Untitled Texas Attorney General Opinion ( 2004 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
April 1,2004
Mr. Terre11Murphy, Commissioner Opinion No. GA-O17 1
Texas Department of Assistive and
Rehabilitative Services Re: Whether the Texas Department of Assistive and
4900 North Lamar Boulevard Rehabilitative Services’ must seek reimbursement
Austin, Texas 78751-2399 for benefit replacement pay erroneously paid to
ineligible employees (RQ-0114-GA)
Dear Commissioner Murphy:
Your predecessor asked whether the Texas Rehabilitation Commission ((‘TRC”)2must seek
reimbursement fi-omcurrent and/or former employees who erroneously received benefit replacement
pay (‘cBRP”).3
I. Facts
From 1996 to May 152003, TRC erroneously paid BRP to twelve employees who were not
eligible for this form of compensation. See Request Letter, suprunote 3, at 1. The legislature
provided for BRP in 1995, in an enactment repealing the requirement that the state pay part of the
employee portion of federal social security taxes. See Act of May 24,1995,74th Leg., R.S., ch. 417,
1995 Tex. Gen. Laws 3029,303O (codified at Government Code chapter 659, subchapter H). Only
state employees on the payroll as of August 3 1, 1995 are entitled to receive BRP to offset the lost
social security tax payment. See TEX.GOV’T CODE ANN.$5 659.12 l(2), .123 (Vernon Supp. 2004);
HOUSE RESEARCH ORG., BILL ANALYSIS, Tex. S.B. 102,74th Leg., R.S. (1995) at 3. Seven of the
twelve TRC employees who received overpayments of BRP are still employed by the agency. Your
predecessor asked whether TRC is required by statute to attempt to recover the overpayment from
the recipients. See Request Letter, supra note 3, at l-2.
‘Formerly the Texas RehabilitationCommission, the Texas Department of Assistive and Rehabilitative Services
began operations on March 1,2004. See Act of June 1,2003,78th Leg., R.S., ch. 198, $0 1 .Ol, 1.26,2003 Tex. Gen.
Laws 611,612,641.
2See supra note 1.
3See Letter from Mr. Vernon M. Arrell, Cornmissioner, Texas Rehabilitation Commission, to Honorable Greg
Abbott, Texas Attorney General (Oct. 3,2003) (on file with Opinion Committee) [hereinafter Request Letter].
Mr. Terre11Murphy - Page 2 (GA-0171)
II. Law
A. Government Code Chapter 666
Government Code chapter 666 provides a method for recovering compensation,
including BRP, paid to a state employee in excess of the amount actually owed the employee. See
TEX. GOV’T CODE ANN. $0 666.001(l)(C), .002 (Vernon Supp. 2004). A “state employee” within
chapter 666 is “an officer or employee of a state agency.” Id.fj 666.001(4). The amount of excess
compensation paid to an employee, or the employee’s “indebtedness” to the agency, may be
recovered from the employee or the employee’s “successor,” defined as a deceased state employee’s
estate or surviving spouse, and the distributees of a deceased state employee’s estate. See id.
$5 666.001(2), (5), .002. Recovery of an overpayment to a state employee may be accomplished by
deducting the overpayment from the employee’s compensation or by reducing the employee’s
base salary for services provided in a pay period after the indebtedness was incurred. See id.
9 666.002(c)-(e). Incases where the comptroller’s office is not responsible for issuing payment to
the employee, the state agency may recover the overpayment itself without the comptroller’s
involvement. See id.0 666.002(a), (c). In the usual case, where an employee’s salary payment
issues from the comptroller’s office, authority to collect the overpayment from future salary is vested
in the comptroller. See id. 0 666.002(b), (d).
The questions presented relate to section 666.002(b), which provides as follows:
The comptroller may recover in accordance with this chapter
the amount of a state employee’s indebtedness to a state agency if:
(1) the agency provides a notice to the
employee or successor that complies with Section
666.003;
(2) the agency’s request for the comptroller
to recover the indebtedness complies with Section
666.005; and
(3) the comptroller is responsible under
[Government Code] Section 404.046, 404.069, or
2 103.003 for paying the amount owed by the agency
to the employee or the successor through the issuance
of a warrant or initiation of an electronic funds
transfer.4
Id.6 666.002(b).
?he Government Code provisions cited in section 666.002(b)(3) re q uire the comptroller to pay various
expenses by warrant or electronic funds transfer. See TEX. GOV’T CODEANN. 3 0 404.046 (Vernon Supp. 2004) (money
may not be paid out of the treasury except on a warrant drawn or an electronic funds transfer initiated by the
comptroller); .069 (withdrawal of trust funds deposited with comptroller); 2103.003 (Vernon 2000) (expenditure of
appropriated funds).
