                       -          .




                        THE            ATTOWNEY                           GENERAL
                                             Q,P TEXAS
                                             AUUTIN           ~.TEXAS
PRICE      DANIEL
.m*ORNEY
       GENERAL
                                            June     28,     1951



    Hon. Allan    Shivers                              Opinion      No.    V-1198
    Governor    of Texas
    Austin,  Texas                                     He:     Constitutionality       of House
                                                               Bill No. 603, authorizing
                                                               agreements        between     the
                                                               State of Texas       and the Fed-
                                                               eral Government          to extend
                                                               Federal     old-age    and survi-
                                                               vors    insurance     coverage     to
    Dear       Governor:                                       certain    public    employees.

                            You   have requested        the opinion        bf this   office   on the
        constitutionality         of House   Bill     603.

                      House    Bill   603 provides     that the State Department            of
    Public     Welfare,     hereafter     referred    to bs the State Agency,          shall
    administer       the provisions       of the Act.     The State Agency         is author’-
    ized to enter       into agreements         with the, Federal      Security   Adminis-
    trator    for the purpose        of extending     Federal     old-age     and survivors
    insurance      coverage      to employees       of any of the counties        or munic-
    ipalities    of the State other        than employees      engaged      in performing
    .serw .d es in connection         with a proprietary      function.

                    The State Agency       is authorized    to enter    into agree-
    ments     with the governing     bodies    of eligible  counties     and munic-
    ipalities    when such counties      and municipalities      desire     old-age   and
    survivors     insurance    coverage     for employees     covered      by the Act.
    The term      “employee”     is defined    as including   an officer      or employ-
    ee of a county     or municipality.       H.B. 603, Sec. l(c).

                            Section   8 reads,      in part,     as follows:

                        “Each     county    or municipality       as to which a plan
                has been approved          . . . shall pay to the State Agency
                . . . contributions       in the amounts       and at the rates      spec-
                ified by the applicable         agreement.      . . . Counties      or
                municipalities       . , . are authorized,       in consideration        of
                the employees        retention    in or entry      upon employment,
                to impose      upon its employees         . . . a contribution      with
                respect    to wages      in keeping    with applicable       State and
                Federal     requirements.         Contributions       so collected
                shall be paid to the State Agency             in partial   discharge
                of the liability     of the county     or municipality,        but failure
Hon.   Allan   Shivers,     Page   Z. (V-1198)




        to deduct    contributions       from    employees’      wages     shall
        not relieve     the employee        or the employer        of liability
        for the contribution.         . . . Matching       contributions        by
        the employing       counties     or municipalities        . . . shall be
        paid from     the respective        source   of funds from which
        covered     employees      receive     their compensation.”

                The respective         governing     bodies    of the various      coun-
ties or municipalities          are authorized      to pay out. of any available
funds not otherwise         dedicated     such amounts        as may be necessary
to finance    their    proportionate      share   of the administrative          cost of
the program        at the State level.       At the end of each fiscal         year,   the
State Agency        must pay from       the Social    Security     Administration
Fund to the State Treasurer             for deposit     to the General      Revenue
Fund of the State of Texas            an amount     not less     than ten per cent
(10%)   of the payments          made   to such fund during         the preceding     year
until such time as the amount             appropriated       to the State Agency
from   funds of the State for administrative                purposes    has been reim-
bursed    in full.

                  Section    11 empowers        the State Agency        to collect    any
delinquencies        and interest      thereon     from   counties    and municipal-
ities.   Likewise,       the State Agency         “may   direct    the deduction      of any
delinquent      payments      with interest      from    any moneys       payable    to the
delinquent      county    or municipality        by the State or any department
or agency      of the State,     provided,     however,      that deductions       shall
be made only from           such prior      appropriations       as were     expressly
made subject        to such deductions.           The Comptroller         and the State
Treasurer       are empowered           and directed     to comply      with the State
Agency’s      deduction     directives      and to remit      the deducted      amounts
to the State Agency         in trust for the contributions            of th& delinquent
county    or municipality.       ”

                Section    6 provides       that the respective       governing     bodies
of such counties       and municipalities         as enter   into agreements         with
the State Agency        under    the Act are authorized         to pay contributions
as required      by these    agreements        from   those funds from        which    the
covered     employees      receive     their   compensation       and “it is expressly
provided     that all prior     laws and parts       of laws which       fix a maximum
compensation        for any covered        employees     of counties      are hereby
amended      td allow    payment     of the matching       contribution      necessary
to this program        in addition    to any maximum         compensation        other-
wise   fixed   by law.”

