Can a Texas county or state agency provide goods or copies before receiving payment without unconstitutionally lending credit?

Deferred payment, public purpose, and lending public credit

Plain-English summary

Texas Attorney General Jim Mattox concluded in 1990 that providing goods or services before payment was not automatically an unconstitutional lending of state or county credit. The arrangement had to accomplish a public purpose and include conditions that kept the public credit directed to that purpose.

"A lending of credit that accomplishes a public purpose and is accompanied by controls that ensure the use of public credit for a public purpose does not violate article III, sections 50 and 52, or article XI, section 3, of the Texas Constitution."

Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1229.pdf

The governing body had initial responsibility for deciding whether a particular credit arrangement met those requirements, and its decision remained subject to judicial review. JM-1229 overruled Attorney General Opinions MW-461 (1982) and JM-533 (1986) to the extent they had required public services to operate only on a cash-before-service basis.

For Aransas County's proposed monthly billing for airport fuel, the request identified no public purpose. The opinion therefore left the constitutional determination to the commissioners court.

"You do not indicate what public purpose would be served by this arrangement. The commissioners court should determine in the first instance whether such an extension of credit would meet constitutional requirements."

Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1229.pdf

The State Law Library could bill patrons after sending photocopies. The opinion identified faster service, possible administrative savings, and collection of fees that might otherwise be waived as possible public benefits. It also identified a control: requiring a deposit or advance payment from patrons who had defaulted before.

"We conclude that the library may constitutionally bill patrons for copies of documents sent in advance of payment."

Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1229.pdf

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.

What the opinion said for affected groups in 1990

County commissioners and local governing bodies

A governing body could approve deferred payment only after determining that the arrangement served an authorized public purpose and included sufficient controls. The opinion treated that determination as discretionary but reviewable by a court.

County airport operators

The proposed fuel-account system was not approved or rejected on the submitted facts. The commissioners court first had to identify and assess a public purpose for the extension of credit.

State Law Library administrators

The library could send requested copies before payment and bill afterward. The opinion treated delayed billing as potentially serving patrons and reducing administrative costs, with deposits or advance payment available as controls for prior defaults.

State agencies and public finance officers

The opinion rejected a categorical cash-only rule. The constitutional question turned on public purpose, adequate consideration, and controls over the use of public credit.

Common questions

Did JM-1229 say government may always provide goods or services before payment?

No. The extension of credit had to serve a public purpose and include controls ensuring that the public purpose was carried out.

Who decided whether a proposed credit arrangement served a public purpose?

The governing body made the first determination in its sound discretion, subject to judicial review.

Could Aransas County bill airport fuel customers monthly?

The opinion did not decide that question. The request identified no public purpose, so the commissioners court had to make the constitutional assessment.

Could the State Law Library send photocopies and bill patrons later?

Yes. The opinion concluded that the library could use delayed billing and could require deposits or advance payment from patrons who had previously defaulted.

Which earlier Attorney General opinions did JM-1229 overrule?

It overruled MW-461 (1982) and JM-533 (1986) to the extent they held that deferred payment was constitutionally forbidden without applying the public-purpose test.

Background and legal framework

Article III, section 50, restricted lending state credit. Article III, section 52, and article XI, section 3, addressed credit extended by political subdivisions and municipal corporations. Earlier Attorney General opinions had read these provisions as requiring cash payment before public goods or services were delivered.

JM-1229 relied on Texas Supreme Court and intermediate appellate decisions applying a public-purpose test. Those authorities treated incidental private benefit as permissible when an expenditure or use of credit directly accomplished a legitimate public purpose and adequate controls protected that purpose.

The opinion also compared delayed payment with approved advance payments and other public-purpose arrangements. It concluded that timing alone did not settle the constitutional issue. The purpose and the safeguards did.

