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Mr. Carl Mullen Deputy Director General Services Commission P.O. Box 13047 Austin, Texas 7871l-3047 March 9,1995 Opinion No. DM-328
Re: Whether the General Services Commission has the authority to promulgate a rule to deem busmesses owned by individuals with disabiities as %istorically underutilized businesses” as that term is de&d in section 1.02(3) of article 6Olb, V.T.C.S. (RQ-721)
Dear Mr. Mullen:
On behalf of the General Services Commission (the “commission”), you ask whether the commission has the authority to promulgate a rule to deem businesses owned by individuals with disabilities as ‘historically underutilized businesses” as that term is detined in section 1.02(3) of article 601b, V.T.C.S. Section 1.02(3) defines the term

“historicahy underutilized business*’to mean a business that is owned (or, in the case of a corporation or partnership, at least fifty-one percent owned) by one or more persons who

are socially disadvsntaged because of their identification as members of certain groups, includmg black Americans, Hispanic Americans, women, Asian Pacitic Americans, and Native Americans, and have s&bred the effects of discriminatory practices or siiar insidious circumstances over which they have no control. V.T.C.S. art. 601b, 3 1.02(3)(A)(i).*

*8cction1.020) in itsentirety provides asfollows:

(A) a mrpation formedfor the pups of makinga profitin which at least51perantofallclassaofthesharrsofstodrorotheroquitablcseeuritia IUCOWlCdbyOneOrmOrrpcrJonsWbo:

(i) are scciatly disadvantagedbecaweoftbciridentificationas mcmatsofccrtaingroups,inchidingblackAmuica~~,Hispauic Americans,

wmcn, AaiaaPa&c Amuicans, and NativeAmcricaos,ad bavc aoffcrul the effects of disctiminatory pracliccsor aimihr insidious cimwtancesowrwhichtheyhawnocontro~andMr. Carl Mullen - Page 2 (DM-328)

Section 1.03 of article 6Olb requires the commission to “certify businesses that are historically underutilized businesses.” Id. 5 1.03(a). Section 1.03 also requires the commission and state agencies to compile information regarding contracts awarded to historically underutilii businesses. Id. $1.03(c) - (d), (g), (k), (m). The commission is required to offer assistance to historically underutilii businesses regarding state procurement procedures and opportunities and to encourage state agencies to use historicshy underutiliaed businesses. Id. fj 1.03(i), (p). Section 3.10(b) of article 601b requires the commission and state agencies to “make a good faith efhort to assist historicdly underutilized businesses to receive not less than 30 percent of the total value of all contract awards.

. that the commission or other agency expeots to make during a fiscal year.” Both section 1.02(3) and section 1.03, the relevant provisions here, were enacted by the legislature in 1991 and amended in 1993. See Act of May 23,1991,72d Leg., RS., ch. 677, $5 I - 2, 1991 Tex. Sess. Law Serv. 2457,2457-58 (adding sections 1.02(3) and 1.03); Act ofMay 19, 1993, 73d Leg., RS., ch. 684, §$ I, 3, 1993 Tex. Sess. Law Serv. 2540,2540-41 (amendmg sections 1.02(3) and 1.03). Having reviewed article 601b and its legislative history, we conclude that the commission does not have the authority to promulgate a rule deeming businesses owned by individuals with disabiities as “historically underutilized businesses” as that term is de&d in section 1.02(3) and used in section 1.03 of article 6Olb, V.T.C.S. The de&&ion of the term “historically underutilized business” in section 1.02(3) refers to persons with two characteristics; first, persons ‘kho are socially disadvantaged because of their identification as members of certain groups, inchtding black Americans, Hispanic Ameritxns, women, Asian Pacitlc Americans, and Native Americans,” and, second,

(ii)havea propdonate interestand demoastrate activepauictpation in thecontrel,cpcration,

aadmsaa8emeat

ofthecorpaatioa’s affairs;

