Attorney General Opinion WW-0565

WILL WILSON ATTOHN- OLZNEHAI. AUSTIN 11. T&x&s March 6, 1959 Honorable William S. Fly Chairman Senate Finance Committee Honorable William S. Heatley Chairman House Appropriations Committee Capitol Station .; Austin, Texas Gentlemen: Opinion No. W-565 Re : Whether the Employees Retirement System and and the Teachers Retire- ment System are adminis- trative agencies of the State for which adminis- tration.expenses should be appropriated by the Legislature, Andy related questions. In y0ur.reques.t for an opinion yourecite that the Legislative Budget Board has raised a question as' to whether it isnecessary for, the .Legislature to make biennial appro- riations 4 covering the administration expenses of the Employees etirement System and the Teachers Retirement System of Texas. You further advise that the Senate Finance Committee and the House Appropriations. Committee desire.,the o,pinion of the Attor- ney General as to the legal,:status of the.various funds of these two retirement systems,, in order,,,that the Legislature might act in the manner prescribed by law in making appropria- tions for these two agencies. The answer to the questions submitted is dependent upon the construction of the,provisions of the statutes re- lating to the creation and administration of the two retire- mentsystems. The statutory provisions relating to the Teacher Retirement System are embodied in Article 2,922-l ~of Vernon's Civil Statutes, while ,the provisions.relating to the Employees Reti.rement System are contained in Article 6220-a. If the various funds of the two retirement systems are required 'to be deposited in ,the State Treasury it must follow, pursuant ~to Section 6 of Article VIII of the Constitution of Texas that such funds cannot be expended or drawn from the Tre;y;nk.ein pursuance of specif'ic appropriations made 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 accordance with the general statutes pertaining to the Systems without prior specific appropriations by the Legislature. Honorable Willlam S. Fly, Honorable William'S. FleathY, page 2, W-565) gectlon‘2 of Artlcl\e'&2-1 speaks of the %orpora~te exlstence*f; of ,the Eeachers Retirement System. It further re- cites that the Retirement System shall have the power and privileges of's corporation and shall transact all of its busi- ne~ss in then name 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 .maintenance are paid. The Expense.Rund is constituted by membership payments contributed annually by each member of the.Retirement Gvstem inthe amount ., ‘: .P. 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 ($2.00) Dollars ~.per contributor:for .the year, the Board:of Trustees shall transfer to the Expense Fund from the Interest Fu@an amount:necessar'y~to cover theexpenses as esti,mated::for'the year;, but in no ‘evcn~t~sh&ll the,amount. trans-:' : ferred exceed in.any:one.year Fifty Cents ($.50) per member of .record as. 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~.Board of Trustees and fur- : ther autho?izes'the Board to ~establish'rules and regulations for the administration.of the:.'ftkds created by. theeAct.and,for~ ': the transaction of~its:.businegs~, that: This Section further provides'.' : 11.. . . ersonsengaged by the State Board of *Trustees, fan x ally other expenses of .the. Board ..'necessary ~for the,~operation.of the Retirement Sys- .~ tern, shall.be Raid at such rates and insuch 'f. amounts as.the,State Board..of.lVus,tces. shalla&~~. prove, ~provided that in no.&8 ,sh@lthey'be ~greater. than that'.paid~for~~l%ke or: s$.mZlar service .' ..of"the State .of Texas;".~ .,.. ., : :.Sectioli:,13,pr~~des::tha~"the Stat& Board of Trustees shail.be; thee%rustees~ of:.the. 'several'.,fun8g.,'created by the and.@11 seo~lties, ~motii'es;'and othex.aagets..qf :the Act Retire& i System;'~and~~have full power to invest~&dre-invest same sub- ject to ~the~limitatlons and restri&ic~s:th&ei.n contained. SubGectlon.3 of Sectlcn:U reads as'foll.c+s: : Yl'he Treasurer of ,the State of'Texas shall be cu todu of all bonds ~s6curities and funds : %~&entsfrom saidfunds s&l be ma&by h& on:war.rapts drawn 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:,.;A duly:attdsted copyoi ti+ +++int+o?l of ,thc ' ,. : Honorable William S. Fly, Honorable William S. Heatley, 3 (WW-565) State Board of Trustees designating such person shall be filed with said Comptroller as his au- thority for issuing such warrants." (Emphasis added.). Subsection 2 of Section 16 directs that the Treasurer of the State of.Texas shall ,RetirementFund give a bon no/100 ($5O,OOOj Dollars. L! upon becoming custodian of the in the sum of Fifty Thousand and In the interest of brevity we will not set out in de- tail the various provisions of the Employees Retirement Act (Article 6228a of Vernon's Civil Statutes) which we consider pertinent to your ~inquiry, but it seems sufficient to say that said Act.contains provisions substantially the same as those pravisions of the Teacher Retirement Act above described. In this connection, we call attention to the following sections of Article 6228a: Subsection 6 of Section 6, Sections 7A,and 7C, and Subsections 5 of Section 8. In the case of New &&, et al.d~151 S.W.2d ~$l~*t~,k$%rn~?