Can the Texas Lottery Commission sell its promotional merchandise to the public?

TX AG Opinion GA-0323: Can the Texas Lottery Commission sell its promotional goods?

Plain-English summary

The Texas Lottery Commission regularly buys promotional items, koozies, T-shirts, scratch-off coins, Christmas ornaments, towels, and sports bags, and gives them away to lottery players and retailers at contests and direct-sales events. The Commission's executive director asked the Attorney General whether the Commission could go a step further and sell those items, to the general public, to Commission employees, or to the vendors it contracts with, either at cost or for a profit.

The Attorney General said no. The governing rule is that a Texas state agency has only the powers the legislature has given it, either spelled out expressly or necessarily implied from an express power. The State Lottery Act, Government Code chapters 466 and 467, lists the Commission's powers, and none of them authorizes selling merchandise. The opinion treated selling goods as a "proprietary or commercial" activity that an agency may undertake only if a statute expressly says so, citing earlier opinions that denied similar revenue-raising ideas to the Board of Nurse Examiners and the Governor's Office of Traffic Safety.

Two arguments the Commission raised did not change the result. First, its express authority to regulate "the means of advertising" the lottery lets it advertise, but advertising is not the same as selling souvenirs, and the Commission could carry out its advertising duty without merchandise sales. Second, the marketing and advertising "strategies" in the General Appropriations Act could not supply the missing power, because a budget rider may direct how appropriated money is spent but cannot rewrite substantive law to grant authority the underlying statutes withhold. The opinion contrasted the Lottery Commission with agencies the legislature did expressly authorize to sell things, such as Parks and Wildlife, the Department of Criminal Justice, the State Preservation Board, and the Bob Bullock Texas State History Museum. Because the Commission had no such grant, it could not sell promotional goods, and whether the sale would be at cost or for profit made no difference. The opinion left untouched the Commission's existing practice of giving the items away.

Currency note

This opinion was issued in 2005. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Who this opinion affected (as of 2005)

The Texas Lottery Commission: The opinion concluded the Commission and its executive director had no statutory authority to sell promotional goods to anyone, the public, employees, or vendors, and that selling at cost rather than for profit would not cure the lack of authority. Its existing practice of giving the items away was not affected.

State agencies generally: The opinion restated the limiting principle that an agency possesses only the powers the legislature expressly grants or that are necessarily implied, and that "proprietary or commercial" activities like selling merchandise require express authority. Agencies the legislature did authorize to sell items (Parks and Wildlife, Criminal Justice, the State Preservation Board, the Bullock Museum) were noted as the contrast.

The Legislature: The opinion located the authority to sell merchandise in the legislature's hands. If the Commission was to have that power, a statute would have to grant it; an appropriations-act rider could not.

Common questions

Could the Texas Lottery Commission sell its branded promotional items to the public?
No. The opinion concluded the Commission lacked statutory authority to sell promotional goods to the public, its employees, or its vendors.

Did it matter whether the Commission sold the items at cost or for a profit?
No. The opinion said that distinction was irrelevant because the Commission had no authority to sell the goods at all.

Could the Commission still give the promotional items away?
Yes. The opinion expressly did not disturb the Commission's existing practice of procuring and giving away promotional goods to players and retailers. The problem was selling them, not distributing them.

Why didn't the Commission's power to advertise the lottery include selling merchandise?
The opinion read the advertising authority as letting the Commission advertise, not sell souvenirs, and found the Commission could carry out its advertising duty without selling promotional goods.

Why couldn't the appropriations-act marketing riders authorize the sales?
The opinion explained that a budget rider can detail or limit how appropriated funds are spent but cannot alter substantive law, so it could not grant the Commission a selling power the Lottery Act did not.

How can some Texas agencies sell items but not the Lottery Commission?
Those agencies, such as Parks and Wildlife and the Department of Criminal Justice, had express statutory authority to sell particular items. The opinion's point was that selling goods takes an express grant, and the Commission did not have one.

Background and statutory framework

The opinion rests on a settled limit on agency power: a Texas state agency has only the authority the legislature has explicitly or implicitly delegated to it (Pub. Util. Comm'n v. City Pub. Serv. Bd., 53 S.W.3d 310 (Tex. 2001); R.R. Comm'n v. Lone Star Gas Co., 844 S.W.2d 679 (Tex. 1992)). The State Lottery Act, Government Code chapter 466, together with chapter 467, sets out the Commission's powers. The Commission has express authority to adopt rules governing "the means of advertising to be used for the lottery" (§ 466.015(c)(10)), and its executive director may award contracts for lottery supplies or services (§ 466.014(c)) and contract for necessary facilities, goods, and services (§ 466.101(a)). None of these reaches selling merchandise.

