Can a Texas agency block state payments to someone who owes it fees?

Plain-English summary

Texas has a collection tool built into how the state pays its bills. Under Government Code section 403.055, the Comptroller (the state's paymaster) is not allowed to cut a "warrant," a state payment, to a person who owes the state money, until that debt is cleared. The Texas Surplus Property Agency, which gets surplus federal property and passes it along to qualifying organizations for a service-and-handling charge, had recipients who never paid their charges. It asked the Attorney General whether it could use section 403.055 to squeeze those debtors by having the Comptroller hold any state payments headed their way.

The Attorney General said yes. Two steps got there. First, an unpaid service-and-handling charge is a "debt" in the ordinary sense, and the agency is allowed by statute to impose that charge, so not paying it creates a real debt. Second, the agency is a subdivision of the state, so owing money to the agency is the same as owing money to the state. Put together, a recipient who stiffs the agency is "indebted to the state," and the Comptroller may withhold that recipient's warrants. The one condition: the agency has to properly tell the Comptroller the statutory basis for the debt, here the provision of its enabling law that authorizes the charge.

The agency also asked a tougher question, whether the Comptroller could hold a payment going not to the delinquent organization itself but to the individual named as its principal officer or responsible employee. The Attorney General would not answer that one, because it depends on figuring out who is legally on the hook for a particular organization's debts, and that is a question of fact an opinion does not resolve. The opinion did flag one limit in the statute: even when the bar applies, subsection (c) still lets the Comptroller pay a state officer's or employee's compensation.

Currency note

This opinion was issued in 1993. 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. The surplus-property agency's enabling statute (then V.T.C.S. article 6252-6b) and the warrant-hold provision (then Government Code section 403.055) have been amended and reorganized since 1993, so confirm current law before relying on anything described here.

Background and statutory framework

The Executive Director of the Texas Surplus Property Agency asked whether the agency could use section 403.055 of the Government Code to collect service charges and fees owed to it. Under its enabling statute, V.T.C.S. article 6252-6b, the agency acquires from the federal government surplus property allocated to it, warehouses it, and distributes it to entities and institutions qualified under the Federal Property and Administrative Services Act of 1949, 40 U.S.C. §§ 471 through 544. Id. § 4(a), (b). The statute lets the agency impose on the recipient a service-and-handling charge or fee to cover the agency's costs of acquiring, warehousing, distributing, or transferring the property. Id. § 4(l); 1 T.A.C. § 143.1. The agency deposits the charges into a special state-treasury fund, the surplus property service charge fund, and may use that money only to carry out its statutory functions. Id. § 4(m). Some recipients had not paid, and the agency asked whether, under section 403.055, it could request the Comptroller to withhold warrants to those in arrears.

The warrant-hold statute. Section 403.055(a) provides that the Comptroller may not issue a warrant to a person if the person is indebted to the state until the debt is paid. Subsection (c) provides the section does not prohibit issuing a warrant to pay the compensation of a state officer or employee. Subsection (d) provides that when the section prohibits issuing a warrant, the Comptroller is also prohibited from using an electronic funds transfer system. (The Code Construction Act defines "person" broadly to include corporations, organizations, governmental subdivisions, trusts, partnerships, associations, and other legal entities. Government Code § 311.005(2).)

What counts as a debt. Construing the predecessor statute, V.T.C.S. article 4350, the office had said the language assumes the existence and establishment of a debt (Letter Advisory No. 57 (1973)). The Comptroller may refuse a warrant where a debt is established "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 legally effective means" (AG Opinion MW-416 (1981)), and lacks authority to withhold a warrant if no debt exists in the usual and ordinary sense.

The two-step conclusion. Because article 6252-6b, section 4(l), authorizes the agency to impose a service-and-handling charge on the recipient of agency goods, failure to pay creates a debt (citing Black's Law Dictionary's definition of "debt"). And because the agency is a subdivision of the state, a person indebted to the agency is likewise indebted to the state. So the agency may request the Comptroller to withhold warrants to a person indebted to it, and the Comptroller is authorized to withhold them, provided the agency properly alleges the statutory basis of the debt, here article 6252-6b, section 4(l).

