement fund for employees of public schools, colleges,
and universities. S.J.R. 18, Acts 1935, 44th Leg., at 1219.
Section 48b of article III, adopted in 1965, created in the
constitution.the Teachers, .Retirement System. S.J.R. 27,
Acts 1965, 59th Leg., at 2201.

Section 51e of article III, adopted in 1943, permitted
incorporated cities and towns to create municipal retirement
systems Andy disability pensions. H.J.R. 8, Acts 1943, 48th
Leg., 5 1, at 1142.,, Section 51f of article III, also
adopted in 1943, permitted the legislature to provide for a
statewide system of retirement and disability benefits for
municipal officers and employees. H.J.R. 8, Acts 1943, 48th
(Footnote Continued)

p. 6014
Honorable Hugh Parmer - Page 4 (JM-1142)

The proposed amendment is similar to the
proposal which was overwhelmingly approved
during the 1974 Constitutional Convention.
The proposal combines the various detailed
provisions in the present constitution into a
more concise provision, eliminates rigidities
which required constitutional amendments
each time the Legislature sought to improve
retirement benefits, and strengthens
protections for members of existing systems.

The amendment enacting section 67 accomplished two
broad objectives. First, subsection (a) of section 67 was a
grant of authority, conferring very flexible power on the
legislature to establish retirement and disability systams.
The uSection-by-Section Arialysis": in the Bill Analysis of
Senate Joint Resolution No. 3 describes subsection (a), in
relevant pa*, in the following way:

Subsection (a)(l) authorizes the Legisla-
ture to establish systems and', programs of
retirement and related disability and death
benefits for public employees. mi arant of
s' flexible thans present
provisioki whT:L authorize specific systems
in very narrow terms and gives constitutional
status to whateversvstems -or nroarams the

(Footnote Continued)
I 5 1, at 1142.
L---v.
Section 62 of article XVI, adopted in 1946, authorized
the legislature to create system of retirement,
disability, and death benefit: for state officers and
employees. It also authorized each county to create such a
system for its officers and employees with the.approval of a
majority of voters of the county. H.J.R. 10, Acts 1945,
49th Leg., at 1045.

And finally,. section 63 of article XVI, adopted in
1953, provided that 'qualified.;members of then Teacher
Retirement System were entitled to service credit for time
earned while they were working for the state and, similarly,
that qualified members of 'the state Employees Retirement
System were entitled to credit for time earned while they
were teachers. S.J.R. 6, Acts 1953, 53rd Leg., at 1169.

p. 6015
Honorable Hugh Parmer - Page 5 (JM-1142)

Maislature mav create subject to the
following general requirements:

(a) benefits must be based on sound
actuarial principles -- a new requirement
which places a new level of fiscal and
fiduciary responsibility on the Legislature
and the administrative bodies which manage
the systems.

(b) funds or assets of the systems are to
be held in trust for the members of the
systems and cannot be diverted for any
purpose other than the benefit of the members
-- a new requirement which protects the funds
from being used for non-retirement purposes.
(Emphasis added.)

Bill Analysis, S.J.R. 3, 64th Leg. (1975).

The legislature has created a variety of retirement and
disability plans for public employees that subsection (a)(l)
would sanction. See. e.a V.T.C.S. arts. 6243a-1, 6343b,
62436-1, 6243e, 6243e.1, 6143e.2, 6243e.3, 6243e-2, 6243e-3,
6243f, 6243f-1, 6243g, 6243g-1, 6243g-3, 62433 (setting
forth provisions 'permitting the creation of, various
retirement programs for firemen, policemen, and municipal
employees'under certain circumstances).3 The legislature
also has ~enacted several statutes permitting political
subdivisions to establish various retirement or deferred
-.

3. Several of the above-listed statutes were enacted
prior to the adoption of section 67 of article XVI: indeed,
several were enacted prior to the adoption of the
constitutional amendments that section 67 was intended to
replace. Subsection (a)(4) of section 67 provides the
following:

General laws establishing retirement
systems and optional: retirement programs for
public employees and officers in effect &
the time of the ado&ion of this section
remain in effect, subject to the general
powers of the legislature established in this
subsection. (Emphasis added.)

p. 6016
Honorable Hugh Parmer - Page 6 (JM-1142)

compensation plans that receive favorable tax treatment
under the Internal Revenue Code. These statutes will be
discussed in Part II of this opinion.

In addition to the conferral of flexible authority set
forth in subsection (a) of section 67, subsections (b), (c),
and (d) direct the legislature to establish or retain
certain retirement systems.4 Subsection (c), the subsection
with which you are concerned, directs the legislature to
provide for the creation of local systems by any city or
county and to create two statewide systems, one for county
and district employees and one for municipal employees, in
which participation is voluntary.

The "Section-by-section Analysis" of the bill analysis
describing subsection (c) contains the following:

Paragraphs (l), (2), and (3) of subsection
(c) require the Legislature to provide for
(a) the creation of separate local systems by
cities and counties, (b) a statewide system
of benefits in. which counties or other ,.
political subdivisions can participate on a
voluntary basis, and (c) a statewide
municipal system in which towns and cities
can participate ona voluntary basis. The
present prohibition '-:
against legislative
appropriations for local retirement systems
has been deleted.,; The requirement that the
creation of separate local systems by cities
and counties must be approved by the voters
thereof has also been deleted. Since
subsection deletes direct arants of authoritv
enablina municinalities and counties to
t
es abl's t eir ow retirement
plans, the Leaislature m v need to enact
enablina leaislation to rezlace Article III,

4. Subsection (b) of section 67, intended essentially
to replace sections 48a and 48b of article III and sections
62 and 63 of article XVI, directs the legislature to create
state retirement and disability systems for teachers, state
officers, and employees. Subsection (d) of section 67
directs that the legislature retain the system already in
place for the state's judiciary.

p. 6017
Honorable Hugh Parmer - Page 7 (JM-1142)

Section 51e. and Article XVI. Section 62(b),
of the nresent onstitution. Other details
that have beenC deleted exist in present
statutes. (Emphasis added.)

