    OFFICE    OF   THE   ATTORNEY   GENERAL   . STATE   OF   TEXAS

   JOHN        CORNYN




                                                         April 152002



The Honorable Mike Moncrief                                      Opinion No. JC-0489
Chair, Committee on Health
 and Human Services                                              Re: Whether article III, section 50 of the Texas
Texas State Senate                                               Constitution prohibits the Texas Commission for the
P.O. Box 12068                                                   Blind from contracting with the United States
Austin, Texas 78711                                              government to operate various vending facilities on
                                                                 federal property under the Federal Randolph-
                                                                 Sheppard Act, 20 U.S.C. ch. 6A, if the contract
                                                                 “create[ s] financial exposure to the State for a multi-
                                                                 million dollar service agreement with . . . Federal
                                                                 Departments”      (RQ-0455-JC)


Dear Senator Moncrief:

         Article III, section 50 of the Texas Constitution and other similar provisions forbid a state
agency to lend the state’s credit solely to aid a private interest. TEX.CONST.art. III, 9 50; cf: id. art.
III, $9 51, 52; id. art. VIII, 4 3. Under the Federal Randolph-Sheppard     Act, 20 U.S.C. chapter 6A
(1994 & Supp. V 1999), the Texas Commission for the Blind (the “Commission”) contracts with the
federal government to operate vending facilities on federal property, which the Commission then
licenses blind citizens to operate. See NISH v. Cohen, 247 F.3d 197,200-01 (4th Cir. 2001); Tex.
Att’y Gen. Op. No. O-2070 (1940) at 3. Referring to these vending contracts, you ask whether the
Commission violates article III, section 50 of the Texas Constitution, “any other section of the
Constitution, or any other statute or law” by entering “a multi-million dollar service agreement with
[a] Federal Department for services to be provided to that Department, without adequate financial
assurances from the third[] party to protect the financial obligation of the State.“’ To the extent that
the arrangement constitutes a lending of credit to a blind licensee for the purpose of article III,
section 50 or other constitutional limitations on the use of public funds, we conclude that it has been
found to accomplish a public purpose. We assume that the arrangement is adequately controlled to
ensure that the public purpose is accomplished.

        You indicate that the Commission, in accordance with the Federal Randolph-Sheppard       Act,
20 U.S.C. 8 107 (1994), “proposes to enter. . . multi-million dollar service agreements for cafeteria



            ‘Letter from Honorable Mike Moncrief, Chairman, Senate Committee on Health & Human Services, to
Honorable     John Comyn, Texas Attorney General (Oct. 16,200l) (on file with Opinion Committee) [hereinafter Request
Letter].
The Honorable Mike Moncrief            - Page 2        (JC-0489)




services.” Request Letter, supra note 1, at 1. Once the Commission enters a contract, you continue,
it “contracts with a private individual to perform the services under the contract.” Id. Profits earned
for providing the cafeteria services “go to the private third[] party with a set-aside fee to the State.”
Id. You believe that the Commission’s arrangement with the federal government may violate article
III, section 50 of the Texas Constitution, some other constitutional provision, or some statute
because the state, and not the private third party, is obligated to the federal government to provide
cafeteria services. See id.

         With respect to vending facilities, including cafeterias, on military facilities, we have been
told that the Commission has “secured financial assurance. . . proportionate to the potential liability
under the contract between the State and the Department of Defense.“2 For example, although we
have been told it is no longer in effect,3 the Commission had an “indemnity agreement from a large
reputable food service company assisting [the Commission] in managing” one contract. Nolan Brief,
supra note 2, at 2. And the Commission currently “has a $500,000 letter of credit to provide . . .
financial assurance against the liability” on another contract. Id. We do not in this opinion consider
whether a particular financial assurance is adequate. See, e.g., Tex. Att’y Gen. Op. Nos. JC-0032
(1999) at 4 (stating that question of fact is beyond purview of this office), JC-0027 (1999) at 3
(stating the questions of fact cannot be addressed in attorney general opinion), JC-0020 (1999) at 2
(stating that investigation and resolution of fact questions cannot be done in opinion process).

