RNEU GENERAL. OF%EXAS

September27,1972
Honorable George W. McNiel StateAuditor OpinionNo. M-1224 Sam Houston State Office Building Re: Austin, Texas 78711 Legality of investment in United States Postal ServiceBonds for various state Dear Mr. McNiel: funds You have requested our opinion as to whether the United States Postal Service (hereinafterstyled Postal Service) may be deemed an agency of the United Stateswithin the meaning of the Texas Constitution and state statutes governing the investmentof (1) the funds of the Teacher Retirement System of Texas, (2) the PermanentUniversityFund, (3) the Permanent School Fund, (4) the funds of EmployeesRetirement System of Texas, and (5) the funds of the Texas County and District Retirement System. The pertinentprovisions of the Texas Constitutionand state statutes which authorize the investmentof these various funds by their respectivegoverningboards are as follows: (1)Teacher Retirement System of Texas. TexasConstitution, Article III, Section 48b: I! .SaidBoard is hereby authorized and empowered to invest and reinvest.

. .inbonds, notes, or other evidences of indebtedness issued or assumed or guaranteed in whole or in part, by the United States or any agency of the United States,
. . ." (2) PermanentUniversityFund. Texas !onstitution,Article VII, Section lla:

. . .theBoard of Regents of The University of Texas may invest

. . . in securities,bonds or other obligations issued, insured, or guaranteed in any manner by the United States Government, or any of its agencies,

. . .'I

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Hon. GeorgeW. McNiel, page 2, (M- 1224)

(3) Permanent SchoolFund. Texas Education Code, Sec. 15.02(a): '.
. . the State Board of Education is authorized and empowered to invest thepermanent school fund in obligations is~~~d~e~~~~~s~syo~o~~~~a~~e~~~~ any manner by the United StitesGovernment o'r any of its agencies;

. . .' (4) Employees Retirement System of Texas. Texas Constitution,Article XVI, Sec. 62(a): 1,

. . .SaidBoard ishereby authorized and empowered to invest and reinvest.

. . in bonds, notes or other evidences of indebtedness issued, or assumed or guaranteed in whole or inpart, by the United States or any agency of the United States,
. . ."l. (5) Texas County and District Retirement System,V.C.S. Article 6228g, Sec. 8, subd. 7: "The assets of the System
. . .as determined by the Board, shall be investedand reinvested in the following types of securities: (a) Interest-bearingbonds or other evidences of indebtedness:

. . . of the United States or of any authority or agency of the United States, or any such securitieswhich are guaranteed as to the payment of principal and interestby the United States or by any authority or agency of the United States." It is clear that the governingboards of the Systems and Funds in questionmay invest in the bonds issued by an agency of the United Stateswhether or not theprincipal and interest thereof is guaranteedby the United States.

1 V.C.S.,Art. 6228a., Sec. 7.A, speaks to the investment of the Employees Retirement System of Texas. However, Tex. Const.,Article XVI, Section 62(a), provides: 'I.
. .This Amendment shall be self-enactingand shallbecome, effective immediatelyupon its adoptionwithout any enabling legislation."

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Hon. George W. McNiel,, page 3, (M-1224)

