Court Opinion

ID: 4131549
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:16:59.040217+00
Date Added: 2024-06-11T14:32:33.869430
License: Public Domain

The Attorney           General of Texas

MARK WHITE
                                                         September        2,   1982
Attorney General

                                        Mr. James R. Hine                             Opinion No.   MW-512
Supreme      Court Building             Acting Administrator
P. 0. Box 12546
Ausfin.    TX. 78711. 2548
                                        Texas Employment Commission                   Re:   Whether Texas Employment
5121475.2501                            TEC Building                                  may obtain advance to state
Telex    9101674-1367                   Austin, Texas    78778                        unemployment  trust fund from
Telecopier      5121475.0266                                                          Federal Unemployment Account

                                        Dear Mr. Hine:
1607 Main St., Suite 1400
Dallas.   TX. 75201-4709
214,742.8944                                 You ask whether the state may legally obtain an advance from the
                                        federal unemployment account to the state unemployment trust fund
                                        under section 1201 of the Social Security Act, 42 U.S.C. §1322, should
4624 Alberta       Ave.. Suite    160
El Paso, TX.       79905.2793
                                        an advance be needed to augment the fund.    You wish to know whether
9151533-3484                            article III, section 49 of the Texas Constitution or article 5221b-16,
                                        V.T.C.S., prohibits the state from securing such an advance.

1220 Dallas Ave., Suite          202
                                             As you note in your request letter, the provisions of the Texas
Houston,     TX. 770026966
7131650-0666
                                        Unemployment  Compensation   Act and   the operations   of the Texas
                                        Employment Commission under it must be approved by the United States
                                        Secretary of Labor pursuant to the Federal Unemployment Tax Act and
606 Broadway.        Suite 312          the Social Security Act.   I.R.C. §3304; 42 U.S.C. §503. If the state
Lubbock.     TX.    79401-3479          fails to pay unemployment benefits under the 'Texas Unemployment Act,
6061747-5236
                                        it would lose ixhe necessary federal approval.     In consequence, the
                                        staff would no longer receive federal funding for the administration
4309 N. Tenth.     Suite 6              of the Unemployment Compensation Act and Texas employers would not
McAtle”.     TX. 76501-1665             qualify for ehe federal unemployment tax credit under section 3302 of
512/682-4547                            the Internal Revenue Code.

200 Main Plaza, Suite 400                    The Texas Employment Commission has a broad grant of authority to
San Antonio.  TX. 76205-2797            make the expenditures and take the actions necessary to carry out its
5121225-4191                            duty to administer the Unemployment Compensation Act.    V.T.C.S. art.
                                        5221b-9.   We believe the commission would have implied statutory
An Equal       Opportunityi
                                        authority to seek an advance from the federal unemployment account to
Affirmative      Action     Employer    the state unemployment trust fund as long as no other Texas statute or
                                        constitutional provision prevented it from doing so.

                                                The authority for the granting of advances to the states from the
                                        federal unemployment account in the unemployment trust fund appears in
                                        section     1321  of Title 42, United States Code.      By amendment of
                                        sections 1321 and 1322 in 1981, these advances are now required to be
                                        repaid by the state with interest ac a percentage rate determined

                                                                     P.   1849
Mr. James R. Hine - Page 2   (KIV-512)

according to a formula contained in section 1322, unless they are
repaid in full before the close of September 30 of the calendar year
in which the advances were made.   Section 1322 also provides that the
interest required to be paid shall not be paid by a state from amounts
in its unemployment fund. If the state pays such interest d1~rectly or
indirectly   from its unemployment    fund, the state's unemployment
compensation law will not be certified by the United States' Secretary
of Labor. However, the state may repay the advances in whole or part
at any time by requesting a transfer from its unemployment account to
the federal unemployment account of the appropriate amount.     In the
event the advances are not paid voluntarily within the no-interest
time frame, section 3302(c)(2) of the Internal Revenue Code provides
for their recovery by a reduction of the tax credits allowed to the
taxpayers of the State and the application of the additional revenues
consequentially obtained by the federal government to the repayment of
such delinquent    advances.   We have    found no provision   for an
involuntary recoupment of unpaid interest.

