September 3, 1975
The Honorable Leonard Prewitt Executive Secretary Opinion No. H- 681 Teacher Retirement System of Texas 1001 Trinity Street Austin, Texas 78701

Dear Mr. Prewitt: Re: Authority ofthe Teacher Retirement System to purchase liability, property and workmen’s comensation insurance. You have requested our opinion concerning the following question: May the Teacher Retirement System of Texas enter into contracts and pay premiums from its expense account for general liability insurance, for insurance on its building and contents, for valuable papers insurance or for worlanen’s compensation insurance? Article 16, section 67 ofthe Texas Constitution, which establishes the Teacher Retirement System, provides in subsection (a)(3):

.%ach statewide benefit system must have a board oftrustees to administer the system and to invest the funds ofthe system in such securities as the board may consider prudent investments. Inmaking investments. aboard shall exercise thejudgment and care under the circumstances then prevailing that persons of ordinary prudence, discretion, and intelligence exercise in the management oftheir ownaffairs. not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income therefrom as well as the probable safety oftheir capital. The legislature by law may further restrict the investment discretion ofaboard.

p. 2964The Honorable Leonard Prewitt. page 2 (H-681)

Section 3. 59(a) ofthe Education Code provides inpart: General administration ofand responsibility for proper operation ofthe reti,rrment system in
. . are vested in a State Board of Trustees
. . . Section 3.60(a) provides in part: The State Board of Trustees shall be thetrustee ofall funds, securities, money, and other assets ofthe retirement system with full power toinvest and reinvest them as authorized by Article III, Section 48b ofthe Texas Constitution. While article 3, section 48b was repealed by article 16, section 67 of the Texas Constitution, the powers ofthe Board of Trustees under section 3.60(a) of the Education Code are to be measured by the terms of the repealed constitutional provision, since it is incorporated by reference into section 3.60. The repealed section 48b established the same investment standard as the presently operative article 16. section 67(a)(3), and speciIical.ly empowered the Board,

toinvest. e . inhome office facilities to be used in administering the Teacher Retirement System including, land, equipment, and office building
. s e See Attorney General Opinion M-644 (1960). - Pursuant tothis authorization such an office building has been erected. You ask whether insurance onthe building, its contents., and valuable papers may be purchased by the System. In Senate Concurrent Resoluti~on No. 3. Acts 1921, 37th Leg., 2nd Called Session, p* 369, the State’s policy in this regard is expressed as follows:

the State shall carry it,sown insurance upon State buildings and contents, and that noinsurance policies shalY be t,aken out upon any ofthepublic buildings ofthe State, nor upon the contents thereof 0e .
p. 2965. The Honorable Leonard Prewitt, page 3 (H-681)

The Resolution additionally provides for a sinking fund in the amount of ten percent ofthe total value ofall State buildings, such fund to be accumulated from biennial appropriations. However, the Comptroller’s Annual Reports indicate that no such fundhas ever been in existence. Article 16, section 67 (a)(3) establishes aprudent person standard with regard to investments of the Board. However, that subsection additionally provides that “the Legislature by law may further restrict the investment discretion of [the] board. I’ (Emphasis added) Assuming without deciding that the office building ofthe Teacher Retirement System is a “state building” within the meaning ofthe aforementioned resolution, it is ineither event our opinion that the Board’s investment discretion is not thereby limited, for a “resolution cannot be given the .effect of a law. ” Mosheim v. Rollins, 79 S.W. 2d 672 (Tex. Civ. App. -- SanAntonio 1935, **writ** dism’d. ); see also Commercial Standard Fire &Marine Co. v. Commissioner ofInsurance, 429 S.W..2d 930 (Tex. Civ. APP. --Austin 1968, nowrit); Terre11 Wells Swimming Pool v. Rodriquez, 182S.W. 2d 824 (Tex. Civ. App. --San Antonio 1944, no**writ).** Inlight of the constitutional limitation onthe amount the State may contribute to the Teacher Retirement System, art. 16, sec. 67(b)(3), and since the building, its contents and valuable papers are assets oftheSystem which are held in trust for its members, sec. 67 (a)(l), it is our opinion that itis within the discretion ofthe Board to purchase insurance to protect these assets from loss. Due to the particular characteristics ofthe Teacher Retirement System, we do notbelieve this determination is in