               Section     7 of the Act authorizes           counties    and municipal-
ities to submit      for approval      by the State Agency          plans for extending
the benefits   of the Federal        old-age     Cl.l-idsurvivors     insurance    system
to the employees        of the county     or municipality         other   than those
engaged    in p.:rforming      services      in connection       with a proprietary
               -       .




Hon.   Allan   Shivers,     Page    3 (V-1198)




function     of the subdivision.           Submitted      plans must meet        stated
requirements,         one of which        is that each plan must specify             the
source     or sources        from   which     the funds necessary         to make the
payments       required       are to be derived         and must contain        guarantees
that these      sources      will be adequate         for this purpose.       The State
Agency      may require         guarantees       in the form     of surety    bonds,     ad-
vance    payments       into escrow,        detailed     representations       and assur-
ances    of priority      dedication,       or any legal      undertaking     to create
adequate      security     that each county          or municipality      will be finan-
cially   responsible        for its share       in the program        for at least     a
minimum        period    equivalent       to that specified       by Federal      require-
ments     to precede       coverage      cancellation.

                  Section    12 establishes         “a special     fund, separate       and
apart    from    all public     moneys       or funds of this Stdte, to be known
as the Social       Security     Fund, which         shall be administered          as di-
rected     by the State Agency           exclusively      for the purposes        of this
Act.    The State Treasurer             shall be treasurer          and custodian      of the
fund.     He shall administer           such fund in accordance            with the direc-
tions of the State Agency,             and the Comptroller           shall issue      warrants
upon it in accordance            with such regulations          as the State Agency
shall prescribe.          The State Agency           shall deposit      all moneys      col-
lected    under the provisions            of this Act, except        moneys     to defray
administrative         expenses       at the State ,level,     in the Social      Security
Fund.      All moneys       so deposited        with the State Treysurer            in the
Social    Security     Fund shall be held in trust,             separate     and apart
from    all public     moneys       or funds of this State.          The State Agency
is vested     with full power,         authority,      and jurisdiction      over    the fund
and may perform           any and all acts necessary              to the administration
thereof     and to pay the amounts             required     to be paid to the appro-
priate    Federal      authorities      and any refunds        or adjustments         neces-
sary    under this Act.”

                   Moneys      collect.ed    from   counties     and municipalities         to
defray      the cost of administrative            expenses     are to be deposited         in
another       special    fund of which the State Treasurer               is made    treas-
urer    and custodian         subject     to the directions      of the State Agency.
The moneys          in both funds are to be disbursed               upon warrants      is-
sued by the Comptroller                of Public   Accounts      pursuant    to sworn
vouchers        executed     by the State Agency.           Section    13 states  that
“These       funds will not be State funds,            and shall not be subject         to
legislative       appropriation.”

                Section   14 appropriates      the sum of $ZO,OOO.OO to the
State Agency      “for  the purposes      enumerated     in Section   13 and to
investigate,,   study,   negotiate,   defend,   and administer      this program
during    the two (2) years      immediately     succeeding    the effective   date
of this Act.”
                                                                                       .            .




Hon.   Allan     Shivers,        Page   4 (V-1198)




                 Section         15 contains   the usual            severability           clause       and
Section      16 declares         an emergency.

