Do members of a Texas advisory committee have to file personal financial disclosure statements?

TX AG Opinion GA-0611: Must advisory committee members file personal financial statements?

Plain-English summary

When Texas settled its 1996 lawsuit against the tobacco industry, a separate settlement with the hospital districts and counties created a Permanent Trust Account to reimburse them for indigent health care costs. The Legislature enacted House Bill 1161 to put that arrangement into law, gave the Comptroller trustee-style duties over the trust, and created the Tobacco Settlement Permanent Trust Account Investment Advisory Committee to advise the Comptroller on how to invest the account. A state representative asked whether the eleven members of that committee must file the personal financial statements required by chapter 572 of the Government Code, noting that the Texas Ethics Commission had answered the question one way in 1999 and the opposite way in 2007.

The Attorney General concluded chapter 572 did not apply to the committee's members. Chapter 572 requires financial statements from "state officers," meaning officers of a "state agency." An entity is a "state agency" only if it meets all three statutory elements, including having "authority that is not limited to a geographical portion of the state." A body that functions in an advisory capacity only does not exercise authority. The statute expressly says the committee "serves in an advisory capacity only," and the one exception (its power to approve or withhold approval of the Comptroller's trust-account rules) was de minimus, a minor extension of its advisory function rather than an independent grant of power. Because the committee lacked authority, it was not a state agency, and its members were not state officers subject to the filing requirement.

Currency note

This opinion was issued in 2008. 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.

The chapter 572 financial-disclosure rules, the "state agency" definition in section 572.002(10), and the trust-account provisions in sections 403.1041 and 403.1042 may have been amended since 2008. Confirm the current statutes and any later Ethics Commission guidance before relying on this analysis.

Who this opinion affected (as of 2008)

Tobacco trust advisory committee members: The opinion concluded they were not state officers and did not have to file chapter 572 personal financial statements, resolving the conflicting Ethics Commission determinations in their favor.

Members of other advisory-only state bodies: The opinion reinforced that an entity functioning in a purely advisory capacity does not exercise "authority" and so is not a "state agency" for chapter 572 purposes, even if it holds a narrow rule-approval power.

The Texas Ethics Commission and the Comptroller: The opinion gave them an authoritative answer to a question the Commission had decided inconsistently, and the Commission's own statute directs it to rely on Attorney General opinions.

Common questions

What is the Tobacco Settlement Permanent Trust Account?
It is a trust the State agreed to fund (with $2.275 billion attributed to a most-favored-nation provision in the tobacco settlement) for the exclusive benefit of hospital districts and counties, to reimburse them for indigent health care. The Comptroller manages and invests it, and the advisory committee advises the Comptroller on investment philosophy.

Why did the answer turn on whether the committee was a "state agency"?
Chapter 572 requires financial statements from state officers, defined as officers of a state agency. If the committee was not a state agency, its members were not state officers and had no filing duty. The "state agency" definition requires actual authority, which an advisory-only body does not have.

Didn't the committee have some real power over the Comptroller's rules?
It could approve or withhold approval of the Comptroller's proposed trust-account rules. The opinion treated that as a de minimus power, an extension of the committee's advisory role, not an affirmative grant of authority. It compared the committee to an entity in a 1997 Ethics Commission opinion that had rule-making power limited to advisory duties and was still not a state agency.

Background and statutory framework

House Bill 1161 (Act of May 27, 1999, 76th Leg., R.S., ch. 753, § 1.01, 1999 Tex. Gen. Laws 3364) was the enabling legislation for the separate settlement with hospital districts and counties. It gave the Comptroller trustee and investment-manager duties (codified at Tex. Gov't Code Ann. §§ 403.1041-.1042), placed administrative duties with the Texas Department of Health (Tex. Health & Safety Code Ann. §§ 12.132-.134), and created the advisory committee (Tex. Gov't Code Ann. § 403.1042). The statute provides that, with one exception, the committee "serves in an advisory capacity only and is not a fiduciary with respect to the account" (id. § 403.1042(a)).

