                      The Attorney                General of Texas
                                          biay 30,     1981

MARK WHITE
Attorney General



                   Honorable Charles W. Evans                  Opinion No. Mu-352
                   Chairman
                   House Committee on Government               Re: Questions regarding proposed
                     Organization                              legislation    placing the National
                   P. 0. Box 2910                              Guard Armory Board under the
                   Austin, Texas 78769                         administrative       control of  the
                                                               Adjutant General’s Department

                   Dear Representative   Evans:

                          You inform us that proposed legislation may amend articles 5931-l -
                   5931-13, V.T.C.S., the provisions governing the National Guard Armory
                   Board. House Bill 2082 would amend article 5931-4 by adding subsection (b)
                   requiring the armory board to use the personnel of the Adjutant General’s
                   Department to administer the act. It would also authorize the board to
                   obtain services necessary to administer the act from other state agencies
                   and to compensate them for these services. The bill would in addition delete
                   from article 5931-5 subsection 4, which presently authorizes the board to
                   hire an executive secretary, other officials, lawyers, agents and employees,
                   and to prescribe their duties and fix their compensation.   The other powers
                   of the armory board would be left intact. These include the power to sue
                   and be sued, to make contracts, to acquire property, to construct buildings,
                   and to issue and sell bonds, debentures, and other evidence of indebtedness
                   to fund authorized projects.

                         You ask the following questions concerning the proposed legislation:

                              Would such action: (1) have the effect of prohibiting
                              the National Guard Armory Board from borrowing
                              money, or issuing bonds, debentures,         or  other
                              evidences    of indebtedness    for the purpose of
                              constructing, remodeling, repairing, and equlping one
                              or more buildings; and (2) would the recommendation
                              violate cr cause to be violated by the National Guard
                              Armory Board any existing covenants, agreements,
                              contracts, or other obligations of the board relating
                              to the indebtedness of the board?




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Honorable Charles W. Evans     -   Page Two   GiW-352)




We answer both of your questions in the negative.

       We note initially that the armory board could have elected to use personnel of
the Adjutant General’s Office under the provisions of the Interagency Cooperation Act,
article 4413(32), V.T.C.S. The armory board is a state agency within the provisions of
this act. Section 2 defines “agency” to include “board. ” The armory board is a “state
agency” for purposes of the Sunset Act. V.T.C.S. art. 5931-la; see V.T.C.S. art. 5429k,
R02(1l(A). It has been a department of state government fo*urposes            of requesting
Attorney General Opinions. See Attorney General Opinions H-24 (1973); M-890 0971);
M-396 (1969); C-242 (1964); O-5505 (1943). It is funded in the General Appropriations
Act. which aoorooriates      monev “for the suooort of the Judicial. Executive and
Legislative Br&h& of the State Government .‘.‘. .I’ Acts 1979, 66th Leg., ch. 843, at
2445, 2453, 2591. See-- Id. art. III, s1, at 2564. See also Texas National Guard Armory
Board v. McCraw, 126 S.W. 2d 627, 640 (Tex.m(dissenting                opinion). Although
Attornev General Ooinion G-5505 (19431stated that the armorv board was “more nearlv
like a municipal cor*poration or city than a State d-epartment,‘;that was for the purposk
of determining that the board did not have to request rental space through the Board
of Control. A governmental entity may be a state agency for purposes of some statutes
and a political subdivision for others. Compare Attorney General Opinion M-316 0968)
with Attorney General Opinion M-1266 09721 (community mental health centers).

       As a state agency within article 4413(32), V.T.C.S., the armory board may enter
into a contract with other agencies of the state “for furnishing necessary and
authorized special or technical services, including the services of employees. . . .I’
Sec. 3. Contracts are to be approved by the board of control which must consider
“1~1 hether the proposed arrangements serve the interests of efficient and economical
administration of the State Government.”    Sec. 5(b).

       Thus, House Bill 2082 merely requires of the board what was formerly a legal
option under the Interagency Cooperation Act. Contracting under this statute for the
services of adjutant general personnel does not affect the power of the armory board
to issue bonds or other evidences of indebtedness under section 8 of article 5931-5. It
simply permits the board to operate more efficiently by pooling resources with the
adjutant general or other state agencies to acquire the services of employees.

       We note that the indebtedness       which the armory board may incur is not
indebtedness within sections 49 and 50 of article III of the constitution.        Texas
National Guard Armory Board v. McCraw, 126 S.W. 2d 627 (Tex. 1939); Charles
Scribner’s Sons v. Marrs, 262 S.W. 722 (Tex. 1924). Constitutional         %Iebt” is an
obligation supported by tax monies, for which there must be specific constitutional
authorization.   The National Guard Armory Board has no authority to issue tax-
supported obligations.   Its authority extends only to the issuance of revenue bonds;,
which are not debt in the constituticnal sense. See generally City of Dayton v. Allred;
68 S.W. 2d 172 (Tex. 19341, Atkinson v. City of Dallas, 353 SW. 2d 275 (Tex. Civ. App. -
 Dallas 1961, writ ref’d n.r.e.1, cert. denied, 370 U.S. 939 (1962). The act granting




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Honorable Charles W. Evans     -   Page Three     (Mw-352)



power to the board to issue revenue bonds, payable from lease revenues from the
Adjutant General’s Department,       was held constitutional    in Texas National Guard
Armory Board v. McCraw, -.          The conduit financing thus approved is not a debt of
the state. The legislature appropriates funds to the adjutant general, from which said
department pays rent to the armory board for the armories constructed by the board.
Those rents are the only security for the board’s revenue bonds issued to construct the
armories; the full faith and credit of the state does not lie behind the bonds.