Bill Analysis, S.J.R. 3, 64th Leg. (1975).

Pursuant to subsection (c)(l), the legislature enacted
V.T.C.S. articles 6243k and 6228j, which conferred on
incorporated cities and counties, respectively, the
authority to create local systems.5 Pursuant to subsection
(c)(2), the legislature enacted what is now codified as
subtitle F of title 8 of the Government Code, creating the
statewide Texas County Andy District Retirement System in
which counties and special districts may voluntarily
participate.~ And, pursuant,. to-, subsection (C) (3), the
legislature enacted what is now codified ,a8 subtitle G of
title 8 of the Government Code, creating a statewide Texas
Municipal Retirement System in which incorporated cities
voluntarily may participate.

~Thus, while, section67 of' article.:XVI does direct the
legislature to establish, certain retirement and disability
systems, it also grants broad authority to the legislature

5. Articles 62283 and .6243k, V.T.C.S., were"~ enacted
in.1975: .Acts 1975, 64th Leg., ch.'426,~ at 1127. Sections
3 and 4 of that bill provided:

Sec. 3. Retirement, disability, and
death benefit systems or programs created
under the authority of Article III, Section
51-e, or Article XVI, Section 62, Subsection
(b)s of the Texas Constitution, or under the
general powers of home-rule cities, remain in
effect, subject to power granted by law to
alter or abolish the systems.

Sec. 4. This Act takes effect on
adoption by the qualified voters of this
state of S.J.R. No. 3, 64th Legislature,
Regular Session.

The amendment enacting section 67 was adopted at an election
held on April 22, 1975.

p. 6018
Honorable Hugh Parmer - Page 8 (JM-1142)

to establish other retirement and disability systems for
public employees. It does not set forth any exclusive list'
of the the retirement and disability systems that could be
established for public employees and Attorney General
opinion JM-1068 did not so hold. We now turn to those
pension plans or retirement systems in which appraisal
districts are authorized by Texas statute to participate.

II

The legislature by statute has created or authorized
the creation of several pension plans or retirement systems
in which appraisal districts may choose to participate.
Article 695g, V.T.C.S., authorizes political subdivisions,
including appraisal districts, to participate In the fed.eral
Social Security .programr' Attorney.~ General Opinions S-152~
(1955): S-19 (1953); V-1198 (1951). And,~ as was pointed out
in Attorney General Opinion JW-1068, appraisal districts are
authorized to participate in the statewide County and
District Retirement System. Gov#t~Code.§ 842.001.

Additionally, the legislature hasauthorized political
subdivisions, including appraisal, districts, to establish
programs that receive favorable tax treatment as "deferred
compensation10 plans for purposes of subchapter D of chapter
1 of the Internal Revenue Code.6 Article 6252-3e,
V.T.C.S., 7 enacted in 1989, permits political subdivisions
in the :state, including appraisal districts, to create
deferred compensation plans that meet the criteria.'of
section 401(k) of the Internal Revenue Code. And article
6252-3f, V.T.C.S., also enacted in 1989, permits political
subdivisions in this 'state, including appraisal districts,
to create deferred compensation plans that meet the criteria
of section 457 of the Internal Revenue Code.8

6. For purposes of the Internal Revenue Code, pension
plans, profit-sharing plans, stock bonus plans, as well as
deferred compensation plans under state law, are considered
"deferred compensation" plans.

7. We note that two different statutes have been
designated "article 6252-3e.l'

8. We note that both V.T.C.S. articles 6252-3e and
(Footnote Continued)

P. 6019
Honorable Hugh Parmer - Page 9 (JM-1142)

There is no statute, however, that confers on appraisal
districts the authority to create local pension systems that
is analogous to the authority conferred on incorporated
cities and towns by V.T.C.S. article 6243k9 and on counties

(Footnote Continued)
6252-3f are repealed, effective September 1, ,1990, to be
replaced by V.T.C.S. article 6252-351. With the enactment of
these statutes, V.T.C.S. article 6252-3b, which was ~enacted
in 1972 and which permitted any political subdivision to
create a deferred compensation plan for its employees and
authorized the purchase of insurance and annuity contracts
and mutual fund contracts, was repealed. Acts 1989, 71st
Leg., ch. 147, 5 4, at 522.

9. Article 6243k, V.T.C.S., provides the following:

An incorporated city or town may create a
retirement, disability, and ~,death. benefit
system for its appointive officers and
employees if a majority of the qualified
voters of the city or town voting on the
propositions approve the creation at an
election called for that purpose. Each
member of the system shall contribute to the
system an amount determined by the city or
town, which may not exceed 10 percent of the
member's annual compensation paid by the city
or town, and the city or town shall contri-
bute for each member an amount that at least
equals but is not more,than twice the amount
of the member's contribution. A member of a
municipal system is eligible for disability
benefits if he is disabled in the course of
his employment with the city or town. A
member is eligible for retirement benefits if
he is 65 years old or older, or he is 60
years old but less than 65 years old and has
(Footnote Continued)

p. 6020
Honorable Hugh Parmer - Page 10 (JM-1142)

by V.T.C.S. article 6228j10, which were enacted pursuant to
subsection (c)(l) of section 67 of article XVI of the Texas
Constitution. It is argued, however, that appraisal
districts have the _imDlied aUthOrity t0 create such local
systems. It is to these arguments that we now turn.

