Can a mayor keep her city salary while working as an independent contractor for a nonprofit that receives state funding?

Texas AG Opinion JM-1165: Does Independent-Contractor Pay From a State-Funded Nonprofit Count as "State Funds"?

Plain-English summary

The Nueces County Attorney asked about the mayor of Corpus Christi, who worked as an independent contractor for a private corporation that provided services to people with intellectual disabilities. The corporation received some of its revenue under contracts with the State of Texas, comingled that money with revenue from private sources, and used it to pay its expenses, including the mayor's hourly consulting fees; she was never an employee of the corporation and received no employee benefits. The question was whether article XVI, section 40 of the Texas Constitution, which bars a "State employee or other individual who receives all or part of their compensation either directly or indirectly from funds of the State of Texas" from also drawing a salary while serving on a city's governing body, applied to her.

The Attorney General traced the current version of section 40 to a 1972 amendment adopted to override Boyett v. Calvert, a case that had barred a Texas A&M employee from receiving both a state salary and pay for serving on a city council under the constitution's earlier language. Read in that historical context, and given that its predecessor language applied to public officers and employees, the opinion concluded section 40 was written to reach state and local government employees, not independent contractors performing services for compensation that happens to be partly traceable to state funds. Because the mayor was an independent contractor of a private corporation, and that corporation, not the mayor personally, contracted with the state, the opinion found her fees too far removed from "funds of the State of Texas" to trigger the constitutional restriction, drawing support from an earlier opinion reaching the same conclusion about an independent contractor working for a school district, and from a separate opinion finding a legislator's interest in a nonprofit transit system's state grant funds too remote to count as an interest in a state contract under a different constitutional provision. The opinion concluded the mayor could keep both her outside consulting fees and her city salary.

Currency note

This opinion was issued in 1990. 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.

Who this opinion affected (as of 1990)

City officials with outside consulting or contract work: The opinion confirmed that fees earned as an independent contractor of a private entity, even one that itself receives state funding, do not count as compensation "from funds of the State of Texas" for purposes of the constitutional bar on drawing both a local government salary and state compensation.

Private corporations and nonprofits that contract with the state: The opinion clarified that their independent contractors are treated differently from their employees for purposes of this constitutional provision, since only employees and similarly situated individuals were within the reach of article XVI, section 40.

The Corpus Christi mayor specifically: The opinion resolved that she could continue receiving both her consulting fees (before she terminated that contract) and her mayoral salary without violating article XVI, section 40.

Common questions

Does working for a company that has a state contract mean you're being paid "from state funds"?
Not under this opinion's reading of article XVI, section 40, at least not if you're an independent contractor rather than an employee of that company; the constitutional provision was read to reach state and local employees, not independent contractors of a private entity.

Why does this matter for someone who also holds local elected office?
Because article XVI, section 40 says a state employee (or similar individual) paid from state funds can serve on a city or school district governing body only without salary for that local service. If the provision doesn't apply to you in the first place, that salary restriction doesn't either.

Where did this constitutional language come from?
The opinion explained the current text was adopted in 1972 specifically to overturn the result in Boyett v. Calvert, which had barred a Texas A&M employee from both a state salary and pay for city council service under the constitution's earlier wording.

Does it matter that the corporation's money was comingled between state and private sources?
Not under this opinion's reasoning. The dispositive fact was the mayor's status as an independent contractor of the corporation, not an analysis of which specific dollars paid her.

Background and statutory framework

Article XVI, section 40 of the Texas Constitution generally bars holding more than two civil offices of emolument, but its clause relevant here addresses a different situation: a "State employee or other individual who receives all or part of their compensation either directly or indirectly from funds of the State of Texas and who are not State officers" may serve on the governing body of a school district, city, town, or other local governmental district, but "shall receive no salary" for that local service. The current language was adopted in 1972 through Senate Joint Resolution 29 of the 62nd Legislature, whose title described it as permitting state employees or certain other individuals who are not state officers to serve on local governing bodies "without forfeiting their salary for their State employment." That 1972 amendment responded directly to Boyett v. Calvert, 467 S.W.2d 205 (Tex. Civ. App.-Austin 1971, writ ref'd n.r.e.), cert. denied, 405 U.S. 1035 (1972), which had interpreted the prior version of section 40 to bar Texas A&M University employees from receiving a state salary while serving on a city council; the 1972 amendment let such dual service continue, but only without a salary for the local office.

