E Amro~wmf GENERAL 

OPTEkAS 

AT-rORNEY CI-RAL 

August 14, 1967 

Honorable~R. L. Coffman 

Admlhistratpr 

Texas Etiployment Commiesion 

TJX Building 

Austin, Texas 78701 

: - 

Re: Whetha?~ the ‘Texas 

Employaieiit~Commi~slon 

may pay a~ptirtion bf 

the premluW3 ??or group 

insurance’under the: 

provlsloka o,f Subsection 

(a) of Section 1 of 

Article 3.51 of the Infnxance Code, as amended 

by S.B. 294, Acts oflithe 

Dear Mr. Coffman: 60th Legislature. 

,Referenoe Is made to. yqur ‘letter in which you requested. 

an opinlon.,from ‘this office (pertaining to the captioned ~makter. 

We quote 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. 

now provides that’,.policies may be issued to an*aaaocSation.of.public employees.. Accordingly, ‘the.qquestions 

we would like for’ your office to answer’*are at3.follolrs: 

“(1) 

“(2) 

Whether TEC may cbntribute to the pretiqms 

of Its emplojreee for group inmwanaa. 

Whether suoh oontrlbutlona cap bwtmde under 

our present arrangement with TPlM and our 

insurance carrier, BepubUo JWionaL Liie 

Insurance Company. L< 

“We feel thati there woihd’be muoh adranta&e to continulng with our present arrangement sinca lt:would avoid 

the necessity of making a new contract lnvolrigg only< 

TEC employees and would probably be a better. contract than 

we could 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 

em loyees are state employees (Attorney General’% Opinion Ro. V-427, 

19 k 7) * As you intimate in your letter, the fund% utlllxed by 

the -Texas Employment Commfssion in the admXnistration of the 

Texaia Unemployment Compensation Act are’furnished by the federal 

government 0 See 42 U,S,C,A,, Section 502. The applicable 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 and 
Honorable 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 TEC employees group insurance premium payments violative 

of the Constitution because It constitutes an application of. 

: public funds to a private purpose? We think 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: 

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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 Sn reme Court, in the case of Byrd-v:City of '~' 

Dallas,' et al, 11 T; Tex. 28, 6 S.W.2d~ 738 (19381,~ said the 

following: 

11 

has powei io 

It 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. On the 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 oft insurance,' 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 em loyees.' 

~of Senate Bill 29 E 

Yeu will further note that the caption 

reads as follows:, 

"AW ACT amending Paragraph (b) of Subsection 

of Section 1 of Article a 

(3) 

ST 

0 oft the Insurance Code 

and amending Subsection a of Section 1 of 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 Law and Practice, Volume I, pages 53, 

54, provides in part; 

"There is no question that a private employer 

may take out a group policy for the benefit of his 

employees. Some question 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 TPEA and 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 ~of our 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 TPBA to 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. 

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. , 

, 

. . 

,’ “~. 

Honorable Honorable R? L. Coffmanj Coffmanj page, 6, ,~,,y,, ,~,,y,, ,‘. __ ,,:! :CpQ&n’ Ko ;1 ..~l/c-125, ..~l/c-125, ::: : ~~ : : 

.’ 

You are. therefore advised that ~when~ contributions.:for ‘, 

premium payments are to .be made with ,state funds,~ t&group. 

policies must bye procured, by TEC. (t.he employer,) and’ the, ‘em-~’ 

ployer, as the policyholder, makes the contribut,Sons tqthe’ 

insurance coinpany a 

/ S U M’M A R Y _--d,--- 

1. The Texas Employment Co,mmlssion may contribute with state funds to the,premiums of its 

employees for 

of Subsection 7 

roup insuranoe under the provisions 

a) of Section 1 of Article 3.51 of 

the Insurance Code, as amended by S.B. 294, Acts of 

the 60th Legislature. 

,2. When state 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~, 

company 0 

very truly, 

rney General of Texas .’ 

Prepared by Ray MoGregor .I/ 

‘Assistant Attorney General 

APPROVED: 

OPINION COMMITTKE 

.A. J. Carubbi, Jr *, Chairman 

Staff Legal Assistant 

Y. 0. Shultz, Co-Chairman 

John Reeves 

Sam Kelley 

Roger Tyler 

John Ranks 

,. 

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