Could Texas appropriate interest earned on non-constitutionally dedicated money in the State Highway Fund for general revenue purposes?

Texas AG Opinion JM-323: Highway Fund Interest

Plain-English summary

Texas legislative leaders asked whether an appropriations rider could use interest earned on nonconstitutional money in the State Highway Fund for general revenue purposes. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Article VIII, section 7-a, constitutionally dedicated net motor-vehicle registration revenue and specified motor-fuel and lubricant taxes to highway purposes. JM-323 said interest on those dedicated revenues also had to be used for highway purposes. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

The State Highway Fund also contained money placed there only by statute, including proceeds from excess land sales, federal and county aid, and certain general-revenue transfers. The opinion described the fund as "a collection of constitutional and non-constitutional funds." Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Interest on statutory money could be legally separated and credited to general revenue under article 2543d, unless the principal was also a trust fund. Constitutional-fund interest and trust-fund interest had to remain with the relevant fund. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

JM-323 concluded that the Legislature could appropriate the severed general-revenue interest by rider, so long as the rider only appropriated or limited an appropriation and did not conflict with general law. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.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

Was the entire State Highway Fund constitutionally protected?

No. JM-323 said the fund contained both constitutionally dedicated revenue and money deposited by statute alone. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

What happened to interest on motor-vehicle registration fees and motor-fuel taxes?

It remained dedicated to highway purposes because the underlying revenue was constitutionally dedicated by article VIII, section 7-a. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Could interest on statutory highway-fund deposits go to general revenue?

Yes, if the money was neither constitutionally dedicated nor held in trust. Article 2543d credited that interest to the General Revenue Fund. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Could interest on federal grant money be diverted?

Not when the grant money was a trust fund. The opinion cited prior authority holding that trust-fund interest remained part of the trust. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Could any appropriations rider move the interest?

No. JM-323 said a valid rider had to be consistent with general law and limited to appropriating funds or limiting an appropriation. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Background and statutory framework

The State Highway Fund was created by statute before article VIII, section 7-a, was adopted in 1946. Article 6694 directed registration fees and other highway revenue into the fund, while later Tax Code provisions allocated motor-fuel taxes there. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

The constitutional amendment gave protected status to revenue already dedicated by statute but did not transform every later statutory deposit into constitutional money. Articles 6673a, 6674e, and 6674f provided examples of nonconstitutional deposits. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Article 2543d allocated depository interest pro rata to constitutional funds, preserved other statutorily protected or trust interest, and placed the remainder in general revenue. Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Citations and references

• Tex. Const. article VIII, sections 7 and 7-a
• Tex. Const. article III, section 35
• V.T.C.S. articles 2543d, 6673a, 6674e, 6674f, and 6694
• Texas Tax Code sections 153.503 through 153.505
• Lawson v. Baker, 220 S.W. 260 (Tex. Civ. App. - Austin 1920, writ ref'd)
• Gulf Insurance Co. v. James, 185 S.W.2d 966 (Tex. 1945)
• Brazos River Conservation & Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936)
• Jessen Associates, Inc. v. Bullock, 531 S.W.2d 593 (Tex. 1975)
• Moore v. Sheppard, 192 S.W.2d 559 (Tex. 1946)

Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.pdf

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0323
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1985/jm0323.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 31, 1985

Honorable William P. Hobby
Lieutenant Governor of Texas
P. O. Box 12068, Capitol Station
Austin, Texas 78711

Honorable Gib Lewis, Speaker
Texas House of Representatives
P. O. Box 2910
Austin, Texas 78769

Honorable Grant Jones, Chairman
Senate Finance Committee
Texas State Senate
P. O. Box 12068, Capitol Station
Austin, Texas 78711

Honorable Jim Rudd, Chairman
House Appropriations Committee
Texas House of Representatives
P. O. Box 2910
Austin, Texas 78769

Opinion No. JM-323

Re: Whether interest on non-constitutional funds in state highway fund may be appropriated for general revenue purposes

Gentlemen:

You ask whether interest on non-constitutional funds in the state highway fund may be appropriated for general revenue purposes by rider to the General Appropriations Act.