Key citations

• Tex. Const. art. III, §§ 50, 51, and 52
• Tex. Const. art. XI, § 3
• Tex. Const. art. XVI, § 6
• V.T.C.S. art. 6252-17a, §§ 9 and 11
• Gov't Code § 91.002(b)
• Texas Turnpike Authority v. Shepperd, 279 S.W.2d 302 (Tex. 1955)
• Barrington v. Cokinos, 338 S.W.2d 133 (Tex. 1960)
• State v. City of Austin, 331 S.W.2d 737 (Tex. 1960)
• Brazoria County v. Perry, 537 S.W.2d 89 (Tex. Civ. App. - Houston [1st Dist.] 1976, no writ)
• Dodson v. Marshall, 118 S.W.2d 621 (Tex. App. - Waco 1938, writ dism'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1229
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1229.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Obvious character-level OCR errors have been corrected where verified against the scan and reporter citations; minor errors may remain. The linked PDF is authoritative.

THE ATTORNEY GENERAL
OF TEXAS
JIM MATTOX October 4, 1990
ATTORNEY GENERAL
Honorable James L. Anderson, Jr. Opinion No. JM-1229
County Attorney
Aransas County, Texas Re: Whether county or
301 N. Live Oak state may provide goods
Rockport, Texas 78382 to patron prior to
receipt of payment; re-
Ms. Kay Schlueter, Director consideration of Attorney
State Law Library General Opinion MW-461
Supreme Court Building (1982) (RQ-1922)
P.O. Box 12367
Austin, Texas 78711-2367
Dear Mr. Anderson and Ms. Schlueter:
Mr. Anderson asks whether Aransas County may sell gas
and fuel products at the county airport to individuals,
corporations, or the Parks and Wildlife Department on a
thirty day account whereby charges during the month are
billed at the end of the month. Ms. Schlueter informs us
that the State Law Library receives many requests from
patrons for next day delivery or telefacsimile transmission
of photocopied materials available in the library. She asks
whether Attorney General Opinion MW-461 (1982) requires the
library to receive payment before the copies are sent
instead of enclosing a bill with the copies.

This office issued Attorney General Opinion MW-461 in
answer to an inquiry by the State Purchasing and General
Services Commission about its billing for copies of bid
tabulations after they are sent out pursuant to open records
requirements. The commission wished to accumulate charges

during each month and send out bills at the end of the
month. The legal question addressed by the opinion was
whether the proposed system of billing would violate article
III, section 50, of the Texas Constitution, which provides
as follows:
The Legislature shall have no power to
give or to lend, or to authorize the giving
or lending, of the credit of the State in aid
of, or to any person, association or
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Honorable James L. Anderson, Jr. - Page 2 (JM-1229)
Ms. Kay Schlueter
corporation, whether municipal or other, or
to pledge the credit of the State in any
manner whatsoever, for the payment of the
liabilities, present or prospective, of any
individual, association of individuals,
municipal or other corporation whatsoever.
Tex. Const. art. III, § 50 (emphasis added).

The opinion cited Letter Opinion R-2358 (1951), which
stated of article III, section 50, that "[o]ur laws
contemplate, it seems, that State offices or enterprises,
the management of which requires the collection of public
funds or charges, should be operated on a cash basis."1
Attorney General Letter Opinion R-2358 at 4. "To defer the
payments of charges for copies of public records by means of
a monthly billing of the accumulated charges," Attorney
General Opinion MW-461 determined, was “just such an
extension of the state’s credit which is constitutionally
proscribed. "2 Attorney General Opinion MW-461, at 2.

1. Letter Opinion R-2358 (1951) is a letter written by
   an assistant attorney general with the hand-written
   designation "R-2358" in the upper right-hand corner. The
   attorney general’s name appears in the closing, followed by
   a signature block for the attorney who wrote the letter.
   Formal attorney general opinions issued in 1951 had a typed
   opinion number, a heading describing the subject matter, a
   summary, and a list of the attorneys who approved the
   opinion. None of these indicia of a formal attorney general
   opinion appear in Letter Opinion R-2358. See Attorney
   General Opinion H-1063 (1977) at 3 (citation form of
   R-1404).