III

While home-rule cities are held to have the full power
of self-government, counties and special districts are not.
In other words, home-rule cities have full authority to do
anything that the legislature could authorize them to do;
accordingly, home-rule cities look to the acts of the
legislature, not for grants of power, but only for
limitations on their powers. Tex. Const. art. XI, 5 5;
Local Gov't Code ch. 51; State ex rel. Rose V. Citv of ha

(Footnote Continued)
been employed by the city or town for 25
years or more.

10. Article 62283, V.T.C.S., provides the following:

(a) A county may create a retirement,
disability, and death benefit system for its
appointive officers, and employees if a
majority of the qualified voters of the
county 'voting on the proposition approve the
creation at an election called for that
purpose and advertised in at least one
newspaper of general circulation in the
county once a week for four consecutive weeks
before the election is held. Each member of
a system shall contribute to the system an
amount determined by the county, but not more
than five percent of the member’s annual
compensation paid by the county. The county
shall contribute for each member an equal
amount.

(b) The assets of a county system, after a
sufficient portion is set aside each year to
pay benefits as they accrue, shall be
invested in bonds issued or guaranteed by the
United States, this state, or counties or
cities of this state.

p. 6021
Honorable Hugh Parmer - Page 11 (JM-1142)

Porte, 386 S.W.2d 782 (Tex. 1965); Jones v. Int'l Ass#n
Firefiahters Local Union No. 936, 601 S.W.2d 454 (Tex. Civ.
APP. - Corpus Christi 1980, writ ref'd n.r.e.).
Counties and special districts, on the other hand, look
to the legislature for grants of power. A county or a
special district exercises only such powers as have been
expressly delegated to it by the constitution or the
legislature or which exist by clear and unquestioned
implication. See, Canales v. Lauahlin, 214 S.W.2d 451 (Tex.
1948); Tri-CitV Fresh Water SUDD~V Dist. No. 2 of Harris
COUntV V. Mann, 142 S.W.2d 945 (Tex. 1940); Franklin Countv
Water Dist. v. Majors, 476 S.W.Zd 371 (Tex. Civ. App. -
Texarkana 1972, writ ref'd n.r.e.) (a special district can
do only',that. which is authorized by the statute .creating
it),. -.. .,.
s

Nevertheless, several arguments have been adduced in
supportof the proposition that, in addition to or instead
of those retirement and disability plans discussed in Part
II of this opinion, appraisal districts have the wimplied"
authority to create.local retirement and disability systems.
We find none of the arguments persuasive.

The first such argument is that because appraisal
districts have the authority to llcompensatet*their employees
pursuant to section 6.05(d):,of the ,Tax Code and because
retirement and disability plans constitute a part of
%ompensation, "11 they have implied authority to. establish

11. In Bvrd v. CitV of Dallas, 6 S.W.Zd 738 (Tex.
1928); the Texas Supreme Court upheld the constitutionality
of a statute authorizing pensions for city police and fire
department personnel.~ Those challenging the statute argued
that the granting of pensions to persons who were no longer
employed by a political subdivision violated the state
constitutional prohibition against granting public funds for
private purposes. The court disagreed, holding that such a
benefit constituted part of the compensation for which
employees contracted.

This case stands for the proposition that a statute
permitting the ~creation of a pension system does not violate
the constitutional prohibition against granting public
(Footnote Continued)

p. 6022
Honorable Hugh Parmer - Page 12 (JM-1142)

local retirement and disability systems, apparently without
restriction. Indeed, it is argued, in the words of one
brief submitted in connection with this request, that
ziyf,i;a; districts have authority to create plans "as they
We disagree for several reasons.

First, statutes are not to be construed in such a way
as to impute to the legislature a foolish, useless, or vain
thing. State ex rel. Childress v. School Trustees of Shelbv
County, 239 S.W.Zd 777 (Tex. 1951); Dovalina v. Albert, 409
S.W.2d 616 (Tex. Civ. App. - Amarillo 1966, writ ref'd
n.r.e.). The governing bodies of counties, cities (both
home-rule and general law), school districts, and special
districts are empowered, either by the constitution or by
statute, to %ompensatem employees. If a conferral of
explicit authority to the governing body of a political
subdivision to llcompensatell public employees necessarily
entailed the implied authority to offer those employees any
retirement plan that the governing body saw fit, then the
legislature's enactments of the statutes set forth in Part I
of this opinion were useless, superfluous acts. Indeed, the
legislature's adoption of all of those statutes set forth
originally as title 109 of the,Revised Civil Statutes of
Texas, recodified in 1981 as title 1lOB and finally
recodified in 1989 as title 8 of the Government Code,
statutes dating back to 1909 and 'through 1989, would have
been superfluous. While some~persons may have assumed that
political subdivisions have the implied authority to offer
to their employees' any retirement plan that they so. choose,
legislatures going back to almost the turn of the century
evidently have not.