         Because you appear primarily concerned about the lending of credit issue that corresponds
to article III, section 50, we limit our review of constitutional and statutory provisions to those
relating to that issue. But before discussing the constitutional requirements, we will briefly
summarize relevant provisions of the Federal Randolph-Sheppard Act (the “Act”), 20 U.S.C. 5 107
(1994), and state statutory provisions, found in the Texas Human Resources Code, authorizing the
Commission to perform certain functions under the Act.

I. The various laws

        A. The Randolph-Sheppard               Act, 20 U.S.C. 8 107

          The Federal Act was enacted in 1936 to provide blind persons with remunerative
employment and with expanded economic opportunities by giving them priority to operate vending
facilities on federal property. 20 U.S.C. 8 107(a) (1994); NISH v. Cohen, 247 F.3d 197, 198,200
(4th Cir. 2001); see also Tex. State Comm ‘nfor the Blind v. United States, 796 F.2d 400,402 (Fed.
Cir. 1986), cert. denied, 479 U.S. 1030 (1987). Congress amended the Act in 1974, “effectively
establishing a cooperative federal-state program that gives contracting priority to blind persons
operating vending facilities on federal property.” NISH, 247 F.3d at 200. The term “vending



         *Letter from Peter A. Nolan, Winstead Se&rest & Minick, to Susan D. Gusky, Chair, Opinion Committee,
Office of the Attorney General, at 2 (Dec. 10,200l) (on file with Opinion Committee) [hereinafter Nolan BriefJ.

        3Telephone   Conversation   with Peter A. Nolan, Winstead   Se&rest & Minick (Jan. 29,2002).
The Honorable Mike Moncrief        - Page 3      (JC-0489)




facility,’ is defined as “automatic vending machines, cafeterias, snack bars, cart services, shelters,
counters, and . . . other appropriate auxiliary equipment.” 20 U.S.C. 5 107e(7) (1994); see In re:
Dep ‘tof the Air Force-Reconsideration,    72 Comp. Gen. 241, B-250,465, B-250,783; B-250465.6,
B-250465.7, B-250783.2,1993 WL 212641, *2 (Comptroller General, June 4,1993); Md. Att’y Gen.
Op. No. 90-061 (1990), 1990 WL 595349, *4.

        A brief we have received suggests that you may be particularly concerned with the
Commission’s contracts to operate cafeterias on military bases. Nolan Brief, supra note 2, at 2. The
Secretary of Education, who is responsible for adopting rules to interpret and enforce the Act, see
20 U.S.C. 8 107(b) (1994); Randolph-Sheppard      Vendors of Am. v. Weinberger, 795 F.2d 90, 93
(D.C. Cir. 1986), defines the term “cafeteria”:

                Cafeteria means a food dispensing facility capable of providing a
                broad variety of prepared foods and beverages (including hot meals)
                primarily through the use of a line where the customer serves himself
                from displayed selections. A cafeteria may be fully automatic or
                some limited waiter or waitress service may be available and
                provided within a cafeteria and table or booth seating facilities are
                always provided.

34 C.F.R. 6 395.1(d) (2001) (emphasis in original); see also NISH, 247 F.3d at 202-03. In NISH v.
Cohen, the United States Court of Appeals for the Fourth Circuit held that the Act applies to military
mess-hall facilities. NISH, 247 F.3d at 205-06; see also Southfork Sys., Inc. v. United States, 141
F.3d 1124, 1127 (applying Act’s priority to military mess halls in Texas); NISH v. Cohen, 95 F.
Supp. 2d 497,505 (E.D. Va. 2000), a#‘d, NISH, 247 F.3d 197.

         Under the Act, the federal government contracts with a state to operate a vending facility on
federal property. This “two-tiered” Business Enterprise Program, which is administered by the
United States Secretary of Education, permits a blind vendor to apply to operate a vending facility
on federal property. See Randolph-Sheppard          Vendors ofAm., 795 F.2d at 93; see also 34 C.F.R.
8 361.8 1 (2001) (defining “Business Enterprise Program”). The Secretary designates a state agency
in each state to license blind United States citizens to operate “vending facilities on Federal and other
property” in the state. 20 U.S.C. 0 107a(a)(5) (1994); Randolph-Sheppard Vendors ofAm., 795 F.2d
at 93. The state licensing agency, among other things, submits bids to the federal government to
operate various vending facilities on federal property, including “military dining facilities,” and, if
selected, contracts to operate the facilities. NISHv. Cohen, 191 F.R.D. 94,96 (E.D. Va. 2000). The
state licensing agency then licenses a blind vendor to manage each facility. 20 U.S.C. 5 107a(a)(5)
(1994); 34 C.F.R. 9 395.7 (2001); Randolph-Sheppard          Vendors ofAm., 795 F.2d at 93.