              House   Bill  603 is designed    to take advantage    of Sec-
tion 106 of the “Social    Security   Act Amendments       of 1950.” Public
Law 734--8lst     Cong.    Section  106 amended      Title 2 of the Social
Security Act by adding      Section  218.   (42 U.S.C.A.    Sec. 418.),

                  The    first     paragraph           of Section     218   reads      as follows:

                   “(a)(l)      The Administrator         shall,    at the request
          of any State,        enter   into an agreement         with such State
          for the purpose          of extending    the insurance        system    es-
          tablished       by this title to services        performed       by indi-
          viduals     as employees         of such State or any political
          subdivision        thereof.     Each such agreement            shall con-
          tain such provisions,            not inconsistent      with the provi-
          sions   of this section,         as the State may request.”

                   Section    218(b)         defines     certain   terms    used in Section
218.      The   term     “coverage           group”     is defined    as follows:

                   “(5)     The term       ‘coverage     group’    means      (A) em-
          ployees     of the State other          than those     engaged     in per-
          forming       service:;     in connection      with a proprietary
          function;      (B) employees         of a political     subdivision      of a
          State other        than those engaged         in performing        service
          in connection         with a proprietary         function;     (C) employ-
          ees of a State engaged             in performing       service     in con-
          nection     with a single        proprietary      function;     or (D) em-
          ployees     of a political        subdivision     of a State engaged        in
          performing          service    in connection       with a single      pro-
          prietary      function.       . . .”

                  Paragraph         (c)(l)      of Section      218    reads       as follows:

                 “An agreement             under this section    shall be appli-
          cable to any one or            more   coverage  groups    designated
          by the State.”

             Paragraphs      (c)(2),   (c)(3), (c)(5),    and (c)(6)                        deal with
the services   to be included      in agreements       relating    or                      applicable
to each coverage    group.

                 Paragraph      (c)(4)   provides   that prior    agreements       with
a State may be modified            so as to include    any coverage       group    to
which    prior    agreements      have not applied      or so as to include       serv-
ices   previously      excluded     from   the agreement     consistently      with the
provisions      of the section      of the Act applicable      in the case of an
original    agreement.
Hon.   Allan   Shivers,           Page   5 (V-1198)




                  We      quote    in full   the following      paragraphs      of Section
218!

                 “(d)  No agreement        with any State may be made
        applicable    (either     in the original    agreement     or by any
        modification      thereof)    to any service     performed     by
        employees      as members        of any coverage       group  in posi-
        tions covered       by a retirement       system   on the date such
        agreement      is made applicable         to such coverage      group.”

                  “(e)     Each      agreement        under   this   section   shall
        provide      --

                 “(1) that the State will pay to the Secretary           of
        the Treasury,      at such time or times       as the Adminis-
        trator    may by regulations     prescribe,     amounts     equiva-
        lent to the sum of the taxes which would            be imposed
        by sections     1400 and 1410 of the Internal         Revenue    Code
        if the services     of employees     covered    by the agreement
        constituted    employment      as defined    in s,ection   1426 of
        such code;    and

                 “(2)  that the State will   comply   with such regula-
        tions relating     to payments    and reports   as the Adminis-
        trator    may prescribe     to carry   out the purposes  of this
        section.    ”

                 “(g)(l)       Upon giving       at least   two years’   advance
        notice    in writing         to the Administrs.tor,      a State may
        terminate,         effective     at the end of a calendar       quarter
        specified        in the notice,      its agreement      with the Admin-
        istrator     either--

                “(A) in its entirety,      but only            if the agreement
        has been in effect     from    its effecti’/=            date for not less
        than five years    prior    to the receipt              of such notice;  or

                 “(B)     with respect     to any coverage    group   desig-
        nated by the State,        but only if the agreement       has been
        in effect     with respect     to such coverage     group   for not
        less than five years         prior   to the receipt  of such notice.

                “(2)   If the Administrator,          after   reasonable    no-
        tice and opportunity        for hearing      to a State with whom
        he has entered       into an agreement          pursuant    to this sec-
        tion, finds   that the State has failed          or is no longer
        legally   able to comply       substantially      with any provision
        of such agreement         or of this section,        he shall notify
        such State that the agreement            will be terminated        in its
                                                  .




