Attorney General Opinion JM-1194

. d1.X PLvrrox July 27, 1990 *.l"l.o~NEY DESERAL Honorable George Pierce Opinion WO. JM-1194 Chairman Committee on Urban Affairs Re: Authority of a munici- Texas House of Representatives pality to advance compensa- P. 0. Box 2910 tion to an employee Austin, Texas 78768-2910 (RQ-1924) Dear Representative Pierce: You ask: May a municipality advance compensation in the form of cash or other property to employees to be fully earned within one year on terms agreeable to the municipality? Given such a general question, we are, of course, limited to a general answer. However, while we cannot fully and finally answer your question, we can say with a fair degree of certainty that a court would disapprove of such an expenditure of public funds. Cities generally have control over their finances. See Local Gov't Code 85 101.002 (type A cities), 101.022 (home rule cities). Cities also have control over the compensa- tion and conditions of employment of their employees. See Bvrd v. Citv of Dallas, 6 S.W.2d 738 (Tex. 1928). However, a city's expenditure of public funds is subject to constitu- tional restrictions. The Texas Constitution is replete with provisions that prohibit the grant of public funds and the lending of public credit to private individuals or organizations. Specifi- cally, article III, section 52(a) reads: Except as otherwise provided by this sec- tion, the Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State to lend its credit or to grant public money or thing of value in aid of, or to any individual, association or corporation whatsoever, or to become a stockholder in P. 6304 Honorable George Pierce - Page 2 (JM-1194) such corporation, association or company. However, this section does not prohibit the use of public funds or credit for the payment of nremiums on nonassessable life, health, or accident insurance policies and contracts issued by a mutual company authorized to do business State. annuity insurance in this Tex. Con&. art. III, § 52(a); see also & 55 50 (prohibi- tion on the lending of the credit of the state), 51 (prohibition on the grant of public moneys to individuals and corporations); j& art. VIII, § 3 (levy of taxes for public purposes only); id. art. XI, 5 3 (prohibition on political subdivisions' subscribing to private capital, and appropriation or loaning of credit to same): ia. art. XVI, § 6 (prohibition on appropriation for private purposes). But see Tex. Const. art. III, §§ 52-a (allowing grants of public money for economic development), 52(e) (allowing political subdivisions to invest funds as authorized by law). One constitutional scholar has analyzed the meaning of the term "lend its credit" found in section 52(a) and the variations of the term found in other constitutional provisions as follows: Section 50 states that the legislature may not 'give' the credit of the state to anybody, 'lend* the credit of the state to anybody, or 'pledge' the credit of the state for anybody. . . . This is an involved and somewhat imprecise way of saying that the state mav not aid anvbodv bv lendina him money. 1 G. Braden, The Constitution of the State of Texas: An Annotated and Comnarative Analvsis 225 (1977) (emphasis added); see also Brazoria Countv v. Perry, 537 S.W.2d 89 (Tex. Civ. APP- - Houston [lst Dist.] 1976, no writ): Attorney General Opinion JM-533 (1986). An advance of salary is clearly a loan and, thus, a lending of credit within the constitutional prohibition. While the language found in section 52(a) only denies the legislature the power to authorize a political sub- division to "lend its credit," cases decided thereunder and other constitutional analyses make it clear that the constitutional prohibition also applies indirectly to political subdivisions. See, e.a., Storrie v. Houston Cite St. Rv. Co., 46 S.W. 796 (Tex. 1898); Braden, sunra: p. 6305 l Honorable George Pierce - Page 3 (JM-1194) (I . Willatt, Constitutional Restrictions on Use of Public Money and Public Credit, 38 Tex. Bar J. 413 (May 1975). The constitutional provisions cited above signify that the law generally abhors the expenditure of public funds for private purposes. In Brazoria C&zuntv v. Perry, sunra, the court addressed article III, section 52, and succinctly restated the rule as follows: The clear purpose of this constitutional provision is to prevent the gratuitous application of funds to private use. [Cita- tions omitted.] The Constitution does not, however, invalidate an expenditure which incidentally benefits a private interest if it is made for the direct accomplishment of a legitimate public purpose. 537 S.W.2d at 90-91; see also Barrinaton v. Cokinos 338 S.W.Zd 133, 140 (Tex. 1960); podson V. rshall 118 i.W.2d 621 (Tex. Civ. App. - Waco 1938, writ dismjd); Attorney General Opinions JM-1146 (1990); JM-551, JM-431 (1986); MW-89 (1979); WW-790 (1960). The requirement stated in the Brazoria County case that the expenditure must be made "for the direct accomplishment of a legitimate public purpose" leads us to doubt that a court would approve the salary advance about which you ask. Your unadorned question offers no implicit public purpose; however, the determination of a public purpose and the establishment of a cuid nro QUO are legislative functions. See, e.a., Youna v. City of Houston, 756 S.W.2d 813, 814 (Tex. App. - Houston [lst Dist.] 1988, writ denied); Dodson, sunra; Attorney General Opinions JM-1146 (1990); MW-373 (1981). SUMMARY A city may not ordinarily advance salary to its employees. JIM MATTOX Attorney General of Texas MARY KELLER First Assistant Attorney General p. 6306 Honorable George Pierce - Page 4 (JM-1194) L . LOU MCCREARY Executive Assistant Attorney General JUDGE ZOUIE STEAKLEY Special Assistant Attorney General RENEA HICKS Special Assistant Attorney General RICK GILPIN Chairman, Opinion Committee Prepared by Karen C. Gladney Assistant Attorney General P. 6307