Can the Texas Commission for the Blind sign federal vending-facility contracts that put state money at risk?

Plain-English summary

Senator Mike Moncrief, who chaired the Senate Committee on Health and Human Services, asked the Attorney General about a program run by the Texas Commission for the Blind. Under the federal Randolph-Sheppard Act, the Commission contracts with the federal government to operate vending facilities (cafeterias and similar facilities, including ones on military bases) on federal property, and then licenses blind Texas citizens to operate them. The contracts can be large, multi-million-dollar service agreements, and because the state, not the private operator, is the party obligated to the federal government, the senator asked whether that financial exposure violated article III, section 50 of the Texas Constitution (which forbids the state from lending its credit to aid a private interest) or any other law.

The Attorney General did not decide whether any particular contract actually "lends" the state's credit, and pointedly declined to judge whether the financial assurances the Commission had in place (for example, a $500,000 letter of credit on one contract) were adequate, calling that a fact question outside what an attorney general opinion can resolve. Instead the opinion answered the legal question: even assuming a given arrangement does lend the state's credit, article III, section 50 permits a loan of state credit when it serves a public purpose and the transaction is sufficiently controlled to ensure that purpose is achieved. The Legislature, going back to a 1947 statute and its 1965 successor, had declared the purpose of letting blind persons earn a living by operating vending stands on public property. So the opinion concluded that the loan of credit, if any, had been found to accomplish a public purpose, and it presumed the Commission had adequate controls in place. On those assumptions, the arrangement does not violate section 50.

Currency note

This opinion was issued in 2002. Subsequent statutory amendments, court decisions, or later Attorney General 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 Texas Commission for the Blind has since been consolidated into other state agencies, and the Human Resources Code provisions cited here have been amended.

What the opinion meant for those who asked

Senator Moncrief and the Health and Human Services Committee (what the opinion held for them): The opinion answered the legal question (the Randolph-Sheppard arrangement does not violate article III, section 50 if it serves a public purpose and is adequately controlled) but expressly refused to decide the factual question the senator was concerned about, whether the financial assurances actually protecting the state were adequate.

The Texas Commission for the Blind (what the opinion held for it): The opinion treated the Commission as statutorily authorized to enter these federal contracts and license blind vendors, and held that any lending of state credit involved had a legislatively recognized public purpose, while presuming (not finding) that the Commission's controls were adequate.

Blind vendors operating federal vending facilities (what the opinion held for them): The opinion identified the program licensing them as serving the public purpose of providing blind citizens remunerative employment and economic opportunity, the purpose the Legislature declared when it authorized vending operations on public property.

Common questions

What is the Randolph-Sheppard program?
A federal program, enacted in 1936 and amended in 1974, that gives blind persons priority to operate vending facilities on federal property. A designated state agency (in Texas, the Commission for the Blind) bids for and holds the contracts and licenses blind vendors to run the facilities.

Why might these contracts raise a state constitutional issue?
Because the state agency, not the private blind vendor, is the party legally obligated to the federal government. Article III, section 50 of the Texas Constitution bars the state from lending its credit to aid a private interest, so a contract that exposes the state to liability for a private operator's performance could implicate that ban.

So did the Attorney General say the contracts are unconstitutional?
No. The opinion concluded that, to the extent the arrangement lends state credit at all, it serves a public purpose the Legislature has recognized (economic opportunity for blind Texans), and that, assuming adequate controls, it does not violate section 50.

Did the opinion approve the specific financial assurances the Commission used?
No. The opinion said whether a particular financial assurance is adequate is a question of fact that cannot be resolved in the attorney general opinion process.