Xon.   Allan    Shiver.s,    Page    6 (V-1198)




        entirety,     or with respect       to any one or more      cover-
        age groups       designated    by him, at such time,       not later
        than two years        from   the date of such notice,      as he
        deems      appropriate,     unless     prior   to such time he finds
        that there      no longer   is any such failure       or that the
        cause     for such legal     inability     has been removed,

                “(3)   If any agreement      entered   into under this
        section    is terminated    in its entirety,    the Administra-
        tor and the State may not again enter            into an agree-
        ment pursuant       to this section.    If any such agreement
        is terminated      with respect    to any coverage       group,  the
        Administrator       and the State may not thereafter          modify
        such agreement        so as to again make      the agreement
        applicable    with respect     to such coverage       group.”

                “(j)    In case any State does not make,                at the time
        or times      due, the payments        provided      for under an a-
        greement       pursuant    to this section,      there     shall be added,
        as part of the amounts          due, interest      at the rate of 6
        per centum        per annum from        the date due until paid, and
        the Administrator         may,    in his discretion,        deduct      such
        amounts      plus interest     from    any amounts         certified     by
        him to the Secretary         of the Treasury          for payment        to
        such State under any other            provision      of this Act.        A-
        mounts      so deducted     shall be deemed         to have been paid
        to the State under        such other     provision       of this Act.
        Amounts       equal   to the amounts       deducted      under      this sub-
        section     are hereby     appropriated       to the Trust         Fund.”

                 “(k)    The Administrator         may,at    the request      of
         any instrumentality          of two or more      States,   enter   into
         an agreement        with such instrumentality          for the purpose
         of extending      the insurance      system    established      by this
         title to services       performed     by individuals      as employees
         of such instrumentality.           Such agreement,        to the extent
        ,practicable,      shall be governed       by the provisions        of this
         section    applicable     in the case of an agreement           with a
                                                                       I
         State.”

                 It is clear     from      the above     summary        of House      Bill   603
that its provisions        devolve      financial     responsibility        upon participat-
ing countiesand          municipalities.        In other      words,     the State Agency
will  simply      receive   or, if necessary,           collect    the payments         due
from    the counties      and municipalities           and will transmit          the proper
portion    of said payments          to the Secretary          of the Treasury         of the
United    States.      The authorization          to the governing         bodies.of      such
counties     and municipalities           as obtain     coverage      for their      employees
to meet     this financial      obligation       by paying       contributions        in the
               .         .




Hon.   Allan       Shivers,   Page    7 (V-1198)




amount      required      by the Federal       Act from      funds from      which    the
covered      employees        receive    their  compensation        (H.B.    103, Sec.6)
is not obnoxious         to Sections      51 and 52 of Article       III of the Consti-
tution of the State of Texas            nor to Section       3 of Article     VIIL1     This
is so because        House     Bill   603 does not authorize         or attempt      to au-
thorize     a gratuity.       The employee’s        right   to receive     the coverage
benefits     will be a part of the agreed            compensation        paid for serv-
ices    rendered.’      Byrd    v. City of Dalla$,        118 Tex.   28, 6 S.W.2d       730
(1928);    Friedman        v. American       Surety    Co. of New York,          137 Tex.
 149, 15<

                     Despite     the fact that House         Bill    603 contemplates          that
participating          counties     and municipalities--not              the State--shall
shoulder         the financial      burdens      incident    to obtaining        coverage     for   ’
their     officers      and employees,         it is equally       clear    that the Federal
Act requires           the State to be the responsible               party    to any agree-
ment with the Administrator                  for coverage         for such officers         and
employees.            Under     the Federal       Act the State is the only party               au-
thorized        to enter     into agreements          with the Administrator,             Se&. 218
(a),(l),,   and to modify         or terminate        such agreements,            Sec. 218(c)(4)
and Sec. 218(g).            The State must make             the payments          and reports
required         by the Act,      Sec. 218(e) ; and, in the event             the State does
not make          the payments       provided       for under the agreement              at the
time      said payments          are due, six per cent interest               will be added
thereto       until paid; and the amount              due, plus such interest,            may,
in the discretion           of the Administrator,           be deducted         from    payments
to the State under any other                provision      of the Social        Security    Act,
and shall be deemed               to have been paid to the State under                  such other
provision,          Sec. 218(j).