Article VIII, section 7-a, of the Texas Constitution dedicates to highway purposes

all net revenues remaining after payment of all refunds allowed by law and expenses of collection derived from motor vehicle registration fees, and all taxes, except gross production and ad valorem taxes, on motor fuels and lubricants used to propel motor vehicles over public roadways. . . .

The interest on the motor vehicle registration fees and fuel taxes dedicated to highway purposes by article VIII, section 7-a, must also be used for highway purposes. A diversion of that interest to other purposes would violate article VIII, section 7 of the Texas Constitution. Lawson v. Baker, 220 S.W. 260 (Tex. Civ. App. - Austin 1920, writ ref'd); see V.T.C.S. art. 2543d.

Article VIII, section 7-a, of the Texas Constitution does not actually establish a state highway fund, or refer to the fund by name. The fund was created by statutes which predate the adoption of article VIII, section 7-a, in 1946. See Tex. A.J.Res. 49, 49th Leg., 1945 Tex. Gen. Laws 1049. Article 6694, V.T.C.S., which derives from a 1917 statute, provides that

[a]ll funds coming into the hands of the Commission derived from the registration fees or other sources provided for in this subdivision, as collected, shall be deposited with the State Treasurer to the credit of a special fund designated as "The State Highway Fund". . . .

Acts 1917, 35th Leg., ch. 190, §23, at 424. Sections 153.503 through 153.505 of the Texas Tax Code allocate motor fuel taxes to the state highway fund. These provisions are the current codification of statutes enacted in 1941. Acts 1941, 47th Leg., ch. 184, art. XVII, §25 at 330. The approval of article VIII, section 7-a, in 1946 gave constitutional status to dedications of funds already required by statute.

There are statutory dedications of monies to the state highway fund which do not have constitutional status. Article 6673a, V.T.C.S., requires funds derived from the sale of excess land to be placed in the state highway fund. Federal aid money and county aid money is deposited in the state treasury to the credit of the state highway fund. V.T.C.S. art. 6674e. Article 6674f, V.T.C.S., provides for certain transfers of general revenue to the state highway fund.

The state highway fund therefore is not a constitutional fund in its entirety. It consists of funds dedicated to highway purposes by the constitution as well as funds statutorily required to be placed in the highway fund. It thus can be described as a collection of constitutional and non-constitutional funds. Only the constitutionally dedicated registration fees and motor vehicle fuel taxes are subject to the rule that interest must be spent for constitutionally authorized purposes. See V.T.C.S. art. 2543d; Lawson v. Baker, supra. The interest on state funds dedicated by statute to highway purposes may be legally severed and placed in the general revenue fund. See Gulf Insurance Co. v. James, 185 S.W.2d 966 (Tex. 1945) (article VIII, section 7, of Texas Constitution applies only to special funds created by the constitution, not by statutes); Attorney General Opinion MW-338 (1981); see also Brazos River Conservation & Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936) (article VIII, section 7, of the Texas Constitution does not apply to general revenue funds).

Article 2543d, V.T.C.S., severs the interest from the principal of non-constitutional funds placed in state depositories.

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.

Interest on constitutional funds must be credited to the constitutional fund and interest on trust funds must be credited to the trust fund. See Attorney General Opinions JM-306 (1984); MW-82 (1979); H-1040 (1977); M-468 (1969). Attorney General Opinion M-468 (1969) held that certain federal grant funds were trust funds, and that interest on them could not be transferred to general revenue but remained part of the trust fund.

Article 2543d, V.T.C.S., placed in the general revenue fund interest on certain monies in the state highway fund, i.e., those which are neither trust funds nor constitutionally dedicated revenues. The legislature may appropriate by rider interest which article 2543d, V.T.C.S., placed in the general revenue fund, so long as the rider is not inconsistent with general law. The validity of a particular rider depends on its only appropriating funds or limiting an item of appropriation. See Tex. Const. art. III, §35; Jessen Associates, Inc. v. Bullock, 531 S.W.2d 593 (Tex. 1975); Moore v. Sheppard, 192 S.W.2d 559 (Tex. 1946).

SUMMARY

Interest earned on non-constitutional funds in the state highway fund may be appropriated for general revenue purposes.

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
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Jennifer Riggs
Nancy Sutton
Bruce Youngblood