JIM MAlTOX 

Attorney General 

Supreme Ca~rl Bulldin 

P. 0. BOX 12549 

Austin, TX. 79711. 2549 

512f4752501 

Telex 910/57&1387 

Telecopier 51214750288 

714 Jackson. Suite 700 

Dallas. TX. 75202.4505 

2141742-9944 

4924 Alberta Ave.. Suite 180 

El Paso, TX. 799052793 

915153x3494 

1001 Texas. Suile 799 

Houston, TX. 77002.3111 

713l22W999 

606 Broadway. Suite 312 

Lubbock, TX. 79401-3479 

905f747~5239 

4309 N. Tenth. Suite B 

McAllen. TX. 79501-1555 

5121882.4547 

200 MaIn Plan, suite 400 

San Antonlo. TX. 792052797 

51212254191 

An Equal OppOrtunitYi 

Aflirmailve Action EmPlOYW 

The Attorney General of Texas 

April 9, 1985 

Mr. Ed Grieham 

chairmen 

Texas Employment Cc~nlrlmission 

T.E.C. Building, Rcsm 624 

Austin, Texas 70i 70 

Dear Chairman Grisham: 

Opinion No. m-306 

Re: Disposition of interest 

earned on money in the Unemployment Compensation Fund 

You ask whether interest earned on money in the Unemployment 

Compensation Fund m%stahlished by section 9 of the Texas Unemployment 

Compensation Act, c,odified as article 5221b-7. V.T.C.S., should be 

credited to that IFund or to the state’s General Revenue Fund. We 

conclude that suck. interest should be credited to the Unemployment 

Compensation Fund. 

The fund in question was established in 1936 as a 

special :Iund , separate and apart from all public 

moneys or funds of this State . . . which shall be 

administctred by the Commission exclusively for the 

purposes of this Act. This fund shall consist of 

(1) all contributions collected under this 

Act . i . (2) all fines and penalties collected 

pursuant to the provisions of this act; (3) 

interest earned upon any moneys in the fund; (4) 

any prope’rty or securities acquired through the 

use of moneys belonging to the fund; and (5) all 

earnings c’f such property or securities. 

Acts 1936. 44th Let;., 3rd C.S., ch. 402, 59(a), at 2004. Section 9(b) 

of that act provida!tr that the “State Treasurer shall be treasurer and 

custodian of the Cund. . . .‘I && Althouth these provisions were 

subsequently emend&l. the character of the fund has not changed. See 

Acts 1945, 49th Let;.. ch. 347, 55. at 594. - 

In 1941. the Texas Supreme Court determined that the State 

Treasurer acts es custodian and trustee of the fund but the fund is 

not the property cf the state and the money collected for the fund 

does not belong ir, the State Treasury. Friedman v. American Surety 

Co. of New York, 1581 S.W.2d 570 (Tex. 1941). The Supreme Court stated 

that the money in t,b,e Unemployment Compensation Fund 

p. 1390 
Mr. Ed Griaham - Page 2 (JR-3061 

is not the propert:r of the state in any capacity, 

but is a trust fur,d to be held out of the State 

Treasury, but in tie hands of the State Treasurer 

as trustee, for the benefit of a class of 

employees. . , . 

Id. at 580. 

- 

Also in 1941, this offim referred to the Supreme Court decision 

in Priedmaa v. American Surtrt:y Co. of New York, in determining that 

the designation of the unel&loyment fund as a trust fund and the 

admonition to establish a &patate fund to be held apart from all 

public money of this state differentiates this money from the general 

and special funds of the state. Attorney General Opinion O-3607 

(1941). 

Subsequent to the act tstablishing the Unemployment Compensation 

Fund, the legislature, in 19#5!#, enacted a statutory provision relevant 

to the disposition of depoaL,tory interest. Article 2543d, V.T.C.S., 

provides. in pertinent part, ,thst 

Section 1. Interest received on account of 

time deposits of moneys in funds and accounts in 

the charge of 1:he State Treasurer shall be 

allocated as follows: To each constitutional fund 

there shall be credited the pro rata portion of 

the interest rece:lved due to such fund. The 

remainder of the interest received, with the 

exception of that portion required by other 

statutes to be credited on a pro rata basis to 

protested tax paynenta. shall be credited to the 

General Revenue Fund. The interest received shall 

be allocated on a monthly basis. 

. . . . 

Sec. 3: As to the proper interpretation and 

application of this Article. the State Treasurer 

is entitled to re:.y upon the opinion and advice of 

the Attorney General. 

This office previously has determined that the provision of 

article 2543d which directs that interest earned on money in funds in 

the charge of the State Treasurer be credited to the General Revenue 

Fund does not apply to interest on trust funds which are not the 

property of the state and which the State Treasurer holds as trustee 

out of the State Treasury. Opinions issued by this office consiatently have determined that interest on such trust funds becomes part 

of the principal and part of the fund which generated the interest. 

p. 1391 
,’ 

Rr. Ed Griaham - Page 3 (Jn-306) 

See Attorney General Opinions JR-300 (1985); RR-82 (1979); H-1040 

m77); M-468 (1969). Cf. Attorney General Opinions FM-338 (1981); 

H-1167 (1978). 

- 

The Supreme Court settled the issue that the Unemployment 

Compensation Fund is a trust fund out of the State Treasury for the 

benefit of a class of emp:.oyeea. It is our opinion that interest 

earned on the Unemployment Compensation Fund should not be deposited 

to the General Revenue Funcl pursuant to article 2543d hut, instead, 

should be credited to the Uremployuent Compensation Fund. 

SUMMARY 

Interest earned on money in 

Compensation Fund established by 

V.T.C.S.. should be credited to 

Compensation Fund, 

the Unemployment 

article 5221b-7, 

the Unemployment 

JIM MATTOX 

Attorney General of Texas 

TOM GREEN 

First Assistant Attorney General 

DAVID R. RICHARDS 

Executive Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Nancy Sutton 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Rick Gilpin, Chairman 

Jon Bible 

Colin Carl 

Susan Garrison 

Tony Guillory 

Jim Moellinger 

Jennifer Riggs 

Nancy Sutton 

p. 1392