                                  E Amro~wmf                   GENERAL
                                           OPTEkAS


AT-rORNEY        CI-RAL

                                       August   14,   1967


            Honorable~R.    L. Coffman
            Admlhistratpr                                    : -
            Texas Etiployment   Commiesion
            TJX Building
            Austin,    Texas 78701                           Re:   Whetha?~ the ‘Texas
                                                                   Employaieiit~Commi~slon
                                                                   may pay a~ptirtion      bf
                                                                   the premluW3 ??or group
                                                                   insurance’under      the:
                                                                   provlsloka     o,f Subsection
                                                                   (a) of Section      1 of
                                                                   Article    3.51 of the In-
                                                                   fnxance Code, as amended
                                                                   by S.B. 294, Acts oflithe
            Dear Mr.      Coffman:                                 60th Legislature.
                ,Referenoe   Is made to. yqur ‘letter     in which you requested.
            an opinlon.,from  ‘this office (pertaining      to the captioned  ~makter.
            We quote froti your lett’kir in part,as~.follovq3:           :‘,
                          ‘Presently      the TeXas: Public Employ&s          Aeriod.atlon
                 ‘iti’ thb’~olicyh6ld&           fdti tiur g$oup insurance.       The law.
                  now provides       that’,.policies      may be issued    to an*aaaocSa-
                  tion.of.public        employees..       Accordingly,   ‘the.qquestions
                  we would like for’ your office             to answer’*are    at3.follolrs:

                           “(1)   Whether TEC may cbntribute         to the pretiqms
                                  of Its emplojreee for group        inmwanaa.

                           “(2)   Whether suoh oontrlbutlona      cap bwtmde under
                                  our present   arrangement   with TPlM and our
                                  insurance   carrier,   BepubUo JWionaL Liie
                                  Insurance   Company.                       L<
                          “We feel thati there woihd’be muoh adranta&e to con-
                  tinulng   with our present      arrangement   sinca lt:would     avoid
                  the necessity    of making a new contract        lnvolrigg   only<
                  TEC employees    and would probably       be a better. contract     than
                  we could nbgotlate     separately.’
        It is assumed that question          number (1) Is governed, by your;
captioned    questlon,      i.e,,    the contributions   by ?$Ic to the premiums
of Its employeesfor           those types of group Insurance       ooverad by
Article    30510    You~wlll~note       that Senate Bill 294, 60th Legisla-
ture> Regular      Session,       p. 1007, Chapter 437, also amends Article
3.50 of the Insurance           Code.   It is this Article   that 1% applicable
to group life      Insurance      a
        Subsection  (a), Section 1, Article                 3.51 of the       Feeias ,Insurance
Code,    as amended by Senate Bill 294 is                  as follows:
                 “(a)      The State     of Texas and each of its political,
        governmental          and administrative           subdivisions,      departments,
        agencies,        assooiatlons       of public       employee%, and the
        governing        boards and .authorltiea            of each ntatq uiiiverfifty,~
        colleges,        common ‘and Independent            school districts        or of
        any other,agency            or subdlvislon         of the public      School
        system of the State             of Texas are authorized            to procure
        oontracts        insuring     their     respective      employees     or any class
        or classes         thereof    under a policy          or policies     of group,
        health,       accident,      accidental       death and dlsmemborment,
        disability         income replacement          and hospital,       surgical     and/or
        medical       expense insurance.            The dependents        of any such
        employees        may be insured         under group policies          which provide
        hospital,        surgical     and/or      medical     expense insurance.          The
        employees        contributions        to the premiums for such Insurance
        leeued to the.employer              or to an association           of public      em-
        ployees       as the policyholder           may be deducted        by t,he employer
        irom the employee% salaries,,               when ,authorlze~d      in nrlting.     by.
        the respeatlve.          employees      so to do* .The~ premium for;~fhe
        pol9cy may be pa3d’ 3n whole or in part fromfunds                           contrfbuted
        by the employer            or in whole or fn part from funds oontributed
        by the insured           employees 0”
      .The Texas Employment Commfesion Is a state                agency and Its
em loyees    are state   employees   (Attorney       General’% Opinion Ro. V-427,
19 k 7) * As you intimate     in your letter,        the fund% utlllxed       by
the -Texas Employment Commfssion in the admXnistration                  of the
Texaia Unemployment    Compensation      Act are’furnished         by the federal
government 0 See 42 U,S,C,A,,        Section     502.      The applicable     Texas
%tatute   pertaining   to these funds,       Artfcle      522lb,   Vernon’s   Civil
Statutes,    provides  in Seetfon    ll:therecf,        in part,    the followings:
              “(a)   Special    Fund: There Is hereby created            In the
        State Treasury    a special    fund to be known as the Unem-
        ployment   ‘Compensation    Adm%nistration     Fund., . , . Ally
        moneys fn th%s fund shall        be deposited,    adlainidttered    and
          Honorable       R. L. Coffman,            Page 3              Opinion    Ilo, M-125