The Postal Service iswholly owned by the United States Government and was established as "an independentestablishment of,the executivebranch of the Government of the United States" (39U.S.C. Sec. 201) created by Act of Congress pursuant to thepower granted to Congress by the Constitution "to establishpost offices and post roads." U.S. Const., Art. 1, Sec. 8. Pursuant to the provisions of the Postal ReorganizationAct, the Postal Service assumed the assets, revenues, functions, and duties of the Post Office Department on July 1, 1971. Congressmade it clear that the United Stateshas a direct interest in the Postal Service. The Postal Service is governed by a Board of Governors composed of elevenmembers. Nine of the members, known as Governors, are appointedby the President,by and with the advice and consent of the Senate. The Governors appoint and have thepower to remove the PostmasterGeneral,who is a voting member of theBoard and who is the chief executive officer of the Postal Service. The Governors and the Postmaster General appoint and have thepower to remove the Deputy Postmaster Generalwho is a votingmember of the Board and who is the alternate chief executive officer of the Postal Service. 39 U.S.C. Section 202. With limited exceptions, officers and employees of the Postal Service shallbe in thepostal career service,which is a part of the civil service. 39 U.S.C., Section 1001. Postal Service Officers and employees are covered by the Federal Workmen's Compensation law and civil service retirement laws. 39 U.S.C., Section 1005. The Postal Service is authorized to borrowmoney and to issue and sell such obligationsas it determinesnecessary to carry out its authorizedpurposes - such obligations outstandingat any one time not to exceed $10,000,000,000. It may pledge its assets and pledge and use its revenues and receipts for thepayment of the principal of or interest on such obligations, for the purchase and redemption thereof, and for otherpurposes incidental thereto. 39 U.S.C., Section 2005. Obligations issuedby the Postal Service shall not be obligations of nor shallpayment of the principal thereof or interest thereon be guaranteedby the Government of the United States, 39 U.S.C., Section 2005 (d)(5),except that obligations issuedby the Postal Service shallbe obligations of the Government of the United States, and payment of principal and interest thereon shallbe

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Hon. GeorgeW. McNiel,page 4, (M-1224)

fully guaranteedby the Government of the United States if and to the extent that, (1) the Postal Service requests the Secretary of the Treasury to pledge the full faith and credit of the Government of the United States for thepayment of principal and interest thereon,and (2) the Secretary in his discretiondetermines that it would be in the public interest to do so. 39 U.S.C., Section 2006(c). Financial transactionsof the Postal Service are conducted through the Postal Service Fund, a revolving fund established in the Treasury of the United States. 39 U.S.C., Section 2003. The accounts and operationsof the Postal Service are audited by the ComptrollerGeneral and reports thereonmade to the Congress to the extent and at such times as he may determine. 39 U.S.C., Section 2008(a). The Postal Service shall cause to be prepared annually a budget programwhich shall be submitted to the Office of Management and Budget. 39 U.S.C., Section 2009. The PostmasterGeneral shall render an annual report concerning the operationof the Postal Service to the Board of Governors and upon its approval, the Board shall transmit such report to the President and the Congress. 39 U.S.C., Section 2402. The Postal Service shal!he operated as a basic and fundamental serviceprovided to thepeople by the Government of the United States, authorizedby the Constitution, createdby Act of Congress, 39 U.S.C., Section 101(a). and supportedby thepeople.

All of the foregoinghave been consideredwith respect to the Postal Service and it is our opinion that the Postal Servicehas sufficient involvementwith the United States government so as to constitute it an agency thereof. The obligations issued or to be issuedby the Postal Service will not constitute obligations of the United Statesunless the Secretary of the Treasuryhas pledged the full faith and credit of the United Stateswith respect to such obligations. However, since the Postal Service exercises powers conferred upon it by federal statute in a field which, under the Constitution of the United States, is within the sole jurisdiction of the federal government, the obligations to be issuedby the Postal Servicewill clearly constitute obligations of an agency of the United States within themeaning of the cited provisions of the Texas Constitution and state statutes.
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Hon. George W. McNiel, page 5, (M-1224)

SUMMARY For the purposes of Tex. Const. Art. III, Sec. 48b, Tex. Const. Art. VII, Sec. lla, Texas EducationCode, Sec. 15.02(a),Tex. Const. Art. XVI, Sec. 62(a), and V.C.S.,Art. 6228g, Sec. 8.7, the United States Postal Service is an agency of the United States Government.

Preparedby James A. Maxwell AssistantAttorney General APPROVED: OPINIONCOMMITTEE Kerns Taylor, Chairman W. E. Allen, Co-Chairman William Craig Fisher Tyler David Longoria Ben Harrison SAMUELD. MCDANIEL Staff Legal Assistant
ALFRED WALKER ExecutiveAssistant NOLA WHITE First Assistant

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