Hon. Horace B. Houston,    Jr ., Chairman
State Affairs  Committee
House of Representatives
53rd Legislature
Austin, Texas
                                     Opinion   No. S- 19

                                     Re:    Constitutionality   of, proposed
                                            amendment to House Bill 346
                                            authorizing    Federal Social
                                            Security coverage for county
                                            or municipal employees        en-
Dear Sir:                                   gaged in proprietary      functions.

              We quote the following excerpt from your letter        request-
ing the opinion of this office on the above captioned subject,

             “The State Affairs Committee     in the House of Repre-
      sentatives   is considering  House Bill 346, which proposes
      an amendment to House Bill 603, Chapter 500, Acts 52nd
      Legislature,    Regular Session,  1951.

              “House Bill 603 excludes services     performed   in con-
      nection with a proprietary    function of the county ok munici-
      pality.   The proposed amendment,       House Bill 346, likewise
      excludes proprietary    services.    It has been proposed, how-
      ever, that services   performed    in connection with proprie-
      tary functions of the counties and municipalities     be included
      in the OASI coverage,    and it has been suggested to the Com-
      mittee that the proposed House Bill 346 be amended SO as to
      take in such proprietary    functions.

             “Our question is:  If House Bill 346 were amended and
      enacted so as not to exclude services   performed    in connec-
      tion with proprietary  functions of the political subdivisions,
      would the Law be constitutional?”

             Attorney General’s   Opinion V- 1198 (,195 1)) addressed
to Governor Allan Shivers,   held that the provisions  of House Bill
603 were constitutianal,   We quote the following excerpt from pages
7 and 8 of that opinion,
Hon. Horace     B. Houston,    Jr.,   page 2 (S-19)




                “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 agreement     with the
        Administrator     for coverage for such officers       and em-
        ployees.     Under the Federal Act the State is the only
        party authorized to enter into agreements         with the Ad-
        ministrator,    Sec. 218(a) (l), and to modify or terminate
        such agreements,       Sec. 218(c) (4) and 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 add-
        ed thereto until paid; and the amount due, plus such in-
        terest, 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 deem-
        ed to have been paid to the State under such other pro-
        vision.   Sec. 218(j).    [The sections referred     to may be
        found in 42 U.S.C.A.,      Sec. 418.1

               “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 au-
        thorize the State Agency to enter into such agreements
        with the l$ederal Security Administrator    as are contem-
        plated by the Federal Act.”

                The opinion held that the Legislature    could validly author-
ize a State Agency to enter into such agreements        as were authorized
by Hous     Bill 603 without violating the provisions    of Section 50 of Ar-
ticle III e of the Texas Constitution   since a limitation on the power of
the Legislature    to lend or give the State’s credit does not apply to a



                ‘Section   50 of Article   III of the Constitution   of the State of
Texas   reads    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, association    or cor-
        poration, whether municipal or other, or to pledge the cre-
        dit of the State in any manner whatsoever,      for the payment
        of the liabilities,   present or prospective,  of any individual,
        association    of individuals,  municipal or other corporation
        whatsoever.    )(
!   .




        Hon. Horace    B. Houston,   Jr.,   page 3 (S-19)          .



        loan or gift of the State’s credit for State purposes.         59 C.J. 208, States,
        Sec. 346; City of Aransas      Pass V. Kezg,        112 Tex. 339, 247 S.W. 818,
        820 (19231.   The oninion Pointed out that counties are agencies          of the
        %te‘thr&gh      whit-h the &ate discharges       the duties of oiga&ed      govern-
        ment and that to the extent the State aids its counties in obtaining Cover-
        age agreements      under the Federal Act for their officers and employees
        it is discharging    a State obligation.    Hence no question of lending the
        State’s credit arises.     Municipalities    “have a two-fold character,      one
        governmental     and the other private, and, insofar as their.;character        is
        governmental,     they are agencies     of the State and subject to state. con-
        trol.”   Yett v. Cook, 115 Tex. 205, 281 S.W. 837 (1926).           The opinion
        specifically  notes that only such employees         of municipalities  as ‘are en-
        gaged in governmental       functions are eligible for coverage and concludes
        that the State could as validly assume an obligation to aid municipalities
        in the performance      of their governmental     functions as to aid counties in
        the discharge    of county functions;

                       It is apparent from the foregoing     summary    that House Bill
        603 as originally    enacted did not violate the provisions    of Section 50 df
        Article 11~1because-        employees     engaged in performing    services in
        connection with governmental       functions, of the State were eligible for
        coverage.    If the Legislature   should atteinpt .to authorize the’State to
        lend or pledge its credit in behalf of political subdivisions      seeking COV-
        erage for employees      engaged in performing     services  in connection with
        proprietary   functions of said subdivisions,     we are of the opinion that
        such an enactment would be unconstitutioxial.

                                            SUMMARY

                     The proposed amendment to House Bill 346 which w&ld
        authorize  the State to enter into agreements     with the Federal Govern-
        ment.,for the purpose of extending Federal      old-age and survivors   insur-
        ante coverage to those employees      of political subdivi$ions  of the State
        who are engaged in performing      services   in connection with proprietary
        functions of said subdivisions   is unconstitutional.    Tex. Const. Art. III,
        Sec. 50.

        APPROVED:                                Yours      very       truly,

        W. Vi Geppert                            JOHN BEN SHEPPERD
        Taxation Division                        Attorney General

        Willis Gresham
        Reviewer                                 B#&f;?!~‘$$?,                           b
                                                                                   eel
        Robert   s. Trotti                          Assistant                   . ‘I
        First Assistant

        John Ben Shepperd
        Attorney General
