When the Texas legislature appropriates the proceeds of a state land sale to an agency, does the agency also get to spend the interest that money earns?
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This page answers the general question as of 1986. Ezel answers yours: what it means for your facts, under current Texas law, with citations.
Texas AG Opinion JM-511: Interest on State Land-Sale Proceeds
Plain-English summary
The executive director of the Texas School for the Blind asked whether the school could spend interest earned on the proceeds of a sale or lease of a tract of land and buildings in Austin. Chapter 362 of the Sixty-ninth Legislature had authorized the board to sell or lease the property and appropriated the proceeds to the school for constructing a facility for severely handicapped students. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
JM-511 concluded the legislature appropriated the proceeds themselves but not the interest earned on them. The reasoning ran through the state's fund-accounting rules. The school is a state agency under the State Funds Reform Act, and money a state agency receives must be deposited in the treasury. The proceeds here are not a trust fund, because they are not administered by a trustee, are collected for general government purposes, and are not set aside for a specific limited group. So under section 3.042(a) of the Treasury Act, interest earned on the deposited proceeds must be credited to the general revenue fund. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Money in the general revenue fund cannot be drawn without a legislative appropriation (article VIII, section 6 of the Texas Constitution). The AG then read chapter 362's appropriation of "the proceeds from the sale or the rental income from the lease" according to its plain and ordinary meaning, and concluded it did not include interest income. It noted that the legislature used the same appropriation language in several other recent land-sale statutes, reinforcing that "proceeds" meant the sale money, not interest on it. So the school could not spend the interest without a separate appropriation. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Currency note
This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. The Treasury Act and State Funds Reform Act provisions it cites (articles 4393-1 and related, V.T.C.S.) have since been recodified into the Texas Government Code. Treat this page as historical context, not current legal advice, and verify current Government Code provisions before relying on any rule mentioned here.
Common questions
If the legislature gives an agency the proceeds of a land sale, does the agency automatically get the interest too?
No. JM-511 concluded that appropriating "the proceeds" of a sale or lease does not, by itself, appropriate the interest those proceeds earn. The interest is treated separately and needs its own appropriation. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Where does the interest go instead?
To the general revenue fund. Because the school is a state agency and the proceeds are not a trust fund, section 3.042(a) of the Treasury Act requires interest on the deposited money to be credited to general revenue. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
What makes something a "trust fund" that would keep its own interest?
The opinion, quoting Attorney General Opinion JM-300, listed three characteristics: the assets are administered by a trustee, they are not granted to the state in its sovereign capacity or collected for general government operations, and they are spent and invested for specific, limited purposes for the benefit of a specific group. The land-sale proceeds did not meet those criteria. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Why can't the agency just spend money sitting in the treasury?
Because article VIII, section 6 of the Texas Constitution says money may not be drawn from the treasury unless it has been appropriated by the legislature. Interest that lands in general revenue is subject to that rule, so it takes a legislative appropriation to spend it. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Background and statutory framework
The opinion works through three layers. First, the State Funds Reform Act (then codified as part of the Treasury Act, article 4393-1, V.T.C.S.) requires that fees, charges, and other funds received by a state agency be deposited in the treasury, and section 4.002's broad definition of "state agency" covers the Texas School for the Blind. The AG cited Attorney General Opinions MW-590 (1982) and MW-454 (1982) on the meaning of "state agency" and the act's exceptions. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Second, on where interest goes, section 3.042(a) of the Treasury Act (formerly article 2543d, V.T.C.S.) directs that interest on time deposits be credited to constitutional funds pro rata and otherwise to the general revenue fund. A line of prior opinions had held that interest follows the fund for constitutional funds and trust funds, but the AG concluded these proceeds were not a trust fund, applying the JM-300 characteristics and citing Lawson v. Baker. Third, on whether chapter 362 itself appropriated the interest, the AG applied the plain-meaning rule of statutory construction (Lawson v. Baker; National Life Co. v. Stegall; Board of Insurance Commissioners v. Duncan), consulted Black's Law Dictionary's definition of "proceeds," and compared the identical appropriation language in chapters 425, 561, and 687 of recent legislatures, concluding "proceeds" did not include interest income. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Citations and references
The opinion cited the following authorities. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Constitutional and statutory provisions:
- Tex. Const. art. VIII, § 6
- V.T.C.S. art. 4393-1 (Treasury Act / State Funds Reform Act), §§ 4.002, 4.004, 3.042(a) (§ 3.042(a) formerly art. 2543d, V.T.C.S.)
