Could Texas divert interest earned on constitutionally dedicated highway funds into general revenue by an appropriations rider or statute?
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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-321: Dedicated Highway Interest
Plain-English summary
The State Department of Highways and Public Transportation asked whether interest on constitutionally dedicated highway funds could be moved to general revenue, first by an appropriations-act rider and second by statute. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
JM-321 concluded that article 2543d required interest earned on a constitutional fund's time deposits to be credited pro rata to that fund. An appropriations rider directing the interest elsewhere would impermissibly amend or repeal that general law. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
The opinion also concluded that an ordinary statute could not divert the interest. Under the rule applied in Lawson v. Baker, interest earned on a constitutionally created or dedicated special fund became an increment of that fund and remained subject to its constitutional purpose. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
For highway revenue, article VIII, section 7-a, dedicated specified motor-vehicle registration fees and motor-fuel taxes to roadway purposes. Article VIII, section 7, barred diversion of a special fund from its purpose, so both the dedicated principal and its interest had to remain protected. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.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
Could an appropriations rider send the interest to general revenue?
No. JM-321 said a rider doing so would conflict with article 2543d and would be an invalid attempt to amend or repeal general law through an appropriations act. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
Could the Legislature accomplish the diversion through a separate statute?
No. The opinion concluded that the Legislature lacked authority to divert interest earned on the constitutionally dedicated motor-vehicle fees and motor-fuel taxes. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
Why did the interest receive the same protection as the principal?
Lawson v. Baker treated interest earned by a constitutional special fund as an increment accruing to that fund. Diverting the increment would divert part of the special fund from its constitutional purpose. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
Did the opinion address every source of State Highway Fund money?
No. The request concerned funds constitutionally dedicated to highway purposes, and the opinion expressly said it did not address other sources of State Highway Fund revenue. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
What highway revenue was central to the opinion?
The opinion focused on motor-vehicle registration fees and motor-fuel taxes dedicated to highway purposes by article VIII, section 7-a. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
Background and statutory framework
Article 2543d directed the State Treasurer to credit each constitutional fund with its pro rata share of interest on time deposits and to credit the remaining interest to general revenue. JM-321 applied that allocation rule to the constitutionally dedicated highway money. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
The opinion relied on the constitutional restrictions in article VIII, sections 7 and 7-a, and on Texas decisions holding both that special funds could not be diverted and that an appropriations rider could not enact, amend, or repeal general law. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
JM-321 also cited Missouri and Oregon decisions that applied the same interest-follows-the-fund principle to constitutionally dedicated highway funds. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
Citations and references
- V.T.C.S. article 2543d, section 1
- Tex. Const. article III, section 35
- Tex. Const. article VIII, sections 7 and 7-a
- Former R.C.S. article 2427
- Moore v. Sheppard, 192 S.W.2d 559 (Tex. 1946)
- Linden v. Finley, 49 S.W. 578 (Tex. 1899)
- State v. City of Austin, 331 S.W.2d 737 (Tex. 1960)
- Carroll v. Williams, 202 S.W. 504 (Tex. 1918)
- Lawson v. Baker, 220 S.W. 260 (Tex. Civ. App. - Austin 1920, writ ref'd)
- State Highway Commission v. Spainhower, 504 S.W.2d 121 (Mo. 1973)
- State v. Straub, 240 Or. 272, 400 P.2d 229 (1965)
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.pdf
Source
- Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0321
- Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0321.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
May 28, 1985
Mr. Robert C. Lanier
Chairman
State Department of Highways
and Public Transportation
Dewitt C. Greer Highway Bldg.
11th & Brazos
Austin, Texas 78701
Opinion No. JM-321
Re: Whether interest on constitutionally dedicated funds may be diverted to general revenue by statute or by appropriations act rider
Dear Mr. Lanier:
You ask two questions regarding the appropriation of interest on funds dedicated by the constitution to highway purposes. You do not inquire about other sources of revenue for the state highway fund. You first ask:
- Can interest on dedicated funds be diverted to general revenue by appropriations act rider?
Article 2543d, V.T.C.S., governs the disposition of interest on time deposits of state funds. Section 1 of this statute provides as follows:
Section 1. Interest received on account of time 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. (Emphasis added).
This provision requires that interest on constitutionally dedicated funds be allocated to the principal, and not to the general revenue fund. Attorney General Opinion M-468 (1969) considered the application of article 2543d, V.T.C.S., to a number of funds in charge of the state treasurer. Three of the funds derived from former article VII, section 17 of the Texas Constitution, which levied a tax to fund construction at designated institutions of higher education. See Tex. S.J. Res. 4, 50th Leg., 1947 Tex. Gen. Laws 1184; Tex. S.J. Res. 24, 59th Leg., 1965 Tex. Gen. Laws 2197. The opinion concluded that those three funds were constitutional funds within the meaning of article 2543d, V.T.C.S., and interest received on account of time deposits thereon was to be credited to the fund.