Mr. Terre11Murphy - Page 3 (GA-0171)
Before requesting the comptroller to recover the amount of the employee’s indebtedness, the
state agency must provide notice that (1) is “given in a manner reasonably calculated to give actual
notice to the employee or successor”; (2) states the “amount of the indebtedness” and the employee’s
name; (3) specifies the “date by which the indebtedness must be paid”; and (4) informs the
“employee or successor” that if the indebtedness is not paid by the specified date, it will be recovered
from the employee’s or successor’s compensation. Id.0 666.003(b). Thus, the state employee is
given an opportunity to repay the excess compensation before the matter may be referred to the
comptroller for collection. “A state agency may not request the comptroller to make a recovery
under Section 666.002(b) before the agency. . . provides the employee or successor the opportunity
to exercise any due process or other constitutional or statutory protection that must be accommodated
before a collection action or procedure may begin” and “determines that the recovery would
not violate any applicable law or rule of this state or the United States.” Id.fj666.005(a). The
comptroller is prohibited from investigating whether the agency has accorded due process or any
other constitutional or statutory protection and is authorized to rely on the agency’s determination
that recovery would not violate any applicable federal or state law or rule. See id. lj666.005(b).
B. Government Code Section 403.055
The request letter provides that Government Code chapter 666 appears to conflict
with Government Code section 403.055,5 which states that “the comptroller, as a ministerial duty,
may not issue a warrant or initiate an electronic funds transfer to a person who has been reported
properly under Subsection (0.” Id.9 403.055(a). Subsection (f) provides that “a state agency shall
report to the comptroller each person who is indebted to the state or has a tax delinquency,” subject
to providing due process pursuant to section 403.055(g). Id.8 403.055(f)-(g). Section 403.055(f)
uses the mandatory term “shall,” see id.,while chapter 666 uses the permissive term “may.” See id.
0 666.002. Seealso id. 311.016(l)-(2) (Vemon 1998) (the term “shall” ordinarily imposes a duty,
fj
while “may” creates discretionary authority or grants permission or a power).
Sections 403.055 through 403.0552 authorize the comptroller to collect debts, for example,
student loans, and delinquent taxes owed to the state. See id. fj§
403.055, .0551, .0552 (Vernon
Supp. 2004); see alsoTEX. EDUC. CODE ANN. 0 57.48(a), (g) (Vernon Supp. 2004) (Guaranteed
Student Loan Corporation must report persons in default on Guaranteed Student Loan to comptroller
but must first provide due process to person). Section 403.055(f) states that “[elxcept as provided
by Subsection (g), a state agency shall report to the comptroller each person who is indebted to the
state or has a tax delinquency.” TEX. GOV’T CODE ANN. 0 403.055(f) (Vernon Supp. 2004).
Subsection (g) provides that “[a] state agency may not report a person under subsection (f) unless
the agency first provides the person with an opportunity to exercise any due process or other
constitutional or statutory protection that must be accommodated before the agency or the state may
begin a collection action or procedure.” Id.5 403.055(g). Even after an indebted person has been
reported under subsection (f), the comptroller may issue a warrant or initiate an electronic funds
transfer to a person “if each state agency that properly reported the person under Subsection (f)
consents to issuance of the warrant or initiation of the transfer.” Id.tj403.055(k).
‘RequestLetter, supra note 3, at 2.
Mr. Terre11Murphy - Page 4 (GA-0171)
When a state agency reports a debt pursuant to section 403.055(f), the comptroller has a
ministerial duty to withhold a warrant payable to the indebted person, see id. 6 403.055(a), unless
it is a warrant for a state officer’s or employee’s compensation. Id.0 403.055(d)(l). Section
403.055 1 authorizes the comptroller to deduct the amount of a person’s tax delinquency or
indebtedness to the state from any amount the state owes the person, except that an employee’s debt
to a state agency may not be deducted from compensation owed by the agency to the employee.
Seeid.f~403.055 l(a), (d). ButseeTEX. FAM. CODE ANN. 0 23 1.007(a), (i) (Vernon Supp. 2004)
(warrant to pay compensation may not be issued to person indebted to state for child support
payments).
Chapter 666 provides the exclusive method for collecting a state agency’s overpayment to
an employee by deduction from the indebted employee’s salary, and the mandatory reporting duty
under section 403.055(f) is not read into chapter 666. The comptroller’s office has stated that a
payroll deduction under chapter 666 is entirely discretionary with the state agency, although the
agency may have a legal obligation to seek the refund of an overpayment of compensation through
other means, such as collecting the debt directly from the employee. See COMPTROLLEROFPUBLIC
ACCOUNTS,PAYROLLPOLICIESANDPROCEDURESGUIDE- 2000, at 4.29-4.30!
