April 29, 

### 1952

Hon. Robert S. Calvert Opinion No. 

### V-1442. Comptroller of Public Accounts Austin, Texas Re: Status of administrative fund established by the Social Security Act passed by the Dear Sir: 52ndLegislature.

Youhave requested the opinion of this office

on the following questions:

“1. Does the second paragraph of Section 12 of House Bill No. 

### 603,Regular Session of the Fifty-second Legislature, create a special fund & the state treasury?

“2. Thelast sentence in Section 12 reads: ‘These funds will not be State funds andwill not be subject to legislative appropriation.’ Is this a valid provision?



### "3. If you should answer question number2 in the negative, then does Section 

### 13of House Bill NO. 

### 603,Acts of the Regular Session of the Fifty-second Legislature, appropriate the monies collected under the provisions of the Act to the Social Security Administrative Fund?”

HouseBill 

### 603,Acts 52ndLeg., R.S. 1951, ch. 500, p. 1480, title “Social S,ecurity - County and Municipal Employees,” (Article 695g, V.C.S.) was passed for the purpose of allowing county andmunicipal employees to participate In the Federal Social Security program. Under the federal act only the State, andnot individual counties andmunicipalities, mayenter into social security agreements with the Federal Agency. In order to comply with the requirements of the Federal Social Security Act the State Department of public Welfare was designatedHon. Robert S. Calvert, page 2 

### (v-1442)

as the State agency to administer this act on behalf of the participants. This office held House Bill 

### 603 constitutional against a contention that the payments required by the participating counties or municipalities were gifts or grants of public moneyIn violation of the Constitution. Att’y Gen. Op. V-1198 (195’1). The specific questions nowbefore us were not involved in that opinion andhence were not considered.

Theprovisions of House Bill 

### 603which give rise to your questions are the following:

“Sec. 10. Therespective governing bodies of the various counties or municipalities of this State which enter into agreements under this program are hereby authorized to pay to the State Agency, out of any available funds not otherwise dedicated, such amounts, separate and apart from employees’ contributions andmatching contributions,~ as mavbe agreed between the P res e t ve a d h State Aaencv to be necessary to finance the cougty’s or municioalitPs orooortionate share $n the administrative cost of this oroarat the State level, TheState Asencv shall, reauire soecific undertakings to defray a r, ro or 0at
exoenses at the State level in agreements negotiated with counties andmunicioalitieg

n any basis mutually nreeable between t& &ate Agency andthe okticinatinz countv or municioality, whether as anannual fee for each participating county or municipality,

an annual fee per employee covered, a percentage based upon the contributions to the Federal authorities, or any other equitable

measure. Annually at the close of each fiscal year, the State Agency shall pay from the Social Security Adminlstratlon FWndto the State Treasurer for deposit to the General Revenue Fond of the State of Texas an ~amountnot less than ten per cent (10%) of these contributions during the preceding year to defray administrative expenses until such time as the amountappropriated to the State Agency from funds of the State for administrative purposes has been reimbursed in full, at which time such payments shall cease.Hon. Robert S. Calvert, page 

### 3 (V-1442)

llSec. 12.

. TheState Agency shall deposit all mone;s’collected under the provisions of this Act from participating counties andmunicipalities to defray the cost of, administering this program at the State level In a special fund to be knownashih; Security Administration Fund. T Fcial t te Treasure sh 1be treasurer and custodian o

al f thq :$.,;kich shall be held secarate andao $

m The State Tieasurzr shall administer this fund

DUlit mnevs or funds of this S&q

in accordance with the directions of the State Agency. Moneys deposited in either, of these special funds shall be disbursed uponwarrants issued by the Comptroller of Public Accounts pursuant to swornvouchers executed by the State Agency acting through the executive director of personnel of the agency to whomhe

will not be State funds andwill not%?%!@ expressly delegates this function.

to leaislative aacrooriatio~.

“Sec. 

