Mr. Zak Covar 

Executive Director 

6) 

ATTORNEY GENERAL OF TEXAS 

GREG ABBOTT 

September 24,2012 

Opinion No. GA-0970 

Texas Commission on Environmental Quality 

Post Office Box 13087 

Re: Whether a state agency's demand for 

restitution based upon an unadjudicated claim for 

breach of a grant contract constitutes a "debt" to 

the state for purposes of section 403.055, 

Government Code (RQ-1054-GA) 

Austin, Texas 78711-3087 

Dear Mr. Covar: 

Your predecessor asked two questions related to the ability of the Texas Commission on 

Environmental Quality ("TCEQ") to use the warrant-hold process under Government Code section 

403.055 as a means of enforcing compliance with certain grant agreements. l TCEQ, in conjunction 

with the Comptroller of Public Accounts (the "comptroller") and the Public Utility Commission, 

administers the Texas Emissions Reduction Plan ("the Plan" or "TERP") under chapter 386 of the 

Health and Safety Code. TEX. HEALTH & SAFETY CODE ANN. § 386.051(a) (WestSupp. 2011). The 

Plan authorizes TCEQ to provide grants or other funding for multiple projects designed to improve 

air quality. [d. § 386.051 (b). If a grantee fails to comply with grant requirements, your predecessor 

explained that TCEQ sends a "formal written demand letter and invoice ... to the grantee requiring 

the return of grant funds paid based on the noncompliance," and that the "amount demanded is 

subject to modification by the amount of performance that was successfully achieved before the 

breach of the contract." Request Letter at 1. 

The request letter notes that Government Code section 403.055 requires state agencies to 

report to the comptroller "each person who is indebted to the state," and that the comptroller 

generally "may not issue a warrant or initiate an electronic funds transfer to a person who has been 

reported" under that section. [d. at 2; TEX. Gov'T CODE ANN. § 403.055(a), (f) (West 2005). The 

request letter first asks whether "TCEQ' s formal written demand for restitution damages based upon 

an un adjudicated claim for breach of a grant contract issued under Chapter 386 ... create[s] a 'debt 

to the state' for purposes of application of Section 403.055 of the Texas Government Code?" 

Request Letter at 2. 

ISee Letter and Brief from Mark R. Vickery, P.G., Exec. Dir., Tex. Comm' n on Env't Quality, to Honorable 

Greg Abbott, Tex. Att'y Gen. (Apr. 16,2012), http://texasattorneygeneral.gov/opin ("Request Letter" & "Brief'). 
Mr. Zak Covar - Page 2 (GA-0970) 

The Legislature has not defined "debt to the state" for purposes of section 403.055. Texas 

courts have defined "debt" to ordinarily mean "a specified sum of money owing to one person from 

another." Seay v. Hall, 677 S.W.2d 19,23 (Tex. 1984); see also Thomas v. State, 919 S.W.2d 427, 

431 n.5 (Tex. Crim. App. 1996) (citing BLACK'S LAW DICTIONARY 403 (6th ed. 1990) (defining 

"debt" as "[a] sum of money due by certain and express terms")). Prior opinions of this office have 

explained that for purposes of section 403.055, a debt to the state must be "established either by 

agreement between the state and the debtor; by the state's proper allegation of the existence of a 

debt by statutory reference; or by some other lawfully effective means." Tex. Att'y Gen. Op. Nos. 

DM-217 (1993) at 2, MW-416 (1981) at 2-3. The TCEQ letter itself does not fall into one of these 

three categories, and the act of sending a letter requesting restitution damages based upon an 

unadjudicated claim for breach of a grant contract issued under chapter 386 ofthe Health and Safety 

Code will not, by itself, establish a debt to the state for purposes of section 403.055 of the 

Government Code. If, however, TCEQ' s formal written demand for restitution damages is premised 

on an agreement between the state and debtor, the existence of a debt by statutory reference, or some 

other lawfully effective means of creating a debt, TCEQ could establish a debt to the state under 

section 403.055. 

We first consider whether TCEQ can establish a debt to the state on the basis of its 

agreements with TERP grantees. Determining whether any given TERP grant contract forms 

the basis of a debt to the state would require that we construe the terms of the agreement, a task 

this office cannot undertake through the opinion process. Tex. Att'y Gen. Op. No. GA-0864 (2011) 

at 3. However, we can answer general questions of law, and thus we rely upon the request letter's 

general description ofTERP grant agreements, which reportedly require that grant funds be returned 

"after a failure to perform the activities required by the grant." Further, the brief indicated that the 

amount owed is "based upon the subsequent valuation of the calculated cost of the contract breach." 

Brief at 3. The request letter's description of these agreements does not suggest a "sum certain in 

money" owed such that the agreements would, by themselves, establish a debt. However, more 

specific contract terms could create a debt by agreement. We can advise only that a demand for 

restitution damages based upon breach of a TERP grant contract mayor may not create a debt to the 

state under section 403.055, depending on the circumstances and the specific terms of the document 

that purportedly creates the debt. 

