Did depository interest earned on Texas's supplemental retirement fund for law enforcement and custodial officers belong to that fund or to General Revenue?
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This page answers the general question as of 1985. Ezel answers yours: what it means for your facts, under current Texas law, with citations.
Texas AG Opinion JM-300: Retirement Fund Interest
Plain-English summary
The Employees Retirement System asked where depository interest earned on the Law Enforcement and Custodial Officer Supplemental Retirement Fund belonged. The request concerned “the disposition of depository interest earned by an account held by the state treasurer on behalf of the Law Enforcement and Custodial Officer Supplemental Retirement Fund.” Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
JM-300 concluded that the supplemental retirement fund was a trust fund and therefore kept its depository interest. The opinion stated: “In our opinion, the Law Enforcement and Custodial Officer Supplemental Retirement Fund is a trust fund entitled to retain depository interest.” Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
The fund met the opinion's trust-fund criteria because trustees administered it, it served limited purposes rather than general state operations, and it benefited a specific group. The opinion described trust assets as those administered by trustees, not collected for general state operations, and “to be spent and invested for specific, limited purposes and for the benefit of a specific group of individuals.” Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
The fund was entitled to interest dating from its creation in 1979. Any interest already placed in General Revenue, however, could not simply be transferred back. JM-300 concluded that “the legislature must make a specific appropriation before any interest erroneously deposited in the general revenue fund may be returned to the retirement fund.” Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Currency note
This opinion was issued in 1985. 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
Did article 2543d ordinarily send depository interest to General Revenue?
Yes, after crediting each constitutional fund its proportional share and accounting for specified protested-tax-payment interest, the statute directed that “[t]he remainder of the interest received ... shall be credited to the General Revenue Fund.” Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Why was this retirement fund treated differently?
JM-300 said assets held in trust were also exempt from article 2543d. It found that this fund was administered by the Employees Retirement System's board of trustees, was available only for supplemental retirement and death benefits and fund administration, and was subject to limits on investment and use. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
How far back did the fund's claim to interest extend?
The opinion said that the fund had shown the relevant trust-fund characteristics “since its creation in 1979” and was entitled to depository interest from that date. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Did the opinion specify how to calculate the earlier interest?
No. It said it could not advise on “the specific accounting method or time intervals to be used in calculating past interest” because the request did not supply deposit terms, durations, types, or applicable interest rates. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Could the treasurer return earlier interest from General Revenue without another legislative act?
No. Relying on article VIII, section 6 of the Texas Constitution and Manion v. Lockhart, JM-300 said money erroneously deposited in General Revenue still could not be removed without a legislative appropriation. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Background and statutory framework
Fund No. 977 was part of the Employees Retirement System of Texas, with a portion of that system's assets credited to the supplemental retirement fund. The fund kept income from investments made outside the State Treasury but had not been credited with depository interest earned by the account. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Article 2543d governed interest on deposits of money in funds and accounts held by the State Treasurer. Prior attorney general opinions had recognized an additional exemption for trust assets. JM-300 distilled three characteristics of such assets: trustee administration, no grant to the state in its sovereign capacity or collection for general operations, and restricted spending and investment for a specific group. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
The opinion found those characteristics in Title 110B's provisions governing the Employees Retirement System and the supplemental fund. It separately applied the constitutional appropriation requirement to money already deposited in General Revenue. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Citations and references
- Article 2543d, V.T.C.S.
- V.T.C.S. Title 110B, Public Retirement Systems, sections 25.101, 25.103(c), 25.302, 25.306(7), and 25.313
- Article VIII, section 6 of the Texas Constitution
- Lawson v. Baker, 220 S.W. 260, 272 (Tex. Civ. App. - Austin 1920, writ ref'd)
- Manion v. Lockhart, 114 S.W.2d 216, 219 (Tex. 1938)
- Attorney General Opinions WW-565 (1959), M-468 (1969), H-1040 (1977), MW-82 (1979), MW-338 (1981), MW-481 (1982), and H-1243 (1972)
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Source
- Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0300
- Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0300.pdf
Original opinion text
Best-effort transcription from a scanned PDF. Minor errors may remain. The linked PDF is authoritative.
The Attorney General of Texas
March 18, 1985
Mr. Clayton T. Garrison
Executive Director
Employees Retirement System of Texas
P. O. Box 13207
Austin, Texas 78711
Opinion No. JM-300
Re: Whether the Employees Retirement System is entitled to depository interest on a particular fund under article 2543d, V.T.C.S.
Dear Mr. Garrison:
You request an opinion from this office concerning the disposition of depository interest earned by an account held by the state treasurer on behalf of the Law Enforcement and Custodial Officer Supplemental Retirement Fund. This account, designated Fund No. 977 by the state treasurer, is established as a part of the Employees Retirement System of Texas, a portion of whose assets is credited to the fund. V.T.C.S. Title 110B, Public Retirement Systems, §25.306(7) (1985 Pamphlet).