Chapter 572 requires financial statements from state officers (Tex. Gov't Code Ann. § 572.021), which includes an "appointed officer," meaning an officer of a state agency appointed for a statutory term (id. § 572.002(1)(C)). A "state agency" must be an executive-branch body, created by the Constitution or a statute, "with authority that is not limited to a geographical portion of the state" (id. § 572.002(10)(A)). The three elements are joined by "and" and are conjunctive (Bd. of Ins. Comm'rs of Tex. v. Guardian Life Ins. Co. of Tex., 180 S.W.2d 906, 908 (Tex. 1944)). Relying on its own analysis and on Ethics Advisory Opinion No. 369 (1997) and Opinion No. 243 (1995), the opinion concluded that an advisory body lacks authority and is not a state agency, so the committee's members were not subject to section 572.021.

Citations

Statutes:

• Tex. Gov't Code Ann. §§ 403.1041 (Vernon 2005); 403.1042 (Vernon Supp. 2007)
• Tex. Gov't Code Ann. §§ 572.002(1)(C), 572.002(10), 572.021 (Vernon Supp. 2007); 572.023(a) (Vernon 2004)
• Tex. Gov't Code Ann. § 571.096(a) (Vernon 2004)
• Tex. Civ. Prac. & Rem. Code Ann. § 105.001(3) (Vernon 2005)
• Act of May 27, 1999, 76th Leg., R.S., ch. 753, § 1.01, 1999 Tex. Gen. Laws 3364 (House Bill 1161)

Cases:

• Bd. of Ins. Comm'rs of Tex. v. Guardian Life Ins. Co. of Tex., 180 S.W.2d 906, 908 (Tex. 1944)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0611
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2008/ga0611.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts may remain - the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

April 1, 2008

The Honorable Wayne Smith
Chair, Committee on County Affairs
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0611

Re: Whether chapter 572, Government Code, relating to the filing of personal financial statements, is applicable to the board members of the Tobacco Settlement Permanent Trust Account Investment Advisory Committee (RQ-0626-GA)

Dear Representative Smith:

You seek our opinion regarding whether chapter 572, Government Code, relating to the filing of financial statements, is applicable to the board members of the Tobacco Settlement Permanent Trust Account Investment Advisory Committee.[1]

I. Background

To answer your question, it is helpful to understand the origin of the Tobacco Settlement Permanent Trust Account Investment Advisory Committee.

A. Tobacco Litigation

In 1996 the attorney general sued the tobacco industry on behalf of the State of Texas. See State of Tex. v. Am. Tobacco Co., No. 5-96CV-91, (E.D. Tex. July 24, 1998); see also SENATE COMM. ON FINANCE, BILL ANALYSIS, Tex. H.B. 1161, 76th Leg., R.S. (1999); HOUSE RESEARCH ORG., BILL ANALYSIS, Tex. H.B. 1161, 76th Leg., R.S. (1999). The lawsuit sought to recover money the State had expended to treat Medicaid patients for tobacco-related illnesses. In July 1998, the parties reached a settlement agreement wherein the tobacco industry agreed to pay the State of Texas billions of dollars over twenty-five years.

B. Settlement Agreement

"Hospital districts and counties had intervened in the settlement, claiming that it would have barred them from obtaining damages of their own for all of the tobacco-related indigent health care they have provided." HOUSE RESEARCH ORG., BILL ANALYSIS, Tex. H.B. 1161, 76th Leg., R.S. (1999). The attorney general entered into a separate settlement agreement ("settlement agreement") with the intervening hospital districts and counties.[2] In the separate settlement agreement, the State agreed to "direct $2.275 billion[3] to a permanent trust account from which Texas counties and hospital districts would be reimbursed for costs of indigent health care."

The settlement agreement provided that all of the money received by the State resulting from the increased payments from a most-favored-nation provision would be distributed to the "exclusive benefit" of the "Political Subdivisions."[4] The settlement agreement allocated the money into two fund pools. One of the fund pools was the Permanent Trust Account (the "Trust Account") for the "exclusive and long term benefit" of the political subdivisions. The Trust Account was to be placed under the auspices of the Comptroller but used for "the exclusive benefit of the Political Subdivisions." Moreover, the settlement agreement expressly stated that "[i]n no event shall the Permanent Trust Account be placed into the State Treasury, nor shall such Permanent Trust Account funds or any earnings generated therefrom be subject to legislative appropriation."