Because the provision the 1972 amendment replaced (former section 33 of article XVI) applied to public officers and employees at both the state and local level, the opinion read the current section 40 as carrying forward that same scope: applying to state and local government employees, not to independent contractors who provide goods or services in exchange for payment that happens to be traceable in part to state funds (citing Attorney General Opinions MW-230 (1980) and JM-118 (1983), the latter involving a teacher paid from federal funds who received state retirement benefits). The opinion found support in Attorney General Opinion V-303 (1947), which construed the predecessor constitutional language to conclude that a state highway department employee could work as an independent contractor for a school district, because an independent contractor is not an agent or employee of the entity paying it (citing also Attorney General Opinion MW-129 (1980), holding an independent contractor is not an "employee" for Open Meetings Act purposes). The opinion also drew on Attorney General Opinion JM-782 (1987), which had construed a different constitutional provision, article III, section 18's bar on legislators being directly or indirectly interested in a state contract, to conclude a legislator's employment relationship with a nonprofit transit system receiving federal grant funds administered through the state was too remote to count as an interest in a state contract.

Applying that framework, the opinion concluded the mayor of Corpus Christi's fees as an independent contractor of a private corporation, itself several steps removed from any direct state contract with her personally, did not constitute compensation "directly or indirectly from funds of the State of Texas" within the meaning of article XVI, section 40, so she was free to also draw her city salary.

Citations

Constitution:

• Tex. Const. art. XVI, §§ 33 (repealed 1972), 40
• Tex. Const. art. III, § 18

Cases:

• Boyett v. Calvert, 467 S.W.2d 205 (Tex. Civ. App.-Austin 1971, writ ref'd n.r.e.), cert. denied, 405 U.S. 1035 (1972)

Related opinions (Texas Attorney General):

• MW-230 (1980); JM-118 (1983); V-303 (1947); MW-129 (1980); JM-782 (1987)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1165
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1165.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

April 24, 1990

Honorable Carlos Valdez
Nueces County Attorney
Nueces County Courthouse
901 Leopard, Room 206
Corpus Christi, Texas 78401

Opinion No. JM-1165

Re: Whether consultant to private corporation that contracts with the state receives compensation "directly or indirectly" from state funds within article XVI, section 40, of the Texas Constitution (RQ-1872)

Dear Mr. Valdez:

You request advice about the application of article XVI, section 40, of the Texas Constitution to a consultant contract entered into by the mayor of Corpus Christi. You inform us that the mayor, working as an independent contractor, contracted with a private corporation that provides services to retarded people. Through contracts with either the State of Texas or with private individuals, the corporation receives revenues from the state or private individuals. These revenues are comingled and used to pay business expenses including fees paid to independent contractors such as the mayor.

You also state that the mayor was not an employee of the corporation. She never received a salary or any other benefit paid to employees, but was strictly a consultant who contracted on an hourly basis as needed. Earlier this year, she terminated her contract with the corporation.

Article XVI, section 40, of the Texas Constitution prohibits individuals from holding more than two civil offices of emolument, with certain exceptions. The provision that is relevant to your question, however, applies to state employees and certain other persons compensated directly or indirectly by the state. This provision states as follows:

State employees or other individuals who receive all or part of their compensation either directly or indirectly from funds of the State of Texas and who are not State officers, shall not be barred from serving as members of the governing bodies of school districts, cities, towns, or other local governmental districts; provided, however, that such State employees or other individuals shall receive no salary for serving as members of such governing bodies.

Tex. Const. art. XVI, § 40.

You wish to know whether this language applies to an independent contractor who contracts with a private entity that receives part of its revenues under contract with the State of Texas. An individual who receives compensation "directly or indirectly from funds of the State of Texas . . . shall receive no salary" for serving as a member of the governing body of a city.

The present language of article XVI, section 40, was adopted in 1972. The amendment was proposed by Senate Joint Resolution 29 of the 62d Legislative Session. S.J.R. 29, Acts 1971, 62d Leg., at 4133. The following portion of the title of the resolution describes the provision under consideration:

permitting State employees or certain other individuals, who are not State officers, to serve as members of the governing body of school districts, cities, or towns, or other local governmental districts without forfeiting their salary for their State employment.

