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### THE ATTORNEY GENERAL OF TEXAS

HonorableDavid H. Cain OpinionNo. JM-782 Chairman Committeeon Transportation Re: Whether article III, section TexasHouse of Representatives 18. or article XVI, section 40, of P. 0. Box 2910 the Texas Constitutionprohibits a Ausein,Texas 78769 member of theTexas House of Representatives from being employed by the Brazes Transit System, a recipient of federal funds

Dear RepresentativeCain:

You ask whether a member of the House of Representativesmay be employed as executive director by the Brazes Transit System, a recipient of state-administeredfederal grant funds under section 18 of the Urban Mass Transit Act of 1964, codified es section 1614 of Title 49 of the United States Code. You inform us that the Brazes Transit System is also eligible under article 6663c, V.T.C.S.. for state funds to match the federal grant, but that it has nor.received any statematching funds.

You do not ask us to address any specificprovision;however,we believe your question requires an examinationof article III, section 18, and article XVI, section 40, of the Texas Constitution. Article III, section 18, of the constitutionbars members of the legislature from being directly or indirectly interested in any contractwith the state or any county "authorizedby any law passed during the tern for which he was elected." Article XVI, section 40 provides in its last sentencethatno legislator

may hold any other office or position of profit under this State, or the United States, except as a notarypublic if qualifiedby law.

Trx. Const. art.XVI, 540.

Article III, section 18, has been held to prohibit a legislator from entering into a contractwith the state authorizedby a statute enactedduring his term as a legislator. Lillardv. FreestoneCounty, 57 S.W. 338 (Tex. Civ. App. 1900, no writ). This office has determined that article III;-section 18, also bars legislators from contractingwith the state if they were members of the legislature when the appropriationproviding funds for the contractwas enacted.

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Attorney General Opinion Nos. JM-162 (1984); H-696, M-625 (1970); O-6582 (1943);O-1519; ConferenceOpinionNo. 2411,January 30, 1922.

In the present case, the legislator does not contemplate contractingwith the state. He wishes to be employed by the Brazes Transit System which ie operated under the Brazes Valley Community Action Agency, a nonprofit corporation established by political subdivisions to receive and administer federal grant funds under various federal programs. See 42 U.S.C. 8§9901-9912 (providing for community services grants r0 states). See also Attorney General Opinion H-1212 (1978) (organizationof community action agency under
now repealed provisions of Economic Opportunity Act of 1964). T~hhe BrazesTransmit

System receives fundsunder section 1614(b)of title 49 U.S.C., which establishes a formula grant program for public transportationprojects included in a stateprogram ofprojects "forpublic transportation services in areas other than urbanized areas." 49 O.S.C. §1614(b). These funds are administered by the State Highway and Public TransportationDepartmentpursuant to section 3 of article 6663~.V.T.C.S. See generallyAttorney General Opinion MW-395 (1981) (discussingrole of StateHighway andPublic TransportationDepartment in administering formula grants). The federal grant funds are appropriatedto theHighwayDepartment. SeeActs 1985, 69thLeg., ch. 980, at I-97, 98 (budget 104-05). The BrGs Valley CommunityAction Agency makes application to the Highway Department for the federal grant and receives them subject to its agreement with the Highway Department that it will cornplywith the statutes, rules and regulations applicable to the grant. Thus, the grant process uses contractual controls to insure that the purposes of the federal law
are carried out, and the recipient must contract with the Highway Department fo abide by those conditions to receive a grant. This is the "contract with the state" which must be looked at in light of article III, section 18, of theTexas Constitution.

We assume that the legislator in question was a member of the legislature when the federal grant funds were appropriated to the Highway Department to distribute to local transit systems. According to facts provided us, the legislator's pecuniary interest in the contract consists of his salary as executive director of the transit system,an entitywhich receives thebenefit of the federalgrant. He is not a party to the contract between the Brazes Valley Community Action Agency and the State Department of Highways and Public Transportation. We do not believe he can be said to be directly interestedin this contract.

