Untitled Texas Attorney General Opinion ( 2012 )

6)
ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
September 24,2012
Mr. Zak Covar Opinion No. GA-0970
Executive Director
Texas Commission on Environmental Quality Re: Whether a state agency's demand for
Post Office Box 13087 restitution based upon an unadjudicated claim for
Austin, Texas 78711-3087 breach of a grant contract constitutes a "debt" to
the state for purposes of section 403.055,
Government Code (RQ-1054-GA)
Dear Mr. Covar:
Your predecessor asked two questions related to the ability of the Texas Commission on
Environmental Quality ("TCEQ") to use the warrant-hold process under Government Code section
403.055 as a means of enforcing compliance with certain grant agreements. l TCEQ, in conjunction
with the Comptroller of Public Accounts (the "comptroller") and the Public Utility Commission,
administers the Texas Emissions Reduction Plan ("the Plan" or "TERP") under chapter 386 of the
Health and Safety Code. TEX. HEALTH & SAFETY CODE ANN. § 386.051(a) (WestSupp. 2011). The
Plan authorizes TCEQ to provide grants or other funding for multiple projects designed to improve
air quality. [d. § 386.051 (b). If a grantee fails to comply with grant requirements, your predecessor
explained that TCEQ sends a "formal written demand letter and invoice ... to the grantee requiring
the return of grant funds paid based on the noncompliance," and that the "amount demanded is
subject to modification by the amount of performance that was successfully achieved before the
breach of the contract." Request Letter at 1.
The request letter notes that Government Code section 403 .055 requires state agencies to
report to the comptroller "each person who is indebted to the state," and that the comptroller
generally "may not issue a warrant or initiate an electronic funds transfer to a person who has been
reported" under that section. [d. at 2; TEX. Gov'T CODE ANN. § 403.055(a), (f) (West 2005). The
request letter first asks whether "TCEQ' s formal written demand for restitution damages based upon
an un adjudicated claim for breach of a grant contract issued under Chapter 386 ... create[s] a 'debt
to the state' for purposes of application of Section 403.055 of the Texas Government Code?"
Request Letter at 2.
ISee Letter and Brief from Mark R. Vickery, P.G., Exec. Dir., Tex. Comm' n on Env't Quality, to Honorable
Greg Abbott, Tex. Att'y Gen. (Apr. 16,2012), http://texasattorneygeneral.gov/opin ("Request Letter" & "Brief').
Mr. Zak Covar - Page 2 (GA-0970)
The Legislature has not defined "debt to the state" for purposes of section 403.055. Texas
courts have defined "debt" to ordinarily mean "a specified sum of money owing to one person from
another." Seay v. Hall, 677 S.W.2d 19,23 (Tex. 1984); see also Thomas v. State, 919 S.W.2d 427,
431 n.5 (Tex. Crim. App. 1996) (citing BLACK'S LAW DICTIONARY 403 (6th ed. 1990) (defining
"debt" as "[a] sum of money due by certain and express terms")). Prior opinions of this office have
explained that for purposes of section 403.055, a debt to the state must be "established either by
agreement between the state and the debtor; by the state's proper allegation of the existence of a
debt by statutory reference; or by some other lawfully effective means." Tex. Att'y Gen. Op. Nos.
DM-217 (1993) at 2, MW-416 (1981) at 2-3. The TCEQ letter itself does not fall into one of these
three categories, and the act of sending a letter requesting restitution damages based upon an
unadjudicated claim for breach of a grant contract issued under chapter 386 ofthe Health and Safety
Code will not, by itself, establish a debt to the state for purposes of section 403.055 of the
Government Code. If, however, TCEQ' s formal written demand for restitution damages is premised
on an agreement between the state and debtor, the existence of a debt by statutory reference, or some
other lawfully effective means of creating a debt, TCEQ could establish a debt to the state under
section 403.055.
We first consider whether TCEQ can establish a debt to the state on the basis of its
agreements with TERP grantees. Determining whether any given TERP grant contract forms
the basis of a debt to the state would require that we construe the terms of the agreement, a task
this office cannot undertake through the opinion process. Tex. Att'y Gen. Op. No. GA-0864 (2011)
at 3. However, we can answer general questions of law, and thus we rely upon the request letter's
general description ofTERP grant agreements, which reportedly require that grant funds be returned
"after a failure to perform the activities required by the grant." Further, the brief indicated that the
amount owed is "based upon the subsequent valuation of the calculated cost of the contract breach."
Brief at 3. The request letter's description of these agreements does not suggest a "sum certain in
money" owed such that the agreements would, by themselves, establish a debt. However, more
specific contract terms could create a debt by agreement. We can advise only that a demand for
restitution damages based upon breach of a TERP grant contract mayor may not create a debt to the
state under section 403.055, depending on the circumstances and the specific terms of the document
that purportedly creates the debt.
