DAN MORALES 

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March 30, 1992 

Mr. James L Pledger 

Commissioner 

Opinion No. DM-99 

Texas Savings and Loan Department 

2601 North Lamar, Suite 201 

Austin, Texas 78705 

Re: Whether certain governmental 

entities may lawfully deposit funds in 

the demand accounts of state and 

federal savings and loan associations 

and savings banks (RQ-220) 

Dear Commissioner Pledger: 

You have requested an opinion regarding whether certain governmental 

entities organized under the laws of the State of Texas may lawfully deposit funds in 

the demand accounts of “state and federal savings and loan associations and savings 

banks,” which you refer to collectively as “savings associations.“l In particular, you 

ask about the authority of municipalities, counties, independent public school 

districts, and institutions of higher learning. 

The authority of these governmental entities to deposit funds is governed by 

statute. Chapter 105 of the Local Government Code authorizes municipalities to 

deposit municipal funds in banks. Section 105.001 defines the term “bank” as,“a 

banking corporation or association or an individual banker.” Chapter 116 of the 

Local Government Code authorizes county commissioners courts to contract with 

banks for the deposit of county funds. Local Gov’t Code 8 116.021.’ Like section 

105.001, section 116.001 defines the term “bank” as “a banking corporation or 

association or an individual banker.” This office has repeatedly stated that the 

statutory definition of “bank” found in these sections does not include savings and 

loan associations, and that savings and loan associations do not qualify as 

depositories for these and other governmental entities without further statutory 

‘In your brief, you appear to use the term “savings association” as defined by federal law, which 

includes state savings and loans and federally chartered savings banks. 12 U.S.C. 9 1813(b). You state, 

however, that ‘[qor purposes of analyzing authorized deposit-taking activities, these thrift institutions 

should be considered collectively.” We use the term “savings association” only in characterizing your 

contentions, and refer to and continc our analysis to “savings and loan associations.” 

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Mr. James L. Pledger - Page 2 (DM-99) 

authorization. Sre Attorney General Opinions MW-531 (19X2) (concluding thar 

savings and loan associations may not serve as hospital district deposirories because 

statutory terms “banking corporation, association or individual bank[s]” do not 

embrace such entities); M-22 (1967) (concluding that former article 2549, V.T.C.S.. 

one of the predecessor statutes to chapter 116 of the Local Government Code, did 

not qualify a savings and loan corporation as a depository for county funds); see ~1x0 

Attorney General Opinions H-1013 (1977); H-723 (1975). 

Subchapter E of chapter 23 of the Education Code, the School Depository 

Act, authorizes independent school districts to establish depositories for the deposit 

of school funds. Section 23.71 mandates that “[a] school depository. shall be a 

bank located in the State of Tesas.“’ Subchapter A of chapter 5 I of the Education 

Code governs the control of funds by certain state institutions of higher learning. 

including the University of Texas and the Texas A & M University systems. See 

Educ. Code $9: 51.001 (setting forth the institutions to which subchapter A applies), 

61.003 (same). Section 51.003 of that subchapter provides that the governing boards 

of such institutions may select “one or more depositories as places of deposit” for 

certain school funds and shall deposit such funds “in tke depository hank or hanks.” 

In Attorney General Opinion MW-272 (19SO). this office concluded that the term 

“bank” in section 23.71 of the Education Code does not embrace sa\.ings and loan 

associations. See uko Attorney General Opinion JM-42 (10%) at I (credit unions 

may not serve as school district depositories). The same rationale appears to apply 

to the terms “depository” and “depository hank” in section 5 1.003. Ser Attorney 

General Opinion MW-272 (“savings and loan associations do not qualify as 

depositories for political subdivisions without statutory authorization”) (emphasis 

added). 

You contend that the foregoin g attorney general opinions were written 

before “the considerable expansion of the powers of savirigs and loans that occurred 

after 1982” and imply that they should he overruled. In support of your contenrion. 

you assert that savings associations are now insured by the Federal Deposit 

Insurance Corporation pursuant to the federal Financial institutions Reform. 

‘Section 23.73 ddincs a “hunk” as: 

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Mr. James L Pledger - Page 3 (DM-99) 

Recovery and Enforcement Act of 1989, and that federal and state law now 

authorize federal savings associations and state savings and loan associations to 

accept demand deposits from any person, see 12 USC. $1464(b); 12 C.F.R. 

Q 545.12; see aLso V.T.C.S. art. 852a, 5 5.05 (providing that a state savings and loan 

association may engage in any activity that is permissible for a federal savings and 

loan association). You also assert that a federal court has “recognized that a savings 

and loan association chartered in Texas is the functional equivalent of a Texas state 

bank,” citing State of Texas v. Clarke, 690 F. Supp. 573 (W.D. Tex. 1988).3 

In 1982, this office considered an argument almost identical to the one 

asserted here. In Attorney General Opinion MW-534, the requestor contended that 

“recent changes in laws governing savings and loan associations.. . might affect 

prior opinions of this office regarding the eligibility of such associations. . . to serve 

as county depositories.” Attorney General Opinion MW-534 at 2. We rejected this 

argument, holding that 

[allthough these changes provide the authority for.. . savings 

and loan associations to perform some of the same functions as 

banks, this alone’ does not provide the. . . requisite statutory 

authority that would permit them to serve as county depositories 

within the ambit of articles 2544 through 2558a, V.T.C.S. [the 

predecessor statutes to chapter 116 of the Local Government 

Code]. 

Id. As is clear from the foregoing, our prior opinions rely on the fundamental 

principle that express legislative authorization is necessary to allow governmental 

entities to deposit funds in savings and loan associations. Since 1982, the Texas 

legislature has not seen fit to amend the applicable provisions of the Local 

Government Code or the Education Code to authorize municipalities, counties, 

school districts and institutions of higher learning to deposit funds in savings and 

loan associations.4 Recent changes in statutes and regulations governing savings 

3Another brief submitted in support of the Savings and LOan Department’s position suggests 

that the Texas Savings and Loan Act, V.T.C.S. art. 852a, 5 6.14, authorizes governmental entities to 

deposit funds in savings and loan associations. In Attorney General Opinion H-723, this office held 

that that provision, standing alone, does not give any political subdivision the authority “to make 

investments unaffected by legal restrictions found elsewhere in the law of this State.” Attorney General 

Opinion H-723 at 4; see also Attorney General Opinion MW-534. 

41ndced, a recent attempt to pass such legislation failed. See H.B. 1572, 72d Leg. (lW1) 

(would have amended Local Government Code, chapter 105, to change the detinition of the ‘term 

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Mr. James L. Pledger - Page 4 (DM-99) 

associations. while they may affect the activities in which such associations may 

engage, do not provide the requisite statutory authority that would permit these 

governmental entities to deposit funds in savings and loan associations, and 

therefore do not affect the continued validity of our prior opinions. 

SUMMARY 

Municipalities, counties, independent school districts, and 

institutions of higher learning are not authorized to deposit 

funds in the demand accounts of savings and loan associations. 

Very truly yours. 

DAN MORALES 

Attorney General of Texas 

WILL PRYOR 

First Assistant Attorney General 

MARY KELLER 

Deputy Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY (Ret.) 

Special Assistant Attorney General 

RENEA HICKS 

Special Assistant Attorney General 

MADELEINE B. JOHNSON 

Chair, Opinion Committee 

Prepared by Mary R. Crouter 

Assistant Attorney General 

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