         TEEATTORNEYGENERAL

                       OF     TEXAS




                     November 21, 1963


Honorable R. L. Coffman               Opinion No. C-   181
Administrator
Texas Employment Commission           Re:   An interpretation of the
Austin 1, Texas                             provisions authorizing
                                            merit increases to em-
                                            ployees of the Texas
Dear Mr. Coffman:                           Employment Commission.
          You have requested our opinion as to whether the
provisions of House Bill 86, Acts of the 58th Legislature, Regular
Session, 1963, found in Article V, Section 1, B L, or provisions
found within the appropriation for the Texas Employment Commis-
sion in Article III are controlling with regard to the granting
of merit increases to employees of the Texas Employment Commission.
          Section 1, S L, Article V, General Provisions, of
House Bill 86, sets forth specific provisions governing Merit
Salary Increases in recognition of oontinuing outstanding per;
formance of State employees "unless otherwise provlded. . .'
          The specific provision within the Commission's
appropriation Is found,at page III-59 and provides as follows:
         "Salary adjustments and Merit Increases
    within designated salary ranges shall be
    governed by agreements with the -Govern-
    ment pursuant to Federal standards $or a Merit
    System of Personnel Administration.   (Rnphasls
    added).
          As a guide to a proper understanding of the question
presented, it is deemed helpful to first review the Texas m-
ployment Commission. It is a State agency and.lts employees are
State employees. It was oontemplated under this coordinated
Federal and State Unemployment Compensation System that the ad-
ministration thereof would be handled through designated State
agencies. The administration of the program is wholly financed


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Hon. R. L. Ccffman, page 2 (c-181    )


by grants from the Federal Government and the Commission is
acting as the disbursing agency for the Federal Government.
The Commission was established In 1936 by Article 522lb-8,
Vernon'sCivil Statutes. Article 5221b-8 through Article
5221b-10 sets forth the responsibllitles and powers of the
Commission. Section (a) of Article 5221b-9, for example,
prescribes certain duties and powers of the Commission, and
in Section (5.)of Article 5221b-9, the Commission is directed
to cooperate to the fullest extent with the Social Security
Board,
          Under this coordinated Federal and State system,
the Federal Government uses the taxes which it collects to
pay the cost of administration of both the Federal and State
plans. This money used to defray administrative costs is sent
to the states by the Secretary of the Treasury upon certlflca-
tion from the Social Security Board In compliance with 42 U.S.C.A.,
Section 502a upon proper compliance with Section 503 of Title
42, U.S.C.A. which provides as follows:
          "(a) The Board shall make no certifica-
     tion for payment to any state unless It finds
     that the law of such State, approved by the
     Board under Sections 1600-1611 of Title 26,
     includes provision for--
          "(1) Such methods of administration
     (Including after January 1, 1940; methods
     relating to the establishment and mainte-
     nance of personnel'standards on a merit
     basis, except that the Board shall exercise
     no authority with respect to the.selection,
     tenure of office, and compensation of any
     individual employed in accordance with such
     methods) as are found by the Board to be
     reasonably calculated to insure full payment
     of unemployment compensation when due; . . .'
     (Emphasis added).
          In Attorney General's Opinion v-427 (1947), this
Department held that with respect to Federal funds expended,
the Commission is primarily governed by the standards prescribed
by the Social Security Administrator and the U.S. Employment
Service of the Department of Labor and the rules and regulations
adopted by the Commission to meet such standards. In Attorney
General's Opinion WW-1242 (1962), the authority of the Commission
to administer the employment program in the most efficient manner



                             -882-
..




     Hon. R. L. Coffman, page 3   (c-181      )

     was held to be within the discretion of the Commission not-
     withstanding special provisions within the General Appropriation
     Act of the 57th Legislature to the contrary. Thus, we recognize
     the ~somewhat different status with regard to the Commission in
     comparison with other State agencies whose funds are not derived
     from Federal grants. In fact, such methods were recognized In
     House Bill 86 at page 111-56, which provides as follows:
               "In order to comply and conform with the
          terms of Federal laws and regulations and
          standards under which such moneys are.:gl"anted
          for administration shall be expended in accord-
          ance with the terms of the Texas Unemployment
          Compensation Act, the standards of the Bureau of
          Employment Security and/or United States Etn-
          ployment Service or successors, and the rules
          or regulations adopted by the Texas Employment




               In view of the fact that it has been long recognized
     that agreements in compliance with applicable Federal social
     security regulations are necessary to qualify for Federal grants,
     it is concluded that the establishment of the recent Texas Em-
     ployees Classification Act should be construed in harmony wlth
     these recognized and prior conditions. Therefore, so long as
     salary adjustments and increases do not increase the employee's
     salary to an amount outside of the salary ranges designated by
     House Bill 86, they are valid as a part of an agreement with the
     Federal Government in the establishing and maintaining of a merit
     system,
               In reaching this result, we are particularly persuaded
     by the mandatory language found in the provisions of Article III
     of House Bill 86, as quoted above, by the historical recognition
     of such agreements between the Commission and the Federal Govern-
     ment and by the fact that the Legislature has limited such



                                      -883-
Hon. R. L. Coffman, page 4 (C- 181 )


agreements only to the extent that the resulting employees'
salary not exceed the designated salary ranges of House Bill
86. It is further observed that the Legislature has recognized
the situation of a State-administered Federal grant program in
an area of such mutual importance, and it is concluded that If
the Legislature had intended to abolish such a system It could
have and would have done so In a clear-and convincing manner.
This it did not do, and therefore, It is concluded that the
granting of Merit Increases to employees of the Texas Eknploy-
ment Commission is governed by agreements with the Federal
Government pursuant to Federal standards for a Merit System
of Personnel Administration.
                    SUMMARY
         Merit Increases within the designated salary
    ranges for employees of the Texas EknploymentCom-
    mission are governed by the provisions found at
    page III-59 of House Bill 86, Acts of the 58th
    Legislature, Regular Session, 1963, which provides
    that Merit Increases within the designated salary
    ranges are governed by agreements with the Federal
    Government pursuant to Federal standards for a
    Merit System of Personnel Administration.
                                Yours very truly,
                                WAGGONER CARR
                                Attorney General

                                By:

PP:mk2l
APPROVED:
OPINION COMMITTEE
George Gray, Acting Chairman
Pat Bailey
Paul Robertson
Nicholas Irsfeld
W. V. Geppert
APPROVED FOR THE ATTORNHY GENERAL
BY: Stanton Stone



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