,




              THE     ATTORNEY            GENERAL
                           OF    TEXAS




    Honorable David H. Cain              Opinion No. JM-782
    Chairman
    Committee on Transportation          Re: Whether article III, section
    Texas House of Representatives       18. or article XVI, section 40, of
    P. 0. Box 2910                       the Texas Constitution prohibits a
    Ausein, Texas   78769                member of the Texas House of Repre-
                                         sentatives from being employed by
                                         the Brazes Transit System, a reci-
                                         pient of federal funds

    Dear Representative Cain:

         You ask whether a member of the House of Representatives may
    be employed as executive director by the Brazes Transit System, a
    recipient of state-administered federal grant funds under section 18
    of the Urban Mass Transit Act of 1964, codified es section 1614 of
    Title 49 of the United States Code. You inform us that the Brazes
    Transit System is also eligible under article 6663c, V.T.C.S.. for
    state funds to match the federal grant, but that it has nor. received
    any state matching funds.

         You do not ask us to address any specific provision; however, we
    believe your question requires an examination of article III, section
    18, and article XVI, section 40, of the Texas Constitution. Article
    III, section 18, of the constitution bars members of the legislature
    from being directly or indirectly interested in any contract with the
    state or any county "authorized by any law passed during the tern for
    which he was elected." Article XVI, section 40 provides in its last
    sentence that no legislator

              may hold any other office or position of profit
              under this State, or the United States, except as
              a notary public if qualified by law.

    Trx. Const. art. XVI, 540.

         Article III, section 18, has been held to prohibit a legislator
    from entering into a contract with the state authorized by a statute
    enacted during his term as a legislator. Lillard v. Freestone County,
    57 S.W. 338 (Tex. Civ. App. 1900, no writ).         This office has
    determined that article III;-section 18, also bars legislators from
    contracting with the state if they were members of the legislature
    when the appropriation providing funds for the contract was enacted.



                                     p. 3686
Honorable David H. Cain - Page 2     (JM-782)




Attorney General Opinion Nos. JM-162 (1984); H-696, M-625 (1970);
O-6582 (1943); O-1519; Conference Opinion No. 2411, January 30, 1922.

     In the present case, the legislator does not contemplate
contracting with the state. He wishes to be employed by the Brazes
Transit System which ie operated under the Brazes Valley Community
Action Agency, a nonprofit corporation established by political
subdivisions to receive and administer federal grant funds under
various federal programs. See 42 U.S.C. 8§9901-9912 (providing for
community services grants r0 states). See also Attorney General
Opinion H-1212 (1978) (organization of community action agency under
now repealed provisions of Economic Opportunity Act of 1964). T~hhe
Brazes TransmitSystem receives funds under section 1614(b) of title 49
U.S.C., which establishes a formula grant program for public trans-
portation projects included in a state program of projects "for public
transportation services in areas other than urbanized areas." 49
O.S.C. §1614(b). These funds are administered by the State Highway
and Public Transportation Department pursuant to section 3 of article
6663~. V.T.C.S. See generally Attorney General Opinion MW-395 (1981)
(discussing role of State Highway and Public Transportation Department
in administering formula grants). The federal grant funds are
appropriated to the Highway Department. See Acts 1985, 69th Leg., ch.
980, at I-97, 98 (budget 104-05). The BrGs     Valley Community Action
Agency makes application to the Highway Department for the federal
grant and receives them subject to its agreement with the Highway
Department that it will cornply with the statutes, rules and
regulations applicable to the grant. Thus, the grant process uses
contractual controls to insure that the purposes of the federal law
are carried out, and the recipient must contract with the Highway
Department fo abide by those conditions to receive a grant. This is
the "contract with the state" which must be looked at in light of
article III, section 18, of the Texas Constitution.

     We assume that the legislator in question was a member of the
legislature when the federal grant funds were appropriated to the
Highway Department to distribute to local transit systems. According
to facts provided us, the legislator's pecuniary interest in the
contract consists of his salary as executive director of the transit
system, an entity which receives the benefit of the federal grant. He
is not a party to the contract between the Brazes Valley Community
Action Agency and the State Department of Highways and Public
Transportation. We do not believe he can be said to be directly
interested in this contract.