Chapter 666, however, “does not prohibit the comptroller or a state agency from recovering
an indebtedness in any manner authorized by a law other than this chapter.” TEX. GOV’T CODE ANN.
5 666.007 (Vernon Supp. 2004). Nor does chapter 666 relieve a state agency of the duty under
section 403.055(f) to report an indebted employee to the comptroller. An indebtedness established
under chapter 666 may be recoverable under section 403.055 from money payable to the indebted
employee for a purpose other than compensation, for example, a reimbursement for travel expenses.
See id.3 403.016(b) (payment of travel expenses). Section 403.055(f) requires a state agency to
report to the comptroller employees indebted to it under chapter 666, subject to the section
403.055(g) requirement that the agency provide “the person with an opportunity to exercise any due
process or other constitutional or statutory protection that must be accommodated before the agency
or the state may begin a collection action or procedure.” Id.6 403.055(g).
c. Constitutionality of Chapter 666
The fact that chapter 666 gives the state agency discretion as to recovering an
employee’s indebtedness from future compensation does not mean that the statute violates Texas
Constitution article III, sections 44 or 5 1, which respectively prohibit the state from granting “extra
compensation to any officer, agent, servant, or public contractors” or granting public money to an
individual. See TEX. CONST. art. III, $9 44,5 1. Seealso Tex. Att’y Gen. Op. No. JC-0383 (2001)
at 4.
This office has considered whether a county was required to seek to recover unauthorized
health insurance premium payments made on behalf of retirees. See Tex. Att’y Gen. Op. No. JC-
0383 (2001) at 4. The opinion determined that the premium payments violated Texas Constitution
article III, section 53, which prohibits a county from granting extra compensation to a public officer,
Mr. Terre11Murphy - Page 5 (GA-0171)
agent, servant, or contractor, but it found no law requiring the county to seek recovery of the
unauthorized payments. See id.Seealso TEX. CONST. art. El, $ 53. Texas cases establish that a
governmental entity may seek to recover a payment that its agent has erroneously paid to a private
party from public funds, but they do not impose a duty to seek recovery. See City ofTaylor v.
Hodges, 186 S.W.2d 6 1, 63 (Tex. 1945)7 (the general rule applicable to private transactions, “that
relief cannot be had fi-om a payment made under a mistake of law,” does not apply when the payment
is made with public money). See also CameronCounty v.Fox,2 S.W.2d 433,436 (Tex. Comm’n
App. 1928, judgm’t adopted) (amount wrongly paid “may be recovered in an action by the county’);
Nunn-Warren Pub1‘gCo.v.Hutchinson County, 45 S.W.2d 65 1, 653 (Tex. Civ. App.-Amarillo
1932, writ ref d) (although county’s unlawful payment to defendant was voluntary, county may
recover it). Attorney General Opinion JC-0383 concluded that a county may exercise reasonable
discretion as to whether to seek reimbursement in a particular case, considering factors such as “‘the
amount of funds to be reimbursed, the ease of collection, and the legal and other costs incident to
collection.“’ See Tex. Att’y Gen. Op. No. JC-0383 (2001) at 4 (citing Tex. Att’y Gen. Op. No.
MW-93 (1979) at 3).
State agencies, like the counties at issue in Attorney General Opinion JC-0383, are authorized
but not required by chapter 666 to seek recovery of overpayments to state officers and employees.
In making a decision about seeking recovery of such overpayments a state agency may consider, in
addition to the factors listed in Attorney General Opinion JC-0383, the need to provide notice and
due process pursuant to chapter 666 and to determine “that the recovery would not violate any
applicable law or rule of this state or the United States.” TEX. GOV’T CODE ANN. $0 666.003(b),
.005(a)(2) (V emon Supp. 2004).
III. Questions
In answering these questions, we will consider both TRC’s permissive authority under
chapter 666 and mandatory duty under section 403.055(f).
The first three questions are as follows:
1. Must TRC seek to recover the above-referenced overpayments
from both current and former employees?
2. If TRC is required to seek reimbursement Tom either the current
or former employees, is reporting the overpayments to the comptroller
sufficient to satisfy TRC’s legal obligation?
3. If TRC is required to report this to the comptroller, what are
TRC’s obligations with respect to past employees? (Chapter 666 only
appears to address current employees.)
Request Letter, supra
note 3, at 2.
‘City of Taylor v. Hodges, 186 S.W.2d 61 (Tex. 19451, overruled on other grounds by Lubbock County, Tex.
v. Trammel’s Lubbock Bail Bonds, 80 S.W.3d 580 (Tex. 2002).