The officer/employee question. The agency also asked whether the Comptroller could withhold a warrant payable to an individual identified and certified as the principal officer or responsible employee of the indebted entity. Answering that would require determining who, in each entity, is legally responsible for the entity's debts, a fact question outside the opinion process. The AG noted, though, that while section 403.055(a) bars a warrant to a person indebted to the state, subsection (c) expressly allows the Comptroller to issue a warrant to pay a state officer's or employee's compensation.

Common questions

How does Texas use state payments to collect a debt?
Under Government Code section 403.055, the Comptroller cannot issue a warrant (a state payment) to someone who owes the state money until the debt is paid. An agency owed money can ask the Comptroller to hold the debtor's warrants.

Does a debt to a state agency count as a debt "to the state"?
Yes, the opinion concluded. Because the Surplus Property Agency is a subdivision of the state, owing the agency is owing the state, so the warrant-hold provision applies to its unpaid service-and-handling charges.

What does the agency have to do to trigger the hold?
It must properly allege to the Comptroller the statutory basis of the debt, here the provision of its enabling statute (article 6252-6b, section 4(l)) that authorizes the service-and-handling charge.

Can the state hold a payment going to the company's officer instead of the company?
The opinion did not decide that. It depends on who is legally responsible for the particular entity's debts, which is a fact question. The opinion did note that subsection (c) protects a state officer's or employee's compensation warrants from the hold.

Citations

• Government Code § 403.055 (Comptroller may not issue a warrant to a person indebted to the state; (c) exception for state-employee compensation; (d) electronic funds transfers)
• Government Code § 311.005 (Code Construction Act definition of "person")
• V.T.C.S. article 6252-6b (Texas Surplus Property Agency enabling statute): § 4(a), (b) (acquire, warehouse, distribute property), § 4(l) (service-and-handling charge), § 4(m) (service charge fund)
• V.T.C.S. article 4350 (predecessor to § 403.055)
• 1 T.A.C. § 143.1 (adopting Texas Plan of Operation)
• Federal Property and Administrative Services Act of 1949, 40 U.S.C. §§ 471 through 544
• Attorney General Opinion MW-416 (1981); Letter Advisory No. 57 (1973); Black's Law Dictionary 363 (5th ed. 1979)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0217
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0217.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain. Some footnote text could not be fully recovered from the scan. The linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

April 26, 1993

Mr. Marvin J. Titzman
Executive Director
Texas Surplus Property Agency
P.O. Box 8120
San Antonio, Texas 78208-0120

Opinion No. DM-217

Re: Whether an entity or institution that owes service and handling charges and fees to the Texas Surplus Property Agency is "indebted to the state" for purposes of section 403.055 of the Government Code, and related questions (RQ-514)

Dear Mr. Titzman:

On behalf of the Texas Surplus Property Agency (the "agency"), you have asked us to consider whether the agency may use section 403.055 of the Government Code to collect service charges and fees owed to it. Pursuant to the agency's enabling statute, V.T.C.S. article 6252-6b, the agency is authorized to acquire from the federal government any surplus property allocated to the agency, to warehouse the property, and, ultimately, to distribute the property to entities and institutions qualified under the Federal Property and Administrative Services Act of 1949, 40 U.S.C. section 471 through 544. V.T.C.S. art. 6252-6b, § 4(a), (b). Additionally, the enabling statute authorizes the agency to impose upon the entity or institution receiving the property a service and handling charge or fee to cover the agency's costs of acquiring, warehousing, distributing or transferring the property. Id. § 4(l); 1 T.A.C. § 143.1 (adopting by reference rules contained in Texas Plan of Operation); Texas Plan of Operation pt. V, at 14; see id. at 14-15 (describing how agency sets service charge). The agency is to deposit the charges and fees it collects into a special fund in the state treasury called "the surplus property service charge fund" (the "fund"). V.T.C.S. art. 6252-6b, § 4(m); 1 T.A.C. § 143.1; Texas Plan of Operation pt. V, at 16, 17 (discussing use of Service Charge Trust Fund). The agency may use money in the fund only to carry out the agency's statutory functions. V.T.C.S. art. 6252-6b, § 4(m).

