    Ron.  Robert S. Calvert                Opinion   No.+177
    Comptroller  of Public
      Accounts                             Re:   Construction   of Section
    Austin, Texas                                8(C) of Article   678f,
                                                 Vernon's Civil Statutes,
<                                                relating   to the certi,ff-
                                                 cation by the Comptroller
                                                 that a contract   awarded
                                                 by the State is not in
                                                 excess of the amount avail-
    .Dear Mr. Calvert:                           able for such project.

                  Your request    for   an opinion   reads,    in part,     as
    follows   :

                   "The State Building Commission has awarded
            a contract     for the 'construction     of certain public
            works for a total contract         price of two million
            eight hundred ninety-six         thousand and one hundred
            dollars    ($2,896,100.00),      approximately   one million
            dollars of which is to be paid from funds appro-
            priated by the Congress and alloted           to the State
            of Texas under the Community Health Centers Act
            (42 U.S. Code, sees. 2681-2687).            Documents have
           .been furnished by the Dallas Regional Office,             De-
            partment of Health, Education and Welfare, U. S.
            Government, which reflect         that  the Federal  funds
            have been approved and obligated           for the public
           ~works project.        However,   the funds have not been
            transferred      to the State,    and it is anticipated
            that the funds will be furnished to State author-
            ities   on a quarterly      basis after the construction
            is started.
                  “Prior   to the award of the contract        the pro-
            posed contract    award was forwarded to the Comp-
            troller   for certification      of available    funds.   In
            those instances     in which sufficient      State funds
            are available <for the complete performance of a
            public works contract        the Comptroller normally
            certifies    on the contract     award "that sufficient
            funds are available       for the contract    described
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                                                      .    I
                                                                   I
.
    c



        Eon.   Robert      S. Calvert,      page 2,       W-177)             I

               above.”    However, in the instant case the Comp-
               troller   determined that funds appropriated    by the
               State only in the amount of $1,849,536.24      were
               available    for the project.   Accordingly,  the
               Comptroller     certified that amount as ~available,
               but noted on the proposed contract      award that
               the Federal funds involved had been obligated
               for.the   project.
                      "In light of the foregoing   circumstances
               your opinion is respectfully     requested on the
               following    questions:

                        ‘a.      Prior to receipt of Federal funds
                      ,’     ,   alloted     and obligated     for a State
                .   .       ‘!   public works project,        which together
                                 with State appropriations          account
                                 for the project,       may the Comptroller
                                 execute an unqualified         certification
                                 that   sufficient     funds are available
                                 for the project?
                                                                ,
                        “b.      If your answer to the foregoing
                                 question      is in the negative,       may a
                                 valid certification       be executed by
                                 adding thereto a qualifying           phrase
                                 such as “subject       to the receipt of
                                 $1,004,360.00       in Federal. funds which
                                 have been obligated        for the above
                                 project?"          'J

                        “C.      Under the contraot described above,
                                 wherein the Comptroller     certified     a
                                 rtatea amount as available      ana,the
                                 balance of the contract price is to
                                 be furnished   from obligated     Federal
                                 funds, may the Comptroll’er make pro-
                                 gress payments or pay any other claim
                                 under the contract prior to receipt
                                 of Federal   funds?
          .
                        "d.      May the Comptroller make progress pay-
                                 ments or pay otherclaim       pursuant to
                                 an awarded construction      contract   in
                                 respect   to which no certification      of
                                 available   funds has been made by the
                                 Comptroller   or in'respect    to which the
                                 amount certified     as available   from
                                 State appropriations     is less than the
                                 amount for which, the contract was
                                 awarded?”                            i
                                               .-851-
                                 .



Hon. Robert   S. Calvert,     page 3,        (M-177)


The applicable   provisions    of Section 8(C) of Article                  678f,
Vernon's Civil   Statutes,    read as follows:
            I . . . Subject to the applicable     provisions
     of other law respecting      the award of State con-
     tracts,    the contract  or contracts   shall be award-
     ed to the qualified     bidder making the lowest and
     best bid; but no' contract     shall be awarded for a
     sum in excess of the amount which the Comptroller
     shall certify    to be available    for such project,
     . . . ."
           Section 49 of Article             III   of   the Constitution       of
Texas prov$des,   in part:

           "No debt shall be created               by or on behalf
     of the State, except . . . .I                 (Exception not
     applicable.)
           Section 6 of Article     VIII Qf the Constitution   of
Texas prohibits   any appropriation    'of'money for a term long-
er than two years.

