Ron. Robert S. Calvert 

Comptroller of Public 

Accounts 

Austin, Texas 

Opinion No.+177 

Re: Construction of Section 

8(C) of Article 678f, 

Vernon's Civil Statutes, 

< relating to the certi,ffcation by the Comptroller 

that a contract awarded 

by the State is not in 

excess of the amount avail- 

.Dear Mr. Calvert: able for such project. 

follows : 

Your request for an opinion reads, in part, as 

"The State Building Commission has awarded 

a contract for the 'construction of certain public 

works for a total contract price of two million 

eight hundred ninety-six thousand and one hundred 

dollars ($2,896,100.00), approximately one million 

dollars of which is to be paid from funds appropriated by the Congress and alloted to the State 

of Texas under the Community Health Centers Act 

(42 U.S. Code, sees. 2681-2687). Documents have 

.been furnished by the Dallas Regional Office, Department of Health, Education and Welfare, U. S. 

Government, which reflect that the Federal funds 

have been approved and obligated for the public 

~works project. However, the funds have not been 

transferred to the State, and it is anticipated 

that the funds will be furnished to State authorities on a quarterly basis after the construction 

is started. 

“Prior to the award of the contract the proposed contract award was forwarded to the Comptroller for certification of available funds. In 

those instances in which sufficient State funds 

are available <for the complete performance of a 

public works contract the Comptroller normally 

certifies on the contract award "that sufficient 

funds are available for the contract described 

-850- 
. I 

. 

I 

c 

Eon. Robert S. Calvert, page 2, W-177) I 

above.” However, in the instant case the Comptroller determined that funds appropriated by the 

State only in the amount of $1,849,536.24 were 

available for the project. Accordingly, the 

Comptroller certified that amount as ~available, 

but noted on the proposed contract award that 

the Federal funds involved had been obligated 

for.the project. 

"In light of the foregoing circumstances 

your opinion is respectfully requested on the 

following 

‘a. 

,’ , 

. . ‘! 

questions: 

“b. 

“C. 

. 

"d. 

Prior to receipt of Federal funds 

alloted and obligated for a State 

public works project, which together 

with State appropriations account 

for the project, may the Comptroller 

execute an unqualified certification 

that sufficient funds are available 

for the project? 

, 

If your answer to the foregoing 

question is in the negative, may a 

valid certification be executed by 

adding thereto a qualifying phrase 

such as “subject to the receipt of 

$1,004,360.00 in Federal. funds which 

have been obligated for the above 

project?" 'J 

Under the contraot described above, 

wherein the Comptroller certified a 

rtatea amount as available ana,the 

balance of the contract price is to 

be furnished from obligated Federal 

funds, may the Comptroll’er make progress payments or pay any other claim 

under the contract prior to receipt 

of Federal funds? 

May the Comptroller make progress payments or pay otherclaim pursuant to 

an awarded construction contract in 

respect to which no certification of 

available funds has been made by the 

Comptroller or in'respect to which the 

amount certified as available from 

State appropriations is less than the 

amount for which, the contract was 

awarded?” i 

.-851- 
. 

Hon. Robert S. Calvert, page 3, (M-177) 

The applicable provisions of Section 8(C) of Article 678f, 

Vernon's Civil Statutes, read as follows: 

I 

. . . Subject to the applicable provisions 

of other law respecting the award of State contracts, the contract or contracts shall be awarded to the qualified bidder making the lowest and 

best bid; but no' contract shall be awarded for a 

sum in excess of the amount which the Comptroller 

shall certify to be available for such project, " 

. . . . 

Section 49 of Article III of the Constitution of 

Texas prov$des, in part: 

"No debt shall be created by or on behalf 

of the State, except . . . .I (Exception not 

applicable.) 

Section 6 of Article VIII Qf the Constitution of 

Texas prohibits any appropriation 'of'money for a term longer than two years. 

The leading cases concerning whether a contract 

creates obligations on behalf of the State in violation 

of Section 49 of Article III of the Constitution of Texas 

are Charles Scribner's Sons v. Marrs, 114 Tex. 11, 262 S.W. 

of Control, 404 S.W.Zd 810 (Tex.Sup. 1966). In Charles 

Scribner's Sons v. Marra, supra, the Court was considering 

the validity of a contract for the purchase of certain 

books for a period of five years. The obligation of the 

contract was not to buy a fixed number or amount of books 

but only so many as needed by the schools of the State. 