2. A resolution proposing a constitutional amendment
   to allow the legislature to authorize state agencies to
   defer fees for services was introduced in the 71st
   Legislature. H.J.R. 94, 71st Leg. (1989). The resolution,
   inspired by the issuance of Attorney General Opinion MW-461,
   was not passed by the legislature.

The legislature’s failure to adopt H.J.R. 94 does not
establish that Attorney General Opinion MW-461 was correct,
or that a constitutional amendment is necessary to change
its holding. See Texas Turnpike Authority v. Shepperd, 279
S.W.2d 302, 305 (Tex. 1955); Friedman v. American Surety Co.
of New York, 151 S.W.2d 570, 580 (Tex. 1941); see also
Attorney General Opinion JM-1102 (1989) at 8.

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Honorable James L. Anderson, Jr. - Page 3 (JM-1229)
Ms. Kay Schlueter

Accordingly, the Purchasing Commission could not institute
its proposed method of billing, unless it required a deposit
to cover the costs of copying records pursuant to section 11
of article 6252-17a, V.T.C.S.

This office addressed a similar question in Attorney
General Opinion JM-533 (1986), which concluded that a county
officer would lend the county’s credit in violation of
article III, section 52, and article XI, section 3, of the
constitution if he delivered services to individuals,
associations, or corporations for deferred payment. 3
Article III, section 52, prohibits the legislature from
authorizing political subdivisions to lend their credit,
while article XI, section 3, directly prohibits counties and
other municipal corporations from lending credit, and the
opinion determined that these provisions required county
officers to provide services on a "cash only" basis.

Attorney General Opinions MW-461 and JM-533 overlooked
authorities holding that the state or a political
subdivision may lend credit to accomplish a public purpose.
In his analysis of article III, section 50, of the Texas
Constitution, Braden described the "lending of credit"
language of this provision as saying that the state may not

aid anybody by providing him land, goods, or services on
credit. Braden, The Constitution of the State of Texas: An
Annotated and Comparative Analysis 225 (1977). He concluded
that if the current interpretation of article III, section
51, is correct, “it follows that today Section 50 is
applicable only if the credit is for a private purpose."
Id. Section 51 provides that the legislature "shall have no
power to make any grant or authorize the making of any grant
of public moneys" to any individual, association of
individuals, or corporation. The current interpretation of
this provision, as given in Braden’s analysis thereof,
prohibits grants for private purposes, but not those to

3. Attorney General Opinion JM-533 (1986) found an
   exception to the "lending of credit" provisions where some
   other constitutional provision, such as article I, section
   13, required a county officer to provide services without
   requiring immediate payment.
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   Honorable James L. Anderson, Jr. - Page 4 (JM-1229)
   Ms. Kay Schlueter

accomplish public purposes, if sufficient controls are
placed on the transaction to ensure that the public purpose
is carried out. Braden, supra at 232-35 (and authorities
cited); see Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex.
1960); see also State v. City of Austin, 331 S.W.2d 737
(Tex. 1960); Davis v. City of Lubbock, 326 S.W.2d 699 (Tex.
1959); Attorney General Opinion JM-626 (1987).
In State v. City of Austin, 331 S.W.2d 737 (Tex. 1960),
the supreme court addressed a number of constitutional
issues pertaining to article 6674w-4, V.T.C.S., which
provides for the relocation of utility facilities at state
expense whenever the relocation is necessitated "by the
improvement of any highway in this State which has
been . . . established ...as a part of the National
System of Interstate and Defense Highways .. . provided
that such relocation is eligible for Federal participation."
The terms of federal reimbursement to the state are set
forth in title 23, section 123, of the United States Code.
See State v. City of Dallas, 319 S.W.2d 767, 772 (Tex. Civ.
App. - Austin 1958), aff’d 331 S.W.2d 737 (Tex. 1960). See
generally Attorney General Opinion JM-105 (1983) (cable
television as a utility within article 6674w-4, V.T.C.S.).