With respect to management of the Trust Account, the settlement agreement provided that the Comptroller was to "manage and invest the funds ... for the exclusive benefit of the Political Subdivisions." "In addition, the Comptroller shall act as paying agent for purposes of making distributions of the earnings from the Permanent Trust Account." The settlement agreement also called for the creation of an advisory board "consisting of representatives of the Political Subdivisions [to be] created ... for the express purpose of providing advice and consultation to the Comptroller of Public Accounts regarding investments of the Permanent Trust Account."

C. Legislation

The Legislature enacted House Bill 1161 as the enabling legislation for the settlement agreement. See Act of May 27, 1999, 76th Leg., R.S., ch. 753, § 1.01, 1999 Tex. Gen. Laws 3364, 3364. House Bill 1161 gave the Comptroller the trustee and investment manager-type duties envisioned by the settlement agreement. See Act of May 27, 1999, 76th Leg., R.S., ch. 753, § 1.01, 1999 Tex. Gen. Laws 3364, 3364-66 (codified at TEX. GOV'T CODE ANN. §§ 403.1041-.1042). The enabling legislation also placed certain administrative duties with the Texas Department of Health. Id. § 2.01, at 3368-69 (codified at TEX. HEALTH & SAFETY CODE ANN. §§ 12.132-.134). And the enabling legislation created two eleven-member advisory committees: one to advise the Comptroller; and one to advise the Department of Health. Id. § 1.01, at 3365-66; 3369-70 (codified at TEX. GOV'T CODE ANN. § 403.1042; TEX. HEALTH & SAFETY CODE ANN. § 12.137).

Pertinent to your question, House Bill 1161 created the Tobacco Settlement Permanent Trust Account Investment Advisory Committee (the "committee"). See TEX. GOV'T CODE ANN. § 403.1042 (Vernon Supp. 2007). The committee is made up of eleven members: One member of the committee is appointed by the Comptroller and the other members are appointed by representatives of the political subdivisions.[5] The committee advises the Comptroller with respect to the Trust Account. Specifically, the committee "shall provide the comptroller guidance with respect to the investment philosophy that should be pursued in managing these assets and the extent to which, at any particular time, the assets should be managed to maximize growth of the corpus or to maximize earnings." Id. § 403.1042(a) (Vernon Supp. 2007). The Legislature expressly provided that, with a specified exception, "the advisory committee serves in an advisory capacity only and is not a fiduciary with respect to the account." Id.

The specified exception involves the Comptroller's power to adopt rules. The Comptroller is given, in section 403.1041(h), the power to adopt rules necessary to "implement the comptroller's duties" under section 403.1041. See id. § 403.1041(h) (Vernon 2005). The Comptroller's rule, however, may not become effective without the approval of the committee. Id.

With that extensive background, we consider your question about the committee.

II. Texas Ethics Commission

In 1999, the Texas Ethics Commission (the "Commission") determined that the committee was not a state agency and, accordingly, that the members of the committee were not required to file personal financial statements under chapter 572, Government Code.[6] More recently, the Commission determined that the committee is a state agency such that its members must file a financial statement under chapter 572.[7] Noting a need for clarification on the question, you ask whether the members of the committee must file the chapter 572 financial statements.

We must first consider whether it is appropriate for the Office of the Attorney General to opine on this matter. The Commission is charged with the administration and enforcement of chapter 572, which pertains to personal financial disclosures, standards of conduct, and conflicts of interest. See TEX. GOV'T CODE ANN. § 571.061(a)(1) (Vernon Supp. 2007). And the Commission is authorized to prepare written opinions about the application of chapter 572. Id. § 571.091(a)(5) (Vernon Supp. 2007). The Commission's governing statute expressly provides that the "authority of the commission to issue an advisory opinion does not affect the authority of the attorney general to issue an opinion as authorized by law." Id. § 571.096(a) (Vernon 2004). Moreover, the Commission's enabling legislation provides that the Commission "shall rely on opinions issued by the attorney general and the courts of this state." Id. § 571.096(c). Therefore, we will independently assess whether the members of the committee are subject to the financial statement requirement.