Second, the argument that appraisal districts have the
implied authority to offer their employees any retirement
plan that they so choose would produce an absurd result. It
would mean that, while counties, cities, and school
districts are governed by and limited to those statutes that
the legislature has enacted over the years regarding
retirement plans, appraisal districts have unrestricted
power to do whatever they want. Moreover, it would also

(Footnot;aCoiziued)
funds: not stand for the proposition ~that a
political subdivision has the implied authority to create a
local pension system.

p. 6023
Honorable Hugh Parmer - Page 13 (JM-1142)

mean that those safeguards and protections designed to
vouchsafe the interests of participating employees and those
limitations upon inves'tments set forth both in section 67 of
article XVI and in the statutes that authorize the creation
of various pension plans or retirement systems would not be
applicable, since those provisions govern plans and systems
enacted by general law. e. a Attorney General
Opinions MW-570, MW-506 (198;:; &-ii2 (1980) (opinions
construing statutory limitations on investments designed to
afford protection to participants). Nor is it at all
certain whether retirement plans created absent explicit
statutory authority would be protected under the Texas Trust
Act, which governs the administration of private trusts.
See CreDs v. Board of Firemen's Relief 8 Retirement Fund
Trustees of Amarillo, 456 S.W.2d 434 (Tex. Civ. App. -
Amarillo 1970, writ ref'd n.r.e.). We know of no reason why
the legislature would intend such a result.12

And third, interpretation by implication is permissible
only when it is necessary; the argument that a special
district has tinlied authority to 'do..athing"is inapposite
in an instance in which it is given specific'authcrity to do
, Cre a r v -Hidala; Countv Water Imorove-
283aS:W. ‘151 (Tex. Comm'n App. 1926,
alle v. Citv of Austin, 22 S.W. 668 (Tex.
1893). Indeed, invoking a common rule of statutory construc-
tion, 'it could well be argued that those statutory plans or
systems enacted'by the legislature should be read to exclude
any others. See Weaver v. ,Robison, 268 S:W. 133 (Tex.
1924); Poster v. Citv of Waco; 255 S.W. 1104 ,(Tex. 1923);
Attorney General Opinion H-604 (1975) (holding thE",,,Ezz
method set forth in V.T.C.S. article 62289, which
the County and District Retirement System and detailed the
way in which a political subdivision could contribute to the
system, was exclusive). As we pointed out in Part II of
this opinion, special districts, including appraisal
districts, that are not authorized explicitly to create a
local retirement system may choose to do one or more of the

12. For this same reason we reject the argument that
all political .-subdivisions have the implied authority to
create whatever pension plan or retirement system that they
so choose and that all of the constitutional amendments and
statutes enacted by the legislature are merely limitations
on that implied authority.

p. 6024
Honorable Hugh Parmer - Page 14 (JM-1142)

following: participate in the federal Social Security
system, participate in, the state-wide County and District
Retirement System, or adopt one of the deferred compensation
plans authorized by statute. We need not strain to find an
implied power when the legislature has conferred specific,
though limited, powers.

It is also argued that Attorney General Opinions M-836
(1971) and WW-215 (1957) and Lower-Colorado River Auth. v.
Chemical Bank & Trust Co., 185 S.W.2d 461 (Tex. Civ. App. -
Austin 1945). aff'd 190 S.W.Zd 48 (Tex. 1945) lhereinafter
-1 support the argument that appraisal districts have
implied authority to create a local pension plan. We think
that reliance on these authorities is misplaced.

Attorney General Opinion M-836 concluded that" the'
Sabine River Authority had the implied power to enter into a
deferred compensation and pension plan based upon its
explicit authority to employ and fix the compensation for
those executives and employees as is necessary to carry out
the functions and duties of the authority. That opinion
relied upon :v.; 151
S.W.2d 570 (Tex. 1941), m 154 S.W.2d 659 (Tex. ,Civ.
APP. - Fort Worth 1941, no writ) [hereinafter. Friedman],
Hvrd V. Citv of Dallas. 6 S.W. 2d 738 (Tex. 1928)
[hereinafter m], and Attorney General Opinion WW-215. The
latter opinion also relied upon Friedman in support,of ' the
proposition that the Port ~Isabel-San Benito Navigation
District had the implied power to provide certain benefits,'~
including pension benefits, to its employees.

For three reasons, we do not think that the two court
opinions are controlling. First, both Friedman and, &&
concerned whether specific statutes enacted by the
legislature, one authorizing the creation of pensions for
city police and firemen and the other creating a Texas
Employment Compensation Fund, violated specific provisions
of the Texas Constitution. In both cases, the Texas Supreme
Court upheld the challenged statutes, concluding that the
benefits that each provided should be considered a part of
the compensation that employees earned, rather than a
gratuity conferred. Neither case stands for the proposition
that a political subdivision has any implied power.

Second, the holdings of these two opinions cannot be
reconciled with other attorney general opinions, issued both
prior and subsequent to the issuance to these opinions, that
Honorable Hugh Parmer - Page 15 (JM-1142)

do not find any implied authority to create or participate
in retirement systems, absent explicit statutory authority.
See, e.a., Attorney General Opinions H-903 (1976); H-604
(1975); C-581 (1966); WE-283 (1957). Nor can they be
reconciled with those opinions that strictly construe
authority conferred and find no implied power to provide
benefits generally, absent explicit statutory authority.
See e.a Attorney General Opinions JR-887 (1988); JR-543
(1986); ‘;M-406 (1985) ; JR-143 (1984); ME-592 (1982); H-535
(1975); WW-1373 (1962).

Third, the holdings of these two opinions cannot be
reconciled with the strict construction evidently given
section 62 of article XVI. When it was adopted in 1946,
subsection (b) of section 62 provided in relevant part .that
"[E]ach county shall have the right to provide for and
administer a Retirement, Disability and Death Compensation
Fund for the appointive officers and employees of the
county . . . .It The subsection made the creation of such a
fund contingent upon the approval of a majority of the
qualified voters of the a county.