Background and statutory framework

Article III, section 50 of the Texas Constitution, along with several analogous provisions, forbids the state to lend its credit solely to aid a private interest. Tex. Const. art. III, § 50; see also id. art. III, §§ 51, 52; id. art. VIII, § 3; id. art. XI, § 3. The opinion noted prior authority that a prohibited "lending of credit" requires the government to assume "some kind of financial liability," and quoted a constitutional treatise describing section 50 as barring the state from aiding anyone by lending money, providing goods or services on credit, or guaranteeing payment to a third party who does so. 1 George D. Braden et al., The Constitution of the State of Texas: An Annotated and Comparative Analysis 225 (1977). But the same line of opinions holds that such a loan of credit is permitted when it serves a public purpose and the transaction is sufficiently controlled to ensure that purpose is accomplished. Tex. Att'y Gen. Op. No. JC-0353 (2001) at 2.

The federal Randolph-Sheppard Act, enacted in 1936, gives blind persons priority to operate vending facilities on federal property. 20 U.S.C. § 107(a) (1994); see NISH v. Cohen, 247 F.3d 197, 200 (4th Cir. 2001). A 1974 amendment established a cooperative federal-state program under which a state agency, designated by the U.S. Secretary of Education, licenses blind citizens to operate the facilities, bids to operate federal vending facilities (including military dining facilities), and contracts to run them if selected. 20 U.S.C. § 107a(a)(5) (1994); 34 C.F.R. § 395.7 (2001); see NISH v. Cohen, 191 F.R.D. 94, 96 (E.D. Va. 2000). Texas designated the Commission for the Blind as that state licensing agency. See Automated Communications Sys., Inc. v. United States, 49 Fed. Cl. 570, 572 n.1 (Fed. Cl. 2001); Tex. State Comm'n for the Blind v. United States, 796 F.2d 400, 402 (Fed. Cir. 1986), cert. denied, 479 U.S. 1030 (1987).

State law authorizes the Commission to administer the Business Enterprises Program under the Act, Tex. Hum. Res. Code Ann. § 94.016(a) (Vernon Supp. 2002), gives it primary responsibility for services to visually handicapped persons, id. § 91.021(a) (Vernon 2001), and directs it to enter agreements with the federal government to implement federal legislation providing services to the visually handicapped, id. § 91.021(d). The opinion traced this authority back to a 1940 opinion (O-2070) reading an earlier statute. On the public-purpose side, the opinion pointed to the Legislature's own declarations: a 1947 act, and its 1965 successor, expressly aimed at "providing blind persons with remunerative employment" and "enlarging the economic opportunities of the blind." Act of May 10, 1965, 59th Leg., R.S., ch. 227, 1965 Tex. Gen. Laws 445; Act of Mar. 12, 1947, 50th Leg., R.S., ch. 47, 1947 Tex. Gen. Laws 62. Finding nothing in the legislative history about the adequacy of controls on the arrangements, the opinion presumed the Commission had adequate controls in place. See 40 Tex. Admin. Code § 167.1 (2001).

Citations

Constitutional, statutory, and regulatory provisions:

• Tex. Const. art. III, § 50
• Tex. Const. art. III, §§ 51, 52
• Tex. Const. art. VIII, § 3
• Tex. Const. art. XI, § 3
• 20 U.S.C. ch. 6A (1994 & Supp. V 1999)
• 20 U.S.C. § 107 (1994)
• 20 U.S.C. § 107(a) (1994)
• 20 U.S.C. § 107a(a)(5) (1994)
• 34 C.F.R. § 361.81 (2001)
• 34 C.F.R. § 395.7 (2001)
• Tex. Hum. Res. Code Ann. § 94.016(a) (Vernon Supp. 2002)
• Tex. Hum. Res. Code Ann. § 91.021(a) (Vernon 2001)
• Tex. Hum. Res. Code Ann. § 91.002(4) (Vernon 2001)
• Tex. Hum. Res. Code Ann. § 91.021(d) (Vernon 2001)
• Tex. Hum. Res. Code Ann. § 91.023 (Vernon 2001)
• 40 Tex. Admin. Code § 167.1 (2001)
• Act of May 10, 1965, 59th Leg., R.S., ch. 227, 1965 Tex. Gen. Laws 445
• Act of Mar. 12, 1947, 50th Leg., R.S., ch. 47, 1947 Tex. Gen. Laws 62