     Article 5221b-16, V.T.C.S., provides that benefits shall be
deemed to be due and payable under the Texas Unemployment Compensation
Act only to the extent provided in the act and to the extent that
moneys are available therefor to the credit of the Unemployment
Compensation Fund, and neither the state nor the commission shall be
liable for any amount in excess of such sums. This provision limits
the commission's liability for payment of benefits to the moneys
"available therefor to the credit of the Unemployment Compensation
Fund."   The statute does not purport to limit the commjssion's power
to seek the advances in question.   Article 5221b-16 is directed only
to the payment of benefits under the Texas Employment Commission
Compensation Act.

     Article III, section 49 of the Texas Constitution provides in
part that "["lo debt shall be created by or on behalf of the [sltate,
except to supply casual deficiencies of revenue, repel invasion,
suppress insurrection, defend the [sItate in war, or pay existing
debt."    (Emphasis  added).     In construing  this  section  of  the
constitution,   the Texas    Supreme Court   in the case of Charles
Scribner's Sons v. Marrs, 262 S.W. 722 (Tex. 1924), held, among other
things, that obligations that run current with revenues are not debts
within the contemplation of the constitution.     The holding in this
case was restated with approval by the Texas Supreme Court in 1966 in
the case of City of Big Spring v. Board of Control, 404 S.W.2d 810,
814 (Tex. 1966).    In view of these constructions of article III,
section 49, it does not, in our "pinion, present any bar to the
state's obtaining such advances.     Presumably, the commission would
expect to repay the principal of the advance with current state funds.
If repayment is not made before interest accrues, by federal action
such advances will be recouped by a reduction of the tax credits of
the state's taxpayers.

                              P.   1850
Mr. James R. Hine - Page 3   (MW-512)

     We also believe that the commission may contract to pay interest
on the proposed advances, and that the interest could legally be paid
from   the  Unemployment  Compensation  Special  Administrative  Fund
established  by article 5221b-22a, V.T.C.S.     As noted above, the
commission has broad authority under article 5221b-9, V.T.C.S., "G
administer this Act" and to "make such expenditures... and take such
other action as it deems necessary       or suitable to that end."
(Emphasis added). Article 5221b-22a, V.T.C.S., provides in part:

            There is hereby established as a special fund,
         separate and apart from all public moneys or funds
         of   this   state,   an    Unemployment   Compensation
         Special Administration Fund which may be used by
         the Commission for the purposes of paying costs of
         the administration of this Act including the costs
         of   reimbursing    the    Unemployment   Compensation
         Benefit Accounts     for unemployment     compensation
         benefits paid to former employees of the State of
         Texas which are based on service for the state,
         and the costs of construction and purchase of
         buildings     and     land     necessary     in    such
         administration.    The State Treasurer shall be the
         Treasurer and custodian of the fund.          He shall
         administer   such fund in accordance         with   the
         directions of the Commission, and the Comptroller
         shall issue warrants upon it in accordance with
         the directions of the Commission.        All interest
         and penalties collected under the provisions of
         this Act and all moneys now on deposit in the
         Unemployment Compensation Special Administration
         Fund   shall be paid       into   this fund....     The
         Commission may, by resolution duly entered in its
         Minutes, authorize     to be charged against said
         moneys any expenditures which it deems proper in
         the interest of good administration of this Act,
         provided the Commission in such resolution finds
         that no other funds are available or can properly
         be used to finance such expenditures.       All moneys
         which are deposited or paid into the Unemployment
         Compensation Special Administration Fund may be
         expended in accordance with the provisions of this
         Act, upon appropriation by the legislature, and
         shall not lapse at any time or be transferred to
         any other fund.    (Emphasis added).

See   &Xl   Attorney   General    Opinion   m-474    (1982)    (discussing
composition and usa of fund).

                             P.   1851
Mr. James R. Hine - Page 4        (MWW-512)

     The   Unemployment  Compensation  Special   Administrative  Fund,
denominated Fund 165, is appropriated by the following language in the
current General Appropriations Act.

