                             QBfficeof tip !Zlttornep@enera
                                                %tate of aexae
DAN MORALES
 AlTORNEY
      GENEaN.                                     March 9,1995

     Mr. Carl Mullen                                       Opinion No. DM-328
     Deputy Director
     General Services Commission                           Re: Whether the General Services Com-
     P.O. Box 13047                                        mission has the authority to promulgate a
     Austin, Texas 7871 l-3047                             rule to deem busmesses owned by
                                                           individuals with disabiities as %istorically
                                                           underutilized businesses” as that term is
                                                           de&d in section 1.02(3) of article 6Olb,
                                                           V.T.C.S. (RQ-721)

     Dear Mr. Mullen:

              On behalf of the General Services Commission (the “commission”), you ask
     whether the commission has the authority to promulgate a rule to deem businesses owned
     by individuals with disabilities as ‘historically underutilized businesses” as that term is
     detined in section 1.02(3) of article 601b, V.T.C.S. Section 1.02(3) defines the term
     “historicahy underutilized business*’to mean a business that is owned (or, in the case of a
     corporation or partnership, at least fifty-one percent owned) by one or more persons who

               are socially disadvsntaged because of their identification as members
               of certain groups, includmg black Americans, Hispanic Americans,
               women, Asian Pacitic Americans, and Native Americans, and have
               s&bred the effects of discriminatory practices or siiar       insidious
               circumstances over which they have no control.
     V.T.C.S. art. 601b, 3 1.02(3)(A)(i).*



            *8cction1.020) in its entiretyprovidesas follows:



                    (A) a mrpation formedfor the pups of making a profit in which at
               least51perantofallclassaofthesharrsofstodrorotheroquitablcseeuritia
               IUCOWlCdbyOneOrmOrrpcrJonsWbo:

                         (i) are scciatly disadvantaged becaweoftbciridentificationas
                     mcmatsofccrtaingroups,inchidingblackAmuica~~,Hispauic
                     Americans,wmcn, Aaiaa Pa&c Amuicans, and Native Amcricaos,ad
                     bavc aoffcrul the effects of disctiminatorypracliccs or aimihr insidious
                     cimwtancesowrwhichtheyhawnocontro~and
Mr. Carl Mullen - Page 2                     (DM-328)




         Section 1.03 of article 6Olb requires the commission to “certify businesses that are
historically underutilized businesses.” Id. 5 1.03(a). Section 1.03 also requires the
commission and state agencies to compile information regarding contracts awarded to
historically underutilii   businesses. Id. $1.03(c) - (d), (g), (k), (m). The commission is
required to offer assistance to historically underutilii         businesses regarding state
procurement procedures and opportunities and to encourage state agencies to use
historicshy underutiliaed businesses. Id. fj 1.03(i), (p). Section 3.10(b) of article 601b
requires the commission and state agencies to “make a good faith efhort to assist
historicdly underutilized businesses to receive not less than 30 percent of the total value of
all contract awards. . that the commission or other agency expeots to make during a
fiscal year.” Both section 1.02(3) and section 1.03, the relevant provisions here, were
enacted by the legislature in 1991 and amended in 1993. See Act of May 23,1991,72d
Leg., RS., ch. 677, $5 I - 2, 1991 Tex. Sess. Law Serv. 2457,2457-58 (adding sections
 1.02(3) and 1.03); Act ofMay 19, 1993, 73d Leg., RS., ch. 684, §$ I, 3, 1993 Tex. Sess.
Law Serv. 2540,2540-41 (amendmg sections 1.02(3) and 1.03).