You advise that some of the entities and institutions to which you have transferred surplus property have not paid the service and handling charges or fees that they owe. You ask, therefore, whether the agency, pursuant to section 403.055 of the Government Code, may request the comptroller to withhold warrants to the entities or institutions whose accounts are in arrears. Section 403.055 states in pertinent part as follows:

(a) The comptroller may not issue a warrant to a person [1] if the person is indebted . . . to the state . . ., until the debt . . . [is] paid.

. . . .

(c) This section does not prohibit the comptroller from issuing a warrant to pay the compensation of a state officer or employee. [2]

(d) When this section prohibits the comptroller from issuing a warrant, the comptroller is also prohibited from using an electronic funds transfer system. [footnotes added.]

In construing the statutory predecessor to section 403.055(a) of the Government Code, V.T.C.S. article 4350, this office stated that the language of the section assumes "the existence and the establishment of a debt." Letter Advisory No. 57 (1973) at 1. Thus, the comptroller "may refuse to issue a warrant to a person if" a debt is "[p]roperly 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 legally effective means." (Emphasis in original.) Attorney General Opinion MW-416 (1981) at 2-3; Letter Advisory No. 57 at 4. The comptroller lacks authority to withhold warrants under section 403.055(a) of the Government Code if no debt exists in the usual and ordinary sense of the word. Attorney General Opinion MW-416 at 3.

As stated above, article 6252-6b, section 4(l), V.T.C.S., authorizes the agency to impose upon a recipient of agency goods a service and handling charge or fee. Failure to pay the charge or fee creates a debt. See Black's Law Dictionary 363 (5th ed. 1979) (defining "debt"). The issue becomes, therefore, whether a person that fails to pay the service and handling charge or fee to the agency is indebted to the state for purposes of section 403.055 of the Government Code. Because the agency is a subdivision of the state, we conclude that a person indebted to the agency is likewise indebted to the state. Consequently, the agency, pursuant to section 403.055 of the Government Code, may request the comptroller to withhold warrants to a person indebted to the agency, and the comptroller is authorized to withhold the warrants, provided that the agency properly has alleged the statutory basis of the debt, here, article 6252-6b, section 4(l), V.T.C.S. See Letter Advisory No. 57 (1973) at 4.

You also ask whether the comptroller is authorized to withhold any warrant that is payable to any individual identified and certified as the principal officer or responsible employee of the entity or institution that is indebted to the agency. To answer your question, we would have to determine who, in each particular entity or institution, is legally responsible for the debts of the entity or institution. Such a determination requires the resolution of facts and is therefore outside the scope of the opinion process. We note in reference to your question, however, that while section 403.055(a) expressly prohibits the comptroller from issuing a warrant to a person that is indebted to the state, subsection (c) expressly authorizes the comptroller to issue a warrant to pay a state officer's or state employee's compensation.

SUMMARY

The Texas Surplus Property Agency, pursuant to section 403.055 of the Government Code, may request the comptroller to withhold warrants to an entity or institution that has failed to pay the agency accrued service and handling charges and fees. Thus, provided that the agency properly alleges to the comptroller the statutory basis of the debt, the comptroller is authorized to withhold such warrants. Whether the comptroller is authorized to withhold any warrant that is payable to an individual identified and certified as the principal officer or responsible employee of the entity or institution that is indebted to the agency is a question involving the resolution of facts; it is therefore outside the scope of the opinion process.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Attorney General for Litigation

RENEA HICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee

Footnotes:

[1] The Code Construction Act of the Government Code, chapter 311, defines "person" to include corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. Government Code § 311.005(2).

[2] Footnote text marked in the source could not be fully recovered from the scan.