TRE 

OF EXAS 

Dr. Henry A. Holle 

Commissioner, State 

Department of Health 

Austin, Texas 

Dear Dr. Holle: 

concerns 

of House 

Session, 

Your request for an opinion, dated August 12, 1957, 

the interpretation and execution of the provisi,ons 

Bill 434, page 235? Acts 55th Legislature, Regular 

1957. 

August 26, 1957 

Opinion No. Ww-241 

Re: Handling of funds received from 

the federal government and various municipalities pursuant to 

provisions of House Bill 434, 

Acts of 55th Legislature, Regular Session, 1957. 

The Act was designed to enable the State to participate in and receive grants pursuant to the Federal Rousing Act 

of 1954, as amended. The latter Act, and the administrative 

rules promulgated pursuant thereto, make federal funds available to state planning agencies to "facilitate urban planning 

for smaller communXties lacking adequate planning resources", 

The federal grants in each instance shall not exceed 5C per 

centum of the estfmated cost of the work for which made. The 

remainder of the aggregate costs must be provided by the state 

and may be derived by the latter from "various sources such as 

state appropriations,,gifts or contributions of cash or technical services from afded municipalities". House Bill 434 

designates the State Department of Health as the State agency 

to receive said federal funds and to contract with reference 

thereto, 

In connection with the foregoing, you have propounded 

for our consideration the following questions: 

1. May the Department of Health assess each 

particfpattig city a sum9 in addition to the actual project costs, sufficient to employ personnel 

needed to effectively administer the program7 

2. If the funds from the federal government 

and from the applicant-city are deposited in the 

State Treasury, canwarrants against such a special 

account be issued? 
Dr. Henry A. Holle, page 2 (~~-241) 

3. If there is no authority for depositing 

funds from municipalities in the State Treasury 

and withdrawing them, can the funds received from 

the federal government and from the municipalities 

legally be deposited in a local bank and checks 

issued against said account for planning services 

rendered in order to carry out the planning program? 

4. If either of the above mentioned procedures are not authorized, will you kindly suggest to 

us, if possible, the procedure for handling these 

funds which will permit us to carry out the intent 

of the provisions of H.B. 4347 

Section 1 of House Bill 434 provides as follows: 

"The State Department of Health is hereby authorized, upon request of the governing body of any 

municipality having a population of 25,000 or less 

in this State; (a) to arrange planning assistance 

(including surveys, urban renewal plans, technical 

services and other planning work) and to arrange 

for the making of a' study or,report upon any planning 

problem of such municipality, submitted to the State 

Department of Health, providing however that the employees of the State Department of Health shall not 

themselves make such surveys, studies or reports. (b) 

to agree with such governing body as to the amount, 

if any, to be paid to the State Department of Heal~th 

for such service, and (c) to apply for and accept 

grants from the Federal Government or other sources 

in connection with any such assistance, study, or report, and to contract, with respect thereto. The 

regular functions of the Texas State Department of 

Health may be utilized on this program, provided 

that any additional employees shall be paid from 

sources other than General Revenue funds of the State." 

It is noted that the Legislature has not appropriated 

any state funds to carry out the provisions of House Bill 434. 

Section lb of the Act authorizes the State Department of Health 

to agree with the governing body of each participating city as 

to the amount, if any, to be paid to the State Department of 

Health and Section lc prohibits use of general revenue funds to 

employ additional personnel for such service. We think it clear 

that the Legislature contemplated that the state's share of the 

project costs should be derived from the participating cities 

with the single exception that the regular functions of the Department of Health may be utilized. 
Dr. Henry A. Holle, page 3 (W-241) 

House Bill 434 authorizes the State Department of 

Health and the participating city to agree on the amount to be 

paid by the city. The amount agreed upon can doubtless include 

not only the state’s pro rata share of the project cost but may 

include, if necessary, an additional sum representing the city’s 

fair share of the added administrative costs, of a continuing 

nature, incurred by the Health Department in administering tl;;? 

r: 

This vfew ffnds support in the fact that House Bill 

;tgig,essly prohibits the use of general revenue funds for 

such purposes but indicates that funds derived from other S~LTQB 

may be so expended. 'The distribution and assessment of such 

costs must, of course, 

the various cities. 

be fairly and equitably made as between 

Your ffrst question is accordfngly answered in t& affirmative. 

Your second question involves the handling and MSbursement of the funds received from both the federal government 

and the municipalities. A careful analysis of the objects 

sought to be attained by House Bill 434 and the Federal Housing 

Act of 1954, excludes the idea that such funds should be deposited in the general revenue fund and be subject to payment only 

by legislative appropriatfons, We think that such monies may 

properly be placed in the hands of the State Treasurer, but not 

in the State Treasury, who becomes a custodian or trustee thereof, disbursing same under the directions of the State Department 

of Health in fulfillment of the purposes for which saze were 

received. In other words, the funds here provided ari- trust 

funds and do not belong to the State in its sovereign capacity, 

but are received and are to be expended for a special purpose. 

This view is supported by the Supreme Court of Texas 

in the case of Friedman vO American Surety Co. of ?Iew York, 

151 S.W.2d 570s In discussing a special fund (Unem>lzy?ent Pompensation Fund) the Court said: 

"The money here involved is not the property 

of the State in any capacity but is a Trust Fund 

to be held out of the State Treasury, but in the 

hands of the State Treasurer as trustee, for the 

benefit of a class of employees. O O O 

"In Manion v. Lockhart, 114 S.W.2d 216, this 

court clearly decided that it is not in violation 

of our constitution to make the State Treasurer 

custodian of a fund that does not belong to the 

State, and does not belong in the State Treasury." 
- . . 

-. __ 

Dr. Henry A. Holle, page 4 (WW-241) 

See also: Manion v* Lockhart, State Treasurer, 131 

Tex. 175, 114 S.W.2d 218; Smith v. Paschal, 1 S.W.2d 1086 (Tex. 

Comm.App..); Tatum v. Wheeless, 1.80 Miss. gO0, 178 So. 95; 108 

A.L.R. 595. 

In reply to your second question you are advised that 

the funds received from both the federal government and the municipalities may properly be placed in the hands of the State 

Treasurer, but not in the State Treasury, as a trust fund, and 

be disbursed therefrom for the purposes for which received. 

In view of our answer to your second question, it becomes unnecessary that we answer the last two questions. 

Pursuant to House Bill 434, Acts 55th Legislature, Regular Session, 1957, page 235, the State 

Department of Health is authorized to agree with 

SUMMARY 

each participating municipality as to the latterrs 

pro rata share of the project costs. The amount 

agreed upon may include an additional sum representing each city's fair share of the added administrative costs, of a continuing nature, incurred by 

the State Department of Health in administering the 

Act. 

The funds received by the State Department of 

Health from both the federal government and the participating municipalities may properly be placed in 

the hands of the State Treasurer, but not in the 

State Treasury, as a trust fund, and be disbursed 

therefrom for the purposes for which received, 

Very truly yours, 

WILL WILSON 

Attorney General of Texas 

Lp:jl:wb 

APPROVED: 

OPINION COMMITTEE 

H. Grady Chandler, Chairman 

Mary Rate Wall 

W. R. Hemphill 

Roger Daily 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: Geo. P. Blackburn 

Lbonard Passmore 

Assistant