        Having reviewed article 601b and its legislative history, we conclude that the
commission does not have the authority to promulgate a rule deeming businesses owned
by individuals with disabiities as “historically underutilized businesses” as that term is
de&d in section 1.02(3) and used in section 1.03 of article 6Olb, V.T.C.S. The
de&&ion of the term “historically underutilized business” in section 1.02(3) refers to
persons with two characteristics; first, persons ‘kho are socially disadvantaged because of
their identification as members of certain groups, inchtding black Americans, Hispanic
Ameritxns, women, Asian Pacitlc Americans, and Native Americans,” and, second,


                     (ii) have a propdonate interest and demoastrateactive pauictpation
                in the contrel, cpcration,aad msaa8emeatof the corpaatioa’s affairs;




                (C) a partmship formed for the prose of making a pmrit in which at
           least5lperantoftheassetsandinterestintbepartncrshipisowaedbyoncor
           morepersonswho:
                     (i) are dcrixihcdin paragraph(A)(i)of this mhdivistcn;aad
                      (it)haveaprcpcrttonateintere5tauddaaonsaate aelivc parlieipstioa
                in the amtml, eperatien,sad managcmmtof the mrperation’saffatrs;
               (D) a joint venturein whicheach entity in thejoint vennnv is a htstaiwny
           uademtilizedhushtessnnder this subd%ion; or
                 (2) a suppliercontracthemvea a histcricatlyundemtiIizcdbusinessaader
           this s&divisionand a prim contractorunderwhich the historicallyundemtilii
           businessis dimctlyinvolvedin the marnd&ctnre or distriion of the sappliesor
           mterials or rkhcnke ware-       and abipsthe supplies.



                                              p.   1736
Mr. Carl Mullen - Page 3                   (DM-328)




persons who “have suffered the effects of discriminatory practices or similar insidious
circumstances over which they have no control.” Although individuals with disabilities
may certainly have the latter of these two characteristics, we believe that the legislature
did not intend for the term “‘group” used in describing the first characteristic to embrace
persons identified as members of groups other than those defined by gender, race, or
ethnicity.

         This conclusion is based on our review of both article 6Olb and the legislative
history of the historically underutilized business provisions. Fi           individuals with
disabiities are mentioned nowhere in section I .02(3) or I .03. Subsection (A)(i) of section
1.02(3) refers solely to persons idemified as memlmrs of groups defined by gender, race,
or ethnicity. Furthermore, subsection (g) of section 1.03 requires the wmmission, in
cooperation with the comptroller and state agencies, to “categorize each historically
underutilized business that is included in a report under this section by sex, race, and
ethnicity.” We believe that ifthe legislature had intended persons identified as members of
groups other than those defmed by gender, race, and ethnicity to q&ii as historically
underutilized businesses that it would have prescribed other, or at least broader, reporting
categories. In addition, the legislative history is devoid of any references to persons
identified as members of groups other than those defined by gender, race, and ethnic&y.
See, e.g., House Research Orgamzation, Bii Analysis, H.B. 799, 72d Leg. (1991); see
also House Special Comm. on Bus. Owned by Women or Minorities, Interim Report to
the 7lst Texas Legislature (1989).2

         Piily, we note that the 1991 and 1993 appropriations acts wntain provisions
regardii     state wntracts with historically underutilii  businesses applicable to any
appropriation to a state agency. The 1993 appropriations act defines the term ‘historically
underutilized business” to mean:

           a corporation formed for the purpose of making a profit in which at
           least 5 I percent of all classes of the shares of stock or other equitable
           securities are owned by one or more persons who have been
           historically undemtihxd because of their identification as women or
           as members of certain minority groups, including Black Americans,
           Hispanic Americans, women, Asian Pacific Americans, and Native
           Americans who have suffered the effects of discriminatory practices
           or similar insidious circumstances over which they have no control.

General Appropriations Act, 73d Leg., R.S., ch. 1051, pt. V, 5 101(2)(a), 1993 Tex. Sess.
Law Serv. 4521, 5379. The detinition in the 1991 appropriations act is similar. See
Oeneral Appropriations Act, 72d Leg., 1st C.S., ch. 19, pt. V, 5 106(2)(a), 1991 Tex.

       zTbc1991lcgislationwasdcscn‘bcdatabtaring~thcHouceCo~~onStatc~byits
authoras coming out of this imaim mmmittec. licmings on HB. 799 Beforelhe HouseComm.on State
Afbim, 72d Leg. (March18, 1991) (testimonyof Fkpmentativchtton).