The Court held, therefore, that since the contract did not 

make a charge on the future revenues of the State, no debt 

was created nor was Section 6 of Article VIII of the Constitution of Texas violated. 

In Fort Worth Cavalry Club v. Sheppard, supra, the 

Court held a 'lease contract for a period of five years void, 

since the adjutant general had the implied power to make a 

contract onlv within the amounts of the appropriation, and 

for the period of the appropriation. 

In City of.Big Spring v. Board of Control, supra, 

the Court held that a contract whereby the city agreed to 

furnish water to the State at a fixed-rate "as-long as the 

State of Texas shall in good faith maintain and operate 

-852- 
-. 

: ,. . 

Ron. Robert S. Calvert, page 4, (M-177) 

said hospital on said site" did not create a debt. 

In Nichols v. State, -32 S.W. 452 (Tex.Civ.App. 

1895, error ref.1 the State was held not liable under a 

- contract entered into by the State involving an amount 

exceeding the amount available for such project, and the 

legislature was held to be without power to ratify the 

contract to the extent it exceeded the appropriation. 

In view of the foregoing, it is our opinion 

that the purpose of Section 8(C) of Article 678f, supra, 

is to prevent the awarding of a contract which would attempt 

to create obligations in violation of Section 49 of Article 

III of the Constitution of Texas. Section 8(C) of Article 

678f is designed to enable agencies of the State to determine 

in advance of the award of a particular contract whether the 

obligation to be created by the award is payable out of monies 

available for such project. In this respect, the certification of the Comptroller with regard to contracts is similar to 

the certification of the Comptroller under the provisions of 

Section 49a of Article III of the Constitution of Texas relating to appropriations being.within the amount estimated to 

be available in the affected funds. 

A contract for the construction of certain public 

works payable out of State funds, appropriated by the Legislature, and out of Federal funds appropriated by the Conqress, and allocated to the State of Texas does not create 

a debt in violation of Section 49 of Article III of the Con8titution of Texas when the amount of State funds appropriated 

by the Legislature, together with the amount of Federal funds 

approved and obligated for such project, is equal to or exceed 

the amount of the awarded contract. Under such circumstances, 

the Comptroller of Public Accounts is authorized to execute 

certificates provided in Section 8(C) of Article 678f. Under 

the facts stated in your request, in answer to your questions 

(a) and (b), it is our opinion that you are authorized to 

make the certification provided in Section 8(C) of Article 

678f, for the reason that the contract awarded is not in excess of the amount made available for such project. 

.Zn~ answer to your questions .(c) and (a), it is noted 

that money can only be drawn from the State Treasury pursuant 

to specific appropriations made by the Legislature. Article 

VIII, Section 6, Texas Constitution. Therefore, the Comptroller does not have authority to pay out funds in the State 

Treasury except in pursuance to specific appropriations, and 

where obligated Federal funds are to be deposited in the State 

Treasury and which have been appropriated by the Legislature, 

progress payments payable from these funds may not be made 

-853- 
Hon. Robert S. Calvert, page 5, (M-177) 

until such Federal funds have been received by the State. 

State funds appropriated by the Legislature, on the other 

hand, may be expended by progress payments until the appropriation has been exhausted. 

SUMMARY 

-------. 

A contract for the construction of certain 

public works payable out of State funds appropriated by the Legislature and out of Federal 

funds appropriated by the Congress and allocated 

to the State of Texas does not create a debt in 

violation of Section 49 of Article III of the 

Constitution of Texas when the amount of State 

funds,appropriated by the Legislature, together 

with the amount of Federal funds approved and 

obligated for such project, is equal to or exceed the amount of the awarded contract. Under 

such circumstances. the Corndroller of Public 

Accounts is 

provided in 

non's Civil 

authorized to ekecute certificates 

Section 8(C) of Article 678f, VerStatutes. 

Prepared by John Reeves 

w truly yours, 

.C. MARTIN 

rney General of Texas 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Hawthorne Phillips, Chairman‘ 

Kerns Taylor, Co-Chairman 

W. V. Geppert 

Harold Kennedy 

w. 0. Shultz 

Bill Allen 

.A. J. CARUBBI, JR. 

Staff Legal Assistant 

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