                     disbursed,     in the same manner and under                the .same con-
                    ‘ditions    and requirements   as if provided               \y law for other
                     special    funds in the State   Treasury.    .
                  Inasmuch as these federal       funds are deposited      in the State
           Treasury,    they are state    funds (Attorney     Genera,l’r   Opinion No.
           c-530,    1965).   With reference    to these public      funds or ,moneys
           and the expenditure     of same, .Sectlon     51 of,Article     III;  Consti-
           tution    of Texas, provides,     in part,   as follows:
                            “The Legislature    shall  have no power to make
                    any grant      or authorize  the making of any grant of
                    public    moneys to any individual,     association of
                    Individuals,      municipal  or other corparatlons  what-
                    aoever.      . . .’
                 The Supreme Court of Texas, In the case of
          of Austin,    160 Tex. 348, 331 S .W,2d 737 (1960),
          Section    31, of Article  III, Constitution of Texas,                       said    in part:
                           II
                                e   9    .  the purpose   of this   section     q , . of f&e Con-
                    stitution           Is to prevent     the appllcatlon       of public funds
                    to private             purposes.   . . .n
                   It ‘would therefore     appear that your’ QU~estion ‘nwB%ber(1)
            resolves     itself into this query:        Is the use of pabldo moneys
            for TEC employees      group insurance      premium payments     violative
            of the Constitution       because    It constitutes    an application      of.
          : public    funds to a private      purpose?     We think that it is not.
                    In Attorney   General’s            Opinion    No. v-1067,     (@5V),      this
           office     ‘said in part:
                           “In determining       whether an expenditure       of ]Irubilc
                     moneys constitutes        a gift  or a’grant    of public   momeys,
                    “‘the primary    guestion     Is whether the fund@ arcI US@13
                     for a “public       or a ‘private”     parpose,    ,The bentrilts
                     of the State    from an expenditure        for: a “publiti  PUrPOse”
                     is. in the nature     of consideration       and the funds expended
                     are therefore     not a gift     even though pr%vate persona
..                   are benefited     therefrom,‘”
     ..
                  The determination      of what constitutes                a   “public   purpose”
           for which a state        may expend moneys has               been    held to be
           primarily    a legislative     functlon,.subject               to    ravlew by the
           courts    when abused,     and the determination               of    the legielatlve



                    1:
                                                       -572-
                          Honorable    R. L. Coffman,      page   4            Opinion    No. R-125

                                 ,-

                          body has been held to be not sub.lect       to reversal   exceot in                  1
                         ,ins%ances~,where   such determinati&     ispalpably     and manifestly
                          arbitrary   and incorrect.     State: ex rel.   McClure v.~Ragertin,.
                           155 Ohio st. 320, 98 N~.E.2a 835 (1951) .
                                  The Texas   Sn reme Court,   in the case of Byrd-v:City                 of   '~'
                          Dallas,'   et al,   11 T; Tex. 28, 6 S.W.2d~ 738 (19381,~ said the
                          following:
                                       11
                                                 It Is academic to say the Legislature
                                has powei io passany          law which lts'wisdom     suggests
                                that is not forbidden         by some provisions     of the.Con-
                                stitution     (federal     or state).   If the pension     pro-
                                vided for In this act Is a gratuity            or donation     to
                                the beneficiary,        it is clearly   forbidden    by the funda-
                                mental law.        On the other hand, if it is a part of
                                the compensation        of such employee for services        ren-
                                dered to the city,         or If it be for a public      purpose,
                                then clearly;      it is~ a valid exercise     of the legisla-.
                                tlve power..
                                ,You will note that Senate Bill 294 amended Subsection                    (a),
                          Section   1, Article     3.51 of the Insurance        Code by striking
                          the language     "provided,     however,   no state    funds-shall       be-used
                          to procure    such contracts,      nor shall   any state      funds be used
                          to pay premiums under said contracts            oft insurance,'      and in-
                          serting   in lieu thereof       the following:      "the premium         for the
                          policy   may be paid in whole or in part fromfunds                 contributed
                          by the employer      or in whole or in part from funds contributed
                          by the insured      em loyees.'     Yeu will further       note that the caption
                         ~of Senate Bill 29 E reads as follows:,
    ,
                                         "AW ACT amending Paragraph       (b) of Subsection        (3)
                                 of Section      1 of Article     a 0 oft the Insurance     Code
                                and amending Subsection          a of Section
                                                                ST                  1 of Artlcle,3.51
                                 of the Inawance        Code.to  permit the expenditure        of.state
                                 funds to pay all or any portion          of the premiums POF
                                certain      group insurance    contracts    coverlhg   employees       of
                                .the..state;     and declaring   an emergency,"
                                 'The Legislature      had made its intention      abundantly     clear   in         1
                         'Senate     Bill '294, i.eap     to permit the expenditure      of state     funds
                          to pay ,a11 or any portion          of the premiums for certain       group in-
                          surance     contracts    covering    employees   of the state.      The Legis-
                          lature     has the authority      to provide. compensation     for state      em-
                          ployees     for servlcea     rendered.     In the opinion    of thisoffice,



                                                                                                      .