           The leading cases concerning   whether a contract
creates obligations    on behalf of the State in violation
of Section 49 of Article    III of the Constitution  of Texas
are Charles Scribner's    Sons v. Marrs, 114 Tex. 11, 262 S.W.

of Control,    404 S.W.Zd 810 (Tex.Sup. 1966).       In Charles
Scribner's    Sons v. Marra, supra, the Court was considering
the validity    of a contract   for the purchase of certain
books for a period of five years.        The obligation   of the
contract was not to buy a fixed number or amount of books
but only so many as needed by the schools of the State.
The Court held, therefore,      that since the contract did not
make a charge on the future revenues of the State, no debt
was created nor was Section 6 of Article       VIII of the Con-
stitution    of Texas violated.
           In Fort Worth Cavalry Club v. Sheppard, supra, the
Court held a 'lease contract for a period of five years void,
since the adjutant general had the implied power to make a
contract  onlv within the amounts of the appropriation,  and
for the period of the appropriation.
          In City of.Big  Spring v. Board of Control,  supra,
the Court held that a contract  whereby the city agreed to
furnish water to the State at a fixed-rate  "as-long  as the
State of Texas shall in good faith maintain and operate

                                     -852-
                                     -.
:   ,.     .


           Ron. Robert       S. Calvert,     page 4,       (M-177)


           said   hospital     on said     site"   did not create    a debt.
                        In Nichols v. State, -32 S.W. 452 (Tex.Civ.App.
           1895, error ref.1 the State was held not liable under a
         - contract    entered into by the State involving    an amount
           exceeding the amount available     for such project,   and the
           legislature    was held to be without power to ratify    the
           contract    to the extent it exceeded the appropriation.

                        In view of the foregoing,       it is our opinion
           that  the purpose of Section 8(C) of Article           678f, supra,
           is to prevent the awarding of a contract           which would attempt
           to create obligations      in violation     of Section 49 of Article
           III of the Constitution      of Texas.      Section 8(C) of Article
           678f is designed to enable agencies of the State to determine
           in advance of the award of a particular           contract whether the
           obligation    to be created by the award is payable out of monies
           available    for such project.      In this respect,      the certifica-
           tion  of the Comptroller with regard to contracts            is similar to
           the certification     of the Comptroller       under the provisions      of
           Section 49a of Article      III of the Constitution        of Texas re-
           lating to appropriations       being.within     the amount estimated to
           be available     in the affected    funds.
                        A contract  for the construction    of certain public
           works payable out of State funds, appropriated          by the Leg-
           islature,    and out of Federal funds appropriated       by the Con-
           qress, and allocated     to the State of Texas does not create
           a debt in violation     of Section 49 of Article    III   of the Con-
           8titution    of Texas when the amount of State funds appropriated
           by the Legislature,     together with the amount of Federal        funds
           approved and obligated      for such project,   is equal to or exceed
           the amount of the awarded contract.         Under such circumstances,
           the Comptroller     of Public Accounts is authorized      to execute
           certificates    provided in Section 8(C) of Article       678f.    Under
           the facts stated in your request,       in  answer to   your  questions
            (a) and (b), it is our opinion that you are authorized          to
           make the certification      provided in Section 8(C) of Article
           678f, for the reason that the contract        awarded is not in ex-
           cess of the amount made available       for such project.
                      .Zn~ answer to your questions  .(c) and (a), it is noted
           that money can only be drawn from the State Treasury pursuant
           to specific    appropriations made by the Legislature.       Article
           VIII, Section 6, Texas Constitution.      Therefore,    the Comp-
           troller   does not have authority   to pay out funds in the State
           Treasury except in pursuance to specific       appropriations,     and
           where obligated    Federal funds are to be deposited      in the State
           Treasury and which have been appropriated       by the Legislature,
           progress payments payable from these funds may not be made
                                                   -853-
Hon. Robert     S. Calvert,   page 5,    (M-177)

until   such Federal funds have been received   by the State.
State funds appropriated    by the Legislature,  on the other
hand, may be expended by progress payments until the appro-
priation   has been exhausted.
                              SUMMARY
                              -------.
               A contract   for the construction     of certain
        public works payable out of State funds appro-
        priated by the Legislature      and out of Federal
        funds appropriated      by the Congress and allocated
        to the State of Texas does not create a debt in
        violation    of Section   49 of Article   III of the
        Constitution     of Texas when the amount of State
        funds,appropriated      by the Legislature,    together
        with the amount of Federal funds approved and
        obligated    for such project,   is equal to or ex-
        ceed the amount of the awarded contract.           Under
        such circumstances. the Corndroller         of Public
        Accounts is authorized      to ekecute certificates
        provided in Section 8(C) of Article         678f, Ver-
        non's Civil Statutes.

                                     w      truly   yours,


                                                .C. MARTIN
                                           rney General of Texas
Prepared by John Reeves
Assistant Attorney General

 APPROVED:
 OPINION COMMITTEE
 Hawthorne Phillips, Chairman‘
 Kerns Taylor, Co-Chairman
 W. V. Geppert
 Harold Kennedy
 w. 0. Shultz
 Bill Allen
.A. J. CARUBBI, JR.
  Staff Legal Assistant




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