The facts of this requestdiffer from those at issue in Attorney General Opinion MW-477 (1982), which concerned the interest of city councilmen in federal funds received in an Urban Development Action Grant by the city. The city council contractedon behalr of the city to receive the granr, and then individual council members contracted with the city council in their privatescapacity as merchants to receive fundsunder the grant. AttorneyGeneralOpinionMW-477 (1982) determined that the city councilmembers were pecuniarily interested

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in a contract with the city and **that** they thereforeviolated common law restrictionsagainst conflict of interest as well as city charter prohibitionsagainstconflictof interest.

The present request also differs from chat addressed in Attorney General Opinion M-714 .(1970),where a city councilman accepted .the position of executivedirector of a communityaction agency organized
as a nonprofit corporationby the city, county, and school district. The expense of the executive director's salarywas paid in part from the city treasury. Article 988, V.T.C.S., at that time barred any city council member from being interested in any work, business, or contract, the .expense of which was paid from the city treasury. SeeAct of March 15, 1975. Acts 1975, 14th Leg., ch. 100, 8147, at 113, 154, 8 H. Gamil, Laws of Texas 526 (1898); repealed by Acts 1983, 68th Leg., ch. 640, at 4082. The employment was expressly barredby statute.

In thepresent case, the executivedirectorof the BrazesTransit Systemwould have no direct interest in any contractwith the state. His interest in his salary with the transit system does not in our opinion constitute even an indirect interest in a contract with the state. The federalgrant is forwardedfrom one level of governmentto another, subject at each level to promises to use it according to its termsand conditions. By the time any grant fundsreach the executive directoras salary,his interest in any contractwith the state IS too remote to be considered an indirect interest under article III, section 18. See generally Attorney General Opinion K-625 (1970) (discussingremoteor insubstantialinterest in a contract).

A recent judicial opinion on article III, secti‘m 18, of the Texas Constitution interprets that provision to give effect to the intent of the people who adopted it, in light of conditions existing at that time. Washingtonv. Walker County, 708 S.W.2d 493 (Tex.App.

- Houston [lstDist.] 1986,writ rrf'dn.r.e.). The case arose out of the appointment of a state legislator as attorney for an indigent prisoneraccused of capitalmurder.

The trial court directed the county and the state to pay the appointed attorney $50,000 under article 26.055 of the Code of Criminal Procedure. The State Comptroller forwarded to the county $50,000 in grant funds provided by the Governor's Criminal Justice Division. Washington v. Walker County, supra; Attorney General Opinion JM-287 (1984) (same facts asWashington v. Walker County,but declining to rule on validity of judicial order). The county refused to pay the state funds to the attorney, contending that article III, section 18 prohibited the payment. The court inWashingtonv. Walker County, 708 S.W.2d 493 (Tex. App. - Houston [lst Dist.] 1986, writ ref'dn.r.e.). evaluatedarticle III, section 18, as foliows:

Art. III. sec. 18 was intended to prevent personal gain and profit by members of the legislature as a result of the office they hold.

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It was first included in the Constitutionof 1876 in response to the graft that occurred during the reconstruction period following the Civil War. Tex. Const. art. III, sec. 16, interp. comentary (Vernon 1984). The negotiated agreement involved in the Lillard casewas the kind of interest-Art. III, sec. 18wes intended toprohibit.
Washington v. Walker County, 708 S.W.Zd et 496. The court discussed the attorney's interest in his appointment to represent an indigent defendant and concluded that it was not a contract between the attorney end the state or countymerely because the attorney received the incidentalbenefit of attorney fees.

