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 of the 

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 of the Texas Constitution, which establishes 

the Teacher Retirement System, provides in subsection (a)(3): 

.%ach statewide benefit system must have a 

board of trustees to administer the system and to 

invest the funds of the system in such securities 

as the board may consider prudent investments. 

In making investments. a board shall exercise 

the judgment and care under the circumstances 

then prevailing that persons of ordinary prudence, 

discretion, and intelligence exercise in the management of their own affairs. 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 of their capital. 

The legislature by law may further restrict the 

investment discretion of a board. 

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

Section 3. 59(a) of the Education Code provides in part: 

General administration of and responsibility for 

proper operation of the 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 the trustee 

of all funds, securities, money, and other assets 

of the retirement system with full power to invest 

and reinvest them as authorized by Article III, 

Section 48b of the Texas Constitution. 

While article 3, section 48b was repealed by article 16, section 67 of 

the Texas Constitution, the powers of the 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of the repealed constitutional provision, since it is incorporated by 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 The repealed section 48b established the 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, 

to invest. e . in home 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). 

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Pursuant to this authorization such an office building has been erected. 

You ask whether insurance on the 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,s own insurance upon 

State buildings and contents, and that no insurance policies shalY be t,aken out upon any 

of the public buildings of the State, nor upon 

the contents thereof 0 e . 

p. 2965 
. 

The Honorable Leonard Prewitt, page 3 (H-681) 

The Resolution additionally provides for a sinking fund in the amount of 

ten percent of the total value of all State buildings, such fund to be 

accumulated from biennial appropriations. However, the Comptroller’s 

Annual Reports indicate that no such fund has ever been in existence. 

Article 16, section 67 (a)(3) establishes a prudent 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 of the Teacher Retirement 

System is a “state building” within the meaning of the aforementioned 

resolution, it is in either 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. -- 

San Antonio 1935, writ dism’d. ); see also Commercial Standard Fire 

& Marine Co. v. Commissioner of Insurance, 429 S. W..2d 930 (Tex. Civ. 

APP. --Austin 1968, no writ); Terre11 Wells Swimming Pool v. Rodriquez, 

182 S. W. 2d 824 (Tex. Civ. App. --San Antonio 1944, no writ). In light of 

the constitutional limitation on the 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 of the System which 

are held in trust for its members, sec. 67 (a)(l), it is our opinion that 

it is within the discretion of the Board to purchase insurance to protect 

these assets from loss. Due to the particular characteristics of the 

Teacher Retirement System, we do not believe this determination is in 

,. 

conflict with prior opinions of this 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. ” It is 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 9 of that Act provides in part: 

all units of government are hereby expressly 

authorized to purchase policies of insurance 

providing protection for such units of government, their officers, agents and employees 

against claims brought under the provisions of 

this Act. . . . 

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

While article V, section 54 of the current Appropriations Act prohibits 

the expenditure of appropriated funds for such insurance, Acts 1973, 

63rd Leg., ch. 659, p. 2217, this prohibition does not affect the 

Teacher Retirement System, for the account from which the premium 

will be paid does not consist of appropriated funds. Attorney General 

Opinion M-949 (1971). See also Attorney General Opinion WW-600 (1959). 

Accordingly, section 9 of the Texas Tort Claims Act authorizes the 

Teacher Retirement System to purchase insurance to cover 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 a person in the service of the 

state under an appointment or express contract of hire, 

oral or written, whose compensation is paid by warrant 

issued by the Comptroller, except a person 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 2 provides 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., 

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ch. 55, p. 119, Vernon’s Texas Session Law Service No. 2. In our 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 . . . on warrants ~drawn by’ thk~ state comptroller . . . . ” Education Code, sec. 3.60(c). In Matthews v. University of Texas, 295 S. W. 2d 

270 (Tex. Civ. App. --Waco 1956, no writ), 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 of the 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, but workmen’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