This portion of the 1972 amendment was a response to Boyett v. Calvert, 467 S.W.2d 205 (Tex. Civ. App.-Austin 1971, writ ref'd n.r.e.), cert. denied, 405 U.S. 1035 (1972), which interpreted the text of article XVI, section 33, of the Texas Constitution that was repealed in 1972. See G. Braden, The Constitution of the State of Texas: An Annotated and Comparative Analysis (2d. 1977). Article XVI, section 33, formerly provided that the state would not pay salary or compensation to any agent, officer or appointee who held any other office or position of honor, trust, or profit under the state. See H.J.R. 27, Acts 1967, 60th Leg., at 2989. Boyett v. Calvert held that employees of Texas A&M University could serve on a city council but could not receive a state salary from the university while doing so. The proposal which amended section 40 of article XVI in 1972 also amended section 33. See S.J.R. 29, Acts 1971, 62d Leg., at 4133. The effect of the 1972 amendment, as indicated by its title, was that persons compensated by state funds who held local offices could receive their state salary, but could not receive compensation for the local office.

The repealed version of article XVI, section 33, applied to public officers and employees at the state and local level. Viewed in this historical context, the provision that was designed to correct the Boyett v. Calvert result should apply within the same parameters as former section 33, that is, to public officers and employees. Article XVI, section 40, deals primarily with state and local officers. In this context, it is reasonable to read the provision you inquire about as applying to state and local employees, in contrast to officers, and not reaching an independent contractor who may provide goods or services in exchange for payment, some of which is traceable to state funds. The scope of the provision is reflected in its language:

State employees or other individuals who receive [compensation from state funds] . . . who are not State officers . . . . (Emphasis added.)

Tex. Const. art. XVI, § 40. We construe the provision you inquire about as applying to state employees and employees of local government, for example, school teachers, but not to independent contractors. See Attorney General Opinion MW-230 (1980); see also Attorney General Opinion JM-118 (1983) (teacher paid from federal funds who received state retirement benefits).

A prior opinion of this office construing the repealed language of article XVI, section 33, supports our conclusion. Attorney General Opinion V-303 (1947) considered whether that provision barred an employee of the State Highway Department from working as an independent contractor for a school district. The relevant language of that constitutional provision read as follows:

The accounting officers of this State shall neither draw nor pay a warrant upon the Treasury in favor of any person for salary or compensation as agent, officer of appointee, who holds at the same time any other office or position of honor, trust, or profit under this State. . . .

H.J.R. 27, Acts 1967, 60th Leg., at 2989.

The opinion stated that a person holding an "office or position of honor, trust or profit" in a school district, would be holding it "under this State." An independent contractor, however, was not an agent or employee of the school district. See also Attorney General Opinion MW-129 (1980) (an independent contractor is not an employee for purposes of the Open Meetings Act). Thus, a predecessor of the relevant provision in article XVI, section 40, did not reach someone who was an independent contractor of a school district. The mayor of Corpus Christi was an independent contractor of a private corporation that contracts with the State of Texas, a much more remote relationship with a public entity than that discussed in Attorney General Opinion V-303.

Finally, Attorney General Opinion JM-782 (1987) also lends support to our construction of this provision. It construed the language of article III, section 18, of the Texas Constitution that bars members of the legislature from being "interested, either directly or indirectly, in any contract with the State, or any county thereof, authorized by any law passed during the term for which he was elected." The legislator wished to be employed by a transit system that received state-administered federal grant funds. The transit system was operated by a nonprofit corporation established by political subdivisions to receive and administer federal grant funds under various federal programs. We stated that the legislator as employee of the transit system would have no direct or indirect interest in any contract with the state. His interest in any contract with the state was too remote to be an indirect interest under section 18 of article III.

Accordingly, article XVI, section 40, does not prohibit the mayor of Corpus Christi from contracting as an independent contractor with a private corporation that receives state funds under contract with the state. In view of our answer to your first question, we need not answer your second question.

SUMMARY

An individual who contracts as an independent contractor with a private corporation that receives state funds under contract with the state does not receive all or part of his "compensation either directly or indirectly from funds of the State of Texas" within article XVI, section 40, of the Texas Constitution. The individual may serve as a member of the governing body of a school district, city, town, or other local governmental district and receive salary for that service.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General