                     April   29, 1952

Hon. Robert S. Calvert              Opinion No. V-1442.
Comptroller of Public Accounts
Austin, Texas                       Re:   Status of adminis-
                                          trative   fund es-
                                          tablished   by the
                                          Social Security
                                          Act passed by the
Dear Sir:                                 52nd Legislature.
            You have requested   the opinion   of this   office
on the following   questions:
            “1.   Does the second paragraph of
     Section 12 of House Bill No. 603, Regu-
     lar Session of the Fifty-second     Legis-
     lature,    create a special fund & the
     state treasury?
            “2.  The last sentence in Section
     12 reads:    ‘These funds will not be
     State funds and will not be subject to
     legislative   appropriation.’  Is this a
     valid provision?
           "3. If you should answer question
     number 2 in the negative,   then does Sec-
     tion 13 of House Bill NO. 603, Acts of
     the Regular Session of the Fifty-second
     Legislature, appropriate   the monies col-
     lected under the provisions   of the Act to
     the Social Security Administrative   Fund?”
            House Bill 603, Acts 52nd Leg., R.S. 1951, ch.
500, p. 1480, title    “Social S,ecurity - County and Muni-
cipal Employees,” (Article     695g, V.C.S.) was passed for
the purpose of allowing county and municipal employees
to participate   In the Federal Social Security program.
Under the federal act only the State, and not individual
counties and municipalities,     may enter into social   secur-
ity agreements with the Federal Agency.       In order to com-
ply with the requirements of the Federal Social Security
Act the State Department of public Welfare was designated
Hon. Robert    S. Calvert,   page 2 (v-1442)


as the State agency to administer this act on behalf
of the participants.     This office   held House Bill 603
constitutional   against a contention     that the payments
required by the participating      counties or municipali-
ties were gifts   or grants of public money In violation
of the Constitution.     Att’y Gen. Op. V-1198 (195’1).
The specific   questions now before us were not involved
in that opinion and hence were not considered.
            The provisions of House Bill 603 which give
rise   to your questions are the following:
              “Sec. 10.    The respective    governing
       bodies of the various counties or munici-
       palities    of this State which enter into
       agreements under this program are hereby
       authorized to pay to the State Agency, out
       of any available     funds not otherwise dedi-
       cated, such amounts, separate and apart
       from employees’ contributions        and matching
       contributions,~    as mav be agreed between the
       P
       res e t ve                      a d h State
       Aaencv to be necessary to finance the coug-
       ty’s or municioalitPs       orooortionate    share
       $n the administrative      cost of this oroar-
       at the State level,       The State Asencv shall,
       reauire soecific     undertakings to defray a
       r,ro or 0 at
       exoenses at the State level in agreements
       negotiated    with counties and municioalitieg
         n any basis mutually      nreeable between t&
       &ate Agency and the okticinatinz           countv or
       municioality,     whether as an annual fee for
       each participating      county or municipality,
       an annual fee per employee covered, a per-
       centage based upon the contributions         to the
       Federal authorities,      or any other equitable
       measure.     Annually at the close of each fis-
       cal year, the State Agency shall pay from
       the Social Security Adminlstratlon         FWnd to
       the State Treasurer for deposit to the Gen-
       eral Revenue Fond of the State of Texas an
       ~amount not less than ten per cent (10%) of
       these contributions      during the preceding
       year to defray administrative        expenses until
        such time as the amount appropriated        to the
       State Agency from funds of the State for ad-
       ministrative     purposes has been reimbursed in
       full,    at which time such payments shall cease.
Hon. Robert   S. Calvert,   page 3    (V-1442)


             llSec. 12.         . The State Agency shall
     deposit all mone;s’collected        under the provi-
     sions of this Act from participating        counties
     and municipalities       to defray the cost of, ad-
     ministering     this program at the State level
     In a special fund to be known ashih; Fcial
     Security Administration        Fund. T     t te Treas-
     ure shal 1 be treasurer and custodian o f thq
     :$.,;kich       shall be held secarate and ao $
          m       DU lit m nevs or funds of this S&q
     The State Tieasurzr shall administer this fund
     in accordance with the directions        of the State
     Agency.      Moneys deposited in either, of these
     special funds shall be disbursed upon warrants
     issued by the Comptroller of Public Accounts
     pursuant to sworn vouchers executed by the
     State Agency acting through the executive di-
     rector of personnel of the agency to whom he
     expressly     delegates this function.
     will not be State funds and will not%?%!@
     to leaislative      aacrooriatio~.
            “Sec. 13. The State Agency is authorized
     to expend moneys in the Social Security Admin-
     istration    Fund for any purpose necessary to
     carry on the administration        of this program at
     the State level       including but not limited to
     salaries,    trave i lng expenses, printing,      sta-
     tionery,    supplies,    equipment, bond premiums,
     postage,    communications,     and contingencies,     and
     the State Agency is authorized to employ such
     personnel,     purchase such equipment, incur such
     expenses as may be necessary to carry out the
     administration      of this program at the State
     level,    provided all salaries     and expenditures
     from this fund shall be consistent         with the let-
     ter and spirit      of comparable items and general
     provisions     inthe    general departmental appro-
     priation    bill then current.       (Emphasis added.)
           The main question for decision  concerns the
validity  of the above provisions  in House Bill 603 re-
lating to the safe-keeping   and handling of the adminis-
trative  fund.  In this regard, the Supreme Court has
said:
Hon. Robert   S. Calvert,   page 4   (v-1442)