        B. State statutes related to the Federal Act

       State law specifically authorizes the Commission to “administer the Business Enterprises
Program in accordance with the provisions of the Randolph-Sheppard   Act.” TEX.HUM. REs. CODE
The Honorable Mike Moncrief      - Page 4      (JC-0489)




ANN. 8 94.016(a) (Vernon Supp. 2002); see also Hearings on Tex. H.B. I400 Before the House
Comm. on Human Sews., 76th Leg., R.S. (Mar. 16, 1999) (testimony of Terry Murphy, Executive
Director, Texas Commission for the Blind) (stating that Act sets up Business Enterprise Program,
and Commission is designated to administer that program in Texas). The Commission is the state-
licensing agency in Texas for the Business Enterprises Program under the Act, as it has been since
 1936. See Automated Communications Sys., Inc. v. United States, 49 Fed. Cl. 570,572 n.1 (Fed. Cl.
2001); see also Southfork Sys., Inc., 141 F.3d at 1127 (indicating that federal contracting officer
negotiated with Commission to operate enlisted-personnel cafeteria complex at Lackland Air Force
Base); SUNSETADVISORYCOMM'NSTAFFREPORT~TEXASCOMM'NFORTHEBL~D                       47,48(1998).
         Thus, the Commission “negotiates and signs contracts with the” federal government and
signs a manager’s agreement with a licensed blind person, who is the vending facility’s sole
proprietor. SUNSETADVISORYCOMM'NSTAFFREPORT~TEXASCOMM'NFORTHEBLMD                      52’63 app.B
(1998). The Sunset Advisory Cornmission, which reviewed the Commission in 1998, summarized
the division of duties with respect to the Commission and the licensed manager of a vending facility:

                [The Commission] provides a manager with initial start-up costs,
               equipment, and equipment maintenance for all manned facilities,
               which does not have to be re-paid. State and federal host sites
               typically do not charge the licensed manager for floor costs, utilities,
               and other costs that are negotiated in a contract. . . . The manager
               must see to the daily operations of the facility including hiring,
               maintaining    inventory,  managing    funds, ordering foods and
               beverages, and meeting sanitation requirements. The manager must
               reimburse the [Commission] for lost or unaccounted[-I for equipment.
               The [Commission], with the participation of the Elected Committee
               of Managers, mediates complaints or grievances from the host or the
               licensed manager, and can place managers on probation for 30 days
               to several months, and has authority to revoke [the] manager’s
               certification.

Id. at 63 app. B. In 1997, Business Enterprises Program managers licensed by the Commission
operated vending facilities on forty-eight federal sites in Texas. See id.

         In Attorney General Opinion o-2070, a 1940 opinion, this office concluded that the
Commission may “enter into a joint undertaking with a department of the Federal government
by the terms of which it will act as licensing agency for the blind operators of stands in federal
buildings in this State.” Tex. Att’y Gen. Op. No. O-2070 (1940) at 4; see also Tex. Att’y Gen. Op.
No. O-5 132 (1943) at 2-3 (citing Attorney General Opinion O-2070 with approval).                The
Commission’s authority, according to the opinion, springs from its statutory authority to “aid the
blind . . . in finding employment”;        to “furnish materials, tools and books for the use as a
means in rehabilitating such persons”; and to “take such measures, in cooperation with other
authorities . . . for the vocational guidance of adults having seriously defective sight.” Tex. Att’y
The Honorable Mike Moncrief       - Page 5     (JC-0489)




Gen. Op. No. O-2070 (1940) at 3-4 (quoting TEX.REV.CIV.STAT.ANN. art. 3207a, 5 2, repealed by
Act of May 27, 1979’66th Leg., R.S., ch. 842, art. I, $2( 1), 1979 Tex. Gen. Laws 2333’2429).