It is well established that the legislature may not enact, amend, or repeal a general law by appropriations act rider. Tex. Const. art. III, §35; Moore v. Sheppard, 192 S.W.2d 559 (Tex. 1946); Linden v. Finley, 49 S.W. 578 (Tex. 1899); Attorney General Opinions JM-167 (1984); H-1040 (1977); M-1141 (1972); V-1254, V-1253 (1951); O-552 (1939). A rider which attempted to appropriate to general revenue interest received on account of time deposits of constitutionally dedicated funds would be invalid as an attempt to amend or repeal article 2543d, V.T.C.S. Interest on constitutionally dedicated funds may not be diverted to general revenue by appropriation act rider in contravention of article 2543d, V.T.C.S.
You next ask:
- Is it permissible to divert interest by statute on highway department constitutionally dedicated funds to general revenue?
Article VIII, section 7-a of the Texas Constitution dedicates revenues received from motor vehicle registration fees and motor fuel taxes to the provision, maintenance, and policing of public roadways. This constitutional provision states in part:
Sec. 7-a. Subject to legislative appropriation,
on county and road district bonds or warrants voted or issued prior to January 2, 1939, and declared eligible prior to January 2, 1945, for payment out of the County and Road District Highway Fund under existing law; provided, however, that one-fourth (1/4) of such net revenue from the motor fuel tax shall be allocated to the Available School Fund. . . . (Emphasis added).
The term “constructing” in article VIII, section 7-a, does not include
merely the clearing and grading of the roadbed and the pouring of the concrete, but includes “everything appropriately connected with, and necessarily incidental to the complete accomplishment” of the general purpose for which the fund exists.
State v. City of Austin, 331 S.W.2d 737, 746 (Tex. 1960) (cost of utility relocation necessitated by improvement of federally-funded highways).
Article VIII, section 7, of the Texas Constitution prohibits the legislature from borrowing, or in any manner diverting from its purpose, any special fund. Constitutional funds can be transferred to the general revenue fund only by constitutional amendment. Carroll v. Williams, 202 S.W. 504 (Tex. 1918) (county funds).
In Lawson v. Baker, 220 S.W. 260 (Tex. Civ. App. - Austin 1920, writ ref'd), the Austin Court of Civil Appeals determined that interest earned on a special fund created or recognized by the constitution became part of that fund. A taxpayer brought the suit to test the constitutionality of the State Depository Law enacted in 1919. Acts 1919, 36th Leg., ch. 145, at 266. The law provided that the interest on all funds deposited would become part of the general revenue. Id. at 269 (former article 2427 R.C.S.). The court stated as follows:
We think it is clear that the interest earned by deposit of special funds is an increment that accrues to such special fund, and any attempt of the Legislature to make such interest a part of the general revenue is futile, in the face of the constitutional provisions creating or dedicating these funds to special purposes. The broad language of the act would seem to make the interest upon all funds, whether general or special, become part of the general revenue, and this portion of the law, if so construed, would authorize a diversion of the special funds from their constitutional purpose, would specially violate section 7, article 8, and would be unconstitutional and void. (Emphasis added).
Lawson v. Baker, supra, at 272. The court found that the statute could be upheld by a construction allocating to constitutional funds the interest earned thereon or by severing the unconstitutional portion.
According to the opinion in Lawson v. Baker, the legislature lacks power to enact a statute diverting interest on constitutionally dedicated funds to general revenue. The supreme courts of Missouri and Oregon have each considered the question you ask: whether interest earned on a constitutionally dedicated highway fund must be credited to that fund. State Highway Commission v. Spainhower, 504 S.W.2d 121 (Mo. 1973); State v. Straub, 240 Or. 272, 400 P.2d 229 (1965) (en banc). Each court relied on Lawson v. Baker to hold that the legislature could not enact a statute diverting to the general fund the interest on the constitutional highway fund.
We conclude that the legislature lacks authority to enact a statute diverting to the general revenue fund interest on the motor vehicle fees and motor fuel taxes dedicated to highway purposes by article VIII, section 7-a of the Texas Constitution.
SUMMARY
Interest on constitutionally dedicated funds may not be diverted to general revenue by appropriation act rider in contravention of article 2543d, V.T.C.S.
The legislature lacks authority to enact a statute diverting to the general revenue fund interest on the motor vehicle fees and motor fuel taxes dedicated to highway purposes by article VIII, section 7-a of the Texas Constitution.
Very truly yours,
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
ROBERT GRAY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
Jon Bible
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Jennifer Riggs
Nancy Sutton
Bruce Youngblood
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