’ The pertinent          portions    of these      constitutional      provisions       read
as follows:

                Art.   III, Sec. 51:   “The    Legislature    shall have
        no power     to make any grant      or authorize     the making
        of any grant of public       money   to any individual,      asso-
        ciation   of individuals,    municipal      or other  corporations
        whatsoever.        . .*’

                   Art.    III, Sec. 52:      “The  Legislature      shall have
         no power        to authorize       any county,    city, town or other
         political      corporation       or subdivision      of the State to lend
         its credit       or to grant      public  money     or thing of value
         in aid of, or to any individual,             association     or corpora-
         tion whatsoever.           . .‘*

                  Art.  VIII, Sec.      3: “Taxes   shall be levied   and
         collected     by general       laws and for public  purposes     only.”
                                                                            .     .




Hon.   Allan     Shivers,    Page   8 (V-l   198)




                 It must be conclusively          presumed,       of course,     that the
Legislature       was familiar       with the provisions        of the Federal      Act
and that therefore        it intended     to authorize      the State Agency       to en-
ter into such agreements             with the Federal        Security    Administrator
as are contemplated          by the Federal       Act.    We will next consider
whether      the Legislature       may validly      authorize     a State agency       to
enter    into the type of agreement           required     by the Federal       Act in
order     to obtain   coverage      for the officers      and employees        of the
counties      and of municipalities        of the State other        than employees
engaged      in performing       services    in connection       with a prbprietary
function.

                  Section   50 of Article     III   of the   Constitution       of the State
of Texas       reads,   in part,  as follows:

                 “The    Legislature      shall have no power         to give
        or to lend, or to authorize           the giving   or lending,      of
        the credit     of the State in aid of, or to any person,              as-
        sociation     or corporation,       whether     municipal      or other,
        or to pledge      the credit     of the State in any manner
        whatsoever,       for the payment        of the liabilities,     pres-
        ent or prospective,          of any individual,     association      of
        individuals,      municipal      or other   corporation      whatso-
        ever.”

                 If the agreement       required    by the Federal       Act and au-
thorized     by House     Bill 603 amounts       to a lending      of the State’s   credit
to the counties       or municipalities       whose   officers     and employees       will
obtain    coverage,     the Act would be invalid.           A limitation    on the pow-
er of the Legislature         to lend or give the state’s         credit  does not
apply    to a loan or gift of the state’s        credit    for state purposes.        59
C.J. 208, States,       Sec. 346.     In construing      the prohibition     contained
in Section     50 of Article     III, the Supreme       Court   in City of Aransas
Pass    v, Keeling,      112 Tex.    339, 247 S.W. 818, 820 (lY23),          made    the
tXiowin8      statGirent:

                 “To the extent   that the State aids in protecting
        Aransas     Pass   from  the menace       of storms    through    a
        grant    of part of the State taxes,      shfe discharges     a State
        obligation,    and.hence   no questionil.rises       as to lending
        or pledging     the State s ~credit to a municipal        corpora-
        tion or for payment      of the liabilities     of such a corpo-
        ration.      (Emphasis    added.)