         Consistently with Attorney General Opinion o-2070, we conclude that the Commission is
authorized by law to contract with the federal government to operate a vending facility on federal
property, by the terms of which the Commission licenses a blind vendor to operate the vending
facility. See Tex. Att’y Gen. Op. No. O-2070 (1940) at 2-3. The substance of the statute on which
the 1940 opinion is based has been codified as various sections of chapter 91, subchapter C of the
Human Resources Code. Section 91.021(a) gives the Commission “primary responsibility” for
providing “all services to visually handicapped persons,” with two exceptions not relevant here.
TEX. HUILI.RES. CODE ANN. 8 91.021(a) (Vernon 2001); see id. 8 91.002(4) (defining “visual
handicap”). Section 91.023 permits the Commission to “furnish materials, tools, books, and other
necessary apparatus and assistance for use in rehabilitating blind and visually handicapped persons.”
Id. 8 91.023. And section 91.02 1(d) requires the Commission to “enter into agreements with the
federal government to implement federal legislation authorizing the provision of services to the
visually handicapped.” Id. tj 92.021 (d).

          The Commission’s duty “to provide vocational rehabilitation services to eligible blind
disabled individuals” appears to further support its authority to contract with the federal government
to operate vending facilities on federal property, which the Commission then licenses blind
individuals to manage. TEX. HUM. RES. CODE ANN. 5 91.052(a) (Vernon 2001). “Vocational
rehabilitation” or “vocational rehabilitation services” are those services that the Commission
“determines are necessary to compensate a blind disabled individual for an employment handicap
so that the individual may engage in a remunerative occupation. The terms include . . . customary
occupational tools and equipment; maintenance; training books and materials; and other goods and
services for which the commission receives financial support under federal law.” Id. 5 91.05 l(6);
cJ: 34 C.F.R. 6 361.48 (2001) (defining “vocational rehabilitation services” for an individual with
disabilities).  The Commission must “cooperate with the federal government to accomplish the
purposes of federal laws relating to vocational rehabilitation and closely related activities” and must
negotiate agreements with the federal government even if the Commission has to waive or modify
state law to conform to federal requirements and to maximize federal financial support. TEX.HUM.
RES.CODE ANN. 8 91.053 (Vernon 2001); cj also id. 55 94.002-.005 (authorizing Commission to
administer state’s statutory counterpart to Federal Randolph-Sheppard         Act, chapter 94, Human
Resources Code, which provides Commission licensees priority for operating “a vending facility or
a facility with vending machines” on state property).

        C. Constitutional   restrictions on lending the state’s credit

         You are, nevertheless, concerned that the vending facility arrangements violate article III,
section 50 of the Texas Constitution. See Request Letter, supra note 1, at 2. Article III, section 50
generally prohibits a state agency from lending the state’s credit to aid any individual, association,
or corporation. TEX.CONST.art. III, 6 50; see also Tex. Att’y Gen. Op. No. O-2070 (1940) at 5. You
also ask about other constitutional provisions, by which we understand you to ask about other
The Honorable Mike Moncrief       - Page 6      (JC-0489)




provisions that analogously prohibit the use of public funds solely for a private purpose. See, e.g.,
TEX. CONST. art. III, 80 5 1’52 (prohibiting legislature to “make any grant or authorize the making
of any grant of public moneys to any individual, association . . . , . . . or other corporations
whatsoever . . . .” and prohibiting a county, city, town, or other political corporation or subdivision
to “lend its credit or to grant public money” to aid individual, association, or corporation); id. art.
VIII, 6 3 (requiring that taxes be levied and collected “for public purposes only”); id. art. XI, 8 3
(prohibiting county, city, or other municipal corporation from loaning its credit). This office
previously has suggested that a prohibited “lending of credit requires the” government to assume
“some kind of financial liability.” Tex. Att’y Gen. Op. No. DM-382 (1996) at 10. But cj: 1 GEORGE
D. BRADEN ET AL.,THECONSTITUTIONOF THE STATE OF TEXAS: AN ANNOTATED AND COMPARATIVE
ANALYSIS 225 (1977) (“Section 50 . . . is an involved and somewhat imprecise way of saying that
the state may not aid anybody by lending him money; by providing him land, goods, or services on
credit; or by guaranteeing payment to a third party who aids anybody by lending him money or
providing him land, goods, or services on credit.“).