,. conflict with prior opinions ofthis office reaching the opposite conclusion

with respect to other state agencies and instrumentalities. See Attorney General Opinion M-1257 (1972). You also ask whether the System may purchase “general liability insurance. ” Itis our understanding that your question is limited to insurance for claims under the Texas Tort Claims Act, article 6252-19. V. T.C.S. Section 9ofthat Act provides in part:

all units ofgovernment are hereby expressly authorized to purchase policies of insurance providing protection for such units ofgovernment, their officers, agents and employees against claims brought under the provisions of this Act.
. . .

p. 2966The Honorable Leonard Prewitt, page 4 (H-681)

While article V, section 54 ofthe current Appropriations Act prohibits the expenditure ofappropriated funds for such insurance, Acts 1973, 63rd Leg., ch. 659, p. 2217, this prohibition does notaffect the Teacher Retirement System, for the account from which the premium will be paid does notconsist of appropriated funds. Attorney General Opinion M-949 (1971). See also Attorney General Opinion WW-600 (1959). Accordingly, section 9 ofthe Texas Tort Claims Act authorizes the Teacher Retirement System to purchase insurance tocover claims authorized to be bought and paid under the Act. And see Attorney General Opinion H-70 (1973). Your final question concerns whether the Teacher Retirement System may purchase worlunen’s compensation insurance, Article 83098, V. T. C. S., provides for workmenIs compensation insurance for state employees. Section l(1) provides:

‘Employee’ means aperson in the service ofthe state under an appointment or express contract ofhire, oral or written, whose compensation is paid bywarrant issued by the Comptroller, except aperson employed by the State Highway Department or by an institution of higher education subject to a separate workman’s compensation law. See also Senate Bill 829, 64th Leg. Section 2provides that “the state is self-insuring. ” We have ruled that compensation may be provided for injuries to state employees occurring on or after July 18. 1975. Attorney ‘~’ General Opinion H-637 (1975). See House Bill 169, Acts 1975, 64th Leg., - ch. 55, p. 119, Vernon’s Texas Session Law Service No. 2. Inour view employees of the Teacher Retirement System are within the definition contained in section l(l), for. “all payments from the accounts shall be made
. . . onwarrants ~drawn by’thk~state comptroller
. . . . ” Education Code, sec. 3.60(c). InMatthews v. University ofTexas, 295 S.W. 2d 270 (Tex. Civ. App. --Waco 1956, nowrit), the court held that since the University of Texas was the subject of a specific workmen’s compensation statute, article 8309d. the general workmen’s compensation statute, article 8306, was not applicable. We believe the same reasoning applies to the Teacher Retirement System.

p. 2967.

. The Honorable Leonard Prewitt, page 5 (H-681)
Accordingly, Teacher Retirement System employees are eligible for workmen’s compensation only under article 8309g. Since section 2 of article 8309g provides that the State shall be a self-insurer and thereby limits the investment discretion ofthe Board of Trustees, Tex. Const. art. 16, sec. 67(a)(3), it is our opinion the Teacher Retirement System may not purchase workmen’s compensation insurance. SUMMARY The Teacher Retirement System may purchase insurance for liability under the Texas Tort Claims Act. Insurance on its building, its contents, and valuable papers may also be purchased, butworkmen’s compensation insurance may not. Very truly yours,

Attorney General of Texas APPROVED:

DAVID M. KEN’DALL, First Assistant

C. ROBERT HEATH, Chairman Opinion Committee

p. 2968