Cases:

• NISH v. Cohen, 247 F.3d 197 (4th Cir. 2001)
• NISH v. Cohen, 191 F.R.D. 94 (E.D. Va. 2000)
• Tex. State Comm'n for the Blind v. United States, 796 F.2d 400 (Fed. Cir. 1986), cert. denied, 479 U.S. 1030 (1987)
• Automated Communications Sys., Inc. v. United States, 49 Fed. Cl. 570 (Fed. Cl. 2001)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. No. O-2070 (1940)
• Tex. Att'y Gen. Op. No. O-5132 (1943)
• Tex. Att'y Gen. Op. No. H-120 (1973)
• Tex. Att'y Gen. LA-9 (1973)
• Tex. Att'y Gen. LA-119 (1977)
• Tex. Att'y Gen. Op. No. JM-942 (1988)
• Tex. Att'y Gen. Op. No. DM-382 (1996)
• Tex. Att'y Gen. Op. No. JC-0020 (1999)
• Tex. Att'y Gen. Op. No. JC-0027 (1999)
• Tex. Att'y Gen. Op. No. JC-0032 (1999)
• Tex. Att'y Gen. Op. No. JC-0353 (2001)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0489
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2002/jc0489.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor errors may remain, and several mid-opinion passages marked [. . .] were not recoverable from the source extraction; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL - STATE OF TEXAS
JOHN CORNYN

April 15, 2002

The Honorable Mike Moncrief
Chair, Committee on Health and Human Services
Texas State Senate
P.O. Box 12068
Austin, Texas 78711

Opinion No. JC-0489

Re: Whether article III, section 50 of the Texas Constitution prohibits the Texas Commission for the Blind from contracting with the United States government to operate various vending facilities on federal property under the Federal Randolph-Sheppard Act, 20 U.S.C. ch. 6A, if the contract "create[s] financial exposure to the State for a multi-million dollar service agreement with . . . Federal Departments" (RQ-0455-JC)

Dear Senator Moncrief:

Article III, section 50 of the Texas Constitution and other similar provisions forbid a state agency to lend the state's credit solely to aid a private interest. TEX. CONST. art. III, § 50; cf. id. art. III, §§ 51, 52; id. art. VIII, § 3. Under the Federal Randolph-Sheppard Act, 20 U.S.C. chapter 6A (1994 & Supp. V 1999), the Texas Commission for the Blind (the "Commission") contracts with the federal government to operate vending facilities on federal property, which the Commission then licenses blind citizens to operate. See NISH v. Cohen, 247 F.3d 197, 200-01 (4th Cir. 2001); Tex. Att'y Gen. Op. No. O-2070 (1940) at 3. Referring to these vending contracts, you ask whether the Commission violates article III, section 50 of the Texas Constitution, "any other section of the Constitution, or any other statute or law" by entering "a multi-million dollar service agreement with [a] Federal Department for services to be provided to that Department, without adequate financial assurances from the third[] party to protect the financial obligation of the State."[1] To the extent that the arrangement constitutes a lending of credit to a blind licensee for the purpose of article III, section 50 or other constitutional limitations on the use of public funds, we conclude that it has been found to accomplish a public purpose. We assume that the arrangement is adequately controlled to ensure that the public purpose is accomplished.

You indicate that the Commission, in accordance with the Federal Randolph-Sheppard Act, 20 U.S.C. § 107 (1994), "proposes to enter . . . multi-million dollar service agreements for cafeteria services." Request Letter, supra note 1, at 1. Once the Commission enters a contract, you continue, it "contracts with a private individual to perform the services under the contract." Id. Profits earned for providing the cafeteria services "go to the private third[] party with a set-aside fee to the State." Id. You believe that the Commission's arrangement with the federal government may violate article III, section 50 of the Texas Constitution, some other constitutional provision, or some statute because the state, and not the private third party, is obligated to the federal government to provide cafeteria services. See id.