Mr. Terre11Murphy - Page 6 (GA-0171)
Section 666.002 provides that a state agency “may” recover the amount of a state employee’s
indebtedness to it and that the comptroller “may,’ deduct the amount of a state employee’s
indebtedness from the employee’s compensation if the agency provides notice and due process to
the employee and requests the comptroller to make the deduction. See TEX. GOV’T CODE ANN.
$6 666.002(a)-(c), .003 (Vernon Supp. 2004). The term “may’ creates a discretionary authority or
grants permission or a power. See id. § 3 11.016(I) (V emon 1998). It does not mandate action. TRC
is not required to seek recovery of overpayments made to any employee by having these amounts
deducted from employee paychecks pursuant to chapter 666. Section 403.055(f) in contrast requires
TRC to report an employee indebtedness to the comptroller, contingent upon providing the employee
“with an opportunity to exercise any due process or other constitutional or statutory protection that
must be accommodated before the agency or the state may begin a collection action or procedure.”
Id.0 403.055(f)-(g) (Vemon Supp. 2004). Due process requires notice and an opportunity for the
employee to object to the amount or existence of the claimed overpayment.
As we have stated, TRC has discretion as to whether it seeks to recover employee
overcompensation from an employee’s future pay warrants, while the agency must report such
indebtedness under section 403.055(f). Once TRC has established the debt by providing the
employee with due process and has reported the overpayments to the comptroller, TRC has carried
out its legal obligation under section 403.055(f).
Both section 403.055(c) and section 666.002(d) provide for recovering an indebtedness from
the estate of a deceased employee, the surviving spouse of a deceased employee, or the distributees
of a deceased employee’s estate. See id. $6 403.055(c); 666.002(d)(l). Thus, both statutes permit
recoveries where the indebted person is no longer employed by the state. The fourth question is as
follows:
Is TRC required to give notice to the employees that recoupment is
being sought or is this only necessary if TRC decides to refer the
obligation to the comptroller?
note 3, at 2.
See Request Letter, supra
If TRC contemplates seeking recovery under chapter 666 by asking the comptroller to deduct
the amount of indebtedness from the employee’s compensation or by reducing the employee’s base
salary, it must provide notice to the employee before requesting the comptroller to act. See TEX.
GOV’T CODE ANN. § 666.002@( 1) (V emon Supp. 2004). Ifit decides not to seek recovery, it need
not give notice to the employee. An agency that plans to recover an indebtedness by itself, without
invoking the comptroller’s assistance, must provide notice before recovering that amount f?om salary
owed the employee. See id. 0 666.002(a).
When a state agency carries out its mandatory duty to report an indebted employee to the
comptroller under section 403.055(f), it must first provide the employee “with an opportunity to
exercise any due process or other constitutional or statutory protection that must be accommodated
before the agency or the state may begin a collection action or procedure.” Id.tj403.055(f)-(g).
Because the duty to report is mandatory under section 403.055(f), TRC should make its best effort
Mr. Terre11Murphy - Page 7 (GA-0171)
to provide the required statutory and constitutional protections so that it may carry out its duty to
report.
The fifth question is whether any of the debts are barred by the applicable statute of
limitations. See Request Letter, supranote 3, at 2. Section 16.004 of the Civil Practice and
Remedies Code provides a four-year statute of limitations for debt. See TEX. CIV. PRAC. & REM.
CODE ANN. 8 16.004 (Vernon 2002). However, section 16.061 of the Civil Practice and Remedies
Code provides that “[a] right of action of this state . . . is not barred by any of the following sections:
16.001-16.004.. . .” Id.9 16.061(a) (V emon Supp. 2004). See also Tex. Att’y Gen. Op. No. MW-
416 (1981) at 3-4 (“limitations will not be a bar to the state’s right of action”). No statute of
limitations bars the state’s recovery of these debts.
The final question is whether TRC has administrative discretion to waive the overpayment
on the ground that it was TRC’s error. As we have determined in answer to the first question,
chapter 666 does not require TRC to pursue collection of an overpayment to an employee. The
mandatory duty to report indebtedness under section 403.055(f) may not be waived.
Mr. Terre11Murphy - Page 8 (GA-0171)
SUMMARY
Government Code chapter 666 authorizes state agencies to .
seek to recover overpayments of compensation to employees,
including benefit replacement pay. The agency may request the
comptroller to recover the overpayment, but it is not required to do
so. Government Code section 403.055(f) requires a state agency to
report to the comptroller that one of its employees has received
excess compensation.
Recovery may be sought from an agency’s former as well as
its present employees. The agency must give notice to the indebted
employee before requesting the comptroller to recover the
overpayment. No statute of limitations bars the state’s recovery of
employee indebtedness to it.
BARRY R. MCBEE
First Assistant Attorney General
DON R. WILLETT
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Susan L. Garrison
Assistant Attorney General, Opinion Committee