- Chapter 362, Sixty-ninth Legislature (uncodified); and chapters 425, 561, and 687 (comparison statutes)
Cases:
- Lawson v. Baker, 220 S.W. 260, 268 (Tex. Civ. App. - Austin 1920, writ ref'd)
- National Life Co. v. Stegall, 169 S.W.2d 155, 157 (Tex. Comm'n App. 1943, opinion adopted)
- Board of Insurance Commissioners v. Duncan, 174 S.W.2d 326, 328 (Tex. Civ. App. - Amarillo 1943, writ ref'd)
The opinion also cited Attorney General Opinions JM-323 (1985), JM-321 (1985), JM-306 (1985), JM-300 (1985), MW-590 (1982), MW-454 (1982), MW-193 (1980), MW-82 (1979), H-1277 (1978), H-1167 (1978), H-1040 (1977), M-468 (1969), and V-01 (1947).
Source
- Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0511
- Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1986/jm0511.pdf
Original opinion text
Best-effort transcription from a scanned PDF via OCR. Minor OCR errors may remain; the linked PDF is authoritative.
The Attorney General of Texas
July 7, 1986
JIM MATTOX
Attorney General
Mr. William H. Miller
Executive Director
Texas School for the Blind
1100 West 45th Street
Austin, Texas 78756
Opinion No. JM-511
Re: Whether the Texas School for the Blind may expend interest earned on proceeds received pursuant to chapter 362 of the Sixty-ninth Legislature
Dear Mr. Miller:
You ask whether the Texas School for the Blind may expend interest earned on the proceeds of a sale or lease which was authorized for a certain tract of land and buildings in the city of Austin by chapter 362, Sixty-ninth Legislature. We conclude that the legislature appropriated the proceeds of a sale or lease of the property in question to the Texas School for the Blind but that it did not appropriate interest earned on the proceeds to the school.
Sections 1 and 3 of chapter 362, Sixty-ninth Legislature, which is not codified, provide, in part, that
SECTION 1. SALE OR LEASE OF PROPERTY. The board of directors of the Texas School for the Blind, on behalf of the Texas School for the Blind, may sell all of the state's interest in the real property described in section 2 of this act for a consideration the board considers appropriate or may negotiate and enter into a lease of that real property on the terms and for rental that the board considers appropriate. ...
SECTION 3. DISPOSITION OF PROCEEDS. In addition to sums previously appropriated for this purpose, the proceeds from the sale or the rental income from the lease of real property authorized by section 1 of this act are appropriated to the Texas School for the Blind to be used for the construction of a facility for severely handicapped students.
The State Funds Reform Act formerly was codified as article 4393c, V.T.C.S., and now is chapter 4 of the Treasury Act, where it is codified as article 4393-1, V.T.C.S. It requires that funds be deposited in the State Treasury. Section 4.004 of that act provides, in part, that
(a) Fees, fines, penalties, taxes, charges, gifts, grants, donations, and other funds collected or received by a state agency under law shall be deposited in the treasury, credited to a special fund or funds, and subject to appropriation only for the purposes for which they are otherwise authorized to be expended or disbursed. ...
(b) Money that is required by this chapter or by another law to be deposited in the treasury shall be deposited to the credit of the General Revenue Fund unless the money is expressly required to be deposited to another fund, trust fund, or special account not in the General Revenue Fund. ...
In our opinion, the Texas School for the Blind is a state agency within the broad definition provided by section 4.002 of the State Funds Reform Act. It also is our opinion that the proceeds of a sale or lease authorized by chapter 362 are not within the exemptions specified in section 4.004. See Attorney General Opinions MW-590 (1982) (discussing meaning of "state agency" and exceptions to State Funds Reform Act); MW-454 (1982) (discussing exceptions to the act). Article 8, section 6, of the Texas Constitution provides that money may not be drawn from the treasury unless it has been appropriated by the legislature. See Attorney General Opinion V-01 (1947) (proceeds from sale of land deposited in treasury and subject to appropriation). The legislature specifically has appropriated the proceeds of the sale or lease for the construction of a facility by the Texas School for the Blind.
Section 3.042(a) of the Treasury Act, formerly article 2543d, V.T.C.S., provides that
(a) Interest received from time deposits of money in funds and accounts in the charge of the treasurer shall be allocated as follows: to each constitutional fund there shall be credited the pro rata portion of the interest received due the fund; the remainder of the interest received, with the exception of that portion required by other statutes to be credited on a pro rata basis to protested tax payments, shall be credited to the General Revenue Fund. The interest received shall be allocated on a monthly basis.