With respect to vending facilities, including cafeterias, on military facilities, we have been told that the Commission has "secured financial assurance . . . proportionate to the potential liability under the contract between the State and the Department of Defense."[2] For example, although we have been told it is no longer in effect,[3] the Commission had an "indemnity agreement from a large reputable food service company assisting [the Commission] in managing" one contract. Nolan Brief, supra note 2, at 2. And the Commission currently "has a $500,000 letter of credit to provide . . . financial assurance against the liability" on another contract. Id. We do not in this opinion consider whether a particular financial assurance is adequate. See, e.g., Tex. Att'y Gen. Op. Nos. JC-0032 (1999) at 4 (stating that question of fact is beyond purview of this office), JC-0027 (1999) at 3 (stating the questions of fact cannot be addressed in attorney general opinion), JC-0020 (1999) at 2 (stating that investigation and resolution of fact questions cannot be done in opinion process).

Because you appear primarily concerned about the lending of credit issue that corresponds to article III, section 50, we limit our review of constitutional and statutory provisions to those relating to that issue. But before discussing the constitutional requirements, we will briefly summarize relevant provisions of the Federal Randolph-Sheppard Act (the "Act"), 20 U.S.C. § 107 (1994), and state statutory provisions, found in the Texas Human Resources Code, authorizing the Commission to perform certain functions under the Act.

I. The various laws

A. The Randolph-Sheppard Act, 20 U.S.C. § 107

The Federal Act was enacted in 1936 to provide blind persons with remunerative employment and with expanded economic opportunities by giving them priority to operate vending facilities on federal property. 20 U.S.C. § 107(a) (1994); NISH v. Cohen, 247 F.3d 197, 198, 200 (4th Cir. 2001); see also Tex. State Comm'n for the Blind v. United States, 796 F.2d 400, 402 (Fed. Cir. 1986), cert. denied, 479 U.S. 1030 (1987). Congress amended the Act in 1974, "effectively establishing a cooperative federal-state program that gives contracting priority to blind persons operating vending facilities on federal property." NISH, 247 F.3d at 200. The term "vending

[. . .]

United States Secretary of Education, permits a blind vendor to apply to operate a vending facility on federal property. See Randolph-Sheppard Vendors of Am., 795 F.2d at 93; see also 34 C.F.R. § 361.81 (2001) (defining "Business Enterprise Program"). The Secretary designates a state agency in each state to license blind United States citizens to operate "vending facilities on Federal and other property" in the state. 20 U.S.C. § 107a(a)(5) (1994); Randolph-Sheppard Vendors of Am., 795 F.2d at 93. The state licensing agency, among other things, submits bids to the federal government to operate various vending facilities on federal property, including "military dining facilities," and, if selected, contracts to operate the facilities. NISH v. Cohen, 191 F.R.D. 94, 96 (E.D. Va. 2000). The state licensing agency then licenses a blind vendor to manage each facility. 20 U.S.C. § 107a(a)(5) (1994); 34 C.F.R. § 395.7 (2001); Randolph-Sheppard Vendors of Am., 795 F.2d at 93.

B. State statutes related to the Federal Act

State law specifically authorizes the Commission to "administer the Business Enterprises Program in accordance with the provisions of the Randolph-Sheppard Act." TEX. HUM. RES. CODE ANN. § 94.016(a) (Vernon Supp. 2002); see also Hearings on Tex. H.B. 1400 Before the House Comm. on Human Servs., 76th Leg., R.S. (Mar. 16, 1999) (testimony of Terry Murphy, Executive Director, Texas Commission for the Blind) (stating that Act sets up Business Enterprise Program, and Commission is designated to administer that program in Texas). The Commission is the state-licensing agency in Texas for the Business Enterprises Program under the Act, as it has been since 1936. See Automated Communications Sys., Inc. v. United States, 49 Fed. Cl. 570, 572 n.1 (Fed. Cl. 2001); see also Southfork Sys., Inc., 141 F.3d at 1127 (indicating that federal contracting officer negotiated with Commission to operate enlisted-personnel

[. . .]

