Untitled Texas Attorney General Opinion

TEEEA~ORNEYUSICNERAL .
OF TEXAS
Aunnw.- 7S7ll
A- o-A&
Augurt 5, 1974
The Honorable Grover E. Murray Opinion No. H- 365
President, Texas Tech University
P.O. Box 461 Re: May Texan Tech University
Lubbock, Texar 79409 . purchare group term life inrrurance
from a mutuaL.tiompany?
Dear President Murray:
Your requert for our opinion indicator &t Tex&c Tech Univerrity
contractr with inrurancc companier to’provide optional group term life
insurance for itr faculty and staff members, with the policiM taken.in‘.
the name of the univerrity. A part of the premiuma ir paid by the univer-
lity out of rtate appropriationm and the balance ia paid by payroll deduc-
tionr . Your question ir whether or not it ir legally proper to permit
mutual life insurance companier to bid on this insurance and to provide
a nonaererrable policy.
It ham been ruggerted that the purchsee df inrurance from a mutual
insurance company would run counter to the provirionr of Subsection (a)
of Section 52 of Article 3 of the Texar Coartitution. T h a lt
ubrection pro-
hibitr “any county, city, town or other political . . . rubdivirion of the
State:’ (emghasir ourn) from betaming a rtockholder in any corporation,
aaeociation or company. And it has been held that thin applier to pro-
hibit a county or other politial subdivision from purchasing insurance in
a mutual insurance company. Attorney General Opinion O-924 (1939);
City of Tyler-v. Texas kn~loyerr’ Insurance Asebciation, 288 S.W.
409 (Tex. Comm. App., 1926), motion for rehearing overruled, 294 S.W.
195 (Tex. Comm. App., 1927); Lewir v. Independent School District of
City of Austin, 161 S.W.2d 450 (Tex. 1942)h
p. 1708
.f. .:
I
The Honorable Grover E. Murray page 2 (H-365)
Whether a rtate university, in general, or Texas Tech Univermity
in particular, ia a “political rubdiviaion of the State” ia a quertion that
har never been directly answered in Texar. Obviourly, it ia not a county,
city or town. % believe that, within the purview and intent of Subsection
(a) of Section 52 of Article 3 of the Texar Conatitution,it ia not a “political
rubdivision” either .
In Bolen v. Board of Firemen, Policemen, and Fire Alarm Operatorr,
308 S.W.2d 904 ~(Tex. Civ. App., San Antonio, 1957, err. ref’d.), it
wae held that the conetitutional provirion did not limit the Board in ite
investment of pension funde. The Court maid:
The Board jurt eimply ir not a political corpora-
tion nor a political ehbdivirion of the State. It doe@
not have any of the attributer of c political rubdivirion.
A political ‘rubdivirion contemplrter: geographical area
and boundaries, public electionm, public officialr, taxing
power and a general public purpore or benefit. The
Board ham none of the@? attributer . . . (308 S. W. 2d
at 905).
Citing an Idaho decimion, the Court rtated, am dictum: “The Board of
Regent0 of a State Univermity ir not a political rubdivision of the State. ”
(308 S. W., 2d at 906). See Attorney General Opinion H-338 (19’14)).
It has been raid that the primary function of a municip$ corporation
ir to regulate and adminirter the internal concerns of the inbabitantr of a
defined locality in matter8 peculiar to the place incorporated and not
common to the people of the rtate at large. Hatcher v. State, 81 S.W.2d
499, ‘500 (Tex. 1935).
\*
In Welch v. State, 148 S.‘W. 2d 876, 879 (Tex. Civ. App., Dallas,
1941, err.. ref’d.), a municipal,corporation ie defined am a:
A.
I . body pal’itic and* .cozporat& aria tiMed by the
kirporation of thd-inhabitant, of a definite ,
p. 1709
The Honorable Grover E. Murray, page 3 (H-365)
locality for the purporea of local government - the
organization of a certain geographical district under
authority of law. ’
We believe that the better view ir that, within the purview and intent
of Subsection(a) of Section 52 of ,Article 3 of the Texas Constitution. a
state university ie an official arm of the State, and not a political sub-
divieion. That this distinction should be considered between the state
and ita agencies, on the one hand, and political rubdivirrions. on the
other, is borne out by the recent enactment of Arttcler 8309g and 8309h
of the Civil Statute6 (Acts 1973, 63rd Leg., ch. 88, p. 195) recognizing
and applying reparately to the two groupa of governmental entitiee.
Article 8309g provider for workmen’s compenration for rtate employees
and include* in that group employeer of inrtitutionr of higher educatioa.
Article 8309h applier to employee8 of a political rubdivirion, defined to
mean "a county, home-nrle city, a city, town, or village organized
under the general law! of thin state, a rpecial dimtrict, a school district,
a junior college dirtrict, or any other legally constituted political Bub-
division of the &ate.” Sec. l(1).
When the factr surrounding thir particular contemplated transaction
are analyzed from a “lending of credit” or “grant of public fundr” rtand-
point, it doer not appear violative of thenprovirions of Section8 50 and 51
of Article 3 of the Texer Constitution. The only obligation of a policy-.
holder in a legal rererve mutual company operating under Chapter 11 of
the Insurance Code of Texae ir the contractual obligation to pay the
initial premium, the same burden a policylioltler:would have with a etock
life insurance company. Lending of credit ia prohibited if there is a
possibility of ass’eesment liability. No provieion for additional aezess-
ments ia included in the policies issued by legal reserve mutual companies
operating under Chapter 11, supra, so no lending of the University’s credit
ie involved. City of Tyler, aupra.
The “grant of public money” prohibition contemplate8 a “gratuitous
appropriation of public money or property.” City of Tyler, aupra at 412.
Texan Insurance Code, Article 3.51, Sec. l(a), authorizes the governing
board of a university to purchare inrurance for ita employees. The pay-
ment of inrurance premiumr in part of the compensation paid the employeer,
p. 1710
. . ’
I, L
. ,,
The Honorable Grover E. Murray page 4 (H-365)
and iz for a conztitutional public purpoze. It ir not a gratuitour appropria-
tion: zee Byrd v. City of Dallaz, 6 S.W.2d 738 (Tex. 1938); Attorney
General Opinion6 M-125 (1967) and M-582 (1970). Later decizionz have
firmly established that when an expenditure of public funds iz made for
the direct accomplishment of a proper’ public purpose rezulting in public
benefit@, the exchange iz not gratuitouz, even though private persona
may incidentally benefit therefrom. See Barrington v. Cokinoz, 338
S.W.2d 133 (Tex. 1960); Brazoz River Authority v. Carr, 405 S.W.
2d 689 (Tex. 1966); State v. City of Awtin, 331 S.W.2d 737 (Tax 1960).
.
Under,the particulir factz here, no impermizzible lending of credit
or grant of jjublic fundz will occur in violation of Article 3, Seer. 50 and
51 of the Texaz Conztitution. Texaz Tech Uaiverzity iz not within the
zcope of Article 3. Sec. 52(a) of the Teuz Conrtitution, l e the University
i# not, within the purpose and intent of there oectione, a political corpora-
tion or political rubdivimion. To the extent that it may conflict with this
opinion, Attorney General Opinion M-582 (1970) in overruled.
SUMMARY
Texaz Tech Univerzity may purchare nona~zcarable
group term life insurance policiez for itz faculty and
ztaff izzued by mutual life inzurance companiez author-
ized by Chapter 11 of the Texzz Inruraake Code.
Very truly yowr,
p. 1711
The Honorable Grover E. MurFry pa#e 5 (H-365)
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4 p. 1712
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