Since the enactment of article 2543d in 1969, numerous prior opinions of this office have determined that interest on constitutional funds must be credited to the constitutional fund and interest on trust funds must be credited to the trust fund. See Attorney General Opinions JM-323 (1985); JM-321 (1985); JM-306 (1985); JM-300 (1985); MW-193 (1980); MW-82 (1979); H-1167 (1978); H-1040 (1977); M-468 (1969). See also Lawson v. Baker, 220 S.W. 260 (Tex. Civ. App. - Austin 1920, writ ref'd). We conclude, however, that the proceeds in question do not constitute trust funds and belong in the treasury to the credit of the general revenue fund in compliance with the State Funds Reform Act. While no particular words are necessary to create a trust, this office stated in Attorney General Opinion JM-300 that
in order to be characterized as trust funds, the assets in question should reflect, among other things, (1) that they are administered by a trustee or trustees, (2) that the assets are neither granted to the state in its sovereign capacity nor collected for the general operation of state government, and (3) that they are to be spent and invested for specific, limited purposes and for the benefit of a specific group of individuals.
The legislature created no special fund for the deposit of the proceeds of a sale or lease authorized by chapter 362. It is our opinion that the proceeds of the sale or lease do not meet the characteristics of a trust fund and that interest earned on such proceeds is subject to the provisions of section 3.042(a) of the Treasury Act that require interest to be credited to the general revenue fund.
Interest that becomes a part of the general revenue fund is subject to legislative appropriation. Hence, the final issue is whether the legislature appropriated such interest by section 3 of chapter 362. We conclude that the legislature did not intend the specific appropriation of "the proceeds from the sale or the rental income from the lease of real property authorized by section 1 of this act" to include interest that may be earned on the proceeds.
Statutes are interpreted according to the popular meaning of the language employed, except where used in a technical sense or a contrary meaning is clearly apparent from the context. In other words, the intention of the legislature is determined by the plain and ordinary meaning of the language used. Lawson v. Baker, id., at 268. See also National Life Co. v. Stegall, 169 S.W.2d 155, 157 (Tex. Comm'n App. 1943, opinion adopted). Our courts have suggested that it may be proper and necessary to consult a dictionary to ascertain the meaning of words in statutes. See Board of Insurance Commissioners v. Duncan, 174 S.W.2d 326, 328 (Tex. Civ. App. - Amarillo 1943, writ ref'd); Attorney General Opinion H-1277 (1978). While the meaning of "proceeds" may depend on the context in which it is used, Black's Law Dictionary 1084 (5th ed. 1979) defines it as money or articles or other thing of value arising or obtained by the sale of property and the sum, amount, or value of property sold or converted into money or into other property.
The language of the appropriation in section 3 of chapter 362 is the same as the language used by the legislature in several other recent statutes which authorize the sale of state-owned land. Chapter 425 of the Sixty-ninth Legislature, 1985, provides
SECTION 4. DISPOSITION OF PROCEEDS. The proceeds from the sale of real property authorized by section 1 of this act are appropriated, for the fiscal biennium ending August 31, 1987, to the Texas Youth Commission for the purpose of constructing the Texas Youth Commission South Texas Regional Facility in Hidalgo County, Texas and/or for repairs or renovations at the Corsicana State Home in Navarro County.
Chapter 561 of the Sixty-eighth Legislature, 1983, provides
SECTION 3. DISPOSITION OF PROCEEDS. The proceeds from the sale of real property authorized by section 1 of this act are appropriated to the Department of Public Safety, and the department may use the proceeds to perform the duties and responsibilities of the department.
Chapter 687 of the Sixty-eighth Legislature, 1983, provides
SECTION 3. DISPOSITION OF PROCEEDS. The proceeds from a conveyance under this Act are appropriated to the Texas Employment Commission for use in acquiring other land or for the construction or improvement of the facilities of the Texas Employment Commission.
We conclude that the legislature intended its appropriation to the Texas School for the Blind in chapter 362 to appropriate the sum of money derived from the sale or lease of the described property but did not intend chapter 362 to also appropriate interest income that may be earned on that money.
SUMMARY
Chapter 362, Sixty-ninth Legislature, authorizes the sale or lease of certain state-owned land and appropriates the proceeds from the sale or lease to the Texas School for the Blind for certain construction. The legislature has not appropriated interest in the treasury that may be earned on the proceeds of the sale or lease.
Very truly yours,
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney General
MARY KELLER
Executive Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Nancy Sutton
Assistant Attorney General
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