                We are of the,opinion       that to the extent     the State aids
its counties    in obtaining     coverage    agreements      for their officers
ar.d employees      under    the Federal    Act,   it is likewise    discharging
a State obligation     and that therefore       no question     can arise    as to
me lending     or pledging     of the State’s    credit   in their behalf.      The
Hon.    Allan    Shivers,       Page     9 (V-1198)




decisions      in this State are uniform                   in their     recognition         of coun-
ties as agencies         of the State through                 which    the State discharges
the duties      which     the State as an organized                   government          assumes
to every     person      and by which          it can best promote                  the welfare       of
all.   City of Galveston            v. Posnainsky,             62 Tex.       118 (1884).        The
functions     of county       officers      and employees              are so tied in with
State government            as to be essential              to its proper          functioning;       and
the State,     therefore,       has a very          vital     interest      in the efficient        func-
tioning    of county       government.            It is obviously           in the best interest
of the State to attract            to, and retain           in the service           of, the counties
the highest      type of officers           and employees.                That there        is an in-
ducement       to enter      and remain          in the services             of an employer          who
provides      some     form     of retirement             or pension         plan is so well         rec-
ognized     as to require          no elaboration.              Thus,      providing      some     such
plan is of vital      concern         not only to the county                but also to the State
as a whole.        The proper          method        for making          such provision,          the
particular      plan, is a matter            which       properly        lies within       the discre-
tion of the Legislature.               This    discretion          the Legislature            has exer-
cised,    and the coverage            agreements             for county        officers      and em-
ployees,     as authorized           by House         Bill    603, do not constitute            a lending
of the State’s      credit      within     the meaning            of the constitutional            pro-
hibition.

                 This     construction       of Section     50 of Article          III is con-
sistent    with the construction           which     has been placed          upon Section
51 of Article       III by those decisions           which    recognize        that the pro-
hibition    against     legislative      grants    of public     money      to any individual,
association      of individuals,        municipal      or other      corporations          does
not prohibit      an appropriation          of State funds to counties               to be used
by them in carrying            out a part of the duties          or governmental             func-
tions which      properly       rest   on the State.       Jefferson      County        v. Board
of County      and District        Road Indebtedness,          143 Tex.       99, 182 S.W.
2d 908 (1944).         A contrary       interpretation       of Section       50 of Article
III would do violence            to the well established          principle        that the Con-
stitution    must be construed            as a whole      so as to give         effect    to all
its provisions,        and, if possible,        to harmonize        them.       Texas      Nat.
Guard     Armory       Board      v. McGraw,       132 Tex.      613, 126 S.W.Zd            627,
-therein.

                We will     next consider      whether    agreements      entered      in-
to by the State to obtain        coverage     for employees       of municipalities,
other   than those engaged        in performing       services     in connection       with
a proprietary       function,   would   constitute     a lending    of the State’s
credit   in violation     of the prohibition      of Section    50 of Article     III.

              Although      municipal    corporations      have been said to be
created   primarily     to regulate   the internal      concerns   of the inhabit-
ants of a defined    locality    in matters    peculiar     to the place incorpo-
rated,  Bexar    County    v. Linden,    110 Tex.     339, 220 S.W.Zd    61 (1920),
Hon.    Allan     Shivers,      Page     10 (V-1198)




nevertheless         they’have    a two-fold     character,     one governmental
and the other         private,   and, in so far as their        character     is govern-
mental,     they     are agencies     of the state,    and subject      to state control.”
Yett v. Cook,         115 Tex.    205, 281 S.W. 837 (1926),          and authorities
cited   therein;       1 Cooley,   Constitutional      Limitations      (8th Ed. 1927)
43.   In Texas        Nat. Guard Armory         Board    v. McGraw,        supra,  the
court    said:

                 “The  State has a vital    interest  in its cities.     In
         its governmental     capacity    a city is a ptilitical   subdivi-
         sion of the State,   and in many instances        is considered
         as an agent of the State;     and the State may use such
         agent  in the discharge     of its duties.”