.       . I   . .~...a                                        -573-
Honorable     R. L. Coffman,      page   5              Opinion   No.,&125


the expenditure       of state   funds to pay the premipmsf~or
dertain _ group
           .       insurance    contracts     of state  employees~~as-a
pare of' thelr     compensation     is, within   the realm of public
purpose.
       Appleman's   Insurance       Law and Practice,       Volume I,     pages   53,
54,   provides   in part;
               "There is no question         that a private      employer
       may take out a group policy             for the benefit      of his
       employees.      Some question       has been raised       as to the
       right    of a social     or political        group to take out
       such a contract       on the theory        that it might con-
       stitute    a diversion     of the funds of taxpayers            to
       an unauthorized       purpose,     but such power has been'
       sustained     as tending    to improve service,          morale,
       and efficiency.       . e . Thereis          no question   but that,
       in general,     such insurance        has a desirable      effect
       upon morale and mental state             of the employees.        . . ,I
        Question   number (2) as presented          in your letter,      "Whether
 such contributions      can be made under        our present     arrangement
with TPEA and our insurance       carrier,        Republic    National    Life
 Insurance     Company" Is not amenable~ to         a complete    answer inas-
much as the details       of your 'present        arrangement"     are~not     set
.out *
       However,, in view ~of our answer to question           number (l),
it must follow that certain         limitations      be placed upon your
arrangement     with the Texas Public Employees Association.                TPEA
is a private     association     of individuals      which charges     a fee for
membership,      Being such, any state         funds granted   to this organiza-
tion are subject       to Section   51 of Article      III,  Constitution     of
Texas.
       However, Subsection        (a), Section     1, Article      3.51 of the In-
surance     Code,as amended by Senate Bill 294 does not grant 'any
state    funds to an association        of public    employees.        The statute
merely authorizes        an association     of public     employees     to procure
contracts     insuring    its employees     and indicates       it may be a.
group policyholder        when the employees'       contribution's      alone'are
involved,       Article   3.51 .is devoid of any language, which authorizes
an association        of public   employees    such as TPBA to procure           group
insurance     contracts     for Its members or to be the policyholder                of
same, wherein state         funds are to be utilized         in the payment of
the premiums.




                                       -5;4-
                                                                                            .        ,




                                                                            ,’     “~.
                                                   ..

             Honorable     R? L. Coffmanj     page, 6, ,~,,y,,
                                                            ,‘. __,,:!:CpQ&n’ Ko ;1..~l/c-125, :::: ~~: :
                                                                                          .’

                      You are. therefore   advised   that ~when~contributions.:for        ‘,
              premium payments are to .be made with ,state         funds,~ t&group.
              policies    must bye procured, by TEC. (t.he employer,) and’ the, ‘em-~’
              ployer,    as the policyholder,      makes the contribut,Sons        tqthe’
              insurance     coinpany a
         /                              S U M’M A R Y
                                        _--d,---
                             1. The Texas Employment Co,mmlssion may con-
                     tribute    with state   funds to the,premiums   of its
                     employees     for   roup insuranoe  under the provisions
                     of Subsection     7 a) of Section  1 of Article  3.51 of
                     the Insurance     Code, as amended by S.B. 294, Acts of
                     the 60th Legislature.
                            ,2. When state   funds are used as contributions,
                     to’ the premiums of group POliCieB by the Texas E&n7
                     ployment    Commission,   the Texas Employment Commission
                     must procure    the contract    of insurance,   be the policy-
                     holder,    and pay the contributions      to the insuranoe~,
                     company 0
                                                           very    truly,



                                                         rney   General          of Texas       .’
              Prepared    by Ray MoGregor          .I/
             ‘Assistant    Attorney General
              APPROVED:
              OPINION COMMITTKE
             .A. J. Carubbi,  Jr *, Chairman
,
             Staff  Legal Assistant
             Y. 0. Shultz,   Co-Chairman
             John Reeves
             Sam Kelley
             Roger Tyler
              John Ranks




    ,.


                                                 -575-
