.

MARK WHITE Attorney General 

# The Attorney General of Texas

August 31. 1981 1

Mr. W. J. Estelle,Jr..Director Texas Department of Corrections Huntsville, Texas 77340 OpinionNo. MW-363
Re: Whether certain funds in the custody of theTexas

Dear Mr. Estelle: Department of Correctionsare excepted from the requirements of House Bill 1623

You have requestedour opinion as towhether certain funds in the custody of the Texas Department of Corrections [hereinafterTDCI are excepted from the requirementsof House Bill 1623, recentlyenactedby the 67th Legislature. Section 4 of Rouse Bill 1623, the State Funds ReformAct of 1981. provides:All fees, fines,penalties, taxes, charges, gifts,

grants, donations, and other funds collected or received by a state agency as authorized or required by law shall be deposited in the state treasury,credited to a special fund or funds, and subject to appropriationonly for the purposes for which they are otherwiseauthorized to be expended or disbursed. Deposit shall be made within seven days after thedate of receipt. Section 2 of House Bill 1623 defines "stateagency" as:

...any department, commission, board, office, institution, or other agency that is in the executive branch of state government, has authority that is not limited to a geographical portion of the state, and was created by the constitutionor a statute of this state, but does not includean institution of higher education as defined in Section 61.003, Texas Education Code, as amended, and does not include the Banking Department of Texas. the Savings and Loan Department of Texas, and the Office of the Consumer Credit Commissioner, whose funds are

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subject to the budgetary ~controlof the Finance Commission of Texas by virtue of existing laws, and does not include the Credit Union Department of Texas whose funds are subject to the budgetary controlof the CreditUnion Commissionof Texas. Section 3(b) of the bill states, however. that the act does not apply to: (1) funds pledged to the payment of bonds, notes,

or other debts if the funds are not otherwise required tobe deposited in the state treasury; (2) fundsheld in trust or escrow for the benefit of any person or entity other thana state agency; (3) funds set apart out of earnings derived from investment of funds held in trust tar others, as administrativeexpenses of the trusteeagency; (4) funds, grants, donations. and proceeds from funds, grants, and donations, given in trust to the Texas State Library and Archives Commission for the establishmentand maintenance of regional historical resourcedepositories and libraries in accordancewith Section 2A. Chapter 503. Acts of the 62nd Legislature, Regular Session, 1971, as amended (Article 5442b. Vernon's Texas Civil Statutes);or (5) the deposit of funds for state agencies subject to review under the Texas Sunset Act (Article5429k.Vernon's Texas Civil Statutes) for 1981. which shall be determined by each agency's enabling statute.
Your question iswhether the Educationaland Recreational [hereinafter E6R] Funds and the Windham Independent School District [hereinafter WISD] Fund are excepted by section 3(b) from required deposit in the state treasury.
A local E&R fund for each TDC facility is authorized in a rider to the present GeneralAppropriationsAct. The rider appropriates to the EhR funds:

.,. receipts from the operation of commissaries. prison-sponsored recreational shows and entertainment [and]all gifts and other income for inmatewelfare. Such fundsmay be expended:

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...only for directbenefits toprisonersincluding commissaries. reimbursement for travel to persons providing free dental and medical services, prisoner educational matters and recreational benefitsof inmates
...andforno otherpurposes. The Windham Independent,School District is a non-geographical school district operated by TDC for the benefit of its inmates. You state that its funds are at present entirely provided by the Foundation School Program. But see Educ. Code 529.03. You suggest that the E&R funds and the WISD Fund are exempt from deposit in the state treasury under section 3(b)(2) of House Bill 1623, as "funds held in trust or escrow tor the benefit of any person or entity other than a state agency."
In our opinion, the EAR Funds may be said to constitute "funds held in trust." The language of the riderwhich details the purposes forwhich the fundsmay be expended comportswith the requirementsfor the creation of an express trust. Pottorffv. Stafford. 81 S.W.2d 539 (Tex. Civ. App. - El Paso 1935,writ ref'd). It is well established that no particular words are necessary to create a trust. Kurtz v. Robinson, 279 S.W.Zd 949 (Tex.Civ. App. - Amarillo 1955,writ ref'd n.r.e.). So long as the parties intend that particular property be held for the benefit of others, a court of equitywill affix to that intent the character of a trust. Patrick v. McGaha. 164 S.W.2d 236 (Tex.Civ.App. - Ft. Worth 1942,no writ). Furthermore, in Attorney General Opinion H-610 (1975). this office, in holding that the Board of Corrections was authorized to investor spend the E8R Fund, declared:

Althoughwe have been furnishedno trust indenture and have not found any general statutoryauthority (but see, Education Code. 029.03) for the establishment or collection of such a fund by the Texas Board of Corrections, the long-established and consistent characterization of the fund as a trust fund and its tacit recognition as such by the Legislature since at least 1957 convinces us that it should be treated as such. We think a confidential, fiduciary relationship. exists between the Board of Correctionsand theprisoners committed to its care with respect to the disposition of labor and property (and the fruits thereof)donated to the fund. H-610 (1975),at 3. (Citationsomitted.)
We are in accordwith thisview. It is thereforeour opinion that the E&R Funds held by the Department of Correctionsconstitute "fundsheld in trust." and as such, in accordance with section 3 of House Bill 1623, theyneed not be deposited in the state treasury.

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**.**

Although the existenceof the WISD is recognizedby regulationof the Board of Corrections, it is not specifically established by statute. The relevant statute, former article 6203b-2. V.T.C.S., repealed.Acts 1971, 62ndLeg.. ch. 405, §54(2).at 1533.now codified as 529.01 of the Education Code, provides that the "Board of Correctionsmay establishand operate schoolsat the various units of the Department of Corrections." According to 529.04 of the Education Code. allWISD funds are providedby the FoundationSchool Program:

The total cost of operating the schoolsauthorized by this chapter shall be borne by the state and shall be paid from the Foundation School Program Fund. Foundation School Program funds are appropriated biennially by the General Appropriations Act. See, e.g., H.B. 558, Acts 1979. 66th Leg.. R.S., ch. **843.** at **2757-2758.** Section 3(a) of House Bill 1623 states that its provisionsare applicable to a state agency "only to the extent that it is not otherwise required to deposit funds in the state treasury." Since Foundation School Fundsare appropriated funds and thus,have previouslybeen deposited in the state treasuryat the time they are transferred to WISD, it would appear that House Bill 1623 does not apply to them. We conclude that the WISD Fund as presentlyconstitutedneed not be deposited in **the** state treasury.

SUMMARY Educational and Recreational funds held by the Texas Department of Corrections for the benefit of its inmates are "trust funds" and thus exempted fromdeposit in the state treasuryunder the terms of House Bill 1623. Funds of the Windham Independent School District are at present entirely appropriated from the Foundation School Programand as such,are not subject to House Bill **1623.**

MARK WHITE Attorney General of Texas JOHN W. FAINTER,JR. FirstAssistantAttorney General
RICHARD E. GRAY III ExecutiveAssistantAttorneyGeneral

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. W. J. Estelle - Page 5 (MU-363) '

Preparedby Rick Gllpin AssistantAttorney General
APPROVED: OPINION COMMITTEE
SusanL. Garrison, Chairman Jon Bible Rick Gilpin Jim Moellinger Brenda Smith BruceYoungblood

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