           'I. . . It is academic to say the
     Legislature   has the power to pass any
     law which its wisdom suggests that is
     not forbidden by some provisions   of the
     Constitution.             ad     citv of
               11.8Tex: 58in6 E.W.2:*738, 740

           The constitutional  provision drawn into con-
troversy in answering your questions is Section 6 of
Article  VIII, which provides:
           “Ho 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        except by the
     first  Legislature   to assem i le under this
     Constitution,    which may, make the neces-
     sary appropriations    to carry on the gov-
     ernment until the assemblage of the slx-
     teenth Legislature.”
             The case of piedman     Am
of New York, 137 Tex. 149 151 iIW.2
that the trust fund established    by t
butions of employees and employers under the Unemploy-
ment Compensation Act was not a state fund and hence
was not in the Treasury subject to appropriation    by the
Legislature,    although the trust fund was held by the
Treasurer.     The Friedman case however, dealt only with
the main trust fund, and not ihe administrative    fund
which Is the fund giving rise to the problems before us.
              In order to answer your questions It is neces-
sary to analyze the Social Security Act passed by the
Fifty-second     Legislature.   Under the provisions   of this
act, counties and municipalities       enter into Social Se-
curity agreements with the State Agency on a voluntary
basis.      The whole plan is based upon contracts    between
the State Agency and the participating       counties and muni-
cipalities.      one of the contractual   agreements is to the
effect    that the State Agency will administer the act on
behalf of the participants,      but at their expense.    The
participants     each agree to share a pro rata part of the
expenses of administration      and in return the State
Agency acts as the liaison      body between the participants
and the Federal Agency.       The State Agency has been given
the authority necessary to comply with Federal require-
ments, but by contract all the counties and municipalities
.   -



        Hon. Robert     S. Calvert,   page 5   (v-1442)


        participating     in the plan share the administrative
        expenses.
                    We think it is clear that the money contrl-
        buted by the participants      and held by the State Agency
        to defray administrative     expenses never becomes “State
        funds” in the sense that they could be placed in gen-
        eral revenue and appropriated      by the Legislature.      These
        funds remain county and municipal property and the
        State Agency holds them as trustee until they are ex-
        pended, since the participants       have contracted    to bear
        the administrative    expense.    If an excess were to be
        established   in this trust fund, the Legislature        could
        not appropriate    it for any other use.      Such an act by
        the Legislature    would violate    the portion of Section
        1.6of Article   I of the Texas Constitution      relating    to
        ImpaIring the obligation     of contracts.     Johnson v.
        Smith, 112 Tex. 222, 246 S.W. 1013 (1922).
                    In light of the above analysis,    you are ad-
        vised that the administrative    funds are not State funds,
        and therefore    are not subject to appropriation.    The
        special  trust fund Is not placed In the State Treasury,
        but by statute the Treasurer is made custodian of the
        fund.   Undoubtedly the Legislature   may place such an
        added duty u on the Treasurer.     Eanlon v. Lockhart, 131
        Tex. 175, 1l.c S.W.2d 216 (1938).


                    The administrative     trust fund established
              under the revisions      of the,Social    Security
              Act (H.B. ‘ii03, Acts 52nd Leg., R.S. 199,         ch,
              500, p. 1480) is a fund provided, pnrsuant to
              contract,   by the. pqtlcipating     .counties~ and
              municipalities.    lithe trust ~3’und’is not ‘a state
              fund and is therefore     not subject to approprla-
              tion by the Legislature.        The fund Is ‘not placed
              in the State Treas~.~,‘~:hmt~the Legislature        has
              merely made the Treksurer custodian of it.
        APPROVED:                                  Yours very truly,
        C. K. Richards                              -PRICE DAEIEL
        Trial & Appellate      Division            Attorney General
        E. Jacobson
        Reviewing Assistant
        Charles D. Mathews
        First Assistant
        EWT:wb