          Like other constitutional prohibitions on the use of public funds to benefit a private
individual or entity, article III, section 50 permits a loan of state credit only if the loan serves a
public purpose and if the transaction is sufficiently controlled to ensure that the public purpose is
accomplished. See Tex. Att’y Gen. Op. No. JC-0353 (2001) at 2; see also Tex. Att’y Gen. Op. Nos.
JM-942 (1988) at 6-7; H-120 (1973) at 3; Tex. Att’y Gen. LA-l 19 (1977) at 2, LA-9 (1973) at 2.
Accordingly, this office has stated that the legislature constitutionally could establish a statutory
program to guarantee student loans if the legislature finds that the program will accomplish a public
purpose and includes “sufficient controls to assure that the program would actually serve that public
purpose.” Tex. Att’y Gen. LA-l 19 (1977) at 2. Without such controls, the state cannot ensure that
it will receive “adequate consideration or benefit for the services provided to private parties,” such
as the students whose loans are guaranteed. Id.

II. Analysis

          Without determining whether any particular agreement between the Commission and the
federal government to operate a vending facility lends the state’s credit for the purposes of article
III, section 50 of the Texas Constitution by requiring the state to assume liability for performing the
contract, we conclude that, to the extent that it does, the legislature has determined that it
accomplishes a public purpose. Chapter 94 of the Human Resources Code, requiring that only a
Commission-licensed      person may operate a vending facility on state property, was adopted in 1965.
See Act of May 10, 1965, 59th Leg., R.S., ch. 227, 1965 Tex. Gen. Laws 445, 445-50. Its
forerunner, adopted in 1947, see id. 8 13, 1965 Tex. Gen. Laws 445,450 (repealing 1947 act); Act
of Mar. 12, 1947’50th Leg., R.S., ch. 47, 1947 Tex. Gen. Laws 62’62-63, declared the purpose of
enabling blind persons to make a living:

                        That for the purpose of providing blind persons with
               remunerative employment, enlarging the economic opportunities of
               the blind, and for stimulating the blind to greater efforts in striving to
The Honorable Mike Moncrief      - Page 7      (JC-0489)




               make themselves self-supporting, blind persons under the provisions
               of this Act shall be authorized to operate vending stands on any State
               property, or State[-Icontrolled property where, in the discretion of the
               head of the department or agency in charge of its maintenance,
               vending stands may be properly and satisfactorily operated.

Id. 5 1, 1947 Tex. Gen. Laws 62’62; cf: id. 0 7, 1947 Tex. Gen. Laws 62’63 (“The fact that a large
number of State-owned or leased property is not being made available for blind persons to operate
vending stands in order to earn a living in this State creates an emergency . . . .“). The state’s
assumption of liability under the contract as required by the Randolph-Sheppard         Act helps
implement the public purpose of providing employment for blind citizens. Furthermore, although
we find nothing in the legislative history regarding the adequacy of controls placed on the
arrangements with blind vendors, we presume that the Commission has adequate controls in place
to ensure that the program accomplishes its public purpose. See 40 TEX.ADMIN.CODE 8 167.1(2001)
(authorizing business enterprises program to provide training and management           supervision
assistance to an eligible blind vendor).
The Honorable Mike Moncrief        - Page 8    (JC-0489)




                                        SUMMARY

                         To the extent that the Texas Commission for the Blind lends
               the state’s credit in making arrangements under the Randolph-
               Sheppard Act, 20 U.S.C. ch. 6A (1994 & Supp. V 1999)’ with the
               federal government to operate vending facilities on federal property
               or in licensing blind vendors to operate the vending facilities, the loan
               of credit has been found to accomplish the public purpose of
               providing economic opportunity to blind persons. Assuming that
               such an arrangement is adequately controlled to ensure that the public
               purpose is accomplished, it does not violate article III, section 50 of
               the Texas Constitution.




                                               Attorney General of Texas



HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Kymberly K. Oltrogge
Assistant Attorney General, Opinion Committee
