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 basedupon 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 ofenforcing 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 ofthe Health and SafetyCode
. TEX
.HEALTH & SAFETYCODEANN. § 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). Ifa grantee fails to comply with grant requirements, your predecessor explainedthat 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 ofthe 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'TCODE ANN. § 403.055(a), (f) (West 2005). The request letterfirst asks whether "TCEQ'sformal written demandfor restitution damagesbasedupon an unadjudicated claim for breach ofa 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 Brieffrom 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

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The Legislature has not defined "debt to the state" for purposes of section 403.055. Texas courts have defined "debt" to ordinarilymean "aspecified sum ofmoney 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.2d427, 431 n.5 (Tex. Crim. App. 1996) (citing BLACK'S LAW DICTIONARY 403 (6th ed. 1990) (defining "debt" as "[a] sum ofmoney due by certain and express terms")). Prior opinions ofthis 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 ofthe 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 itselfdoes not fall into one ofthese three categories, and the act of sending a letter requesting restitution damages based upon an unadjudicatedclaimfor breach ofa grant contract issued under chapter 386 oftheHealth and Safety Code will not, by itself, establish a debt to the state for purposes of section 403.055 of the GovernmentCode. If, however,TCEQ'sformal written demandfor restitution damages is premised on an agreementbetween the state and debtor, the existence ofa debtby statutoryreference, or some other lawfully effective means ofcreating 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 cannotundertake through the opinionprocess. Tex. Att'yGen. Op. No. GA-0864 (2011) at 3. However, we can answer general questions oflaw, and thus we rely upon the request letter's general description ofTERPgrant agreements, which reportedlyrequire that grantfunds bereturned "after a failure to perform the activities required by the grant." Further, the briefindicated that the amount owed is "basedupon the subsequent valuation ofthe calculatedcostofthe contractbreach." Briefat 3. The request letter's description ofthese 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 basedupon breach ofaTERP grant contractmayormay not create a debt to the stateunder section403.055, depending on the circumstances and the specific terms ofthe document that purportedly creates the debt. Itmay 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 ofdifferent programs that are intendedto improve air quality. TEX. HEALTH & SAFETYCODEANN. § 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 ifthe grant contract involves a legislative program wherein the enabling legislation specifically creates a debt.Mr. Zak Covar

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Prior opinions ofthis office have explained that a debt to the state may also be established "bysome other lawfully effectivemeans." Tex. Att'y Gen. Op. Nos. DM-217 (1993) at 2, MW-416 (1981) at 2-3. One such lawfully effective means ofestablishing a debt couldbe an internal TCEQ administrative process that provides grantees with the due process required by section 403.055(g) ofthe 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 ofthat administrative process in the first instance. Along those lines, therequest letter's secondquestion asked whether "theTCEQprocess 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 aperson" to the comptroller as indebted to the state "unless the agency first provides the person with an opportunity to exercise anydueprocess orotherconstitutional orstatutoryprotectionthatmustbe accommodated before the agency orthe state maybegin acollection action orprocedure." TEX. GOy'T CODEANN. § 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 ofthe" 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 ofthe 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 provideyou with the exactprocess necessaryto complywith the statute's due process requirements, we can advise that until TCEQ has provided grantees with some opportunity to contestthe amount orexistence ofthe alleged debt, TCEQ "may notreport a person" to the comptroller as indebted to the state under section 403.055(f). If, however, a debt to the state has beenestablished at the conclusion ofan administrativeprocess 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]hatprocess 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 ofan erroneous deprivation of such interest through the procedures used, and the probable value, ifany, ofadditional 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. ofTex. Med. Sch. v. Than, 901 S.W.2d 926, 930 (Tex
. 1995)
.Mr. Zak Covar

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### 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 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. The Texas Commission on Environmental Quality could establish the existence of a debt to the state ifspecific contract terms that create an agreementbetweenthe state and grantee establish a debt, ifthe Commission can allege the existence ofa debt by statutoryreference, or ifthe Commission can establish the debt by some other lawfully effective means, including a TCEQ internal administrativeprocessthatprovidesthegranteewiththerequisitedue process. Once the Commission has established a debt to the state and provided grantees with due process, including an opportunity to contestthe amountorexistence ofacontractbreach, 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