In 1958 the voters rejected an amendment to section 62
of article XVI of the Texas Constitution that would have
expanded the scope of the section to include officers and
employees of precincts.' S.J.R. 6, Acts 1957, 55 Leg., at
1631. Even more, significantly, in 1962 the voters of Texas
defeated an amendment to subsection (b) to expand its scope
to include "[e]ach county nd anv other oolitical
subdivision of this State." Ha&R. 36, Acts 1961, 57th
WJ., at 1314 (emphasis added). Subsection (c) of section
62 was added in.1966, which authorized the legislature to
provide a pension plan "for all the officers and employees
of a county or other nolitical subdivision of the State."
S.J.R. 4, Acts 1965, 59th Leg., at 2190. It was only after
this amendment was adopted and pursuant to this
authorization that the legislature created in 1967 the
statewide County and District Retirement System. Acts 1967,
60th Leg., ch. 127, at 240 (codified originally at V.T.C.S.
article 6228g and now codified at subtitle F of title 8 of
the Government Code). Clearly,,neither the legislature that
proposed the 1958 and 1962 amendments nor the voters that
defeated them assumed that the implied power to create
pension systems existed; if they had, the amendments would
have been superfluous.

Both Attorney General Opinions M-836 and WE-215
contained faulty reasoning and relied upon authorities that

p. 6026
Honorable Hugh Parmer - Page 16 (JM-1142)

do not support the proposition for which they were cited.
Accordingly, Attorney General Opinions M-836 and WW-215 are
hereby overruled.

In m, the court of civil appeals considered, inter
a, whether the LCRA had the implied power to increase the
compensation that it paid its officers and employees by four
percent and then set aside the four percent in a segregated
fund for the purpose of providing a pension or retirement
plan for those officers and employees. The court held that
it had the implied power, based in part upon its explicit
statutory power to compensate employees. For two reasons,
we conclude that m does not control your question.

First, keeping in mind'.that the purpose of the LdXA,
which is in part to provide electric power to consumers in
much the same way that'an investor-owned utility does, it is
significant that the court employed the following rationale
to support its conclusion:

While designated and classified a ..,
governmental agency and body politiz and
corporate;- the Authority's' functions and
activities partake, in large measure the
nature and characteristics, within
legislative restrictions, of a large
industrial enterprise, rather than of a
strictly governmental .function. It has 'no
power' to levy taxes," enact laws nor
ordinances, as a city has; and its efficient~
functioning depends in large measure on the
sound judgment and good business management
of its Board of Directors. They have large
control over the operation of its properties,
and the income to be derived therefrom, which
constitute the only source of revenue to meet
its obligations. Of necessity matters
relating thereto must be left in large
measure to their judgment, experience and
discretion; and obviously could not be
prescribed ,in detail"by law.

. . . .

Retirement pay from funds ,~accumulated
through the co-operative efforts of employer
and employee are now well-established
business practices among practically all

p. 6027
Honorable Hugh Parmer - Page 17 (JM-1142)

large industrial enterprises; and are being
increasingly applied by national, state and
municipal governments. Typical instances are
civil service employees, postal employees,
fire and police employees, etc.

185 S.W.2d at 467.

The court clearly felt that the LCRA was not simply a
political subdivision; indeed, the Texas Supreme Court
decision that affirmed the w judgment of the court of
appeals held for the first time that the LCM was tax exempt
from ad valorem taxes as a political subdivision. Whatever
else may be said,about appraisal districts, they are not
analogous to industrial enterprises.

We acknowledge that the public policy reasons that
impelled the court to conclude that the LCRA had an implied
power to create pension systems can apply equally to the
creation.of pension. systems for every sort of political
subdivision: namely that such plans may encourage employees
to remain so employed,~,with the result that there is less
rnzloyee turn-over, better service to the general public
ultimately less cost to the public. But it needs to be
rem&bered that, at the time that m was handed down, no
other sort of pension system or plan wasp available to the
employees of'the LCRL An d it should also be remembered
that the court itself admitted that, while,pension systems
for employees had become nwell-established business
practices" among practically all large industrial
enterprises," it was only l@increasingly applied" to public
employees. The force of the rationale that impelled that
court to create an implied power in 1945 is greatly weakened
in 1990 in the face of the fact that the legislature
explicitly has made provision for the retirement benefits of
special district employees.

Second, for the reasons set forth in the discussion
above regarding Vompensationl' and implied power, it is
obvious that the legislature has not assumed that, whatever
the ICRA might have implied power to do, all special
districts have identical implied powers. If such were the
case, again, virtually all of the legislation enacted in
this area would be unnecessary and superfluous. a may
stand for the proposition that the ICRA has the, implied
power to create a pension system for its officers and
employees: it does not stand for the proposition that
special districts generally are so empowered.

P- 6028
Honorable Hugh Parmer - Page 18 (JM-1142)

Instructive in this regard is Attorney General Opinion
V-569 (1948), in which the state auditor asked whether a
list of 31 special districts were authorized to participate
in the Employees Retirement System of Texas. All of the
districts were created pursuant to section 59 of article XVI
of the Texas Constitution. The opinion discusses the &Q&
case and sets forth essentially the same quotation set forth
above, describing the LCRA8s functions and power, before
concluding that its employees were not authorized to
participate in the Employees Retirement System, based upon
the statutory definitions of l'employeell and tldepartment"
that govern participation in the retirement system. In
spite of the fact that the LCRA had been held to be an
agency of the state in b $ lo ad
McGraw, 83 S.W.2d 629 (Tez. 1935) the opinion concluded
that LCRA employees were not ~empl~yees of the State" for
purposes of the retirement system. Reasoning by analogy,
the opinion held that employees of conservation and
reclamation districts were not llemployees of the State" for
purposes of the retirement system either. Curiously, the
opinion referred to the "apparent" authority of the LCRA to
create its own retirement system, but failed to state that
conservation and reclamation districts possessed the same
power:

We note here that from reading Lower
Colorado River Authority v. Chemical Bank and
Trust Co., supra, the L.C.R.A. apparently has
its own retirement system. In any event, the
employees of this particular district would
be precluded from membership in the system
afforded by H. B. 168 [the Bmployees
Retirement System of Texas], by reason of
Section l.c., of H. B. 168 which defines
'employee.'