No. O-5132 (1943) at 2-3 (citing Attorney General Opinion O-2070 with approval). The Commission's authority, according to the opinion, springs from its statutory authority to "aid the blind . . . in finding employment"; to "furnish materials, tools and books for the use as a means in rehabilitating such persons"; and to "take such measures, in cooperation with other authorities . . . for the vocational guidance of adults having seriously defective sight." Tex. Att'y Gen. Op. No. O-2070 (1940) at 3-4 (quoting TEX. REV. CIV. STAT. ANN. art. 3207a, § 2, repealed by Act of May 27, 1979, 66th Leg., R.S., ch. 842, art. I, § 2(1), 1979 Tex. Gen. Laws 2333, 2429).

Consistently with Attorney General Opinion O-2070, we conclude that the Commission is authorized by law to contract with the federal government to operate a vending facility on federal property, by the terms of which the Commission licenses a blind vendor to operate the vending facility. See Tex. Att'y Gen. Op. No. O-2070 (1940) at 2-3. The substance of the statute on which the 1940 opinion is based has been codified as various sections of chapter 91, subchapter C of the Human Resources Code. Section 91.021(a) gives the Commission "primary responsibility" for providing "all services to visually handicapped persons," with two exceptions not relevant here. TEX. HUM. RES. CODE ANN. § 91.021(a) (Vernon 2001); see id. § 91.002(4) (defining "visual handicap"). Section 91.023 permits the Commission to "furnish materials, tools, books, and other necessary apparatus and assistance for use in rehabilitating blind and visually handicapped persons." Id. § 91.023. And section 91.021(d) requires the Commission to "enter into agreements with the federal government to implement federal legislation authorizing the provision of services to the visually handicapped." Id. § 91.021(d).

[. . .]

TEX. CONST. art. III, § 50; see also Tex. Att'y Gen. Op. No. O-2070 (1940) at 5. You also ask about other constitutional provisions, by which we understand you to ask about other provisions that analogously prohibit the use of public funds solely for a private purpose. See, e.g., TEX. CONST. art. III, §§ 51, 52 (prohibiting legislature to "make any grant or authorize the making of any grant of public moneys to any individual, association . . . , . . . or other corporations whatsoever . . . ." and prohibiting a county, city, town, or other political corporation or subdivision to "lend its credit or to grant public money" to aid individual, association, or corporation); id. art. VIII, § 3 (requiring that taxes be levied and collected "for public purposes only"); id. art. XI, § 3 (prohibiting county, city, or other municipal corporation from loaning its credit). This office previously has suggested that a prohibited "lending of credit requires the" government to assume "some kind of financial liability." Tex. Att'y Gen. Op. No. DM-382 (1996) at 10. But cf. 1 GEORGE D. BRADEN ET AL., THE CONSTITUTION OF THE STATE OF TEXAS: AN ANNOTATED AND COMPARATIVE ANALYSIS 225 (1977) ("Section 50 . . . is an involved and somewhat imprecise way of saying that the state may not aid anybody by lending him money; by providing him land, goods, or services on credit; or by guaranteeing payment to a third party who aids anybody by lending him money or providing him land, goods, or services on credit.").