The opinion drew a line between regulating advertising, which the statute grants, and conducting "proprietary or commercial activities" like selling goods, which a prior opinion (LO-93-004) said an agency may do only with express authority. Earlier opinions had denied comparable revenue ideas to the Board of Nurse Examiners (newsletter advertising) and the Governor's Office of Traffic Safety (selling "Drive Friendly" T-shirts) (H-366 (1974)). On the appropriations question, the opinion applied the rule that a rider "may detail, limit, or restrict the use of funds" but may not alter substantive law (Strake v. Ct. App. for the First Jud. Dist., 704 S.W.2d 746 (Tex. 1986); Tex. Const. art. III, § 35). Finally, it catalogued agencies the legislature expressly authorized to sell items, Parks and Wildlife (Tex. Parks & Wild. Code §§ 12.006(a), 12.008(a), 13.017(a)), the Department of Criminal Justice (Gov't Code §§ 497.012(b), 497.031), the State Preservation Board (§ 443.013(d)), and the Bullock Museum (§ 445.003(a)(1), (2)), to show by contrast that the Lottery Commission had received no such grant.

Citations

Statutes and constitutional provisions:

• Tex. Gov't Code Ann. chs. 466, 467 (Vernon 2004)
• Tex. Gov't Code Ann. §§ 466.001, 466.014(c), 466.015(c)(10), 466.101(a) (Vernon 2004)
• Tex. Gov't Code Ann. §§ 497.012(b), 497.031, 443.013(d), 445.003(a)(1), (2) (Vernon 2004)
• Tex. Parks & Wild. Code Ann. §§ 12.006(a), 12.008(a), 13.017(a) (Vernon 2002)
• Tex. Const. art. III, § 35
• General Appropriations Act, 78th Leg., R.S., ch. 1330, art. VII, 2003 Tex. Gen. Laws 5023, 5734-35

Cases:

• Pub. Util. Comm'n v. City Pub. Serv. Bd., 53 S.W.3d 310, 315-16 (Tex. 2001)
• R.R. Comm'n v. Lone Star Gas Co., 844 S.W.2d 679, 685 (Tex. 1992)
• Strake v. Ct. App. for the First Jud. Dist., 704 S.W.2d 746, 748 (Tex. 1986)

Other authorities:

• Tex. Att'y Gen. Op. Nos. GA-0016 (2003), GA-0022 (2003), GA-0143 (2004), H-366 (1974), WW-192 (1957)
• Tex. Att'y Gen. LO-93-004

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0323
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2005/ga0323.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

May 6, 2005

Mr. Reagan E. Greer
Executive Director
Texas Lottery Commission
Post Office Box 16630
Austin, Texas 78761-6630

Opinion No. GA-0323

Re: Whether the Lottery Commission may sell promotional items to the general public, Commission employees, or vendors with whom the Commission contracts (RQ-0287-GA)

Dear Mr. Greer:

On behalf of the Texas Lottery Commission (the "Commission"), you ask whether the Commission may sell promotional items to the general public, Commission employees, or vendors with whom the Commission contracts.[1]

You indicate that the Commission "regularly procures promotional goods[, such as] koozies, T-shirts, scratch-off coins, Christmas ornaments, towels, [and] sports bags . . . to distribute to lottery players and retailers through contests and direct-sales events." Request Letter, supra note 1, at 1. The Commission believes that the items "promote sales" of lottery tickets "and help to generate and maintain high levels of player awareness throughout the State." Id. at 1-2. The Commission now is considering whether to offer promotional goods for sale to the public, Commission employees, and vendors. See id. at 2. You therefore ask whether the Commission has authority to sell promotional goods "either on a cost[-]recovery or for-profit basis." Id.

The Commission has authority to sell promotional goods only if that authority is among the Commission's express powers or is necessarily implied from the Commission's express powers. A state agency has only those powers that the legislature has explicitly or implicitly delegated to the agency. See Pub. Util. Comm'n v. City Pub. Serv. Bd., 53 S.W.3d 310, 315-16 (Tex. 2001); R.R. Comm'n v. Lone Star Gas Co., 844 S.W.2d 679, 685 (Tex. 1992); Tex. Att'y Gen. Op. No. GA-0022 (2003) at 3.

Chapter 466, the State Lottery Act, and chapter 467 of the Government Code set out the Commission's powers. See TEX. GOV'T CODE ANN. chs. 466, 467 (Vernon 2004); see also id. § 466.001 (titling chapter 466). Under the statutes, the Commission has express authority to adopt rules governing "the means of advertising to be used for the lottery." Id. § 466.015(c)(10). The Commission's executive director has express statutory authority to award a contract for lottery supplies or services, see id. § 466.014(c), as well as authority to purchase, lease, or contract for any necessary facilities, goods, and services. Id. § 466.101(a).

You suggest that the current General Appropriations Act authorizes the Commission to promote the lottery. See Request Letter, supra note 1, at 1 & n.1. You particularly cite two strategies that outline the Commission's marketing and advertising duties:

A.1.2 Strategy: MARKETING, RESEARCH, AND PROMOTION

[E]ducate players and provide opportunities to learn about lottery products . . . communicate game information . . . to lottery retailers . . . .