III. Legal Analysis

A. Chapter 572, Government Code, Financial Statements

For purposes of chapter 572, Government Code, a financial statement must generally include "an account of the financial activity of the individual required ... to file a financial statement and an account of the financial activity of the individual's spouse and dependent children [under certain circumstances]." TEX. GOV'T CODE ANN. § 572.023(a) (Vernon 2004). Under chapter 572, financial statements are required of state officers.[8] Id. § 572.021 (Vernon Supp. 2007).

A "state officer" under chapter 572 is defined, in relevant part, to include "an appointed officer." See id. § 572.002(12). An "appointed officer" is, again in relevant part, "an officer of a state agency who is appointed for a term of office specified by the Texas Constitution or a statute of this state." Id. § 572.002(1)(C). And for purposes of chapter 572, a "state agency" is:

(A) a department, commission, board, office, or other agency that:

(i) is in the executive branch of state government;

(ii) has authority that is not limited to a geographical portion of the state; and

(iii) was created by the Texas Constitution or a statute of this state;

Id. § 572.002(10); see also TEX. CIV. PRAC. & REM. CODE ANN. § 105.001(3) (Vernon 2005); TEX. GOV'T CODE ANN. § 2004.001 (Vernon 2000); TEX. HEALTH & SAFETY CODE ANN. § 361.421(10) (Vernon 2001); TEX. LAB. CODE ANN. § 21.002(14)(A) (Vernon 2006). As the members of the committee are appointed and serve a six-year term as specified by statute, we must determine whether the committee satisfies the requirements in section 572.002(10)(A) and is a "state agency" under chapter 572. See TEX. GOV'T CODE ANN. § 572.002(1)(C) (Vernon Supp. 2007); see also id. § 403.1042(e) (establishing six-year term for committee members).

B. State Agency

The three elements of the definition of "state agency" are joined by the word "and." The term is usually used in a conjunctive sense and here we find no indication its use is intended to be otherwise. See Bd. of Ins. Comm'rs of Tex. v. Guardian Life Ins. Co. of Tex., 180 S.W.2d 906, 908 (Tex. 1944) (describing the word "and" as a conjunctive term and one not ordinarily interchangeable with the word "or"). Under this definition, therefore, unless an entity satisfies all three elements listed in section 572.002(10)(A), it is not a "state agency." The committee was clearly created by Texas statute. See TEX. GOV'T CODE ANN. § 403.1042 (Vernon Supp. 2007). And due to its placement in the Government Code and its operation under the Comptroller, it is likely a court would consider it to be part of the executive branch of state government. Accordingly, we will focus on the second element of section 572.002(10)(A) and determine whether the committee has "authority that is not limited to a geographical portion of the state." Id. § 572.002(10)(A)(ii).

An entity that functions in an advisory capacity only does not have "authority" and does not satisfy the second element. See Op. Tex. Ethics Comm'n No. 243 (1995) ("If an executive branch entity functions in an advisory capacity only and is not authorized to exercise actual governmental authority, it is not a state agency for purposes of chapter 572."); see also Op. Tex. Ethics Comm'n No. 369 (1997). Section 403.1042 provides the committee with mere advisory tasks. As noted earlier, section 403.1042 expressly states, with a specified exception, that the committee "serves in an advisory capacity only." Id. § 403.1042(a) (Vernon Supp. 2007). Thus, but for the specified exception, it is clear the Legislature intended the committee to serve in only an advisory capacity. We must therefore examine the power provided by the exception to determine whether it constitutes "authority" under the second element of section 572.002(10)(A).

The exception involves the adoption of rules. The Comptroller is authorized to adopt rules related to the Comptroller's duties with respect to the Trust Account. See TEX. GOV'T CODE ANN. § 403.1041(h) (Vernon 2005). As it is primarily advisory in nature, the committee has no independent authority to adopt rules. The committee has power only to approve or disapprove the Comptroller's proposed rules that relate to the Trust Account. And any proposed rule of the Comptroller is itself confined to the Comptroller's limited authority over the Trust Account.

