The Attorney General of Texas
MARK WHITE
September 2, 1982
Attorney General
Mr. James R. Hine Opinion No. MW-512
Supreme Court Building Acting Administrator
P. 0. Box 12546
Ausfin. TX. 78711. 2548
Texas Employment Commission Re: Whether Texas Employment
5121475.2501 TEC Building may obtain advance to state
Telex 9101674-1367 Austin, Texas 78778 unemployment trust fund from
Telecopier 5121475.0266 Federal Unemployment Account
Dear Mr. Hine:
1607 Main St., Suite 1400
Dallas. TX. 75201-4709
214,742.8944 You ask whether the state may legally obtain an advance from the
federal unemployment account to the state unemployment trust fund
under section 1201 of the Social Security Act, 42 U.S.C. §1322, should
4624 Alberta Ave.. Suite 160
El Paso, TX. 79905.2793
an advance be needed to augment the fund. You wish to know whether
9151533-3484 article III, section 49 of the Texas Constitution or article 5221b-16,
V.T.C.S., prohibits the state from securing such an advance.
1220 Dallas Ave., Suite 202
As you note in your request letter, the provisions of the Texas
Houston, TX. 770026966
7131650-0666
Unemployment Compensation Act and the operations of the Texas
Employment Commission under it must be approved by the United States
Secretary of Labor pursuant to the Federal Unemployment Tax Act and
606 Broadway. Suite 312 the Social Security Act. I.R.C. §3304; 42 U.S.C. §503. If the state
Lubbock. TX. 79401-3479 fails to pay unemployment benefits under the 'Texas Unemployment Act,
6061747-5236
it would lose ixhe necessary federal approval. In consequence, the
staff would no longer receive federal funding for the administration
4309 N. Tenth. Suite 6 of the Unemployment Compensation Act and Texas employers would not
McAtle”. TX. 76501-1665 qualify for ehe federal unemployment tax credit under section 3302 of
512/682-4547 the Internal Revenue Code.
200 Main Plaza, Suite 400 The Texas Employment Commission has a broad grant of authority to
San Antonio. TX. 76205-2797 make the expenditures and take the actions necessary to carry out its
5121225-4191 duty to administer the Unemployment Compensation Act. V.T.C.S. art.
5221b-9. We believe the commission would have implied statutory
An Equal Opportunityi
authority to seek an advance from the federal unemployment account to
Affirmative Action Employer the state unemployment trust fund as long as no other Texas statute or
constitutional provision prevented it from doing so.
The authority for the granting of advances to the states from the
federal unemployment account in the unemployment trust fund appears in
section 1321 of Title 42, United States Code. By amendment of
sections 1321 and 1322 in 1981, these advances are now required to be
repaid by the state with interest ac a percentage rate determined
P. 1849
Mr. James R. Hine - Page 2 (KIV-512)
according to a formula contained in section 1322, unless they are
repaid in full before the close of September 30 of the calendar year
in which the advances were made. Section 1322 also provides that the
interest required to be paid shall not be paid by a state from amounts
in its unemployment fund. If the state pays such interest d1~rectly or
indirectly from its unemployment fund, the state's unemployment
compensation law will not be certified by the United States' Secretary
of Labor. However, the state may repay the advances in whole or part
at any time by requesting a transfer from its unemployment account to
the federal unemployment account of the appropriate amount. In the
event the advances are not paid voluntarily within the no-interest
time frame, section 3302(c)(2) of the Internal Revenue Code provides
for their recovery by a reduction of the tax credits allowed to the
taxpayers of the State and the application of the additional revenues
consequentially obtained by the federal government to the repayment of
such delinquent advances. We have found no provision for an
involuntary recoupment of unpaid interest.
Article 5221b-16, V.T.C.S., provides that benefits shall be
deemed to be due and payable under the Texas Unemployment Compensation
Act only to the extent provided in the act and to the extent that
moneys are available therefor to the credit of the Unemployment
Compensation Fund, and neither the state nor the commission shall be
liable for any amount in excess of such sums. This provision limits
the commission's liability for payment of benefits to the moneys
"available therefor to the credit of the Unemployment Compensation
Fund." The statute does not purport to limit the commjssion's power
to seek the advances in question. Article 5221b-16 is directed only
to the payment of benefits under the Texas Employment Commission
Compensation Act.
Article III, section 49 of the Texas Constitution provides in
part that "["lo debt shall be created by or on behalf of the [sltate,
except to supply casual deficiencies of revenue, repel invasion,
suppress insurrection, defend the [sItate in war, or pay existing
debt." (Emphasis added). In construing this section of the
constitution, the Texas Supreme Court in the case of Charles
Scribner's Sons v. Marrs, 262 S.W. 722 (Tex. 1924), held, among other
things, that obligations that run current with revenues are not debts
within the contemplation of the constitution. The holding in this
case was restated with approval by the Texas Supreme Court in 1966 in
the case of City of Big Spring v. Board of Control, 404 S.W.2d 810,
814 (Tex. 1966). In view of these constructions of article III,
section 49, it does not, in our "pinion, present any bar to the
state's obtaining such advances. Presumably, the commission would
expect to repay the principal of the advance with current state funds.
If repayment is not made before interest accrues, by federal action
such advances will be recouped by a reduction of the tax credits of
the state's taxpayers.
P. 1850
Mr. James R. Hine - Page 3 (MW-512)
We also believe that the commission may contract to pay interest
on the proposed advances, and that the interest could legally be paid
from the Unemployment Compensation Special Administrative Fund
established by article 5221b-22a, V.T.C.S. As noted above, the
commission has broad authority under article 5221b-9, V.T.C.S., "G
administer this Act" and to "make such expenditures... and take such
other action as it deems necessary or suitable to that end."