In addressing the state’s argument that payment of the
relocation costs would constitute a gift or loan of the
credit of the state in violation of article III, section 50,
the supreme court opinion in State v. City of Austin stated
as follows:
Article 6674w-4 obviously does not involve
a gift or loan of the credit of the state
unless it can be said that payment of
relocation costs amounts to a grant of public
money in violation of Article III, Section

51. The purpose of this section and of
    Article XVI, Section 6, of the Constitution
    is to prevent the application of public funds
    to private purposes.
    331 S.W.2d at 742 (emphasis added). The supreme court, like
    Braden, applies the same "public purpose" test to determine
    the validity of a transaction under article III, section 50,
    and article III, section 51, of the constitution.
    In Brazoria County v. Perry, 537 S.W.2d 89 (Tex. Civ.
    App. - Houston [1st Dist.] 1976, no writ), the county sued a
    former deputy sheriff under a promissory note whereby the
    deputy agreed to repay county funds spent on training him if
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Honorable James L. Anderson, Jr. - Page 5 (JM-1229)

Ms. Kay Schlueter

he did not serve for two years after completing training.
The central issue was whether there was a lending of credit
by the county in violation of article III, section 52, of
the constitution. The court found no violation, stating as
follows:

The clear purpose of this constitutional
provision is to prevent the gratuitous
application of funds to private use. The
Constitution does not, however, invalidate an
expenditure which incidentally benefits a
private interest if it is made for the direct
accomplishment of a legitimate public
purpose.

537 S.W.2d at 90-91 (citations omitted); see also Attorney

General Opinion H-1010 (1977). Thus, a “loan of credit"

does not violate the constitution if it is made to
| accomplish a public purpose.

Opinions of this office issued since Attorney General
Opinion MW-461 have treated extensions of credit as
constitutional if they met the "public purpose" test.

vom Attorney General Opinion JM-274 (1984) stated that article
III, section 52(a), prohibits the use by a political
subdivision of its public funds or credit for private
purposes and concluded as follows:
Any lending of credit must be intended to
accomplish an authorized county purpose and
must be accompanied by conditions to ensure
the use of county credit for a public
purpose.
Attorney General Opinion JM-274 at 2-3.

Attorney General Opinion JM-1030 (1989) considered
whether the Texas Department of Mental Health and Mental
Retardation could make advance payment of start-up costs to
private entities that had contracted to provide services to
clients of the department. Start-up costs could be used to
purchase and renovate space in which to provide services,
purchase furniture, and pay other costs associated with the
preparation to provide services. Thus, the department would
be transferring funds to the contractor well in advance of
its provision of services to the department’s clients.

The requestor asked whether advance payment of start-up
costs to a private entity might contravene the prohibition
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Honorable James L. Anderson, Jr. - Page 6 (JM-1229)
Ms. Kay Schlueter

against the grant of public credit in section 50 of article

III or the prohibition against the grant of public monies in

section 51. The opinion took note of several opinions that

approved the advance payment of public funds to private

parties for the achievement of a public purpose. See

Attorney General Opinions MW-423 (1982) (grant to private

museum honoring firefighters, subject to condition that

museum remain open long enough for public to receive benefit

of grant); H-1010 (1977) (payment of medical tuition as .

partial compensation for promise that student will practice

medicine in county); H-74 (1973) (prepayment of state

employees’ authorized travel expenses); see also State ex

rel. Grimes County Taxpayers Ass'n v. Texas Municipal Power

Agency, 565 S.W.2d 258 (Tex. Civ. App. - Houston [1st Dist.]

1978, writ dism'd w.o.j.) (test for validity of transactions

between governmental entities in which one renders agreed

services to the other in exchange for money paid at a

different time); V.T.C.S. art. 601b, § 3.24 (state agencies

may pay in advance for goods purchased from federal and

state agencies where advance payment will expedite

delivery); Attorney General Opinion H-1033 (1977) (sale of

accounts receivable from patients by county hospital).