It may also be possible for TCEQ to establish a debt to the state by statutory reference. The 

Legislature has authorized TCEQ to use the TERP Fund to provide grants for a number of different 

programs that are intended to improve air quality. TEX. HEALTH & SAFETY CODE ANN. § 386.051(b) 

(West Supp. 2011). Each of these programs is established in a separate chapter, subchapter, or 

section of the Health and Safety Code, which may or may not include a statutory basis for 

establishing a debt. See, e.g., id. § 391.302(c)-(d) (West 2010) (explaining that a misuse of grant 

funds provided under the new technology implementation grant program "results in a debt owed to 

the state" under section 403.055(g)). Within the confines of an attorney general opinion, we can 

advise only that TCEQ could establish a debt to the state under section 403.055 if the grant contract 

involves a legislative program wherein the enabling legislation specifically creates a debt. 
Mr. Zak Covar - Page 3 (GA-0970) 

Prior opinions of this office have explained that a debt to the state may also be established 

"by some other lawfully effective means." Tex. Att'y Gen. Op. Nos. DM-217 (1993) at 2, MW-416 

(1981) at 2-3. One such lawfully effective means of establishing a debt could be an internal TCEQ 

administrative process that provides grantees with the due process required by section 403.055(g) 

of the Government Code, including notice and an opportunity to contest the amount or existence of 

a contract breach. See TEX. GOy'T CODE ANN. § 403.055(g) (West 2005). TCEQ would need to 

determine the specific nature of that administrative process in the first instance. 

Along those lines, the request letter's second question asked whether "the TCEQ process for 

determination of the breach and amount of damages and demand thereof satisfy the due process 

requirements of Section 403.055(g), and if not, what extra due process protections may be 

necessary." Request Letter at 2. Under section 403.055(g), TCEQ "may not report a person" to the 

comptroller as indebted to the state "unless the agency first provides the person with an opportunity 

to exercise any due process or other constitutional or statutory protection that must be accommodated 

before the agency or the state may begin a collection action or procedure." TEX. GOy'T CODE ANN. 

§ 403.055(g) (West 2005). In a prior opinion, we explained that under subsections 403.055(f)-(g) 

"[d]ue process requires notice and an opportunity ... to object to the amount or existence of the" 

breach. Tex. Att'y Gen. Op. No. GA-0171 (2004) at 6. Thus, in order to ensure that its procedures 

satisfy section 403.055(g), TCEQ must, at a minimum, provide grantees with notice of the alleged 

breach and an opportunity to contest the allegations. The Legislature has not established further 

procedures for complying with this due process requirement, and we therefore cannot specify what 

exact process must be afforded to each individual grantee.2 

While the TCEQ demand letter may provide the requisite notice, due process also requires, 

at a minimum, that the alleged debtor have an opportunity to contest the demand for restitution. 

Although we are unable to provide you with the exact process necessary to comply with the statute's 

due process requirements, we can advise that until TCEQ has provided grantees with some 

opportunity to contest the amount or existence of the alleged debt, TCEQ "may not report a person" 

to the comptroller as indebted to the state under section 403.055(f). If, however, a debt to the state 

has been established at the conclusion of an administrative process that satisfies section 403.055(g), 

TCEQ may report the grantee to the comptroller as indebted to the state under section 403.055(f). 

2The Texas Supreme Court has explained that "[ w ]hat process is due is measured by a flexible standard that 

depends on" three factors, which include: 

(1) the private interest that will be affected by the official action; (2) the risk of an 

erroneous deprivation of such interest through the procedures used, and the 

probable value, if any, of additional or substitute procedural safeguards; and (3) the 

government's interest, including the function involved and the fiscal and 

administrative burdens that the additional or substitute procedural requirement 

would entail. 

Univ. of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 930 (Tex. 1995). 
Mr. Zak Covar - Page 4 (GA-0970) 

SUMMARY 

The act of sending a letter requesting restitution damages 

based upon an unadjudicated clairn for breach of a grant contract 

issued under chapter 386 of the Health and Safety Code will not, by 

itself, establish a debt to the state for purposes of section 403.055 of 

the Government Code. The Texas Commission on Environmental 

Quality could establish the existence of a debt to the state if specific 

contract terms that create an agreement between the state and grantee 

establish a debt, if the Commission can allege the existence of a debt 

by statutory reference, or if the Commission can establish the debt by 

some other lawfully effective means, including a TCEQ internal 

administrative process that provides the grantee with the requisite due 

process. 

Once the Commission has established a debt to the state and 

provided grantees with due process, including an opportunity to 

contest the amount or existence of a contract breach, the Commission 

may report a person to the comptroller as indebted to the state under 

Government Code subsection 403.055(f). 

DANIEL T. HODGE 

First Assistant Attorney General 

JAMES D. BLACKLOCK 

Deputy Attorney General for Legal Counsel 

JASON BOATRIGHT 

Chair, Opinion Committee 

Virginia K. Hoelscher 

Very truly yours, 

Assistant Attorney General, Opinion Committee