       An amicus brief submitted for the armory board advances the position that by
causing the board to utilize administrative staff of the adjutant general, the board
loses all independence, that, in effect, once the board must utilize the staff of the
adjutant general, the adjutant general would be both lessor (presently the role of the
armory board) and lessee. In terms of indebtedness incurred by the board, according to
the position advanced by the            brief, the adjutant general would be both the
issuer of the bonds and the security for the payment of same; he would “in one
capacity pledge to himself in another capacity the amounts which he would pay as
rentals to meet the bond obligations. ” Brief of attorneys for the armory board at page
9. We submit that no substantive change has actually occurred in the security for the
bonds or in the issuer of the bonds. The board still retains, inter alia, the right to sue
or to be sued, the right to enter contracts, to acquire property, to issue bonds. The
security for such bonds has not changed. That security is still in the lease payments of
the adjutant general to the armory board, not out of the general revenues of the state,
but from the state appropriation to the adjutant general.

       The board retains by the proposed amendment all the characteristics   it had save
the ability to hire its own administrative staff. The adjutant general is still required
to make lease payments, subject to a legislative appropriation for such. The board can
still be brought to court in event of a default. Unless there is some infirmity in the
legislature ordering to be done what could be done optionally formerly, we can see no
way in which the security of the boards outstanding bonds or the ability to issue future
bonds would be impaired.

      In holding the act establishing   the National Guard Armory Board constitutional
the Texas Supreme Court stated:

            . . . The Legislature has seen fit to enact this law for the
            purpose of procuring sites and erecting armories, and has
            furnished the method for financing the plan. The wisdom or
            expendiency of this law ls left exclusively to the Legislature to
            determine, and courts are concerned only with its validity.

Te                                      supra, at 631. Since the court found the law
valid, implementation   is clearly left in the hands of the legislature.    The court
certainly appears to recognize the plenary power of the leglslature to prescribe the
 method of implementation in the constitutionally valid undertaking. See also Attorney
General OpiniOn G-6598 0943) at 11(opinion also cites powers of the board, of which




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Honorable Charles W. Evans    -   Page Four   (MW-352)




the power to maintain an administrative staff is one power out of seven enumerated).
There ls no negative effect on the power of the armory board to issue bonds brought
about by mandating that the board should utilize administrative       services of the
adjutant general. The board retains all powers which would go to their ability to issue
bonds and Secure such bonds or other evidences of indebtedness.

      The second part of your query concerns the possible violation of existing
covenants by the change in the act. Since the board effected an advance refunding
under article 717k. V.T.C.S.. the oroceedines relatinrr to such refundinu contain all
extant covenants. . See National duard Ariory Boari Refunding Bonds;Scrics 1979,
Resolution AuthorizE      the Issuance of Bonds, August 25, 1979, section 22. These
covenants contain no guarantee to maintain the administration     as then constituted.
The covenants do pledge efficient and economical management (Resolution, su ra,
section 22, at (cl). A purpose of the Interagency Cooperation Act is to serve ef +icient
and economical administration of state government.      The board could effect through
this statute the same administrative    changes that the proposed amendment to the
enabling legislation mandates. No violation of outstanding covenant is effected by the
proposed chanae. Bondholders have no vested rizht azainst a chanee in the law. unless




bondholders took the bonds with notice of such legislation and with notice that the
board could voluntarily undertake to use another entity’s administrative   staff.  Were
this to comprise a substantial impairment of their contract, there would have been
covenants proscribing utilization of the Interagency Cooperation Act in the bond
resolution.    As we have demonstrated       above, mandating what could have been
voluntarily undertaken is permissible.   If the voluntary act would not have impaired
existing covenants, there is no basis for concluding that legislation mandating the act
will impair covenants, and certainly no basis for concluding that the mandate goes to
substantial rights under the contract.

                                    SUMMARY

                Legislation requiring the armory board to utilize the
           administrative   facilities  of the adjutant general will not
           preclude the board from issuing bonds or other evidences of
           indebtedness, nor wlll such action violate existing covenants
           relating to the board’s indebtedness.




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    Honorable Charles W. Evans      -   Page Five   (NW-352)




                                               MARK      WHITE
                                               Attorney General of Texas

    JOHN W. FAINTER, JR.
    First Assistant Attorney General

    RICHARD E. GRAY, III
    Executive Assistant Attorney General

    Prepared by Susan L. Garrison
    Assistant Attorney General
    Susan Lee Voss

    APPROVED:
    OPINION COMMITTEE

    Susan L. Garrison, Chairman
    Rick Gilpin
    Jim Moelinger
    Susan Lee Voss




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