The Attorney General of Texas 

August 21, 1980 

MARK WHITE 

Attorney General 

Honorable Jerry (Nub) Donaldson 

House of Representatives 

Capitol Building 

Austin, Texas 

Opinion No. MW-224 

Re: Authority of a county to 

invest in obligations issued by the 

United States 

Dear Representative Donaldson: 

You ask whether county governments and subdivisions thereof may 

withdraw funds from county depository banks and invest them in debt 

instruments of the federal government. Articles 2544 through 2558a, 

V.T.C.S., provide for the selection and utilization of a county depository. 

Article 2549, V.T.C.S., provides that the county treasurer shall transfer to 

the depository all funds belonging to the county and to any district or other 

municipal subdivision thereof not selecting its own depceitory. The tax 

collector is to deposit all taxes collected by him in the depository, and all 

money held by any district, county or precinct officer in the county is to be 

governed by this law. See Attorney General Opinion H-1185 (1978). 

There are certain specific statutes which permit county funds to be 

placed in debt instruments of the federal government. The county may 

invest sinking funds accumulated for the redemption and payment of its 

outstanding bonds in federal government securities. V.T.C.S. arts. 779, 836. 

However, the proceeds from the sale of the bonds may not be so invested. 

See Attorney General Opinion V-1182 (1951). Articles 708b and 708b-1, 

m.C.S., permitted the proceeds of bonds issued and sold prior to their 

passage to be invested in federal securities provided the political subdivision 

was unable to obtain labor and materials to carry out the purpose for which 

the bands were issued. See Attorney General Opinions O-7393, O-7267 

(1946). These statutes have present application. Finally, article 1269j-3, 

V.T.C.S., provides as follows: 

All political subdivlsrons of the State of Texas 

which have balances remaining in their accounts at 

the end of any fiscal year may invest such balances in 

Defense Bonds or other obligations of the United 

States of America; provided, however, that when such 

funds are needed the obligations of the United States 

in which such balances are invested shall be sold or 

redeemed and the proceeds of said obligations shall 

be deposited in the accounts from which they were 

originally drawn. 

P. 713 
Honorable Jerry (Nub) Donaldson - Page Two (MW-224) 

You ask whether a county governing body has authority to withdraw funds from the 

depository and invest them in United States obligations in the absence of express statutory 

authority to do so. Since article 2549, V.T.C.S., provides that all money is to be placed in 

the county depository, we believe a specific statute must provide an exception in order for 

the county to place funds in federal debt instruments. Such exceptions are provided by 

articles 779, 836, and 1269j-3, V.T.C.S. 

It is suggested that article 4413(34c), V.T.C.S., authorizes a county to invest its 

funds in United States obligations. However, this statute applies only to funds which the 

political subdivision has legal authority to invest. V.T.C.S. art. 4413(34c), 5 l(1). Placing 

funds in a depository is not an investment of those funds. Lawson v. Baker, 220 S.W. 260 

(Tex. Civ. App. - Austin 1920, writ ref’d). Thus article 4413(34c) does not authorize a 

county to invest funds which other statutes require to be placed in the county depository. 

See Attorney General Opinion H-1013 (1977). 

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You also ask whether the withdrawal of funds from a county depository for the 

purpose of investing them in United States securities other than as specifically permitted 

by statute would constitute a breach of the depository contract entered into by the county 

and its depository bank. The laws existing at the time the contract is made become part 

of it. Langever v. Miller, 76 S.W.2d 1025 (Tex. 1934); Winder Bros. v. Sterling, 12 S.W.2d 

127 (Tex. 1929). We believe the statutes requiring all county funds, with certain specific 

exceptions, to be placed in the county depository become part of the county’s contract 

with the depository. Thus, if the county were to withdraw funds from the depository in 

order to invest them in United States securities other than as authorized by statute, it 

would breach its contract with the depository. 

You next ask whether a county relinquishes any statutory right to invest its funds in 

United States securities by agreeing to a contract term that county funds are to be 

deposited with the depceitory. In our opinion, statutes which permit the county to invest 

certain funds in United States securities become part of the contract. See, Langever v. 

Miller, supra; Winder Bros. v. Sterling, supra. Thus, the county does not waive eny right 

under these statutes by entering into a depository contract. 

Moreover, in our opinion a county may not enter into a depceitory contract 

containing provisions inconsistent with those established by statute. A county has only 

that contractual authority conferred by the constitution and statutes. Hill v. Sterrett, 252 

S.W.2d 766 (Tex. Civ. App. -Dallas 1952, writ rePd n.r.e.); Galveston, H. & S.A. Ry. Co. v. 

Uvalde County, 167 S.W. 2d 305 (Tex. Civ. App. -San Antonio 1942, writ rerd w.o.m.). It 

may not contract away its statutory authority. See Gulf Bitulithic Co. v. Nueces County, 

297 S.W. 747 (Tex. Civ. App. -San Antonio 1927),=, 11 S.W.2d 305 (Tex. Comm’n App. 

1928). See also Attorney General Opinions M-974, M-802 (1971); G-3837 (1941) (county 

cannot alter term of depository contract fixed by statute). 

You next ask whether article 1269j-3, V.T.C.S., permits the withdrawal of funds from 

the year-end balances of the county in order to invest them in United States securities 

even though the funds may not be surplus funds and may have been collected for the 

purpcee of financing county expenditures in the subsequent fiscal year. Article 1269j-3, 

P. 114 
Honorable Jerry (Nub) Donaldson - Page Three (HW-2241 

V.T.C.S., refers to “balances remaining in their accounts at the end of any fiscal year” 

“Balance” has been defined to mean the excess funds in an account. Commercial Discount 

Co. v. Holland, 289 P. 906 (Cal. App. 1930); Jones v. Marrs, 263 S.W. 570 (Tex. 1924); 

Holmes v. Ho: b, 396 P.2d 633 (Wash. 1964). We be !lieve this definition aoolies to article 

1269i-3. whicl 1 refers to “balances remaining” in the accounts. (Emphasis added). The 

“accounts” referred to are, in our opinion, those records of account required by law to be 

kept by public officials for each separate fund as evidence of the stewardship of the 

fund - not bank accounts in which monies from many such funds might be collected. See 

V.T.C.S. arts. 1607, 1608, 1609. 

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In our opinion, article 1269j-3, V.T.C.S., permits the investment of only the monies 

remaining as surplus in the separate accounts for the preceding fiscal year. Only such 

unexpended year-end balances may be invested under it. Monies collected to finance 

public expenditures in the subsequent fiscal year are attributable to accounts for the new 

year, not the old one, and may not be withdrawn pursuant to article 1269j-3, V.T.C.S., until 

the conclusion of the new fiscal year, when any balances therein remaining would then 

become stiject to it. Attorney General Opinion O-5278 (1943). See Attorney General 

Opinions M-75 (1967); V-l182 (1951). 

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We need not answer your final question, which depends on a conclusion that funds 

described in your previous question may be withdrawn at the end of the fiscal year. 

Mr. Resweber has submitted the Harris County Depository Pledge Contract and asks 

whether Harris County may invest its funds in United States obligations under its terms 

and provisions. Harris County may invest its funds in United States obligations as 

permitted by the statutes discussed in answer to Representative Donaldson’s questions. 

Since those provisions are incorporated into the contract, investment of the funds in 

accordance with them will not constitute a breach of contract. 

SUMMARY 

County governments may withdraw funds from the county 

depository to invest them in United States obligations where 

expressly permitted to do so by statute. The laws existing at the 

time the contract is made become part of it. Thus, violation of a 

statute regarding withdrawal of funds constitutes a breach of the 

contract, and the county does not waive its right to withdraw funds 

pursuant to statute by entering into a depository contract. Article 

1269j-3, V.T.C.S., does not authorize a county to withdraw at the 

end of a fiscal year and place in federal obligations funds which 

were collected for the subsequent fiscal year. 

lkrYverY~~ 

MARK WHITE 

Attorney General of Texas 

p. 715 
Honorable Jerry (Nub) Donaldson - Page Four (MW-224) 

JOHN W. FAINTER, JR. 

Fiist Assistant Attorney General 

Prepared by: 

Susan Garrison & Bruce Youngblood 

Assistant Attorneys General 

APPROVED: 

OPINION COMMITTEE 

C. Robert Heath, Chairman 

Jon Bible 

Welter Davis 

Susan Garrison 

Rick Gilpin 

Tom Pollan 

Mitch Winnick 

Bruce Yamgblood 

p. 716