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 gen-
                                     eral 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 pay-
ments, 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 ob-
ligations 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,tatehas 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. FlorI-
da 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'taside therein moneys for the pay-
ment of Interest and bond retirement. If the bonded Indebted-
ness Is to be paid exclusively from this fund, then they are
not general obligations of the state.
         In 1948, Louisiana approved a constitutional amend-
ment 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, author-
         izing 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, ex-
         pressly or by necessary ImplIcatIon, that pay-
         ment 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 pay-
ment 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 suffi-
                cient 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 con-
                stitute, 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,

                                          WILL WILSON
    APPROVED:
    OPINION COMMITTEE
    By: H. Grady~Chandler,
                  Chairman