You inform us that while the fund retains the income derived from investment made outside the state treasury, it has not been credited with the depository interest earned by Fund No. 977. Accordingly, you ask whether the fund is entitled to such interest and, if so, what method should be used to calculate previously accumulated interest not credited to Fund No. 977.
A statutory provision relevant to the disposition of depository interest is article 2543d, V.T.C.S., which provides the following in pertinent part:
Interest received on account of the deposits of moneys in funds and accounts in the charge of the State Treasurer shall be allocated as follows: To each constitutional fund there shall be credited the pro rata portion of the interest received due to such fund. The remainder of the interest received, with the exception of that portion required by other statutes to be credited on a pro rata basis to protested tax payments, shall be credited to the General Revenue Fund. The interest received shall be allocated on a monthly basis.
V.T.C.S. art. 2543d, §1. This office has determined on numerous occasions that in addition to the funds exempted above, assets held in the form of a trust are also exempt from the requirements of article 2543d. See Attorney General Opinions MW-338 (1981); MW-82 (1979); H-1040 (1977); M-468 (1969).
The opinions just cited establish that in order to be characterized as trust funds, the assets in question should reflect, among other things, (1) that they are administered by a trustee or trustees, (2) that the assets are neither granted to the state in its sovereign capacity nor collected for the general operation of state government, and (3) that they are to be spent and invested for specific, limited purposes and for the benefit of a specific group of individuals. Being in the nature of a trust, such assets are entitled to retain the proceeds from their investment. Attorney General Opinions MW-481 (1982); M-468 (1969). Cf. Attorney General Opinion H-1243 (1972) (interest earned in joint funds must be deposited into the general revenue fund). The same theory applies to interest earned on time deposits of these assets. Attorney General Opinion M-468 (1969). See Lawson v. Baker, 220 S.W. 260, 272 (Tex. Civ. App. - Austin 1920, writ ref'd). Accordingly, they are not subject to the provisions of article 2543d. Attorney General Opinions MW-82 (1979); H-1040 (1977).
In our opinion, the Law Enforcement and Custodial Officer Supplemental Retirement Fund is a trust fund entitled to retain depository interest. The retirement fund is administered by the board of trustees of the Employees Retirement System. V.T.C.S. Title 110B, Public Retirement Systems, §25.101 (1985 Pamphlet). This office has previously determined that the assets of the Employees Retirement System, of which the retirement fund is a part, are trust funds. Attorney General Opinion WW-565 (1959). The retirement fund is not collected for the general operation of the state; rather, it is available only to pay “supplemental retirement and death benefits to law enforcement and custodial officers” and for “administration of the fund.” V.T.C.S. Title 110B, §25.313(b). The method and form of investment of retirement fund assets are limited, see V.T.C.S. Title 110B, §§25.103(c) and 25.302, and the proceeds of any such investment are expressly made part of the retirement fund. See V.T.C.S. Title 110B, §25.313(a). These features are sufficient, in our view, to remove the retirement fund from the coverage of article 2543d. The interest earned on deposits of the retirement fund, therefore, must be credited to the retirement fund itself and not deposited in the general revenue fund.
Your second inquiry concerns the proper method of crediting the retirement fund for interest earned in previous years. We are unable to give advice as to the specific accounting method or time intervals to be used in calculating past interest. The answer to this question depends on information not provided by your request, such as the terms, duration, and types of deposits, applicable rates of interest, etc. We can state as a general matter, however, that the retirement fund has exhibited the aforementioned trust fund characteristics since its creation in 1979. See Acts 1979, 66th Leg., ch. 269, at 528 (enacting former article 6228f-1, V.T.C.S., establishing Law Enforcement and Custodial Officer Supplemental Retirement Fund). Consequently, the retirement fund is entitled to credit for depository interest from that date. Before the retirement fund may be credited with this interest, however, certain limitations on the use of treasury funds must be considered.
Article VIII, section 6 of the Texas Constitution prohibits withdrawal of funds from the state treasury in the absence of legislative appropriation. The Texas Supreme Court has held that funds erroneously deposited in the general revenue fund are nevertheless subject to this constitutional limitation and may not be removed from the treasury without legislative action. Manion v. Lockhart, 114 S.W.2d 216, 219 (Tex. 1938). Accordingly, the legislature must make a specific appropriation before any interest erroneously deposited in the general revenue fund may be returned to the retirement fund.
SUMMARY
The Law Enforcement and Custodial Officer Supplemental Retirement Fund must be credited for interest earned on deposits of the fund. Any interest previously deposited in the general revenue fund must receive specific legislative appropriation before return to the retirement fund.
Very truly yours,
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Rick Gilpin
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
Jon Bible
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Jennifer Riggs
Nancy Sutton
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