### 13. TheState Agency is authorized to expend moneys in the Social Security Administration Fundfor anypurpose necessary to carry onthe administration of this program at the State level including but not limited to salaries, trave lng expenses, printing, stai tionery, supplies, equipment, bond premiums, postage, communications, andcontingencies, and the State Agency is authorized to employ such personnel, purchase such equipment, incur such expenses as maybe necessary to carry out the administration of this program at the State level, provided all salaries and expenditures from this fund shall be consistent with the letter and spirit of comparable items and general provisions inthe general departmental appropriation bill then current. (Emphasis added.)

Themainquestion for decision concerns the validity of the above provisions in HouseBill 603relating to the safe-keeping andhandling of the administrative fund. In this regard, the SupremeCourt has said:Hon. Robert S. Calvert, page 4 (v-1442)

'I

. . . It is academic to say the Legislature has the power to pass any law which its wisdom suggests that is not forbidden by someprovisions of the Constitution. ad citvof



### 11.8 Tex: 

### 58in6E.W.2:*738,740

The constitutional provision drawninto controversy in answering your questions is Section 

### 6of Article VIII, which provides:

“Homoneyshall be drawnfrom the Treasury but in pursuance of specific appropriations madeby law; nor shall any appropriation of moneybe madefor a longer term than twoyears except by the first Legislature to assem le under this i Constitution, which may,makethe necessary appropriations to carry on the government until the assemblage of the slxteenth Legislature.”

The case of piedman Am of NewYork, 137 Tex. 149 151 iIW.2 that the trust fund established by t butions of employees and employers under the Unemployment Compensation Act was not a state fund andhence

was not in the Treasury subject to appropriation by the Legislature, although the trust fund washeld by the Treasurer. TheFriedman case however, dealt only with the main trust fund, andnot ihe administrative fund which Is the fund giving rise to the problems before us.

In order to answer your questions It is necessary to analyze the Social Security Act passed by the Fifty-second Legislature. Under the provisions of this act, counties andmunicipalities enter into Social Security agreements with the State Agency on avoluntary basis. Thewhole plan is based upon contracts between the State Agency andthe participating counties andmunicipalities. one of the contractual agreements is to the effect that the State Agency will administer the act on behalf of the participants, but at their expense. The participants each agree to share a pro rata part of the expenses of administration andin return the State Agency acts as the liaison body between the participants andthe Federal Agency. TheState Agency has been given the authority necessary to comply with Federal requirements, but by contract all the counties andmunicipalities. -

Hon. Robert S. Calvert, page 5 

### (v-1442)

participating in the plan share expenses. the administrative

Wethink it is clear that the moneycontrlbuted by the participants andheld by the State Agency to defray administrative expenses never becomes “State funds” in the sense that they could be placed in general revenue andappropriated by the Legislature. These funds remain county andmunicipal property andthe State Agency holds themas trustee until they are expended, since the participants have contracted to bear the administrative expense. If an excess were to be established in this trust fund, the Legislature could not appropriate it for any other use. Such an act by the Legislature would violate the portion of Section 

### 1.6 of Article I of the Texas Constitution relating to ImpaIring the obligation of contracts. Johnson v. Smith, 112 Tex. 222, 

### 246S.W.1013 (1922).

In light of the above analysis, you are advised that the administrative funds are not State funds, and therefore are not subject to appropriation. The special trust fund Is not placed In the State Treasury, but by statute the Treasurer is madecustodian of the fund. Undoubtedly the Legislature mayplace such an added duty u onthe Treasurer. Tex. 

### 175,1l.c S.W.2d 

### 216 (1938). Eanlon v. Lockhart, 

### 131

Theadministrative trust fund established under the revisions of the,Social Security Act (H.B. ‘ii



### 03,Acts 52ndLeg., R.S. 199, ch, 

### 500,p. 1480) is a fund provided, pnrsuant to contract, by the.pqtlcipating .counties~ and municipalities. lithe trust ~3’und’is not ‘a state fund and is therefore not subject to approprlation by the Legislature. Thefund Is ‘not placed in the State Treas~.~,‘~:hmt~the Legislature has merely madethe Treksurer custodian of it.

APPROVED:

C. K. Richards Trial &Appellate Division

E. Jacobson Reviewing Assistant Yours very truly,

-PRICEDAEIEL Attorney General

Charles D. Mathews First Assistant EWT:wb