We are, therefore, of the opinion that the
employees of the conservation and reclamation
districts named in your reguest are not
eligible for membership in the Employees
Retirement System of Texas.

Id. at 7.

The reason for the apparent failure of the legislature
specifically to provide for the inclusion of special
districts in the statewide plan for counties until 1967
probably stems from the fact that the proliferation of

p. 6029
Honorable Hugh Parmer - Page 19 (JM-1142)

special districts in Texas is a comparatively recent
phenomenon. As recently as February 1959, there were an
estimated 524 special districts in Texas. Of these, 115
were authorized by local law and 409 were created under some
13 general laws governing water districts. See w.
Thrombley, Special Districts and Authorities in Texas,
Institute of Public Affairs, University of Texas at Austin
(1959). By 1979 there were over 420 special districts in
Harris County alone. We think it significant that in a
treatise on public employee retirement in Texas written in
1955, no mention is made of any implied authority of special
districts to create local pension systems, nor is mention
made of the LcRA case. See Swanson 8 Miskell, Public
Employment Retirement in Texas, Institute of Public Affairs,
University of Texas at Austin (1955). Indeed, the .only
reference to any so* of retirement system for specials-
districts in this 1955 treatise is the federal Social
Security program. Id. at Table XIV, part III, at p. 91;

Threes other arguments have been adduced, each, relying
upon misconstrued ore ~misunderstood specific statutory
provisions, in support of the "implied power" theory.' The
first maintains that the facts that participation in the
County and District Retirement System is voluntary and that
the System's board must approve any such participation by a
special district, Gov't Code 0 842.001(c), necessarily mean
that special districts have the implied authority to create.
their own local pension systems.

This argument is faulty in two respects. One; it
ignores the authority conferred by statute to create
deferred compensation plans and to participate in the
federal Social Security program. And two, it wrongly
presupposes that a retirement plan has to be offered to
employees in the first instance. In other words, it assumes
that the only choice a special district has is either to
participate in the County and District Retirement System or
to create a local pension system analogous to those
authorized by V.T.C.S. articles 62283 and 6243k.

In fact, neither federal nor state law requires a local
political subdivision to create a pension plan. The federal
Employee Retirement Income Security Act of 1974, 29 U.S.C.
§§ 1001 et sea. (llERISAn) does not ,govern local political
subdivisions. Attorney General Opinion H-618 (1975); 29
U.S.C. 5 1003(b). And no provision in state law requires
local political subdivisions, except independent school

p. 6030
Honorable Hugh Parmer - Page 20 (JM-1142)

districts, to make participation in a retirement program
available to its employees: participation is voluntary.

For example, in Attorney General Opinion H-1122 (1978),
this office held that a municipality that chooses to exempt
itself from the operation of V.T.C.S. article 6243e, which
governs retirement systems for volunteer fire departments,
is not required to create an alternate retirement system.
In Attorney General Opinion H-903 (1976), in answer to a
question asking whether employees of a hospital whose
administration had been taken over by the county were
authorized to establish their own pension plan, this office
held that employees became automatic members of County and
District Retirement System if the county was already
participating in the system or the county could elect to
discontinue participation in the statewide system and create
a local one pursuant to V.T.C.S. article 62285. No other
alternative was available. Thus, in an instance in which a
special district is not authorized explicitly by statute to
create a pension plan, it may only do one or more of the
following: adopt a'deferred compensation plan pursuant -to
statute, participate in the federal Social Security program,
again by statute, or participate in the County and District
System. Or it may offer nothing at all.

The next argument misconstruing specific statutory
provisions asserts that the existence of_ what .,is now
codified as section 842.006 in the Government Code amounts
to a recognition by the legislature that special districts
have the implied authority to create local pension systems.
That section provides:

A local pension system established for
employees of a subdivision may merge into the
[County and District] retirement system on
conditions prescribed by the board of
trustees [of the County and District Retire-
ment System].

Section 842.006 is the amended version of what originally
was denominated sections 10 and 11 in V.T.C.S. article
6228g.

Subsection (c) of section 62 article XVI, which created
the County and District Retirement System, authorized the
legislature to provide for a voluntary merger of subdivision
(b) "local systems" into the state system. Pursuant to this
authorization, section 10 of article 6228g, V.T.C.S., was

p. 6031
Honorable Hugh Parmer - Page 21 (JM-1142)

enacted to govern the merger of a .local county system into
the newly-created state-wide system. It provided in
pertinent part:

The voluntary merger into the System
established by this Act (in this Section
called the 'state system') of pension systems
heretofore established under Subsection (b)
of Section 62 of Article XVI of the
Constitution of Texas (in this Section called
the 'local system') is hereby authorized upon
the terms and conditions stated in this
section, and upon such additional terms and
conditions as may be prescribed by the Board
of Trustees of the state system, and after
approval of the merger proposal by the
governing body of the subdivision.

The only lllocal system11 to which this section could apply is
a local county system authorized by subsection (b) of
section 62.

~Section 11 of article 6228g, V.T.C.S., governed "other
local systems" and provided in pertinent part:

The voluntary merger into the state system
created by this Act of pension systems
heretofore or hereafter established for
employees ~-of subdivisions as hereinabove
defined (exclusive of such systems as are
included within the provisions of Section X,
above)13 is authorized to be effected upon

13. Subdivision 3 of section 2 of article 6228g,
V.T.C.S., defined %ubdivisionW in the following way:

The term 'subdivision# means and includes:
the several counties of this State; all other
political subdivisions of this State now
existing or hereafter established, which
consist of all of the geographical area of a
county, or of all or parts of more than one
county; the several political subdivisions of
each county of this State which have the
.(Footnota Continued)

p. 6032
Honorable Hugh Parmer - Page 22 (JM-1142)

terms and conditions to be prescribed by the
Board of Trustees of this state system, and
generally in accordance with the provisions
of Section X, above, so far as applicable.

