                                The Attorney           General         of Texas

JIM MAlTOX                                        April   9, 1985
Attorney General


Supreme Ca~rl Bulldin          Mr. Ed Grieham                                 Opinion No. m-306
P. 0. BOX 12549                chairmen
Austin, TX. 79711. 2549        Texas Employment Cc~nlrlmission                Re:   Disposition   of  interest
512f4752501                    T.E.C. Building,  Rcsm 624                     earned on money in the Unemploy-
Telex 910/57&1387
Telecopier 51214750288
                               Austin, Texas    70i 70                        ment Compensation Fund

                               Dear Chairman Grisham:
714 Jackson. Suite 700
Dallas. TX. 75202.4505               You ask whether interest     earned on money in the Unemployment
2141742-9944
                               Compensation Fund m%stahlished by section    9 of the Texas Unemployment
                               Compensation Act,   c,odified as article   5221b-7.  V.T.C.S., should be
4924 Alberta Ave.. Suite 180   credited  to that IFund or to the state’s     General Revenue Fund.   We
El Paso, TX. 799052793         conclude  that suck. interest   should be credited   to the Unemployment
915153x3494                    Compensation Fund.

1001 Texas. Suile 799               The fund in question     was established      in 1936 as a
Houston, TX. 77002.3111
713l22W999                               special     :Iund, separate and apart from all public
                                         moneys or funds of this State . . . which shall be
                                         administctred by the Commission exclusively            for the
606 Broadway. Suite 312
Lubbock, TX. 79401-3479
                                         purposes of this Act.          This fund shall consist of
905f747~5239                             (1)     all      contributions     collected      under     this
                                         Act . i . (2) all fines and penalties                collected
                                         pursuant       to the provisions         of  this    act;    (3)
 4309 N. Tenth. Suite B
                                         interest      earned upon any moneys in the fund; (4)
 McAllen. TX. 79501-1555
 5121882.4547
                                         any prope’rty or securities           acquired    through the
                                         use of moneys belonging         to the fund; and (5) all
                                         earnings c’f such property or securities.
 200 MaIn Plan, suite 400
 San Antonlo. TX. 792052797
                               Acts 1936. 44th Let;., 3rd    C.S., ch. 402, 59(a), at 2004.  Section 9(b)
 51212254191
                               of that act provida!tr that   the “State Treasurer shall be treasurer and
                               custodian   of the Cund. .     . .‘I &&    Althouth these provisions  were
 An Equal OppOrtunitYi         subsequently   emend&l. the   character of the fund has not changed.   -See
 Aflirmailve Action EmPlOYW    Acts 1945, 49th Let;.. ch.    347, 55. at 594.

                                     In 1941. the Texas Supreme Court determined         that the State
                               Treasurer acts es custodian and trustee    of the fund but the fund is
                               not the property cf the state and the money collected        for the fund
                               does not belong ir, the State Treasury.     Friedman v. American Surety
                               Co. of New York, 1581 S.W.2d 570 (Tex. 1941).    The Supreme Court stated
                               that the money in t,b,e Unemployment Compensation Fund



                                                                    p. 1390
Mr. Ed Griaham - Page 2 (JR-3061




             is not the propert:r of the state in any               capacity,
             but is a trust fur,d to be held out of                 the State
             Treasury, but in tie hands of the State                Treasurer
             as trustee,   for   the benefit   of  a                class    of
             employees. . , .

-Id.   at 580.

      Also in 1941, this offim       referred   to the Supreme Court decision
in Priedmaa v. American     Surtrt:y  Co. of New York,    in determining that
the   designation    of the unel&loyment fund as a trust          fund and the
admonition to establish     a &patate       fund to be held apart from all
public money of this state differentiates          this money from the general
and special      funds of the state.        Attorney General Opinion O-3607
(1941).

      Subsequent to the act tstablishing       the Unemployment Compensation
Fund, the legislature,    in 19#5!#, enacted a statutory provision relevant
to the disposition     of depoaL,tory interest.    Article 2543d, V.T.C.S.,
provides.  in pertinent part, ,thst

                     Section    1. Interest        received     on account     of
                 time deposits      of moneys in funds and accounts in
                 the charge       of    1:he State      Treasurer      shall   be
                 allocated    as follows:       To each constitutional       fund
                 there shall be credited           the pro rata portion        of
                 the interest        rece:lved    due to such fund.           The
                 remainder of the           interest     received,     with the
                 exception     of     that    portion     required     by other
                 statutes    to be credited         on a pro rata basis        to
                 protested    tax paynenta. shall be credited             to the
                 General Revenue Fund. The interest              received shall
                 be allocated     on a monthly basis.

                     .   .   .   .

                    Sec. 3: As to the proper interpretation      and
                 application  of this Article.  the State Treasurer
                 is entitled to re:.y upon the opinion and advice of
                 the Attorney General.

        This office    previously   has determined that the provision       of
 article    2543d which directs   that interest   earned on money in funds in
 the charge of the State Treasurer be credited         to the General Revenue
 Fund does not apply to interest          on trust funds which are not the
 property of the state and which the State Treasurer holds as trustee
 out of the State Treasury.         Opinions issued by this office    consia-
 tently have determined that interest       on such trust funds becomes part
 of the principal     and part of the fund which generated the interest.



                                            p.   1391
,’




     Rr. Ed Griaham - Page 3 (Jn-306)




     See Attorney   General   Opinions JR-300 (1985);   RR-82     (1979); H-1040
     m77);    M-468 (1969).    Cf.
                               -     Attorney General Opinions    FM-338 (1981);
     H-1167 (1978).

           The Supreme Court settled      the issue  that    the Unemployment
     Compensation Fund is a trust fund out of the State Treasury for the
     benefit  of a class   of emp:.oyeea.   It is our opinion   that interest
     earned on the Unemployment Compensation Fund should not be deposited
     to the General Revenue Funcl pursuant to article     2543d hut, instead,
     should be credited  to the Uremployuent Compensation Fund.

                                      SUMMARY

                  Interest   earned on money in the Unemployment
               Compensation Fund established  by article 5221b-7,
               V.T.C.S..   should be credited to the Unemployment
               Compensation Fund,




                                                  JIM     MATTOX
                                                  Attorney General of Texas

     TOMGREEN
     First Assistant   Attorney   General

     DAVID R. RICHARDS
     Executive Assistant Attorney     General

     RICK GILPIN
     Chairman, Opinion   Committee

     Prepared by Nancy Sutton
     Assistant Attorney General

     APPROVED:
     OPINIONCOMMITTEE

     Rick Gilpin, Chairman
     Jon Bible
     Colin Carl
     Susan Garrison
     Tony Guillory
     Jim Moellinger
     Jennifer Riggs
     Nancy Sutton




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