     The facts of this request differ from those at issue in Attorney
General Opinion MW-477 (1982), which concerned the interest of city
councilmen in federal funds received in an Urban Development Action
Grant by the city. The city council contracted on behalr of the city
to receive the granr, and then individual council members contracted
with the city council in their privates capacity as merchants to
receive funds under the grant. Attorney General Opinion MW-477 (1982)
determined that the city council members were pecuniarily interested



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Honorable David H. Cain - Page 3    (JM-782)




in a contract with the city and that they therefore violated common
law restrictions against conflict of interest as well as city charter
prohibitions against conflict of interest.

     The present request also differs from chat addressed in Attorney
General Opinion M-714 .(1970), where a city councilman accepted .the
position of executive director of a community action agency organized
as a nonprofit corporation by the city, county, and school district.
The expense of the executive director's salary was paid in part from
the city treasury. Article 988, V.T.C.S., at that time barred any
city council member from being interested in any work, business, or
contract, the .expense of which was paid from the city treasury.
See Act of March 15, 1975. Acts 1975, 14th Leg., ch. 100, 8147, at
113, 154, 8 H. Gamil, Laws of Texas 526 (1898); repealed by Acts
1983, 68th Leg., ch. 640, at 4082. The employment was expressly
barred by statute.

     In the present case, the executive director of the Brazes Transit
System would have no direct interest in any contract with the state.
His interest in his salary with the transit system does not in our
opinion constitute even an indirect interest in a contract with the
state. The federal grant is forwarded from one level of government to
another, subject at each level to promises to use it according to its
terms and conditions. By the time any grant funds reach the executive
director as salary, his interest in any contract with the state IS too
remote to be considered an indirect interest under article III,
section 18. See generally Attorney General Opinion K-625 (1970)
(discussing remote or insubstantial interest in a contract).

     A recent judicial opinion on article III, secti‘m 18, of the
Texas Constitution interprets that provision to give effect to the
intent of the people who adopted it, in light of conditions existing
at that time. Washington v. Walker County, 708 S.W.2d 493 (Tex. App.
- Houston [lst Dist.] 1986, writ rrf'd n.r.e.). The case arose out of
the appointment of a state legislator as attorney for an indigent
prisoner accused of capital murder.

     The trial court directed the county and the state to pay the
appointed attorney $50,000 under article 26.055 of the Code of
Criminal Procedure. The State Comptroller forwarded to the county
$50,000 in grant funds provided by the Governor's Criminal Justice
Division.   Washington v. Walker County, supra; Attorney General
Opinion JM-287 (1984) (same facts as Washington v. Walker County, but
declining to rule on validity of judicial order). The county refused
to pay the state funds to the attorney, contending that article III,
section 18 prohibited the payment. The court in Washington v. Walker
County, 708 S.W.2d 493 (Tex. App. - Houston [lst Dist.] 1986, writ
ref'd n.r.e.). evaluated article III, section 18, as foliows:

             Art. III. sec. 18 was intended to prevent
          personal gain and profit by members of the
          legislature as a result of the office they hold.



                                   p. 3688
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Honorable David H. Cain - Page 4   (JM-782)




          It was first included in the Constitution of 1876
          in response to the graft that occurred during the
          reconstruction period following the Civil War.
          Tex. Const. art. III, sec. 16, interp. comentary
          (Vernon 1984). The negotiated agreement involved
          in the Lillard case was the kind of interest-Art.
          III, sec. 18 wes intended to prohibit.

Washington v. Walker County, 708 S.W.Zd et 496. The court discussed
the attorney's interest in his appointment to represent an indigent
defendant and concluded that it was not a contract between the
attorney end the state or county merely because the attorney received
the incidental benefit of attorney fees.