It is argued that the existence of this section
indicates legislative recognition that special districts
have the implied power to create local pension systems
because it is only to these systems that the section could
refer. We disagree. If, at the time that this section was
enacted, there were no other subdivisions that had explicit
statutory authority to create pension systems to which this
section could have applied, this argument might be more
compelling. Such, however, was not the case. s e. a
V.T.C.S. arts. 4494i, 4494n (now recodified as chaEterq.28;
of the Health 8 Safety Code); board of Manaaers of the
Ha r s Count H 8 . ist. v.
J
for the Citv of Houston, 449 S.W.2d 33 (Tex. 1969); Attorney
General Opinion WW-904 (1960) . The fact that the
legislature enacted section 11 of article 6228g is not
evidence of legislative recognition that special districts
that do not have the explicit statutory authority to create
local pension systems possess the implied authority to
create them.

The third argument. misconstruing specific statutory
provisions asserts that the existence of section 802.001 of
title 8. ~of the Government Code indicates legislative
recognition that special districts have the implied
authority to create local pension systems. We disagree.

(Footnote Continued)
power of taxation; and all counties and
cities operating a city-county hospital under
the provisions of Chapter 383, Acts of the
48th Legislature,.Reg-ular Session, 1943, as
amended [V.T.C.S.' art. 4494i, now recodified
as Health & Safety Code 55 265.011 - .016].
The term also includes, for the purpose of
providing similar coverage for its own
employees, the Texas County and District
Retirement System. But the term 'subdivi-
sion' excludes all incorporated cities and
towns, and all school districts and junior
college districts established under the laws
of this State.
 Honorable Hugh Parmer - Page 23 (JM-1142)
.

Chapter 802 of title 8 of the Government Code sets
forth certain administrative requirements governing public
retirement systems, and provides that, with certain
specified exceptions, all must register with the State
Pension Review Board. Subdivision (2) of section 802.001
defines "public retirement system" for purposes of that
chapter and provides:

'Public retirement system' means a
continuing, organized program of service
retirement, disability retirement, or death
benefits for officers or employees of the
state or a political subdivision, or of an
agency or instrumentality of the state or a
political subdivision, other than: .

(A) a program providing only workers'
compensation benefits:

(B) a program administered by the federal
government;14,. /\

(C) an individual retirement account or
individual retirement annuity within the
meaning of Section 408, or a retirement bond
within the meaning of Section 409, of the
Internal ,Revenue .Code.. of;: 1986 (26 U.S.C.,
Sections 408, 409):

(D) a plan described bye Section 401(d)
[sic] of the Internal Revenue Code of 1986
(26 U.S.C. Section 401)~~~

(E) an individual account plan consisting
of an annuity contract described by Section
403(b) of the Internal Revenue Code of 1986
(26 U.S.C. Section 403);16

14. See V.T.C.S. art. 695g.

15. &g V.T.C.S. art. 6252-3e, to be superseded by
V.T.C.S. art. 6252-3g.

16. &8 V.T.C.S. art. 6252-5a.

p. 6034
Honorable Hugh Parmer - Page 24 (JM-1142)

(F) eligible state deferred
compensatizz plan described by Section 457(b)
of the Internal Revenue Code of 1986 (26
U.S.C. Section 457);17 or

(G)(i) in Sections 802.104 and 802.105 of
this chapter, a program for which benefits
are administered by a life insurance company;
and

(ii) in the rest of this chapter, a
program for which the on1 funding agency is
a life insurance company. 18

This section merely requires that all public retirement
systems, other than those programs specifically listed
above, must register with the State 'Pension Review Board.
The list sets forth programs in which political subdivisions
have been authorized to participate explicitly by statute or
in which they arguably may be permitted to participate in
the future. It is not a list of programs in,which political
subdivisions have implied authority to participate nor does
it in any way constitute an affirmative conferral of
authority to participate. in such programs. Moreover,
section 802.105, which requires that each public retirement
system register with the board, provides that registrants
must include "a c itation of the law under which the system
was created." Gov't Code s 802.105(b)(3) (emphasis added).
Obviously, any system whose authority was merely imnlied
could not comply with this provision. Thus it is evident
that the legislature did not assume that such implied
authority existedl9.

17. See V.T.C.S. art. 6252-3f, to be superseded by
V.T.C.S. art. 6252-3g.

18. j&9 V.T.C.S. art. 6252-5a.

19. It is suggested that the Internal Revenue Code
itself confers authority on special districts to enter into
plans approved by the IRS. We disagree. The form letter
that the IRS sends special districts approving a plan
specifically disclaims that it constitutes approval under
local law:
(Footnote Continued)

p. 6035
Honorable Hugh Parmer - Page 25 (JM-1142)

The final argument adduced to support the claim that
appraisal districts have the implied authority to create
local pension systems does not misconstrue any statutory
provisions. Instead, it misapplies a rule of statutory
construction. It is urged that, because the staff of the
State Property Tax Board, in its published newsletters and
pamphlets, declared that appraisal districts were empowered
to create local pension systems other than those whose
creation is specifically authorized by statute, this
administrative construction should be given great weight.
We do not find this argument convincing.

