Could the Texas comptroller borrow constitutionally dedicated highway money to cover a temporary General Revenue Fund deficit?

Texas AG Opinion JM-673: Borrowing Dedicated Funds

Plain-English summary

Texas Comptroller Bob Bullock asked whether he could use interfund borrowing against constitutionally created and dedicated funds to cover a General Revenue Fund deficit.

The Attorney General answered no. Article 4344c allowed transfers of surplus cash between treasury funds to manage General Revenue cash flow, but expressly excluded constitutionally dedicated revenue.

The Texas Constitution imposed the same result independently. Article VIII, section 7, denied the Legislature power to borrow or divert constitutional special funds from their designated purposes. A statute attempting to authorize that borrowing would itself violate the Constitution.

The opinion distinguished constitutionally dedicated funds from special funds created only by statute. Texas Supreme Court decisions had limited article VIII, section 7, to constitutional funds, leaving the Legislature more authority over statutory funds.

Currency note

This opinion was issued in 1987. 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.

Common questions

What problem was interfund borrowing meant to address?

Article 4344c permitted transfers of surplus cash to manage General Revenue Fund cash flow and avoid a temporary cash deficiency.

Did the statute cover constitutionally dedicated revenue?

No. Its text expressly excluded constitutionally dedicated revenues from eligible transfers.

Would borrowing have been allowed if the statute had omitted that exclusion?

No. The opinion concluded that article VIII, section 7, independently prohibited borrowing or diverting constitutional special funds.

Did the constitutional prohibition apply to every statutory special fund?

No. The Texas Supreme Court decisions cited by the opinion treated article VIII, section 7, as applying to constitutional funds rather than funds created only by statute.

What highway money prompted the question?

The Comptroller described Highway Fund No. 006 as containing federal money, state constitutional money, and state statutory money. The question specifically concerned borrowing against its constitutionally dedicated component.

Background and statutory framework

Article 4344c authorized the Comptroller, with the State Treasurer's consent, to transfer surplus cash between treasury funds. The Comptroller had to return the cash as soon as practicable, preserve fund equity, and allocate interest as though no transfer had occurred.

The statute's exclusion for constitutionally dedicated revenues tracked Texas Constitution article VIII, section 7. That provision barred the Legislature from borrowing, withholding, or diverting a special fund from its purpose.

The opinion relied on Texas Supreme Court decisions separating constitutional funds, which received article VIII protection, from statutory funds, which did not receive that specific constitutional protection merely because a statute called them special.

Citations and references

Statutes:

• Article 4344c, V.T.C.S. (surplus-cash transfers between treasury funds)
• Texas Constitution article VIII, section 7
• Federal Highway Act, 23 U.S.C. section 101 et seq. (1982)

Cases:

• Brazos River Conservation and Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936)
• Gulf Insurance Co. v. James, 185 S.W.2d 966 (Tex. 1945)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0673
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1987/jm0673.pdf

Original opinion text

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

April 9, 1987

Honorable Bob Bullock
Comptroller of Public Accounts
L.B.J. State Office Building
Austin, Texas 78774

Opinion No. JM-673

Re: Whether the comptroller may engage in inter-fund borrowing against constitutionally created and dedicated funds to cover deficits in the General Fund

Dear Mr. Bullock:

You inform us that, pursuant to article 4344c, V.T.C.S., which authorizes the comptroller of public accounts and the state treasurer to engage in inter-fund borrowing from certain state funds, money has been borrowed from the fund designated Highway Fund No. 006. This highway fund is comprised of federal, state constitutional, and state statutory money. See Attorney General Opinion Nos. JM-323, JM-321 (1985). You inform us that the only money heretofore borrowed has been state statutory money and the money received from the federal government that is intended to reimburse the state pursuant to the Federal Highway Act, 23 U.S.C. § 101 et seq. (1982). The comptroller is required by appropriations act rider to credit such federal money to the specific fund from which the original expenditure was made. Acts 1985, 69th Leg., 3rd C.S., ch. 13, art. V, § 20, at 594-95. You ask the following question: "May I inter-fund borrow against constitutionally created and dedicated funds to cover deficits in the General Fund?" The answer is "no."

Article 4344c, V.T.C.S., permits the transfer of surplus cash between funds in the state treasury in certain instances. Section 1 of article 4344c provides the following:

Section 1. The comptroller of public accounts, with the consent of the State Treasurer, may transfer surplus cash, excluding constitutionally dedicated revenues, between funds in the State Treasury. Those transfers are authorized to allow effective management of the cash flow of the General Revenue Fund and to avoid temporary cash deficiency in the General Revenue Fund. The comptroller shall return the surplus cash to the fund from which it was transferred as soon as practicable. The comptroller shall preserve the fund equity and the State Treasurer shall allocate the depository interest as if the transfers had not been made. (Emphasis added).

By the clear terms of the statute, you may not engage in inter-fund borrowing of constitutionally dedicated revenues.

We note that, even in the absence of the above underscored language in section 1 of article 4344c, V.T.C.S., constitutionally dedicated revenues deposited in the state treasury could not be borrowed. The Texas Constitution imposes specific limitations on the scope of the transfers that could be authorized by any statute. Article VIII, section 7, of the Texas Constitution sets forth the following:

The legislature shall not have power to borrow, or in any manner divert from its purpose, any special fund that may, or ought to, come into the Treasury; and shall make it penal for any person or persons to borrow, withhold or in any manner to divert from its purpose any special fund, or any part thereof.

The Texas Supreme Court has concluded that article VIII, section 7, of the Texas Constitution applies only to constitutional funds, not to statutory funds. Brazos River Conservation and Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936). Specifically, the court has held that article VIII, section 7, does not apply to special funds created by statute. Gulf Insurance Co. v. James, 185 S.W.2d 966 (Tex. 1945). See also Attorney General Opinion Nos. JM-566, JM-539 (1986); JM-323, JM-321 (1985); V-107 (1947); O-2302 (1940). Any statute that purported to authorize the borrowing of constitutionally dedicated revenues would violate article VIII, section 7, of the Texas Constitution.

SUMMARY

By the clear terms of article 4344c, V.T.C.S., the comptroller of public accounts and the state treasurer may not engage in inter-fund borrowing of constitutionally dedicated revenues. Any statute purporting to permit such a practice would violate article VIII, section 7, of the Texas Constitution.

JIM MATTOX
Attorney General of Texas

JACK HIGHTOWER
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General