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 Retirement System are administrative agencies of the 

State for which administration.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 approriations 

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 Attorney 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 appropriations for these two agencies. 

The answer to the questions submitted is dependent 

upon the construction of the,provisions of the statutes relating to the creation and administration of the two retirementsystems. 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 Retirement 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 recites that the Retirement System shall have the power and 

privileges of's corporation and shall transact all of its busine~ss in then name of the Teachers ~Retirement,System of Texas. 

Section 10 creates and describes the various funds of the Teachers 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 operation.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 xally 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 subject 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 authority 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 detail 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 custodian 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 Unemployment 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 

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 soygreisn canacitv. The statute wermanentlv auurola,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 presented 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 contri.?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 various '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 appropriations 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, Constitution of Texas. We suggest, therefore, that then biennial appropriations 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 custodian. 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 appropriate to the Employees Retirement'System and Teachers Retirement 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 Retirement System should be made from the respective funds from,;: 

which the employees,benefited by the Act,receive their respeotive ~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 credited 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 contribution 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 Treasury. 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 appropriations 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 Retirement 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 custodian 'but out of the State Treasury. 

The Biennial'Appropriations .Act .for the ensuing biennium should appropriate the State's matching contributions for each system and should also 

appropriate the unexpended balances of funds deposited 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