                     The agreements             authorized         by House       Bill     603 would
obtain     coverage        only for such employees                   of municipalities            as are
engaged        in governmental             functions      as distinguished             from     propri-
etary     functions.         We think that the State’s                interest       in the efficient
discharge         of city government             is equally        as great       as its interest
in the efficient          discharge         and functioning          of county        government.
The whole          is no better        than the sum of its parts,                .and we think that
the public        benefit     to be derived          from      the maintenance             of the high-
est type of local           government          clearly       imposes       a duty and an obli-
gation     upon the State to aid in obtaining                      such government.               The
reasoning         which justifies           the assumption           of an obligation           on the
part of the State to aid the counties                       in the efficient          discharge       of
county      functions       justifies       a State obligation          which will enable             munic-
ipalities       to efficiently        perform      their      governmental            functions.        The
inhibition        of Section       50 of Article        III was never          intended        to prevent
the State from           lending      its credit      for proper         purposes.          If the State
cannot      use its credit          for governmental              purposes,        a situation      might
well    arise      in which      it could not function.               Article     III, Section       50
and its related           provisions         in the Constitution            of Texas        which were
enacted       for the purpose            of protecting         public     funds were          never     in-
tended      to apply      to such legitimate             use of the State’s             credit.     Rather,
their     purpose       and those of similar               constitutional         provisions        enacted
by other        states    in the Union were             to put an end to the use of the
credit     of the State in fostering               private       business,       a practice        which
prevailed         in the early        days of the history             of most       states.

                The Supreme          Court   of Iowa,    in construing      the Iowa
constitutional     provision      that “The      credit   of a state   shall not in any
manner,      be given     or loaned     to, or in aid of, any individual,           asso-
ciation,    or corporation”        stated   that the provision       was the result
of the past experience          of states    in loaning     their  credit    freely    and
extravagantly      to corporate        enterprises      such as ~railways,        canals,
wate,rpowers,        etc.,  and that it was for the purpose             of inhibiting
the incurring      of obligations       by the indirect      method    of secondary
liability   that the constitutional         provision     was enacted.        Grout    v.
Iion.   Ailan     Shivers,   Page    11 (V-l    198)




Kendall,        192 N.W.   529, i95 Iowa 467 (1923).   See also              the dissent-
ingioion           by Judge Cardozo    in People v. Westchester                Nat. Bank,
231 N.Y.        465, 132 N.E.   241 (19211.

                    Had we any doubt as to the constitutionality                    of the pro-
visions        of House     Bill    603 which    we are presently          discussing,      the
well      settled    rule that all doubts        must be resolved           in favor   of con-
st:itutionality       wbuld      require    us to sustain      these    provisions.      Brown
v.    City
.~_...-~.     of  Galve:ston,      97  Tex.   1, 75  S.W.    488   (1903);    Greene    v.-
<on, IT~x.              516    8 S.W.2d      655 (1928);     Duncan v. Gabler,         147 Tex.
zn,       215 S.W.2d       I;5 (1948);      9 Tex.   Jur. 479       C onstltutlonal     Law,
Sec. 60; 1 Cooley,            Constitutional       Limitatiods       (8th Ed. 1927) 354i 355,
375.

                 Having    concluded     that the agreements      authorized      by
House    Bill   603 do not constitute       a lending   of the credit    of the Stati,
we pass to a consideration           of whether     any provision    of the Texa.6
Constitution      will be violated     by a compliance       with the requirem&
of Section     218(g)   of the Federal      Act that agreements       entered    i,nto
between     the states    and the Administrator         shall be binding     &or at
least  a five-year      period.

                The State’s   right   to contract          is unlimited.  except         by the
Constitution.      As stated   by the Supreme             Gout-t in Texas    Nat.        Guard
Armory      Board   v. McGraw,      supra:

                  “The    subjects      of contract,,    the Length of term       for
        which     a contract       may be made,, and the general            policy
        re,lating     to contracts,       are clearly      withm    the power    of
        the Legislature.            The Constitution        does not provide       for
        the length      of term      for which      a contract     may be made
        by the State.         The only provisions          of the Constitution
        which     might     affect    the term     of a contract      are those
        which     prohibit      the creation     of any debt by or on behalf
        of the State (Section           49 of Article      3, of the Constitution)
        and that no appropriation             of ,money      may be made for a
        longer     term     than two years        (Section     6 of Article   8 of
        the Constitution),          and that monopolies          shall never    be
        allowed      (Section      26 of Article      1 of the Constitution).”