We find no judicial or attorney general opinion that provides direct precedent helpful to your inquiry. The Commission, however, has issued an opinion that offers us some guidance. See Op. Tex. Ethics Comm'n No. 369 (1997). The Commission, in Ethics Advisory Opinion 369, considered the nature of the Agriculture Resources Protection Authority ("ARPA"). The ARPA served as a "'coordinating body' for six state agencies' policies and programs regulating pesticides." Relevant here, the ARPA had authority to "adopt rules relating to its duties." In the opinion, the Commission noted that the Texas Department of Agriculture, which provided administrative support for the ARPA, argued that the ARPA acted in only an advisory capacity. The Commission agreed stating that "[a]lthough the ARPA has rule-making authority, it may adopt rules only relating to its duties, all of which are advisory." Under Ethics Advisory Opinion 369, an entity with actual power to adopt rules does not exercise authority under section 572.002(10) so long as the rules are statutorily limited to an advisory role.

The committee's power with respect to rules is no greater than the power of the entity considered by Ethics Advisory Opinion 369. The committee's power to approve or withhold approval of a proposed rule of the Comptroller provides the committee some ability to influence the rules adopted regarding the Trust Account. Yet, its power to influence rules does not equate to an affirmative grant of power to adopt rules. And any power of the committee to approve or withhold approval of a Comptroller rule is nonetheless confined by the committee's limited advisory role. We believe the committee's primary role as set out in the statute is to advise the Comptroller, and that its power to influence a Comptroller-proposed rule is de minimus when compared to its primary function of advising the Comptroller. See generally Tex. Att'y Gen. Op. No. JM-141 (1984) (examining Texas Sesquicentennial Commission's executive power as compared to its advisory and ceremonial duties and determining the executive power was, comparatively, de minimus). Accordingly, we believe the committee's role in influencing rules is merely an extension of its advisory power vis-a-vis the Trust Account. We therefore conclude that the committee acts in an advisory capacity only. Absent authority, the committee does not fall within the definition of a state agency under section 572.002(10).

IV. Conclusion

Because the committee is not a state agency under section 572.002(10), a member of the committee is not an officer of a state agency who is appointed for a term of office specified by the Texas Constitution or a statute of this state. Therefore, a member of the committee is not a state officer under chapter 572 and not subject to section 572.021's financial statement requirement.

SUMMARY

Chapter 572, Texas Government Code, relating to the filing of financial statements, is not applicable to the board members of the Tobacco Settlement Permanent Trust Account Investment Advisory Committee.

KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Charlotte M. Harper
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Honorable Wayne Smith, Chair, Committee on County Affairs, to Honorable Greg Abbott, Attorney General of Texas, at 1 (Sept. 13, 2007) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] "Agreement Regarding Disposition of Settlement Proceeds," in State of Tex. v. Am. Tobacco Co., No. 5-96CV-91, (E.D. Tex. July 24, 1998) [hereinafter Agreement].

[3] "The $2.275 billion accrued to Texas because of a 'most favored nation' provision in the tobacco settlement, which awarded Texas with increased payments comparable to Minnesota's subsequent settlement on somewhat more favorable terms." HOUSE RESEARCH ORG., BILL ANALYSIS, Tex. H.B. 1161, 76th Leg., R.S. (1999).

[4] The settlement agreement defines the "Political Subdivisions" to mean "all hospital districts, other local political subdivisions owning and maintaining public hospitals, and counties of the State of Texas responsible for providing indigent health care to the general public." Agreement, supra note 2, ¶ 3(e).

[5] The representatives of the political subdivisions that are designated to appoint members to the committee include the: political subdivisions that, in the preceding year, received certain large distributions from the Account, the County Judges and Commissioners Association of Texas, the North and East Texas County Judges and Commissioners Association, the South Texas County Judges and Commissioners Association, the West Texas County Judges and Commissioners Association. See TEX. GOV'T CODE ANN. § 403.1042(b)(2)-(8) (Vernon Supp. 2007).

[6] See Texas Ethics Commission Request For Determination of Filing Status (Oct. 19, 1999) (attached to Request Letter, supra note 1) (on file with the Opinion Committee).

[7] See Letter to Martin A. Hubert, Deputy Comptroller, Texas Comptroller of Public Accounts, from Natalia Luna Ashley, General Counsel, Texas Ethics Commission (May 2, 2007) (attached to Request Letter, supra note 1) (on file with the Opinion Committee).

[8] A financial statement is also required of a "partisan or independent candidate for an office as an elected officer" and a "state party chairman." TEX. GOV'T CODE ANN. § 572.021 (Vernon Supp. 2007). Neither of these is of concern here.