The court'sremarks on article III. section 18,quoted above, are relevant to the present inquiry. The contract between the State Department of Highways and Public Transportation end the nonprofit community action agency is not the kind of negotiated agreement that article III, section 18,wes intended toprevent. The federalgovernment establishes the terms upon which its money will be distributed, and every governmentalentity acting es a conduit for the grant funds agrees to comply with those terms. The legislature's role is restricted to authorizingstate entitiestoparticipate in the federal program. See, e.g., Attorney General Opinion MW-395 (1981); H-1272 (1978). Under the facts presented there is little opportunity for "personalgain andprofit by members of the legislaturees a result of the office they hold." Washington v. Walker County, 708 S.W.Zd at 496. The opinion of the court in Washington v. Walker County, lends support to our conclusion that article III, section 18, was not intended to prohibit a legislator's appdintment to the position of executive director of a transit system which receives state appropriatedfederalgrant funds.

ArticleXVI, section 40, of theTexas Constitutionprovides that

No member of the Legislature of this State may hold any other office or position of profit under this State, or the United States, except as a notary public if qualified by law. (Emphasis added).

Tex. Const. art. XVI, §40. The emphasized languagehas been held to prevent a legislator from receiving compensation as an employee of a state supported junior college, Letter Advisory No. 4 (1973); or a state university, Letter Advisory No. 153 (1978). See also Attorney General Opinion JM-32 (1983). Attorney General Opinion C-221 (1964), construing the language of a former version of article XVI, section 33, of the Texas Constitution, concluded that an employee of the Sebine River Authority held a "position of honor, trust or profit" under the State of Texas. Tex. Const. art. XVI, 533 (1876, emended 1972). The SabineRiver Authority,was ua governmentalagency of the State of Texas. a body politic and corporate." Acts 1949, 52stLeg., ?

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ch. 110, 51, at 194. An employeeof the river authoritywas therefore
an employeeof an agencyof the state.

Theprior opinionsof this officewhich have construedthephrase "position of profit under this State" or similar languagehave found it to apply to employees of state agencies and of political subdivisionswhich can be characterizedas agencies of the state. Cases from other stateshave limited comparableprovisions to employees of. state agencies or positions created by state statute. See Begich v. Jefferson, 411 P.2d 27 (Alaska 1968) (employee of state-operated school system holds position of profit under -the state); Wood v. Miller, 242 S.W. 573 (Ark. 1922) ("civil office" under this stateN
means "under the laws of this state,” or by virtue of authority conferred by state es sovereign); State v. Peterson, 369 A2d 1076 (Del. 1976) ("office of trust, honor or profit under this state" includes county officerwith right to exercise some part of sovereign power of the state).

The executive director of the Brazes Transit System is employed by a nonprofit corporation. He is not an employee of a state agency or of a political subdivision acting es an agency of the state to carry out a state policy locally. His .employmentis not created "under state law." Cf. Cassiano v. Amigos de1 ialle, Inc., 776 F.2d 1300 (5thCir. 1985) (nonprofitcorporationwhich uses federal funding to provide services for ;he elderlywas not acting "under color" of state law). ArticleXVI, section 40, doesnot bar him from servingas executive director of the Brazes Transit Authority. See Attorney General Opinion H-1304 (1978) (legislatornot necessarilybarred from receiving federal funds es officer of corporation which receives federal contract payment or grant). See also V.T.C.S. art. 6252-9b, 557, 8;AttorneyGeneralOpinionH-696 (1975).

SUMMARY

A member of the House of Representatives is not prohibited by article 111, section 18, or articleXVI, section 40, of theTexas Constitution frombeing employedby the Brazes Transit System,
a recipient of federal funds administeredby the State Department of Highways end Public Transportacion. I Very trulyyour

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# J-h

J IM M A T-T 0 X AttorneyGeneral oi Texas

MARY KELLER ExecutiveAssistantAttorneyGeneral

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JUDGE ZOLLIE STEAKLEY SpecialAssistantAttorneyGeneral

RICK GILPIN Chairman,Opinion Committee
Preparedby SusanL. Garrison AssistantAttorneyGeneral

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