              Under   the provisions     of House    Bill    603 it is clear   that
no debt is created    by or on behalf     of the State;     nor is any appro-
priation  of money   for longer    than a two-year        peridd   attempted,     We
are therefore   of the opinion    that the legislative       authorization    to com-
ply with the requirements       of Section~218(g)      is constitutional.

                   The trust funds      which    are established    by Section  12 of
House  Bill       603 are similar      to the   trust fund which was considered
and upheld        in the Friedman       case,   supra,   in the face of the conten-
Hon.   Allan    Shivers,       Page      12 (V-1198)




tion that the requirements                of Section      6 of Article        VIII of the State
Corlstitution had not been               met.2    The     requisites        of this provision
are therefore   satisfied.

                We have discussed          only those             provisions     of the Con-
stitution   which    raise some      serious    question             as to the validity   of
the provisions      of House    Bill   603.    We have             not mentioned      or dis-
cussed    those provisions      of the Constitution                 which are not involved
or which are clearly       satisfied,       Likewise,             we have not discussed
any provisions      of the Federal       Constitution              sixe    none of its pro-
visions    cast any doubt upon the validity           of          this legislation.     Our
conclusion     is that the Act is valid,        and you            are accordingly      so ad-
vised.



                                         SUMMARY

                 The provisions            of House        Bill   603 which authorize
        the State to enter           into agreements             with the Federal
        Government          for the purpose             of extending       Federal       old-
        age and survivors             insurance          coverage      to employees          of
        counties     and municipalities               of the State other          than em-
        ployees     engaged        in performing            services      in connection
        with a proprietary             function       do not constitute          a lending
        of the State’s        credit     within      the meaning         of Section       50 of
        Article    III, Constitution           of Texas.         The authorization             to
        governing        bodies     of counties          and municipalities           to pay
        contributions         in the amount            required      by the Federal
        Act from       the funds from           which       covered      employees         re-
        ceive    their     compensation           is not obnoxious          to Sections
        51 and 52 of Article             III, or to Section           3 of Article       VIII>
        since    employees’          right    to receive        coverage        benefits
        will be a part of the agreed                   compensation         paid for serv-
        ices rendered.           Byrd      v. City of Dallas,            118 Tex.      28, 6
        S.W.Zd     738 (1928);         Friedman          v. American        Surety       Co. of
        New York,          137 Tex.       149, 151 S.W.Ld            570 (1941).        The
        State may enter           into a coverage            agreement         for the
        minimum         five-year        term,      since     the only constitutional
        provisions        (Sec. 49, Art.         III; Sec. 6, Art.         VIII;   Sec. 26,




2 Section      6 of Article       VIII    reads,    in part,      as follows:

               “No money   shall be drawn       from  the Treasury   but
        in pursuance  of specific   appropriations      made by law;
        nor shall any appropriation     of money     be made for, a
        longer  term than two years.     . .‘I
Hon. Allan Shivers,     Page 13 (V-1198)   ,,               ~, I
                      ,,,/. ,,. :,.



   ‘:~:,~Art. I, Tex. Const.) which may affect the term of a
        State contract have not been violated.    See Texas Nat.
        Guard Armory Board v. McGraw,        123 Tex. 613 126
          . .         (lm).   The provisions  of Ho,use Biil 603
        which create and provide for the administration      of the
        Social Security Fund and the Social Security Adminis-
        tration Fund do not violate Section 6 of Article VIII of
        the Constitution.   Friedman v. American’ Surety     Co.
        of New York, supra.     House Bill 603 is constitutional.

                                   Yours   very   truly,


                                    PRICE DANIEL.
                                   Attorney General


APPROVED:                          B

‘W, V. Geppert                                               Assistant
T,axation Division

Jesse P. Luton, Jr.
Reviewing Assistant

Charles D. Mathews
First Assistant



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