          Out   of  the Unemployment   Compensation              Special
          Administrative Fund No. 165, to be:

          There   is   hereby   appropriated    to   the  Texas
          Employment    Commission    all   funds   which    the
          COllUXiSSiOn, by resolution duly entered in its
          Minutes, deems proper in the interest of good
          administration     of    the    Texas    Unemployment
          Compensation Act, provided that no other funds are
          available or can properly be used to finance such
          expenditures.    This estimate     is based on the
          assumption that Congress will enact legislation
          extending Section 903 of the Social Security Act
          to authorize the Texas Employment Commission to
          expend funds out of the Federal Unemployment Trust
          Fund for the administration of the Unemployment
          Compensation Law and public employment offices.

Acts 1981,   67th   Leg.,   ch.   875,   at     3402   (amount   of   appropriation
omitted).

     As an examination    of these provisions    of the Unemployment
Compensation Act and the Appropriations Act shows, the commission may
contract to pay interest from Fund 165 if the interest is a cost of
administering the Act. As a general rule, the state is not liable for
interest in the absence of a statute or express contract providing for
the payment thereof.    State v. Hale, 146 S.W.Zd 731 (Tex. 1941);
Walker v. State, 103 S.W.Zd 404 (Tex. Civ. App. - Waco 1937, no writ).
However, prior opinions of this office indicate that a state agency
may agree to pay interest on the basis of implied statutory authority.

     Attorney General Opinion H-691 (1975) held that the trustee of
the Mental Health and Mental Retardation Patient Benefit Fund could
place the fund in certificates of deposit and then pledge such
certificates as collateral for loans. The opinion considered whether
the purpose and effects of the transaction were consistent with the
relevant statutes, and did not seek express statutory authority for
the loan transaction.   Attorney General Opinion H-340 (1974) concluded
that the State    Bar could finance the construction of the State Bar
Center by pledging voluntary contributions and revenues generated by
the building.    The statutory authority was found in language giving
the State Bar "power to contract with relation to its own affairs and
necessary to carry out the purposes of this Act." The opinion did not
specifically   address the question of interest.      However,  such a
financing   arrangement   would  necessarily  involve  the payment   of

                                    P.   1852
.   .

        Mr. James R. Hine - Page 5   (MW-512)

        interest.  See also Attorney General Opinion M-656    (1970) (purchase of
        equipment on installment plan).

             We believe the commission may make the payments in question even
        though it does not have express statutory authority to pay interest.
        Expenditures incident to maintaining an adequate flow of funds through
        the state unemployment trust fund could reasonably be characterized as
        "costs of the administration of this Act."    V.T.C.S. art. 5221b-22a.
        This office concluded in Attorney General Opinion O-128 (1939) that
        Fund 165 could be used for payment of legal fees and court costs
        incurred   by  the commission   in civil suits brought     to collect
        delinquent contributions under the act.     The commission may charge
        against Fund 165 "any expenditures which it deems proper in the
        interest of good administration of this Act...."      This is a broad
        grant of authority.    Under this grant of authority we believe the
        commission could conclude that the interest payments incident to
        maintaining the balance of the unemployment trust fund would be proper
        administrative expenditures.  Such interest payments might well enable
        the commission to continue to make benefit payments in an orderly and
        timely fashion during a period of fiscal adjustment.     We cannot say
        that the proposed expenditure is not authorized.    The commission may
        agree to make interest payments that it can reasonably expect to pay
        from current revenues in this fund.

              It is therefore our opinion that the Texas Employment Commission
        may legally seek to obtain advances to its trust fund from the federal
        unemployment   account of the Social Security Act pursuant to the
        procedures found in section 1201 of that act, and, if necessary, pay
        interest thereon from moneys available in the special administrative
        fund.

                                     SUMMARY

                     The state may legally obtain advances to its
                  Texas Employment   Commission  Unemployment Trust
                  Fund from the Federal Unemployment Account of the
                  Social Security Act.

                                                  MARK      WHITE
                                                  Attorney General of Texas

        JOUN W. FAINTER, JR.
        First Assistant Attorney General

        RICHARD E. GPxAY III
        Executive Assistant Attorney General

                                      P.   1853
                                              .   ,

Mr. James R. Him    - Page 6   (me512)

Prepared by Robert L. Lattimore
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan L. Garrison, Chairman
Rick Gilpin
Patricia Hinojosa
Robert L. Lattimore
Jim Moellinger

                                  P.   1854