(Emphasis added). Article 5221b-22a, V.T.C.S., provides in part:
There is hereby established as a special fund,
separate and apart from all public moneys or funds
of this state, an Unemployment Compensation
Special Administration Fund which may be used by
the Commission for the purposes of paying costs of
the administration of this Act including the costs
of reimbursing the Unemployment Compensation
Benefit Accounts for unemployment compensation
benefits paid to former employees of the State of
Texas which are based on service for the state,
and the costs of construction and purchase of
buildings and land necessary in such
administration. The State Treasurer shall be the
Treasurer and custodian of the fund. He shall
administer such fund in accordance with the
directions of the Commission, and the Comptroller
shall issue warrants upon it in accordance with
the directions of the Commission. All interest
and penalties collected under the provisions of
this Act and all moneys now on deposit in the
Unemployment Compensation Special Administration
Fund shall be paid into this fund.... The
Commission may, by resolution duly entered in its
Minutes, authorize to be charged against said
moneys any expenditures which it deems proper in
the interest of good administration of this Act,
provided the Commission in such resolution finds
that no other funds are available or can properly
be used to finance such expenditures. All moneys
which are deposited or paid into the Unemployment
Compensation Special Administration Fund may be
expended in accordance with the provisions of this
Act, upon appropriation by the legislature, and
shall not lapse at any time or be transferred to
any other fund. (Emphasis added).
See &Xl Attorney General Opinion m-474 (1982) (discussing
composition and usa of fund).
P. 1851
Mr. James R. Hine - Page 4 (MWW-512)
The Unemployment Compensation Special Administrative Fund,
denominated Fund 165, is appropriated by the following language in the
current General Appropriations Act.
Out of the Unemployment Compensation Special
Administrative Fund No. 165, to be:
There is hereby appropriated to the Texas
Employment Commission all funds which the
COllUXiSSiOn, by resolution duly entered in its
Minutes, deems proper in the interest of good
administration of the Texas Unemployment
Compensation Act, provided that no other funds are
available or can properly be used to finance such
expenditures. This estimate is based on the
assumption that Congress will enact legislation
extending Section 903 of the Social Security Act
to authorize the Texas Employment Commission to
expend funds out of the Federal Unemployment Trust
Fund for the administration of the Unemployment
Compensation Law and public employment offices.
Acts 1981, 67th Leg., ch. 875, at 3402 (amount of appropriation
omitted).
As an examination of these provisions of the Unemployment
Compensation Act and the Appropriations Act shows, the commission may
contract to pay interest from Fund 165 if the interest is a cost of
administering the Act. As a general rule, the state is not liable for
interest in the absence of a statute or express contract providing for
the payment thereof. State v. Hale, 146 S.W.Zd 731 (Tex. 1941);
Walker v. State, 103 S.W.Zd 404 (Tex. Civ. App. - Waco 1937, no writ).
However, prior opinions of this office indicate that a state agency
may agree to pay interest on the basis of implied statutory authority.
Attorney General Opinion H-691 (1975) held that the trustee of
the Mental Health and Mental Retardation Patient Benefit Fund could
place the fund in certificates of deposit and then pledge such
certificates as collateral for loans. The opinion considered whether
the purpose and effects of the transaction were consistent with the
relevant statutes, and did not seek express statutory authority for
the loan transaction. Attorney General Opinion H-340 (1974) concluded
that the State Bar could finance the construction of the State Bar
Center by pledging voluntary contributions and revenues generated by
the building. The statutory authority was found in language giving
the State Bar "power to contract with relation to its own affairs and
necessary to carry out the purposes of this Act." The opinion did not
specifically address the question of interest. However, such a
financing arrangement would necessarily involve the payment of
P. 1852
. .
Mr. James R. Hine - Page 5 (MW-512)
interest. See also Attorney General Opinion M-656 (1970) (purchase of
equipment on installment plan).
We believe the commission may make the payments in question even
though it does not have express statutory authority to pay interest.
Expenditures incident to maintaining an adequate flow of funds through
the state unemployment trust fund could reasonably be characterized as
"costs of the administration of this Act." V.T.C.S. art. 5221b-22a.
This office concluded in Attorney General Opinion O-128 (1939) that
Fund 165 could be used for payment of legal fees and court costs
incurred by the commission in civil suits brought to collect
delinquent contributions under the act. The commission may charge
against Fund 165 "any expenditures which it deems proper in the
interest of good administration of this Act...." This is a broad
grant of authority. Under this grant of authority we believe the
commission could conclude that the interest payments incident to
maintaining the balance of the unemployment trust fund would be proper
administrative expenditures. Such interest payments might well enable
the commission to continue to make benefit payments in an orderly and
timely fashion during a period of fiscal adjustment. We cannot say
that the proposed expenditure is not authorized. The commission may
agree to make interest payments that it can reasonably expect to pay
from current revenues in this fund.
It is therefore our opinion that the Texas Employment Commission
may legally seek to obtain advances to its trust fund from the federal
unemployment account of the Social Security Act pursuant to the
procedures found in section 1201 of that act, and, if necessary, pay
interest thereon from moneys available in the special administrative
fund.
SUMMARY
The state may legally obtain advances to its
Texas Employment Commission Unemployment Trust
Fund from the Federal Unemployment Account of the
Social Security Act.
MARK WHITE
Attorney General of Texas
JOUN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GPxAY III
Executive Assistant Attorney General
P. 1853
. ,
Mr. James R. Him - Page 6 (me512)
Prepared by Robert L. Lattimore
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Rick Gilpin
Patricia Hinojosa
Robert L. Lattimore
Jim Moellinger
P. 1854