Could a private Louisiana horse breeders association require banks to secure its public-fund deposits?

Plain-English summary

In 2013, the Louisiana Attorney General concluded that the Louisiana Quarter Horse Breeders Association could not require banks to secure its deposits under the state depositing authority statutes. The request said the association held revenue classified as public funds. The AG applied the public-entity test and found that the legislature had not created the association. It therefore was not a state institution under La. R.S. 49:319 and could not invoke La. R.S. 49:321 to demand security.

The AG relied on a four-factor public-entity test described in the opinion and found that the association had not been created by the legislature. It recommended spreading deposits among insured banks and considering a deposit registry service to maximize then-available insurance coverage. The copy of an earlier AG opinion identified as an enclosure was absent from the returned source text.

Currency note

This opinion was issued in 2013. 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

Why was the nonprofit not a state depositing authority?

The statutory definition covered specified state officials and institutions. The AG said the association was a private entity because it failed the public-entity test's requirement that the legislature create it.

Why was the association not a state institution?

The opinion used a four-factor public-entity test and said all factors had to be present. The association failed the creation-by-legislature factor.

What did the opinion say about protecting the deposits?

The AG recommended distributing funds among insured banks and considering the Certificate of Deposit Account Registry Service to increase coverage. That was a recommendation in a 2013 opinion, not a conclusion that the association could demand a state security pledge.

Background and statutory framework

The association asked whether it qualified as a state depositing authority. Its request described statutory recognition as the official registrar for Louisiana-bred quarter horses and receipt of public gaming revenue. The AG read La. R.S. 49:319 as defining a state depositing authority and La. R.S. 49:321 as the requested security provision. It found that the association was not created by the legislature, failing one required factor of the public-entity test.

Citations

• La. R.S. 49:319 (definition of state depositing authority).
• La. R.S. 49:321 (requested security for deposits).
• La. RS. 4:179 (association's statutory recognition, as described in the request).

Source limitation

The source text says that a copy of La. Atty. Gen. Op. No. 09-0073 was enclosed, but that copy is absent from the extract available here. This page reproduces the signed opinion and its footnotes, without the enclosure.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/13-0190

Original opinion text

~tat.e of 'lfiouisiana
DEPARTMENT OF JUSTICE
P.O. BOX 94005
BATON ROUGE
70804-9005
JAMES D. "BUDDY" CALDWELL
ATIORNEY GENERAL

IDEC 1 9 2013
OPINION 13-0190

90-A-1 PUBLIC FUNDS & CONTRACTS
Mr. Leverne Perry
La. R.S. 49:319
Executive Director
The Louisiana Quarter Horse Breeders Association is not a state
Louisiana Quarter Horse
depositing authority under La. R.S. 49:319 and thus is not able to
Breeders Association
require security for deposits of state funds under La. R.S. 49:321.
P.O. Box 12300
Alexandria, Louisiana 71315

Dear Mr. Perry:

You requested an opinion from this office regarding whether the Louisiana Quarter Horse Breeders Association (the "Association") is considered a "state depository authority" under La. RS. 49:319 and thus able to require security for deposits of state funds under La. RS. 49:321.

You indicated that the Association is a nonprofit corporation and is statutorily recognized under La. RS. 4:179 "... as the sole official registrar for purposes of registering of accredited quarter horses foaled in Louisiana." To further this purpose, the Association receives revenue from certain gaming activities, all of which is properly classified as public funds under Louisiana law. 1

Currently, the Association has over $7 million dollars in public funds on deposit at three institutions, none of which is currently protected by a pledge of any bank securities. The Federal Deposit Insurance Corporation ("FDIC") policy providing unlimited protection for .non-interest bearing deposits for corporations expired on December 31, 2012.

Pertinently, the term "state depositing authority" is defined in La. RS. 49:319 as follows:

"State depositing authority" as used in this Chapter means the state treasurer, and other elected state officials or any department, board, commission, or institution of the state; and "depository" or "fiscal agent bank" means any bank selected and designated by the Interim Emergency Board for deposit of state funds by the treasurer and other elected state officials or any department, board; commission, or institution of the state.

See La. R.S. 4:165, La. R.S. 27:361, and La. Atty. Gen. Op. No. 10-0292.

Page 2

,
Mr. Leverne Perry
Opinion 13-0190
Page -2­

[Emphasis added].

Clearly, the Association is not the state treasurer or other elected state official or a department, board, commission. Thus, the Association can only be a state depositing authority if it is considered to be a state institution.

Nevertheless, it is clear that the Association is not a public entity, but rather a private entity. Therefore, it cannot be considered to be a state institution.

The Louisiana Supreme Court has held that in order for an entity to be considered public, the following four factors must be considered: (1) whether the entity was created by the legislature; (2) whether its powers were specifically defined by the legislature; (3) whether the property of the entity belongs to the public; and (4) whether the entity's functions are exclusively ofa public character and performed solely for public benefit. 2 Further, all four factors must be present in order for a court to determine that an entity is public. 3 The Association is not an entity created by the legislature. If an entity fails to meet the criteria of even one factor, it is not a public entity. Therefore, the Association is not public and thus cannot be considered a state institution.

Considering the forgoing statutory authority, it is the opinion of this office that the Association is not a state depositing authority under La. R.S. 49:319 and thus is not able to require security for deposits of state funds under La. R.S. 49:321. We recommend that the Association consider spreading its deposits of public funds over multiple insured banks and using the Certificate of Deposit Account Registry Service4 in order to maximize the FDIC coverqge. .

We trust this adequately responds to your request. However, if our office can be of further assistance, please do not hesitate to contact us.

Yours very truly,

JAMES D. "BUDDY" CALDWELL
Attorney General

By: ~,4-.
BENJAMIN A. HUXEN " tr (&.""
Assistant Attorney General
JDC/BAH"

2
State v. Smith, 357 SO.2d 505, 507-08 (La.1978).
3
Property Insurance Association of Louisiana v. Theriot, 09-1152 (La.3/16/10), 31 SO.3d 1012, 1015.
4
See La. Atty. Gen. Op. No. 09-0073, a copy of which is enclosed.