### E Amro~wmf 

### GENERAL OPTEkAS

AT-rORNEY CI-RAL August 14, 1967

Honorable~R. L. Coffman Admlhistratpr Texas Etiployment Commiesion TJXBuilding Austin, Texas 78701 :-

Re: Whetha?~the ‘Texas Employaieiit~Commi~slon may pay a~ptirtion bf the premluW3 ??or group insurance’under the: provlsloka o,fSubsection (a) of Section 1of Article 3.51 of the Infnxance Code, as amended by S.B. 294, Acts oflithe 60th Legislature. Dear Mr. Coffman: ,Referenoe Is made to. yqur ‘letter in which you requested. an opinlon.,from ‘this office (pertaining to the captioned ~makter. Wequote froti your lett’kir in part,as~.follovq3: :‘,

‘Presently the TeXas: Public Employ&s Aeriod.atlon
‘iti’thb’~olicyh6ld& fdti tiur g$oup insurance. The law. nowprovides that’,.policies may be issued to an*aaaocSation.of.public employees.. Accordingly, ‘the.qquestions wewould like for’ your office to answer’*are at3.follolrs:



## “(1)

“(2) Whether TECmay cbntribute to the pretiqms of Its emplojreee for group inmwanaa. Whether suoh oontrlbutlona cap bwtmde under our present arrangement with TPlMand our insurance carrier, BepubUo JWionaL Liie Insurance Company. L< “Wefeel thati there woihd’be muohadranta&e to continulng with our present arrangement sinca lt:would avoid the necessity of making anew contract lnvolrigg only< TECemployees and would probably be a better. contract than wecould nbgotlate separately.’It is assumed that question number (1) Is governed, by your;

captioned questlon, i.e,, the contributions by ?$Ic to the premiums of Its employeesfor those types of group Insurance ooverad by Article 30510 You~wlll~note that Senate Bill 294, 60th Legislature> Regular Session, p. 1007, Chapter 437, also amends Article 3.50 of the Insurance Code. It is this Article that 1%applicable to group life Insurance a Subsection (a), Section 1, Article 3.51 of the Feeias ,Insurance Code, as amended by Senate Bill 294 is as follows:

“(a) The State of Texas and each of its political, governmental and administrative subdivisions, departments, agencies, assooiatlons of public employee%, and the governing boards and .authorltiea of each ntatq uiiiverfifty,~ colleges, common‘and Independent school districts or of any other,agency or subdlvislon of the public School system of the State of Texas are authorized to procure oontracts insuring their respective employees or any class or classes thereof under a policy or policies of group, health, accident, accidental death and dlsmemborment, disability income replacement and hospital, surgical and/or medical expense insurance. The dependents of any such employees may be insured under group policies which provide hospital, surgical and/or medical expense insurance. The employees contributions to the premiums for such Insurance leeued to the.employer or to an association of public employees as the policyholder may be deducted by t,he employer irom the employee% salaries,, when,authorlze~d in nrlting. by. the respeatlve. employees so to do* .The~premium for;~fhe pol9cy may be pa3d’3n whole or in part fromfunds contrfbuted by the employer or in whole or fn part from funds oontributed by the insured employees 0” .The Texas Employment Commfesion Is a state agency and Its emloyees are state employees (Attorney General’% Opinion Ro. V-427, 19k7)* As you intimate in your letter, the fund% utlllxed by the -Texas Employment Commfssion in the admXnistration of the TexaiaUnemployment Compensation Act are’furnished by the federal government 0 See 42 U,S,C,A,, Section 502. Theapplicable Texas %tatute pertaining to these funds, Artfcle 522lb, Vernon’s Civil Statutes, provides in Seetfon ll:therecf, in part, the followings:

“(a) Special Fund: There Is hereby created In the State Treasury a special fund to be known as the Unemployment ‘Compensation Adm%nistration Fund.,

. , . Ally moneys fn th%s fund shall be deposited, adlainidttered andHonorable R. L. Coffman, Page 3 Opinion Ilo, M-125

disbursed, in the same manner and under
‘ditions and requirements as if provided special funds in the State Treasury.

. the .same con- \y law for other

Inasmuch as these federal funds are deposited in the State Treasury, they are state funds (Attorney Genera,l’r Opinion No. c-530, 1965). With reference to these public funds or ,moneys and the expenditure of same, .Sectlon 51 of,Article III; Constitution of Texas, provides, in part, as follows:

“The Legislature shall have no power to make any grant or authorize the making of any grant of public moneys to any individual, association of Individuals, municipal or other corparatlons whataoever. . . .’ The Supreme Court of Texas, In the case of of Austin, 160 Tex. 348, 331 S.W ,2d 737 (1960), Section 31, of Article III, Constitution of Texas, said in part:

II e 9

. the purpose of this section q , . of f&e Constitution Is to prevent the appllcatlon of public funds to private purposes. . . .n It ‘would therefore appear that your’ QU~estion ‘nwB%ber(1) resolves itself into this query: Is the use of pabldo moneys for TECemployees group insurance premium payments violative of the Constitution because It constitutes an application of. :public funds to a private purpose? Wethink that it is not. In Attorney General’s Opinion No. v-1067, (@5V), this office ‘said in part:

..

.. “In determining whether an expenditure of ]Irubilc

moneys constitutes a gift or a’grant of public momeys, “‘the primary guestion Is whether the fund@ arcI US@13 for a “public or a ‘private” parpose, ,The bentrilts of the State from an expenditure for: a “publiti PUrPOse” is. in the nature of consideration and the funds expended are therefore not a gift even though pr%vate persona are benefited therefrom,‘” The determination of what constitutes a “public purpose” for which a state may expend moneys has been held to be primarily a legislative functlon,.subject to ravlew by the courts when abused, and the determination of the legielatlve

1: -572-Honorable R. L. Coffman, page 4 Opinion No. R-125

,- body has been held to be not sub.lect to reversal exceot in 1 ,ins%ances~,where such determinati& ispalpably and manifestly arbitrary and incorrect. State: ex rel. McClure v.~Ragertin,. 155 Ohio st. 320, 98 N~.E.2a 835 (1951)

. The Texas Snreme Court, in the case of Byrd-v:City of '~' Dallas,' et al, 11T;Tex. 28, 6 S.W.2d~738 (19381,~ said the following:

11 has powei ioIt Is academic to say the Legislature

passany law which lts'wisdom suggests that is not forbidden by some provisions of the.Constitution (federal or state). If the pension provided for In this act Is a gratuity or donation to the beneficiary, it is clearly forbidden by the fundamental law. Onthe other hand, if it is a part of the compensation of such employee for services rendered to the city, or If it be for a public purpose, then clearly; it is~a valid exercise of the legisla-. tlve power..

, ,You will note that Senate Bill 294 amended Subsection (a),

Section 1, Article 3.51 of the Insurance Code by striking the language "provided, however, no state funds-shall be-used to procure such contracts, nor shall any state funds be used to pay premiums under said contracts oftinsurance,' and inserting in lieu thereof the following: "the premium for the policy may be paid in whole or in part fromfunds contributed by the employer or in whole or in part from funds contributed by the insured emloyees.' ~of Senate Bill 29E Yeu will further note that the caption reads as follows:, "AWACTamending Paragraph (b) of Subsection of Section 1 of Article a (3) ST0 oftthe Insurance Code and amending Subsection a of Section 1of Artlcle,3.51 of the Inawance Code.to permit the expenditure of.state funds to pay all or any portion of the premiums POF certain group insurance contracts coverlhg employees of .the..state; and declaring an emergency," 'The Legislature had made its intention abundantly clear in 1 'Senate Bill '294, i.eap to permit the expenditure of state funds to pay ,a11 or any portion of the premiums for certain group insurance contracts covering employees of the state. The Legislature has the authority to provide. compensation for state employees for servlcea rendered. In the opinion of thisoffice,

. . I . .~...a . -573-Honorable R. L. Coffman, page 

### 5

the expenditure of state funds to dertain group insurance contracts

_ . pay the premipmsf~or of state employees~~as-a pare of' thelr compensation is, within the realm of public purpose. Opinion No.,&125

Appleman's Insurance Lawand Practice, Volume I, pages 

### 53, 54, provides in part;

"There is no question that a private employer maytake out a group policy for the benefit of his employees. Somequestion has been raised as to the right of a social or political group to take out such a contract on the theory that it might constitute a diversion of the funds of taxpayers to an unauthorized purpose, but such power has been' sustained as tending to improve service, morale, and efficiency.

. e . Thereis no question but that, in general, such insurance has a desirable effect upon morale and mental state of the employees.

. . ,I Question number (2) as presented in your letter, "Whether such contributions can be made under our present arrangement with TPEAand our insurance carrier, Republic National Life Insurance Company" Is not amenable~ to a complete answer inasmuch as the details of your 'present arrangement" are~not set .out*However,, in view ~ofour answer to question number (l), it must follow that certain limitations be placed upon your arrangement with the Texas Public Employees Association. TPEA is a private association of individuals which charges a fee for membership, Being such, any state funds granted to this organization are subject to Section 51 of Article III, Constitution of Texas.However, Subsection (a), Section 1, Article 3.51 of the Insurance Code,as amended by Senate Bill 294 does not grant 'any state funds to an association of public employees. The statute merely authorizes an association of public employees to procure contracts insuring its employees and indicates it may be a. group policyholder when the employees' contribution's alone'are involved, Article 

### 3.51.is devoid of any language, which authorizes an association of public employees such as TPBAto procure group insurance contracts for Its members or to be the policyholder of same, wherein state funds are to be utilized in the payment of the premiums.

-5;4-. ,

, .. ,’ “~.

Honorable Coffmanj 6,,~,,y,, ,‘

.__ ,,:! :CpQ&n’ Ko;1..~l/c-125,::::~~ :: Honorable R? L. Coffmanj page, ,~,,y,, ..~l/c-125,

.’
Youare. therefore advised that ~when~ contributions.:for ‘, premium payments are to .be made with ,state funds,~ t&group. policies must byeprocured, by TEC.(t.he employer,) and’the, ‘em-~’ ployer, as the policyholder, makes the contribut,Sons tqthe’ insurance coinpany a
/ SUM’MARY _--d,--- 1. The Texas Employment Co,mmlssion may contribute with state funds to the,premiums of its employees for of Subsection 7roup insuranoe under the provisions

a) of Section 1of Article 3.51 of the Insurance Code, as amended by S.B. 294, Acts of the 60th Legislature. ,2. Whenstate funds are used as contributions, to’the premiums of group POliCieB by the Texas E&n7 ployment Commission, the Texas Employment Commission must procure the contract of insurance, be the policyholder, and pay the contributions to the insuranoe~, company0 very truly,

rney General of Texas

.’ Prepared by Ray MoGregor .I/
‘Assistant Attorney General APPROVED: OPINIONCOMMITTKE .A.J. Carubbi, Jr *, Chairman Staff Legal Assistant Y. 0. Shultz, Co-Chairman John Reeves SamKelley Roger Tyler John Ranks

,. -575-