It may also be possible for TCEQ to establish a debt to the state by statutory reference. The
Legislature has authorized TCEQ to use the TERP Fund to provide grants for a number of different
programs that are intended to improve air quality. TEX. HEALTH & SAFETY CODE ANN. § 386.051(b)
(West Supp. 2011). Each of these programs is established in a separate chapter, subchapter, or
section of the Health and Safety Code, which may or may not include a statutory basis for
establishing a debt. See, e.g., id. § 391.302(c)-(d) (West 2010) (explaining that a misuse of grant
funds provided under the new technology implementation grant program "results in a debt owed to
the state" under section 403.055(g)). Within the confines of an attorney general opinion, we can
advise only that TCEQ could establish a debt to the state under section 403.055 if the grant contract
involves a legislative program wherein the enabling legislation specifically creates a debt.
Mr. Zak Covar - Page 3 (GA-0970)
Prior opinions of this office have explained that a debt to the state may also be established
"by some other lawfully effective means." Tex. Att'y Gen. Op. Nos. DM-217 (1993) at 2, MW-416
(1981) at 2-3. One such lawfully effective means of establishing a debt could be an internal TCEQ
administrative process that provides grantees with the due process required by section 403.055(g)
of the Government Code, including notice and an opportunity to contest the amount or existence of
a contract breach. See TEX. GOy'T CODE ANN. § 403.055(g) (West 2005). TCEQ would need to
determine the specific nature of that administrative process in the first instance.
Along those lines, the request letter's second question asked whether "the TCEQ process for
determination of the breach and amount of damages and demand thereof satisfy the due process
requirements of Section 403.055(g), and if not, what extra due process protections may be
necessary." Request Letter at 2. Under section 403.055(g), TCEQ "may not report a person" to the
comptroller as indebted to the state "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." TEX. GOy'T CODE ANN.
§ 403.055(g) (West 2005). In a prior opinion, we explained that under subsections 403.055(f)-(g)
"[d]ue process requires notice and an opportunity ... to object to the amount or existence of the"
breach. Tex. Att'y Gen. Op. No. GA-0171 (2004) at 6. Thus, in order to ensure that its procedures
satisfy section 403.055(g), TCEQ must, at a minimum, provide grantees with notice of the alleged
breach and an opportunity to contest the allegations. The Legislature has not established further
procedures for complying with this due process requirement, and we therefore cannot specify what
exact process must be afforded to each individual grantee. 2
While the TCEQ demand letter may provide the requisite notice, due process also requires,
at a minimum, that the alleged debtor have an opportunity to contest the demand for restitution.
Although we are unable to provide you with the exact process necessary to comply with the statute's
due process requirements, we can advise that until TCEQ has provided grantees with some
opportunity to contest the amount or existence of the alleged debt, TCEQ "may not report a person"
to the comptroller as indebted to the state under section 403.055(f). If, however, a debt to the state
has been established at the conclusion of an administrative process that satisfies section 403.055(g),
TCEQ may report the grantee to the comptroller as indebted to the state under section 403.055(f).
2The Texas Supreme Court has explained that "[ w]hat process is due is measured by a flexible standard that
depends on" three factors , which include:
(1) the private interest that will be affected by the official action; (2) the risk of an
erroneous deprivation of such interest through the procedures used, and the
probable value, if any, of additional or substitute procedural safeguards; and (3) the
government's interest, including the function involved and the fiscal and
administrative burdens that the additional or substitute procedural requirement
would entail.
Univ. of Tex. Med. Sch. v. Than, 901 S.W.2d 926, 930 (Tex. 1995).
Mr. Zak Covar - Page 4 (GA-0970)
SUMMARY
The act of sending a letter requesting restitution damages
based upon an unadjudicated clairn for breach of a grant contract
issued under chapter 386 of the Health and Safety Code will not, by
itself, establish a debt to the state for purposes of section 403.055 of
the Government Code. The Texas Commission on Environmental
Quality could establish the existence of a debt to the state if specific
contract terms that create an agreement between the state and grantee
establish a debt, if the Commission can allege the existence of a debt
by statutory reference, or if the Commission can establish the debt by
some other lawfully effective means, including a TCEQ internal
administrative process that provides the grantee with the requisite due
process.
Once the Commission has established a debt to the state and
provided grantees with due process, including an opportunity to
contest the amount or existence of a contract breach, the Commission
may report a person to the comptroller as indebted to the state under
Government Code subsection 403.055(f).
Very truly yours,
DANIEL T. HODGE
First Assistant Attorney General
JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel
JASON BOATRIGHT
Chair, Opinion Committee
Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee