Honorable Earl Rudder Opinion NO. ~~-82 

Commissioner 

General Land Office Re: Bonds issued under 

Austin, Texas Article 3, Section 

49-b, Constitution 

of Texas, are general obligations of 

Dear Mr. Rudder: the State of Texas. 

You ask whether or not Veterans' Land Bonds issued 

under Article 3, Section 49-b of the Constitution of Texas, 

are general obligations backed by the full faith and credit 

of this State. 

Article 3, Section 49-b, Constitution of Texas, 

creates a Veterans' Land Board; preECribe6 its membership; 

endows it with the prerogative to issue installment bonds 

not to exceed Two Hundred Million Dollars; sets up a fund 

to receive the proceeds; provides for Its expenditure on land 

purchases for resale to veterans, and provides a revolving 

fund feature to absorb Income therefrom; and, dedicates a 

sufficient amount therefrom to pay interest on the bonds and 

declares that after December 1, 1965, "all monies received by 

the (Board) from the sale of the lands and Interest on payments, or 60 much thereof as may be necessary, shall be set 

aside for the retlrement of said additional bonds and to pay 

interest thereon ~ m -" 

The question is whether these bonds are general obligations of the State of Texas for the payment of which the 

full faith and credit of the State are pledged. 

Article 3, Section 49-b of the Constitution provides 

that all "such bonds shall be executed by said Board as an 

obligation of the State of Texas." 

The Issuing authority, the Veterans' Land Board, was 

created and exists pursuant to constitutional authority. It 

is a department of the State Government by virtue thereof and 

the bonds It legally issues are obligations of the State of 

Texas and not of the Board. But It does not follow ipso facto 
Honorable Earl Rudder, page 2 (W-82) 

that the S,tate has pledged Its general power of taxation to 

the payment thereof, 

The prime factor that constitutes a general state 

obligation is whether or not the taxing power of the state 

may be called on to service and dischar e it. State v. FlorIda State Improvement Comm., 34 so. 2, 4 & 3, 451 T1946). 

In the Instant case, we have a specific fund and 

the board Is directed to se't aside therein moneys for the payment of Interest and bond retirement. If the bonded Indebtedness Is to be paid exclusively from this fund, then they are 

not general obligations of the state. 

In 1948, Louisiana approved a constitutional amendment relative to veterans' bonuses, to be paid by a tax on 

beer. Under the Louisiana scheme, a state board was allowed 

to anticipate tax collections and issue bonds and to pledge and 

dedicate the avails and proceeds of the beer tax as security 

therefor. 

The resulting bonds came under attack when issued as 

a general.obligatIon of the state. In sustaining them as such, 

the Supreme Court of Louisiana in State v. Board of Liquidation 

of State Debt, 39 So. 2d 333, 334, said: 

"It is well established that a statute, authorizing the contracting of debt on behalf of a 

public'agency, which provides a special fund 

for the payment of the debt, contemplates the 

issuance of a general obligation to represent 

the debt so incurred unless It provides, expressly or by necessary ImplIcatIon, that payment of the debt shall be limited to the special 

fund." 

There is no declaration in Article 3, Section 49-b, 

that the established fund shall alone be applied to the payment of the principal and interest of the bonds, nor is there 

any express provision that such bonds are payable exclusively 

out of the fund, nor is there any implication that payment of 

the bonds is Intended to be limited solely to the fund. On 

the contrary, Article 3, Section 49-b, provides: "* . . Ali 

bonds Issued hereunder . ~ ~ shall constitute obligations of 

the State under the Constitution of Texas." 
, 

Honorable Earl Rudder, page 3 (~~-82) 

We have previously ruled that Article 5421m, V.A.C.S., 

is applicable to Article 3, Section 49-b. Attorney General 

Opinion No. W-2 (Jan. 14, 1957). 

Section 9(c) of Article 5421m provides: 

"If said Board (Veterans' Land Board), at any 

time during the existence of said Veterans' 

Land Fund, shall determine that during the 

following biennium there will not be sufficient moneys In said Fund to pay principal 

of and/or interest on said bonds which will 

fall due during the said following biennium, 

the Legislature shall appropriate from the 

General Fund of the State sufficient moneys 

to meet such obligation . . ." (Emphasis ours) 

The Constitution and statutes in force and effect 

at the time bonds are issued will necessarily become a part 

of the contract. 

You are respectfully advised that the bonds issued 

under Article 3, Section 49-b, Constitution of Texas, after 

approval by the Attorney General of Texas, registration by 

the Comptroller, and delivery to the purchaser or purchasers, 

will constitute general obligations of this State, for the 

payment of which the full faith, credit and resources of the 

State of Texas are unconditionally and Irrevocably pledged. 

SUMMARY 

Bonds Issued by the Veterans' Land Board constitute, under the Constitution and Laws of 

this State, a general obligation backed by the 

full faith and credit of the State of Texas. 

Very truly yours, 

APPROVED: 

OPINION COMMITTEE 

By: H. Grady~Chandler, 

Chairman 

WILL WILSON