A.1.3. Strategy: ADVERTISING

Inform adult Texans by mass media (television, radio, newspaper, billboards), point-of-sale materials and merchandising regarding lottery games . . . .

General Appropriations Act, 78th Leg., R.S., ch. 1330, art. VII, 14-15, 2003 Tex. Gen. Laws 5023, 5734-35.

Neither the Commission nor the executive director has express statutory authority to sell promotional goods. This office previously has concluded that a state agency must have express authority to engage in "what may be characterized as proprietary or commercial activities, if they are to engage in them at all." Tex. Att'y Gen. LO-93-004, at 3. For this reason, this office previously has determined that the Board of Nurse Examiners may not, by itself or through a vendor, secure advertising to cover the costs of producing and mailing an agency newsletter. See id. at 3. Similarly, this office previously has determined that the Governor's Office of Traffic Safety lacks authority to contract with a private entity to merchandise "Drive Friendly" T-shirts to generate revenue for the State Traffic Safety Program. See Tex. Att'y Gen. Op. No. H-366 (1974) at 3; see also Tex. Att'y Gen. Op. No. WW-192 (1957) at 3 (stating that a county may not enter a contract to sell asphalt, other than surplus asphalt, to the state).

We decline to infer authority to sell promotional goods from the Commission's or executive director's general statutory authority to regulate the means of advertising the lottery, see TEX. GOV'T CODE ANN. § 466.015(c)(10) (Vernon 2004) (authorizing the commission to adopt rules governing "the means of advertising to be used for the lottery"), although we believe the Commission is thereby authorized to advertise the lottery. The Commission and executive director successfully may exercise their statutory duty to advertise the sale of lottery tickets without selling promotional goods.

Because the Commission lacks statutory authority to sell promotional goods, we will not infer the authority from the appropriations act riders you cite. An appropriation act rider "may detail, limit, or restrict the use of funds appropriated elsewhere in the appropriations act or may otherwise insure that money is spent for the purpose for which it is appropriated." Tex. Att'y Gen. Op. No. GA-0016 (2003) at 5 n.4. A rider may not, however, attempt to alter substantive law. See Strake v. Ct. App. for the First Jud. Dist., 704 S.W.2d 746, 748 (Tex. 1986) (stating that a rider may not attempt to alter substantive law); see also TEX. CONST. art. III, § 35 (prohibiting a bill from containing more than one subject, although permitting general appropriation bills to "embrace the various subject and accounts, for and on account of which moneys are appropriated"); Tex. Att'y Gen. Op. No. GA-0143 (2004) at 8-9 ("General laws may not be adopted, repealed, or amended by a general appropriations act.").

Certain state agencies have express statutory authority to sell particular items. For example, the Parks and Wildlife Department has express authority under sections 12.006 and 13.017 of the Parks and Wildlife Code to "provide or sell information, including books, magazines, photographs, prints, and bulletins, to the public about wildlife values and management" and about state parks. TEX. PARKS & WILD. CODE ANN. §§ 12.006(a), 13.017(a) (Vernon 2002). The Parks and Wildlife Department has additional express authority to sell products grown on Department land when the product exceeds "wildlife management needs." Id. § 12.008(a). Similarly, the Department of Criminal Justice has express authority to sell repaired or refurbished data processing equipment to a school district, a state agency, or a political subdivision of the state. See TEX. GOV'T CODE ANN. § 497.012(b) (Vernon 2004); see also id. § 497.031 (authorizing the Department of Criminal Justice to sell "prison-made articles or products" to certain governmental entities and flags to the Commission on Law Enforcement Officer Standards and Education). The State Preservation Board has express statutory authority to operate gift and souvenir shops in the State Capitol and the General Land Office building, see id. § 443.013(d), and the Bob Bullock Texas State History Museum has express authority to operate a gift shop and food services, see id. § 445.003(a)(1), (2). By contrast, the Commission has not been granted such authority.

We conclude that the Commission has no authority to sell promotional goods. Whether the sales are made on "a cost[-]recovery or for-profit basis" is irrelevant. Our conclusion does not extend to the Commission's current practice of giving away promotional goods. See supra at 1 (stating that the Commission regularly procures and distributes promotional goods). Given our conclusion, we need not answer your remaining questions: into which treasury or account sales proceeds should be deposited, and what exposure to liability in contract, tort, or otherwise the Commission would have in connection with the sales. See Request Letter, supra note 1, at 2.

SUMMARY

The Texas Lottery Commission lacks authority to sell promotional goods.

BARRY R. McBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Kymberly K. Oltrogge
Assistant Attorney General, Opinion Committee

Footnotes

[1] Letter from Reagan E. Greer, Executive Director, Texas Lottery Commission, to Honorable Greg Abbott, Texas Attorney General (Oct. 27, 2004) (on file with Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].