            TFIE A-ITORNEY   GENERAL
                    OF%+EXAS
                            AIJEJTIN.   -             78711



                                    April    7. 1975


The Honorable   Je.sre Jamen                            Opinion   No. H-   574
State Trcarurcr
Treasury   Department                                   Re: Limitr of FDIC insurance
State of Texar                                          of rtate fundr deporited in
Austin,  Texae   78711                                  commercial    bankr.

Dear Mr.   James:

          You have requeeted   our opinion concerning   the extent to which
funds depooited by the State Treasurer      in various bank account6 are
insurable under Public Law 93-495,       12 U.S. Code Cong. & Ad. Newr
5684 (19744.     Under Article 2529a. V. T. C. S., recurity for deporita
of political  rubdivirionr  ir required only to the extent raid depoeite are
not inrured under the Federal Reserve       Act, 12 U.S. C. $1811. et req.

         Public Law 93-495,   in addition to raising Federal Deporit
Inrurance Corporation    (FDIC) coverage    to $40,000 for a11 inrured
accountr,   provider in part:

                    (2) (A) Notwithrtanding    any limitation in thir Act
                or in any othaprovieion     of law relating to the amount
                of deporit insurance available for the account of any
                one deporitor,   in the caee of a deporitor who ir . . .

                    .   .   .   .


                     (ii) an officer,    employee,   or agent of any State
                of the United Staten, or of any county, municipality,
                or political   rubdivieion   thereof having official custody
                of public fund6 and lawfully inverting or deporitinn       the
                rame in time and eavingr depoeitr in an inrured bank
                in euch State.: . . . hie depoeit .&all be ineured in an
                amount not to exceed $100,000 per account. (Emphario
                added)     Section 101(a), amending,     12 U.S. C. 3 1821(a).




                                            p. 2564
The Honorable   Jesre       Jamer    page 2   (H-574)




        The FDIC har conrtrued   thecle provisions   in Ruler and Rsgula-
tionr Section 330.8, Public Unit Accountr,     39 Fed. Rag. 41359 (1974),
which provide6 in part:

            (a) (2) Each official custodian of funds of any State
                of the United Staten or any county, municipality,
                or political rubdivirion  thereof deporiting the
                same in time or oavings depoeitr in an insured
                bank in the same State shall be reparately insured
                up to $100,000.

                    .   .    .   ,


                 (5) .Each official curtodian referred    to in para-
                graphs (a)(2), (3) and (4) of this clection lawfully
                depositing    such funds in demand deporitr in an
                insured bank within the eame State,District        of
                -Columbia,     Commonwealth,     po~aerrion   or territory
                 comprising     the public unit or wherein the public
                 unit is located,   or in any form of deporit,    whether
                time, sayings or demand, in an insured bank
                 outside jurisdiction,    shall be separately inmured
                 up to $40,000.

                (6) For purposes     of thin paragraph (a), if the same
                person is an official curtodian of more than one
                public unit, he shall be separately     insured with
                respect to the public funds held by him for each
                such unit, but shall not be separately     insured by
                virtue of holding different offices in such unit or,
                except as provided in paragraph      (b) of this eection.
                holding such funda for different purposes.

            (b) Public bond iaaues.    Where an officer,  agent or
                employee   of a public unit has custody of certain
                funds which by law or under the bond indenture
                are required   to be paid to the holders of bonds
                irrrued by the public unit, any deporit of ruch




                                       p. 2565
The Honorable   Jerre   Jamer     page    3    (H-574)




                fundr in an inrured bank shall be deemed to be
                a deporit by a truetee   of truer fundr of which the
                bondholder6 are pro rata beneficiarier,     and each
                such beneficial  interest 6hall be reparately   inrured
                up to $20,000.

          It appears that paragraph   2 ir more limited in itr application
than the statute itself, the former limiting FDIC insurance        to $109,000
per custodian rather than per account.       Given the state policy to pro-
tect the 6ecurity of state fund6 deposited in banks, we believe the more
restrictive    language of the FDIC Rule6 and Regulation6      should be
followed    under article 2529a, for while we have some doubt regarding
the validity of this construction,   it remains the official administrative
interpretation    pending amendment    or judicial alteration.

         Under the FDIC rules and regulatlonr       the deposits of each custodian
of public fund6 for each public unit are inrured to $100,000 in the aggregate
for time and savings depositr and to $40,000        in the aggregate fWh$8d   depa~ti d
BldepositsS ban&e outside the 6tate.      Public unit is defined in 12 U.S. C.
1813 (m) as ‘I . . . any State of the United States, . . . any county, . . .
any municipality,    or . . . any political  eubdivision   thereof. ” Section
330.8(c)   of the FDIC rule8 and regulationo     provides:

                     (c) Political    subdivieion.    The term “political
                subdivision”     include6 anv subdivirion        of a public
                unit, as defined in 6ection 3(m) of the Federal
                Deposit Insurance Act, or any principal depart-
                ment of such public unit, (1) the creation          of which
                subdivision     or department has been exprersly
                authorized by State statute,        (2) to which some
                functions of government         have been delegated by
                State rtatute, and (3) to whichkinG have been
                allocated by rtatute       or ordinance    for its exclusive
                ure and control.       It also includes drainage,       irriga-
                tion, navigation!       improvement,     levee,    ranitary,
                school or power di6triCt6,         and bridge or port au-
                thorities and other special district6          created by




                                         p. 2566
                                                          .~ _ .----.   -   ..-_.   _.   _




The Honorable    Jerre   Jamar   page 4         (H-574)




                State rtatute or compactr       between the Statea.
                Excluded from the term are rubordinate or
                nonautonomoun        divirionr,  lgenciem, or boards
                within principal      departmentr.    12 C. F. R.
                S 330.8(c)   (1974).

Thir definition  of political rubdivirion    differ8 in some rerpectr from
that adopted by the State for its own purporea.        See H-365     (1974).
Of course for FDIC purporer       the above definitiox      to be utilired.
When the State Trearurer      depoait6 fundr for different     political rub-
divirions  an defined by the FDIC, the fundr of each rubdivirion are
ineured to $100,000 in the aggregate      for time and ravings deporitr
and to $40,000 for demand deposit6 and all depoeitr in banks outaide
the State.

         For example,   were the State Trearurer   to deposit fund6 for the
University   of Texan System,  Park6 and Wildlife Department,     and the
Department    of Mental Health and Mental Retardation,    the fundr of each
such rubdivirion   would be aeparately  in6ured to the maximumr.

        To the extent any depo6itr are inrured by the FDIC recurity                          ir
not required from the bank under article 2529a, V. T. C. S.

                                 SUMMARY

                      The FDIC Rules and Regdationr,       12 C. F. R.
                 5330.8 (1974) i6 the appropriate    rtandard for
                 determining    FDIC coverage of depo6itr of public
                 fundr.    The deponitn of each curtodian    of a public
                 unit are insurable    to $100,000 per bank in the
                 aggregate for time and raving6 deponitr in bank6
                 within the rtate, and to $40,000 per bank in the
                 aggregate   for demand deporits within the rtate and
                 all depoaita outride the &ate.     Greater coverage
                 is available for fund6 to be paid to holders of public
                 irrue bond6 and in nome other circumntancer.          To




                                      p. 2567
.




    The Honorable   Jesse   James     page   5      03,- 574)



                    the extent that depo6itr of public unite
                    are insured  by FDIC, no additional    recurity
                    ir required by article 2529a.




    APPROVED:




    DAVID M. KENDALL,         Firrt   Assistant




    3
    Opinion   Committee




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