The opinion concluded that the department could pay
"start-up costs" to private entities, provided that the
public receive adequate consideration and the governmental
body retained enough control over the expenditure of the
funds to assure that the public purpose of providing mental
health/mental retardation services was actually met. A
requirement that advances be repaid was discussed as a
possible, although not necessarily exclusive, method of
control. If repayment were required, the transfer would
take the form of a loan rather than a grant.

Based on the authorities cited, we conclude that a
lending of credit will not violate the constitution if it
accomplishes a public purpose and is accompanied by
conditions to ensure the use of governmental credit for a
public purpose. Accordingly, a state or local entity may
provide services to a private person or entity in advance of
receiving payment if a public purpose will thereby be
accomplished and if it places sufficient controls on the
transaction to insure that the public purpose will be
carried out. Attorney General Opinions MW-461 and JM-533
are overruled to the extent that they hold the contrary.

The determination that a particular extension of credit
meets the constitutional requirements is in the first
instance within the sound discretion of the governing body,
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Honorable James L. Anderson, Jr. - Page 7 (JM-1229)
Ms. Kay Schlueter

subject to judicial review. See, e.g., Dodson v. Marshall,
118 S.W.2d 621 (Tex. App. - Waco 1938, writ dism'd);
Attorney General Opinions JM-1030 (1989); JM-551 (1986);
MW-423 (1982); H-1260 (1978). Mr. Anderson informs us that
Aransas County has installed a new gas dispensing and
payment system which would allow a person to buy airplane
fuel twenty-four hours a day and use an approved credit card
for payment. Several entities, including the Texas Parks
and Wildlife Department, wish to be issued a special card
for the fuel dispensing facilities and be billed on a
monthly basis. You do not indicate what public purpose
would be served by this arrangement. The commissioners
court should determine in the first instance whether such an
extension of credit would meet constitutional requirements.

With respect to the inquiry of the State Law Library,
however, its request letter and the remarks of the State
Purchasing and General Services Commission noted in Attorney
General Opinion MW-461 provide some information as to the
public purpose that might be served by providing copies of
documents to individuals in advance of payment. The State
Law Library "may be used by the members and staff of the
supreme court, court of criminal appeals, the office of the

attorney general, and other state entities and by citizens
of the state." Gov't Code § 91.002(b). The letter from the
library states that its patrons request next day delivery or
telefacsimile transmission of photocopies because they are
in a hurry for the information. When they do not have the
time to send the money first, the library is forced to
either send the information without charge or not send it at
all. See V.T.C.S. art. 6252-17a, § 9 (charges for copies of
documents under the Open Records Act); General
Appropriations Act, Acts 1989, 71st Leg., ch. 1263, at 5705
(fee schedule for duplication services at State Law
Library). Attorney General Opinion MW-461 noted that the
State Purchasing and General Services Commission might
benefit from reduced administrative costs if it billed for
documents on a monthly basis.

The library might be able to operate more efficiently
and reduce administrative costs by billing on a delayed
basis. In determining whether a public purpose will
actually be served by permitting delayed payment, the
library can balance its savings in administrative costs and
in fees collected that would otherwise be waived against
possible losses through default of payment. The library has
an effective means of control over such transactions in that
it can require a deposit or advance payment by a patron who
has defaulted on payment in the past. We conclude that the

—
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Honorable James L. Anderson, Jr. - Page 8 (JM-1229)
Ms. Kay Schlueter

library may constitutionally bill patrons for copies of
documents sent in advance of payment. The details of such a
plan, including the controls necessary to carry out its
public purpose, are for the library administrators.
SUMMARY
A lending of credit that accomplishes a
public purpose and is accompanied by controls
that ensure the use of public credit for a
public purpose does not violate article III,
sections 50 and 52, or article XI, section 3,
of the Texas Constitution. The determination
that a particular extension of credit meets
the constitutional requirements is in the
first instance within the sound discretion of
the governing body, subject to judicial
review. Attorney General Opinions MW-461
(1982) and JM-533 (1986) are overruled to the
extent they hold the contrary.
Very truly yours,

JIM MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
LOU MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RENEA HICKS
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan Garrison
Assistant Attorney General

p. 6538