     The court's remarks on article III. section 18, quoted above, are
relevant to the present inquiry. The contract between the State
Department of Highways and Public Transportation end the nonprofit
community action agency is not the kind of negotiated agreement that
article III, section 18, wes intended to prevent. The federal govern-
ment establishes the terms upon which its money will be distributed,
and every governmental entity acting es a conduit for the grant funds
agrees to comply with those terms.        The legislature's role is
restricted to authorizing state entities to participate in the federal
program. See, e.g., Attorney General Opinion MW-395 (1981); H-1272
(1978). Under the facts presented there is little opportunity for        ?
"personal gain and profit by members of the legislature es a result of
the office they hold." Washington v. Walker County, 708 S.W.Zd at
496. The opinion of the court in Washington v. Walker County, lends
support to our conclusion that article III, section 18, was not
intended to prohibit a legislator's appdintment to the position
of executive director of a transit system which receives state
appropriated federal grant funds.

     Article XVI, section 40, of the Texas Constitution provides that

          No member of the Legislature of this State may
          hold any other office or position of profit under
          this State, or the United States, except as a
          notary public if qualified by law.      (Emphasis
          added).

Tex. Const. art. XVI, §40. The emphasized language has been held to
prevent a legislator from receiving compensation as an employee of a
state supported junior college, Letter Advisory No. 4 (1973); or a
state university, Letter Advisory No. 153 (1978). See also Attorney
General Opinion JM-32 (1983). Attorney General Opinion C-221 (1964),
construing the language of a former version of article XVI, section
33, of the Texas Constitution, concluded that an employee of the
Sebine River Authority held a "position of honor, trust or profit"
under the State of Texas. Tex. Const. art. XVI, 533 (1876, emended
1972). The Sabine River Authority, was ua governmental agency of the
State of Texas. a body politic and corporate." Acts 1949, 52st Leg.,



                               p. 3689
.
    Honorable David H. Cain - Page 5    (JM-782)




    ch. 110, 51, at 194. An employee of the river authority was therefore
    an employee of an agency of the state.

         The prior opinions of this office which have construed the phrase
    "position of profit under this State" or similar language have found
    it to apply to employees of state agencies and of political sub-
    divisions which can be characterized as agencies of the state. Cases
    from other states have limited comparable provisions to employees of.
    state agencies or positions created by state statute. See Begich v.
    Jefferson, 411 P.2d 27 (Alaska 1968) (employee of state-operated
    school system holds position of profit under -the state); Wood v.
    Miller, 242 S.W. 573 (Ark. 1922) ("civil office" under this stateN
    means "under the laws of this state,” or by virtue of authority
    conferred by state es sovereign); State v. Peterson, 369 A2d 1076
    (Del. 1976) ("office of trust, honor or profit under this state"
    includes county officer with right to exercise some part of sovereign
    power of the state).

         The executive director of the Brazes Transit System is employed
    by a nonprofit corporation. He is not an employee of a state agency
    or of a political subdivision acting es an agency of the state to
    carry out a state policy locally. His .employment is not created
    "under state law." Cf. Cassiano v. Amigos de1 ialle, Inc., 776 F.2d
    1300 (5th Cir. 1985) (nonprofit corporation which uses federal funding
    to provide services for ;he elderly was not acting "under color" of
    state law). Article XVI, section 40, does not bar him from serving as
    executive director of the Brazes Transit Authority. See Attorney
    General Opinion H-1304 (1978) (legislator not necessarilybarred from
    receiving federal funds es officer of corporation which receives
    federal contract payment or grant). See also V.T.C.S. art. 6252-9b,
    557, 8; Attorney General Opinion H-696 (1975).

                                SUMMARY

                   A member of the House of Representatives is
              not prohibited by article 111, section 18, or
              article XVI, section 40, of the Texas Constitution
              from being employed by the Brazes Transit System,
              a recipient of federal funds administered by the
              State Department of Highways end Public Trans-
              portacion.                       I
                                           Very truly your


                                          J-hJ I M
                                                   .


                                                     M A T-T 0 X
                                             Attorney General oi Texas

    MARY KELLER
    Executive Assistant Attorney General




                                       p. 3690
                                                .
Honorable David H. Cain - Page 6     (JM-782)




JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General




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