%&% ;ixas was concerne with the status of the Employees Compensation Fund and the necessity for speoific ~legislative appropriation prior to the expenditure.of'the fund in the payment of unemployment benefits. In concluding that legislative appropriation‘was not necessary, the Court stated;. %ubdivision b of Section 7 of Article 5221b constitutes the State ~$reasurer treasurer and cus- todian of the Unemployment Compensation F'und. Un-' der the provisions of th$s subdivision the mone$ collected for such fund 1s never paid into the State Treasury shall ever be Ii nor is it contemplated, that such one. The officer who fills the office of State Treasurer:is simply given an added duty or responsibility. It 'is made the duty of such officer to act as custodian of the Unemploy- ment Compensation Fund, and to pay it over as pro- ;zd.by the Act. The money collected for such ,--though levied and collected in the form of excise taxes,--is not levied or .collected to 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 t Y ry incemon ~Eecomes he Act in its the urocertv of a t usk.' c:eated for the benefit of a cl.ass:of citiiens of .,' , Honorable William S. Fly, Honorable William S. ,Heatley, page k W-565) I I this State,--the unemployed whose 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 wermanentlv auuro- la,es this fund to be used for the euruoses . + or which it was collected without the necessitv pf an auurouriation bv the Lesislature everv two years:" (Emphasis added.) Tex . See also: Manion v. Lockhart. State Treasurer 175, 114 S.W.2d 218; Smith v. Paschal, 1 S.W.2d lo&, 131 (Tex.Comm.App); Tatum v. Wheeless, 180'~iss. 800, 178 So. 95; 108 A.L.R. 595; Attorney General's+Op%nion W-241 (1957). The applicability of.the holding of the-Supreme Court .' of Texas in the Friedman case a, to the question here pre- sented is readily apparent. i t leads us here to the same co& elusion reached by the,Supreme Court 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~class of citizens of this State,---the employees and the teachers of the State, respectively whrl con- tri.?ute in a large measure to the respective funds. $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 'statutory provisions relating to the administration of the two systems that the Legislature either contemplated or ks required that there must be a specific appropriation of these funds before the same may be expended for the purposes received; but on the contrary we believe that the effect of the language used when considered in light of the purposes of the two acts, 1 s to constitute a permanent and continuing appropriation of the funds accruing to each system, thereby eliminating' the necc:sity of recurring legislative appropria- tions cnch two years, As in the Friedman case State Treasurer has been constituted the K suura, the custo 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 Treasurer as custodian. ;Ls the Su'preme Court 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 accordance with the general laws governlng~the operation of the two,systems without prior Honorable William S. Fly, Honorable William S. Reatley, page 5 (W-565) specific appropriation by the Legislature of Texas. This is true because the two retirement Acts do not contemplate that funds of either system shall be placed in the4tate Treasury, and Section 6 of Article VIII of the Constitution of Texas, requires specific legislative appropriation only 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~without specific appropriation of said funds made by th'e Legislature, 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 $111, Constitu- tion of Texas. We suggest, therefore, that then biennial ap- propriations bill appropriate any unex;?ended balances of funds belonging to the systems, now on deposit in the State Treasury,' and direct and authorize the transfer of such balances to a special .trust account with the Sta$e Treasurer acting as cus- todian. When this is accomplished it will not be necessary for the Legislature to make further.appropriatiohs'of these funds before they may be legally.expended by the governing board of each retirement system.for the pur~osea for which re: ceived. The Biennial Appropriations Act should also appro- priate to the Employees Retirement'System and Teachers Retire- ment System the State~'s matching contribution. In the case of the Teachers Retirement System the State contribution should be appropriated from.the allocations of the, Om@bus~Tax Fund, while the State's matching contribution for theEmployees Re- tirement System should be made from the respective funds from,;: which the employees,benefited by the Act,receive their respeo- tive ~salaries. This statement rests on the assumption that the Legislature will desire to continue to provide matching funds for the two retirement systems from the same source.5 as in the current Biennial Appropriations Act (H.B. 133, Acts ;, of the 55th Legislature, Regular Session, 1957). By way of summary, the Biennial Appropriations Act for the ensuing biennium should~contain two items for each '~ retirement system. One item should appropriate and 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 respective retirement 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;:orable William 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.accounts within the State Treas- ury. Should this be accomplished no portion of said funds could be expended without specific, prior appropriation by the Legislature and in accordance with such appropriations. Even if the funds of the two systems are not deposited in the State Treasury, thereby eliminating the necessity of legislative ap- propriations the' Legislature~may, by general statute, impose such restrictions upon the expenditure of the funds as it may deem necessary so long as such restrictions do not result in a diversion of the funds to unauthorized purposes. SUMMARY The~respective funds 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 'but out of the State Treasury. The Biennial'Appropriations .Act .for the ensu- ing biennium should appropriate the State's match- ing contributions for 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 trarisfer of . 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 LP:mfh:wb B onard Passmore Assistant Honorable William page 7 (W-565) . S. Fly, Honorable William S. HeatleY, APPROVED: OPINION COMMITTEE Geb. P. Blackburn, Chairman Dean Davis William E. Allen Riley Eugene Fletcher John !B,. Webster RJXLEWEDFOR TBEATTORNEYCENERAL BY: W. V. Geppert ,.,, .</ ..y