ATTORNEY GENERAL OF TEXAS 

GREG ABBOTT 

The Honorable Richard J. Miller 

Bell County Attorney 

Post Office Box 1127 

Belton, Texas 76513 

Dear Mr. Miller: 

January 12, 2011 

Opinion No. GA-0834 

Re: Whether a local governmental body subject to 

the Public Funds Investment Act, chapter 2256, 

Government Code, may invest in money market 

and other demand accounts (RQ-0895-GA) 

You ask whether a local governmental body subject to Government Code chapter 2256, the 

Public Funds Investment Act, may "invest" in money market deposit accounts or other demand 

accounts that are insured by the Federal Deposit Insurance Corporation.l 

Chapter 2256 applies to various kinds of governmental bodies, among which is "a local 

government." TEX. GOV'T CODE ANN. § 2256.003(a)(1) (West 2008). A local government is 

specifically permitted to "purchase, sell, and invest its funds and funds under its control in 

investments authorized under this subchapter in compliance with investment policies approved by 

the governing body and according to the standard of care prescribed by SeCtion 2256.006." [d. § 

2256.003(a). Section 2256.009 lists various kinds of permissible investments, and other provisions 

of chapter 2256 describe other kinds of authorized investments, such as certificates of deposit, 

repurchase agreements, commercial paper, and mutual funds. See, e.g., id. §§ 2256.009, .010, .011, 

.013, .014. You suggest that "investments" in demand accounts may be permitted by a provision of 

section 2256.009 that lists, as one kind of authorized investment under chapter 2256, 

other obligations, the principal and interest of which are 

unconditionally guaranteed or insured by, or backed by the full faith 

and credit of, this state or the United States or their respective 

agencies and instrumentalities. 

[d. § 2256.009(a)(4); Request Letter at 1-4. 

We have found nothing in statutory or case law that would indicate that a demand account 

cannot be properly deemed an "other obligation" under section 2256.009 of the Government Code. 

'Request Letter at 1 (available at http://www.texasattorneygeneral.gov). 
The Honorable Richard J. Miller - Page 2 (GA-0834) 

Chapter 2256 specifically provides that "[t]he authority granted by this subchapter is in addition to 

that granted by other law." TEX. GOy'T CODE ANN. § 2256.024(a) (West 2008). In construing a 

statute, however, we are mindful that we must consider "the consequences of a particular 

construction." [d. § 311.023(5) (West 2005). The "other obligations" authorized as an investment 

by section 2256.009 must be insured by, inter alia, the "full faith and credit of ... the United States." 

[d. § 2256.009(a)(4) (West 2008). Demand deposits, of the kind of which you inquire, are insured 

only to the maximum extent of federal law, which is at present $250,000. See Act of July 21, 2010, 

Pub. L. No. 111-203, § 335(a)(1),124 Stat. 1376, 1540 (2010) (to be codified at 12 U.S.c. § 

1821(a)(1)(E».2 

You should also be aware that the kind of deposit of which you inquire is governed by 

chapter 2257, Government Code, the Public Funds Collateral Act. See TEX. GOy'T CODE ANN. 

§ 2257.001 (West 2008) ("This chapter may be cited as the Public Funds Collateral Act."). "Deposit 

of public funds" under chapter 2257 "means public funds of a public entity that: (A) the comptroller 

does not manage under Chapter 404; and (B) are held as a demand or time deposit by a depository 

institution expressly authorized by law to accept a public entity's demand or time deposit." [d. 

§ 2257.002. Demand accounts held for a local governmental body must be fully secured under 

chapter 2257 by collateral provided by the depository institution. [d. § 2257.021. At the request of 

a public entity other than a state agency, a depository for that entity is required to "deposit with a 

custodian a security pledged to secure a deposit of public funds." [d. § 2257.041(b) (West SUpp. 

2010). "A custodian holds in trust the securities to secure the deposit of public funds of the public 

entity in the depository pledging the securities." [d. § 2257.041(e). 

Thus, while a local governmental body may "invest" its funds in money market deposit 

accounts under chapter 2256, Government Code, those funds are governed, when they exceed the 

maximum amount insured under federal law, by chapter 2257, Government Code. 

2Your question appears to reflect a misunderstanding of the nature of an "investment." A "demand deposit," 

for purposes of the deposit of county funds, is defined as "a deposit of funds that may be withdrawn on the demand of 

the depositor." TEx. Loc. GOV'TCODEANN. § 116.001(2) (West 2008). See also BLACK'S LAW DICTIONARY 504 (9th 

ed. 2009) (defining "demand deposit" as "a bank deposit that the depositor may withdraw at any time without prior 

notice to the bank"). The statutes authorizing deposits of county funds distinguish between the terms "deposit" and 

"investment." For example, a commissioners court "may direct the county treasurer to withdraw any county funds 

deposited in a county depository that are not immediately required to pay obligations of the county and invest those funds 

as provided by this section." TEx. Loc. GOV'T CODE ANN. § 116.112(a) (West 2008). 
The Honorable Richard J. Miller - Page 3 (GA-0834) 

SUMMARY 

While a local governmental body may "invest" its funds in 

money market deposit accounts under chapter 2256, Government 

Code, the Public Funds Investment Act, those funds are governed, 

when they exceed the maximum amount insured under federal law, 

by chapter 2257, Government Code, the Public Funds Collateral Act. 

DANIEL T. HODGE 

First Assistant Attorney General 

DAVID J. SCHENCK 

Deputy Attorney General for Legal Counsel 

NANCY S. FULLER 

Chair, Opinion Committee 

Rick Gilpin 

Assistant Attorney General, Opinion Committee