JIMMAlTOX Attorney General

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AnEqualOppOrtunitYi Aflirmailve Action EmPlOYW 

# The Attorney General ofTexas April 9, 1985

Mr. EdGrieham chairmen Texas EmploymentCc~nlrlmission T.E.C. Building, Rcsm624 Austin, Texas 70i70 Dear ChairmanGrisham: Opinion No. m-306 Re: Disposition of interest earned onmoneyin the Unemployment Compensation Fund

You ask whether interest earned on money in the Unemployment Compensation Fund m%stahlishedby section 9 of the Texas Unemployment Compensation Act, c,odified as article 5221b-7. V.T.C.S., should be credited to that IFundor 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

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. (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 NewYork, 1581S.W.2d 570 (Tex. 1941). The SupremeCourt stated that the moneyin t,b,eUnemploymentCompensation Fund

p. 1390Mr. EdGriaham- 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 SupremeCourt 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 moneyof this state differentiates this moneyfrom the general and special funds of the state. Attorney General Opinion O-3607 (1941). Subsequent to the act tstablishing the UnemploymentCompensation 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 RevenueFund. The interest received shall be allocated on amonthly basis.

. . . . Sec. 3: As to the proper interpretation and application of this Article. the State Treasurer is entitled to re:.y upon the opinion andadvice of the Attorney General. This office previously has determined that the provision of article 2543d which directs that interest earned on moneyin 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. EdGriaham- 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 Funclpursuant 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 TOMGREEN First Assistant Attorney General DAVIDR. RICHARDS Executive Assistant Attorney General RICKGILPIN Chairman, Opinion Committee Prepared by NancySutton Assistant Attorney General APPROVED: OPINIONCOMMITTEE Rick Gilpin, Chairman Jon Bible Colin Carl Susan Garrison TonyGuillory JimMoellinger Jennifer Riggs NancySutton

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