(C) a partmship formedfor the prose ofmakinga pmrit in which at least5lperantoftheassetsandinterestintbepartncrshipisowaedbyoncor morepersons

who: (i) aredcrixihcd

in paragraph(A)(i)

ofthismhdivistcn;

aad (it)haveaprcpcrttonateintere5tauddaaonsaate aelivcparlieipstioa in theamtml, eperatien,sad managcmmt ofthemrperation’s

affatrs; (D) ajointventure

in whicheachentityin thejoint vennnvisa htstaiwny uademtilized

hushtess nnderthis subd%ion; or (2) a supplier

contract hemveaa histcricatly

undemtiIizcd

business aader this s&divisionandaprim contractor underwhichthehistorically undemtilii business is dimctlyinvolved

in themarnd&ctnre

or distriion ofthe sapplies or mterials orrkhcnke ware- andabips the supplies.

p. 1736Mr. Carl Mullen - Page 3 (DM-328)

persons who “have suffered the effects of discriminatory practices or similar insidious circumstances over which they have no control.” Although individuals with disabilities may certainly have the latter of these two characteristics, we believe that the legislature did not intend for the term “‘group”used in describing the first characteristic to embrace persons identified as members of groups other than those defined by gender, race, or ethnicity.
This conclusion is based on our review of both article 6Olb and the legislative history of the historically underutilized business provisions. Fi individuals with disabiities are mentioned nowhere in section I .02(3) or I .03. Subsection (A)(i) of section 1.02(3) refers solely to persons idemified as memlmrs of groups defined by gender, race, or ethnicity. Furthermore, subsection (g) of section 1.03 requires the wmmission, in cooperation with the comptroller and state agencies, to “categorize each historically underutilized business that is included in a report under this section by sex, race, and ethnicity.” We believe that ifthe legislature had intended persons identified as members of groups other than those defmed by gender, race, and ethnicity to q&ii as historically underutilized businesses that it would have prescribed other, or at least broader, reporting categories. In addition, the legislative history is devoid of any references to persons identified as members of groups other than those defined by gender, race, and ethnic&y. See, e.g., House Research Orgamzation, Bii Analysis, H.B. 799, 72d Leg. (1991); see also House Special Comm. on Bus. Owned by Women or Minorities, Interim Report to the 7lst Texas Legislature (1989).2 Piily, we note that the 1991 and 1993 appropriations acts wntain provisions regardii state wntracts with historically underutilii businesses applicable to any appropriation to a state agency. The 1993 appropriations act defines the term ‘historically underutilized business” to mean:

a corporation formed for the purpose of making a profit in which at least 5I percent of all classes of the shares of stock or other equitable securities are owned by one or more persons who have been historically undemtihxd because of their identification as women or as members of certain minority groups, including Black Americans, Hispanic Americans, women, Asian Pacific Americans, and Native Americans who have suffered the effects of discriminatory practices or similar insidious circumstances over which they have no control. General Appropriations Act, 73d Leg., R.S., ch. 1051, pt. V, 5 101(2)(a), 1993 Tex. Sess. Law Serv. 4521, 5379. The detinition in the 1991 appropriations act is similar. See Oeneral Appropriations Act, 72d Leg., 1st C.S., ch. 19, pt. V, 5 106(2)(a), 1991 Tex.
zTbc1991lcgislationwasdcscn‘bcdatabtaring~thcHouceCo~~onStatc~byits author as comingoutofthisimaim mmmittec. licmings onHB. 799Before lheHouseComm.on State Afbim, 72dLeg.(March18, 1991)(testimony ofFkpmentativc

htton).

p. 1737Mr. Carl Mullen - Page 4 (DM-328)