Like other constitutional prohibitions on the use of public funds to benefit a private individual or entity, article III, section 50 permits a loan of state credit only if the loan serves a public purpose and if the transaction is sufficiently controlled to ensure that the public purpose is accomplished. See Tex. Att'y Gen. Op. No. JC-0353 (2001) at 2; see also Tex. Att'y Gen. Op. Nos. JM-942 (1988) at 6-7; H-120 (1973) at 3; Tex. Att'y Gen. LA-119 (1977) at 2, LA-9 (1973) at 2. Accordingly, this office has stated that the legislature constitutionally could establish a statutory program to guarantee student loans if the legislature finds that the program will accomplish a public purpose and includes "sufficient controls to assure that the program would actually serve that public purpose." Tex. Att'y Gen. LA-119 (1977) at 2. Without such controls, the state cannot ensure that it will receive "adequate consideration or benefit for the services provided to private parties," such as the students whose loans are guaranteed. Id.

II. Analysis

Without determining whether any particular agreement between the Commission and the federal government to operate a vending facility lends the state's credit for the purposes of article III, section 50 of the Texas Constitution by requiring the state to assume liability for performing the contract, we conclude that, to the extent that it does, the legislature has determined that it accomplishes a public purpose. Chapter 94 of the Human Resources Code, requiring that only a Commission-licensed person may operate a vending facility on state property, was adopted in 1965. See Act of May 10, 1965, 59th Leg., R.S., ch. 227, 1965 Tex. Gen. Laws 445, 445-50. Its forerunner, adopted in 1947, see id. § 13, 1965 Tex. Gen. Laws 445, 450 (repealing 1947 act); Act of Mar. 12, 1947, 50th Leg., R.S., ch. 47, 1947 Tex. Gen. Laws 62, 62-63, declared the purpose of enabling blind persons to make a living:

That for the purpose of providing blind persons with remunerative employment, enlarging the economic opportunities of the blind, and for stimulating the blind to greater efforts in striving to make themselves self-supporting, blind persons under the provisions of this Act shall be authorized to operate vending stands on any State property, or State[-]controlled property where, in the discretion of the head of the department or agency in charge of its maintenance, vending stands may be properly and satisfactorily operated.

Id. § 1, 1947 Tex. Gen. Laws 62, 62; cf. id. § 7, 1947 Tex. Gen. Laws 62, 63 ("The fact that a large number of State-owned or leased property is not being made available for blind persons to operate vending stands in order to earn a living in this State creates an emergency . . . ."). The state's assumption of liability under the contract as required by the Randolph-Sheppard Act helps implement the public purpose of providing employment for blind citizens. Furthermore, although we find nothing in the legislative history regarding the adequacy of controls placed on the arrangements with blind vendors, we presume that the Commission has adequate controls in place to ensure that the program accomplishes its public purpose. See 40 TEX. ADMIN. CODE § 167.1 (2001) (authorizing business enterprises program to provide training and management supervision assistance to an eligible blind vendor).

SUMMARY

To the extent that the Texas Commission for the Blind lends the state's credit in making arrangements under the Randolph-Sheppard Act, 20 U.S.C. ch. 6A (1994 & Supp. V 1999), with the federal government to operate vending facilities on federal property or in licensing blind vendors to operate the vending facilities, the loan of credit has been found to accomplish the public purpose of providing economic opportunity to blind persons. Assuming that such an arrangement is adequately controlled to ensure that the public purpose is accomplished, it does not violate article III, section 50 of the Texas Constitution.

                              JOHN CORNYN
                              Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Kymberly K. Oltrogge
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Mike Moncrief, Chairman, Senate Committee on Health & Human Services, to Honorable John Cornyn, Texas Attorney General (Oct. 16, 2001) (on file with Opinion Committee) [hereinafter Request Letter].

[2] Letter from Peter A. Nolan, Winstead Sechrest & Minick, to Susan D. Gusky, Chair, Opinion Committee, Office of the Attorney General, at 2 (Dec. 10, 2001) (on file with Opinion Committee) [hereinafter Nolan Brief].

[3] Telephone Conversation with Peter A. Nolan, Winstead Sechrest & Minick (Jan. 29, 2002).