                                          p.   1737
Mr. Carl Mullen - Page 4                   (DM-328)




Sess. Law Serv. 365, 1042. The 1993 appropriations act also provides that it is the intent
of the legislature that state agencies report certain information about state wntracting to
the General Services Commission “classified by minority group status as defined in
subsection 2.a above and by gender.” General Appropriations Act, 73d Leg., RS., ch.
 1051, pt. V, 4 101(8)(a), 1993 Tex. Sess. Law Serv. 4521, 5380. Although these
appropriations act provisions are not intended to create substantive law,3 we believe it is
signiticant that th9 too describe and discuss historically under&ii     businesses solely in
terms of businesses owned by persons identitkd as members of groups defined by gender,
raw, and ethnicity.

         In wnclusion, it is a well-established legal principle that an administrative agency
“can adopt only such rules as are authorized by and wnsistent with [its] statutory
authority.” See Texar Fire & CasuaIty Co. v. Harris Coun~~Bail Band Bd., 684 S.W.2d
177, 178 (Tex. App.-Houston [14th Dist.] 1984, writ refd n.r.e.). Because the term
“historically underutilized busines.F as de&ted by section 1.02(3) is limited to businesses
owned by persons identified as members of groups detined by gender, raw, or ethnic&y,
we must conclude that the wmmission is not authorized to promulgate a rule to deem
businesses owned by indiiduals with disabilities as “historically underutilii     businesses.”
Such a rule would be inwnsistent with the statute.

         Of wurse, the legislature is free to amend section 1.02(3) to include busmesses
owned by individuals with disabilities within the defmition of historically underutilii
businesses ifit determines such an amendment is appropriate. In this regard, we note that
we do not believe that such an amendment would be inwnsistent with sections 3.20,3.22,
and4.15ofsrticle601borchapters94and122oftheHumanResourcesCode,theother
provisions about which you inquire. These provisions pertain to state purchases of goods
and services from nonprofit agencies and other organizations that train individuals with
disabilities or to the licensing of certain persons to operate certain state facilities.4 None




        QoIh apprepriationsaet pmvistoas mgardta8 hisanicslly Mdmailized bmiaesscs amtaia me
follcwinglaa8va8e: ~Sscnionisan~~~oftheintmt~tbcLegislatunandQsmtimposca
dutymtalnadyprwidedforbygenerallaworncgatcapowcr~bygenaalLaw.”                          S&General
Ap~nqniations Act, 72d Leg., 1st C.S., ch. 19, pt. V, 0 W(3), 1991 Tex gcs.8.Law Serv. 365, 1043;
Genual Appqmiatim Aet 73d Leg., KS., ch. 1051, pt. V, &S     101(3), 1993 Tex. Sess. Law km. 4521,
5379.

         ‘Section 3.20 of article6olb pmides that “pmdom of workshops,organizations,or corporations
whoseprimarypuposeisvainingmdclnplayingmentallyrrtardedorphysicellybandi*lppebpnsoar
shall be given preferenceif they meet state specilicationsas to quantity,quality, and price.” siy.
section 3.22 providesIhat the mmpetitivebidding provisionsof article6Olb atx not applicable“to state
purchastsofblindaradegoodsor~aso&rcdforsPlctostateagcaciaMaresult~cffonsmadcby
tbcTarasCommiacconPurchags~BLiad-MedcGoodsandSavias”cnatalbychapcr122aftbc
ElmnanRaourca Code. SectIon122.004(a)of the Humsa Remme6Codemakesitclearthat”blind-
made goods and services”tefem to goods and servicesoffertd for sale by nonprofitagencies. sation



                                              p.   1738
Mr. Carl Mullen - Page 5               (DM-328)




of these provisions pertain to state contracting with for-profit businesses owned by
individuals with disabilities.

                                 SUMMARY

              The General Services Commission does not have the authority to
         promulgate a rule to deem businesses owned by individuals with
         disabiities as “historically underutilized businesses” as that term is
         deiined in section 1.02(3) of article 6Olb, V.T.C.S., because the
         legislature did not intend that term to refer to businesses other than
         those owned by persons who are socially disadvankged because of
         their identifkation as members of groups defined by gender, race, or
         ethnicity.




                                                   DAN MORALES
                                                   Attorney General of Texas

JORGE VEGA
Fii Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opiion Committee

Prepared by Mary R. Grouter
Assistant Attorney General