It is an accepted ,principle of statutory construction
that the construction placed upon a statute by the agency
charged with its administration is entitled to great weight,
Ex narte Roloff, 510 S.W.2d 913 (Tex. 1974): State v.:
Aransas Dock and Channel Co., 365 S.W.2d 220 (Tex. Civ. App.
- San Antonio 1963, writ ref'd), especially where contempo-
raneous, or nearly so, with the statute itself, Burroubhs
V. Lvles, 181 S.W.Zd 570 (Tex. 1944); Stanford v. Butler,
181 S.W.Zd 269 (Tex. 19441. But in this instance. the
application of this 'principle is undermined because the
administrative construction made by the staff of the State
Property Tax Board has not been consistent.

As early as 1983, the pamphlet published by the agency
entitled "Appraisal Board Manual: A Handbook for Countywide
Appraisal District Directors" provided specifically that
,appraisal districts could participate in either the County
and District Retirement System or a private retirement plan.
Id. at 19-20. But even earlier, in an issue of the agency's
monthly newsletter ?3tatement," published in August 1980,
the agency indicated that the only options available to
appraisal districts were participation in the federal Social
Security program, the County and District Retirement System,
or both. Id. at 9.

Moreover, the application of this principle of
construction has been invoked in instances in which an

(Footnote Continued)

This opinion relates only to the acceptability of the
form of the plan under the Internal Revenue Code. It
is not an opinion of the effect of other Federal or
local statutes. (Emphasis added.)

p. 6036
Honorable Hugh Panzer - Page 26 (JM-1142)

administrative agency has construed an act that it is
charged to administer. In this instance, the State Property
Tax Board has no duties relative to any of the statutes
governing the creation of pension systems or deferred
compensation plans. Without regard to either the skill or
knowledge of the staff of the State Property Tax Board,
their administrative construction of these statutes is
entitled to no greater weight than the administrative
constructions of these same provisions by the staff of, for
example, the Texas Water Commission or the Department of
Public Safety.

We therefore conclude that appraisal districts have no
implied authority, absent specific statcltory authority, to
create local pension systems. Accordingly, we conclude taat
appraisal districts may participate in the following: .the
federal Social Security program pursuant to article 695g,
V.T.C.S., the County and District Retirement System pursuant
to chapter 842 of the Government Code, and deferred
compensation plans authorized by article 6252-3e and
6252-3f,,V.T.C.S. (to be superseded by article 6252-3g,
V.T.C.S., effective September 1, 1990). Appraisal districts
have no implied authority to create local retirement systems
analogous to those authorized by articles V.T.C.S. 6243k and
62283, which incorporated cities and counties, respectively,
may create. We turn finally to your second question.

You wish to know what will be the income tax
consequences to individual appraisal district employees and
the proper method of disbursing funds held in any retirement
plans in the event that any plans already in place were
entered into improperly. The Texas Association of Appraisal
Districts conducted a survey of its members that indicated
that, among the 254 counties of the state, 124 appraisal
districts offer "local retirement plans." If an appraisal
district created a local plan that was not authorized by
statute, the apparent varieties as to contracts entered
into, benefits offered, system or plan administration,
restrictions as to participation, years required for
vesting, employee contributions, and appraisal district
contributions are so great that an attempt would necessarily
require us to answer hypothetical questions and engage in
fact-finding, neither of which is permitted in the opinion
process. Accordingly, we decline to answer your second
question.

p. 6037
Honorable Hugh Parmer - Page 27 (JM-1142)

We are not unmindful of the possible consequences of
our decision, but the consequences of legal interpretation
do not control. Regarding a matter of constitutional
interpretation, the Texas Supreme Court declared in Kov v.
Scheider, 218 S.W. 479 (Tex. 1920):

No matter how far-reaching and disastrous
would be the consequences . . . we would not
decline to make the declaration if such was
believed to be the true intent of the
language of the Constitution.

Quoted in Director of the DeD't of Asric. and Env't v.
Printina Indus. Ass'n. of Texas, 600 S.W.2d 264 (Tex. 1980).
--SheDherd v. San Jacinto Junior Collece Dist., 363 S.W.2d
742 (Tex. 1962); Cramer v. ShenDard, 167 S.W.2d 147 (Tex.
1942). We are no less bound by this principle.

The situation with which we are here confronted is not
altogether unprecedented. When the legislature was apprised
of the fact that many appraisal districts in the state had
entered into long-term lease agreements for the rental of
office space or entered into contracts for the construction
of buildings or the purchase of real property without the
statutory authority to do'so, 'it enacted section 6.051 of
the Tax Code to so empower those appraisal districts. Acts
1987, 70th Deg., ch. 55, S 2, at 147. ,The remedy for the
situation with which we are here confronted lies with the
legislature.

We affirm the result of Attorney General opin'ion
JN-1068.
SUMMARY

Appraisal districts are authorized to
participate in the federal Social Security
program by article 695g, V.T.C.S., to
participate in the County and District
Retirement System by chapter 842 of the
Government Code, and to create deferred
compensation plans authorized by V.T.C.S.
articles 6252-3e and 6252-3f. Appraisal
districts have no implied authority to create
local pension systems analogous to those
systems that incorporated cities and counties
may create pursuant to V.T.C.S. articles
6243k and 62283 respectively. Because an
answer to the question as to the possible

p. 6038
Honorable Hugh Parmer - Page 28 (JM-1142)

income tax consequences to individual
appraisal district employees of participating
in a retirement system that is not authorized
by statute would require us to both answer
hypothetical questions and make findings of
fact, we decline to answer your second
question. We affirm the result of Attorney
General Opinion JM-1068 (1989).

Very truly yours,
,
3-W
JIM MATTOX
Attorney General of Texas

MARYRELIRR
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HI& .
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

p. 6039