Sess. Law Serv. 365, 1042. The 1993 appropriations act also provides that it is the intent of the legislature that state agencies report certain information about state wntracting to the General Services Commission “classified by minority group status as defined in subsection 2.a above and by gender.” General Appropriations Act, 73d Leg., RS., ch. 1051, pt. V, 4 101(8)(a), 1993 Tex. Sess. Law Serv. 4521, 5380. Although these appropriations act provisions are not intended to create substantive law,3 we believe it is signiticant that th9 too describe and discuss historically under&ii businesses solely in terms of businesses owned by persons identitkd as members of groups defined by gender, raw, and ethnicity.
In wnclusion, it is a well-established legal principle that an administrative agency

“can adopt only such rules as are authorized by and wnsistent with [its] statutory authority.” See TexarFire & CasuaIty Co. v. Harris Coun~~ Bail Band Bd., 684 S.W.2d 177, 178 (Tex. App.-Houston [14th Dist.] 1984, writ refd n.r.e.). Because the term

“historically underutilized busines.F as de&ted by section 1.02(3) is limited to businesses owned by persons identified as members of groups detined by gender, raw, or ethnic&y, we must conclude that the wmmission is not authorized to promulgate a rule to deem businesses owned by indiiduals with disabilities as “historically underutilii businesses.” Such a rule would be inwnsistent with the statute.
Of wurse, the legislature is free to amend section 1.02(3) to include busmesses owned by individuals with disabilities within the defmition of historically underutilii businesses ifit determines such an amendment is appropriate. In this regard, we note that we do not believe that such an amendment would be inwnsistent with sections 3.20,3.22, and4.15ofsrticle601borchapters94and122oftheHumanResourcesCode,theother provisions about which you inquire. These provisions pertain to state purchases of goods and services from nonprofit agencies and other organizations that train individuals with disabilities or to the licensing of certain persons to operate certain state facilities.4 None

QoIh apprepriations

aet pmvistoasmgardta8hisanicsllyMdmailized bmiaesscsamtaia me follcwinglaa8va8e: ~Sscnionisan~~~oftheintmt~tbcLegislatunandQsmtimposca dutymtalnadyprwidedforbygenerallaworncgatcapowcr~bygenaalLaw.” S&General Ap~nqniationsAct, 72d Leg., 1st C.S., ch. 19,pt. V, 0 W(3), 1991Tex gcs.8. Law Serv.365, 1043; Genual Appqmiatim Aet 73d Leg.,KS., ch. 1051,pt. V, &S 101(3), 1993Tex. Sess. Law km. 4521, 5379.

‘Section 3.20ofarticle 6olb pmides that“pmdom ofworkshops, organizations,

orcorporations whoseprimarypuposeisvainingmdclnplayingmentallyrrtardedorphysicellybandi*lppebpnsoar shall be given preference if theymeetstatespecilications as to quantity,

quality,andprice.” siy. section3.22 provides

Ihatthe mmpetitive

biddingprovisionsof article6Olbatx not applicable “tostate purchastsofblindaradegoodsor~aso&rcdforsPlctostateagcaciaMaresult~cffonsmadcby tbcTarasCommiacconPurchags~BLiad-MedcGoodsandSavias”cnatalbychapcr122aftbc Elmnan Raourca Code. SectIon122.004(a) ofthe HumsaRemme6Codemakesitclearthat”blindmade goodsand services”tefemto goodsand servicesoffertdfor sale by nonprofit agencies. sation

p. 1738Mr. Carl Mullen - Page 5 (DM-328)

of these provisions pertain to state contracting with for-profit businesses owned by individuals with disabilities.
SUMMARY

The General Services Commission does not have the authority to promulgate a rule to deem businesses owned by individuals with disabiities as “historically underutilized businesses” as that term is deiined in section 1.02(3) of article 6Olb, V.T.C.S., because the legislature did not intend that term to refer to businesses other than those owned by persons who are socially disadvankged because of their identifkation as members of groups defined by gender, race, or ethnicity.

DAN MORALES Attorney General of Texas
JORGE VEGA Fii Assistant Attorney General
SARAH J. SHIRLEY Chair, Opiion Committee Prepared by Mary R. Grouter Assistant Attorney General