  11 OFFICE OF THE ATTORNEY GENERAL . STATE OF TEXAS

   JOHN     CORNYN




                                                June 19,200l



The Honorable J. E. “Buster” Brown                      Opinion No. JC-0391
Chair, Committee on Natural Resources
Texas State Senate                                      Re:     Whether an individual employed by a
P.O. Box 12068                                          company that receives all of its revenue from a
Austin, Texas 787 1 l-2068                              contract with the State of Texas may be
                                                        compensated as a director of a municipal utility
                                                        district (RQ-03 5 1-JC)


Dear Senator Brown:

        You have requested our opinion as to whether an individual employed by a company that
receives all of its revenue from a contract with the State of Texas may be compensated as a director
of a municipal utility district. For the reasons set forth below, we conclude that such a person may
be compensated for service on the board of a municipal utility district.

          You explain that the individual in question is a director of a municipal utility district created
under the provisions of article XVI, section 59 of the Texas Constitution, and chapter 54 of the
Water Code. A municipal utility district is governed by a board of five directors. TEX. WATER CODE
ANN. 5 54.101 (Vernon 1972). Chapter 49 of the Water Code is applicable to municipal utility
districts created under chapter 54 to the extent that the former’s provisions do not directly conflict
with any provision of the latter. Id. 8 49.002(a) (Vernon 2000). A director of a municipal utility
district is “entitled to receive reimbursement of actual expenses reasonably and necessarily incurred
while engaging in activities on behalf of the district.” Id. 9 49.060(b). Furthermore, “[a] director
is entitled to receive fees of office of not more than $100 a day for each day the director actually
spends performing the duties of a director.” Id. 8 49.060(a). You relate that:

                The director in question . . . is employed by a company . . . that
                receives its revenue from a contract with the Texas Department of
                Criminal Justice. . . . The contract is awarded by public bid. The bid
                resulted in a three year contract that is renewed annually.        The
                contract is re-bid by TDCJ every three years. The TDCJ [contract]
                is the only contract that the Company has. The Director is strictly an
                employee and owns no part or portion of the Company. . . . He
                receives compensation in the form of a salary from the Company.’



        ‘Letter from Honorable J. E. “Buster” Brown, Chair, Senate Committee on Natural Resources, to Honorable
                                                                                                   (continued...)
The Honorable J. E. “Buster” Brown         - Page 2      (K-039    1)




       Article XVI, section 40 of the Texas Constitution          provides, in relevant part:

                State employees or other individuals who receive all or part of their
                compensation either directly or indirectly from funds of the State of
                Texas and who are not State officers, shall not be barred from serving
                as members of the governing bodies of school districts, cities, towns,
                or other local governmental districts; provided, however, that such
                State employees or other individuals shall receive no salary for
                serving as members of such governing bodies.

TEX.CONST. art. XVI, 8 40 (emphasis added). A municipal utility district is a “local governmental
district.” But c$ County of Maverick v. Ruiz, 897 S.W.2d 843,847 (Tex. App.-San Antonio 1995,
no writ) (county is not a “local governmental district” under article XVI, section 40 of Texas
Constitution).    This provision means that a person who receives his compensation Tom the state,
either directly or indirectly, is entitled to serve as a member of a local governing body, such as a
municipal utility district, only if he receives no salary for the latter position other than reimbursement
for actual expenses. Tex. Att’y Gen. LO-95-001, LO-93-033. Subsection 49.060(a) of the Water
Code authorizes the payment of fees beyond reimbursement for expenses to directors of a municipal
utility district. Your question is whether the individual in question, who is compensated by a
company whose only income derives from a state contract, may be said to be a person “who receives
all or a part of his compensation either directly or indirectly from funds of the State of Texas.”
Request Letter, supra note 1, at 2.

         The proviso of article XVI, section 40 is applicable to persons other than state employees.
Teachers employed by an independent school district, employees of a district attorney, and
employees of a junior college district are examples of individuals to whom the proviso applies.
Their salaries as essentially local employees are supplemented from state funds. See Tex. Att’y Gen.
Op. No. JM-118 (1983); Tex. Att’y Gen. LO-94-045, LO-90-106. The distinction that all these
persons share, other than receiving part of their compensation from state funds, is that they arepublic
employees. On the other hand, the individual of whom you inquire is not a public employee.
Moreover, he does not receive his salary, either directly or indirectly, from funds of the state.
Rather, he is compensated as an employee of a private employer that, as it happens, has contracted
with the state. The proviso is no more applicable to such a person than it is to an employee of any
other private company that receives state tinds pursuant to a contract. The article XVI, section 40
proviso should not be construed to cast so wide a net. In order to fall within its ambit, we believe
that an individual, in addition to receiving “all or part of his compensation” from the state, must also
be reasonably classifiable as a public employee.

        We conclude that an individual employed by a company that receives all of its revenue from
a contract with the State of Texas may be compensated as a director of a municipal utility district.


        ‘(...continued)
John Comyn, Texas Attorney General (Feb. 13,200l) (on file with Opinion Committee) [hereinafier Request Letter].
The Honorable   J. E. “Buster” Brown   - Page 3     (JC-0391)




                                        SUMMARY

                         An individual employed by a company that receives all of its
                revenue from a contract with the State of Texas may be compensated
                as a director of a municipal utility district.




                                              Attorney General of Texas



ANDY TAYLOR
First Assistant Attorney General

SUSAN D. GUSKY
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General - Opinion Committee
