Can the Texas legislature move money out of a special produce-claims fund into general revenue?

Texas AG Opinion JM-946: Can the Legislature Sweep a Produce-Claims Fund?

Plain-English summary

Texas licenses the middlemen who handle produce, the commission merchants and retailers who buy and sell vegetables and citrus. To protect the farmers and sellers who deal with them, the state keeps a special pot of money called the Produce Recovery Fund. If a licensed dealer stiffs someone, the fund pays the valid claim. It is fed by license fees and penalties, and it replaced an older system where dealers had to post bonds.

At the end of the 1986-1987 fiscal year, the fund had a surplus of roughly half a million dollars, and the legislature passed a bill (Senate Bill 6) that swept $337,348 of it into the state's General Revenue Fund, the general checkbook. The Commissioner of Agriculture asked the Attorney General whether the legislature was actually allowed to do that.

The Attorney General's answer was yes, the transfer was lawful, with one important limit.

The first point is what kind of fund this is. The Texas Constitution protects certain "special funds" and forbids the legislature from diverting them. But the Produce Recovery Fund is not one of those constitutional funds. It was created by ordinary statute, so the constitutional no-diversion rule does not apply to it.

The Commissioner and the Comptroller both thought the whole question hinged on whether the fund is a "trust fund." The Attorney General reframed it. Even for a statutory trust fund, the real question is vested rights. The legislature is generally free to change or reduce a benefit it created by statute, as long as it does not impair a right that has already vested in someone. So the transfer is fine unless it wipes out a right that a specific claimant already holds.

When would that happen here? Only if the transfer eventually drained the fund so much that valid claims could not be paid, and even then, only to the extent the shortfall was actually caused by the transfer rather than by the fund's normal ups and downs. At the time of the request, the fund still had about $141,600 and was viable. So any impairment of a claimant's rights was, at most, a hypothetical future possibility. The Attorney General declined to guess at circumstances that had not happened and would not rule the transfer unlawful based on speculative future harm.

The Commissioner also asked what the Produce Recovery Board should do about paying valid claims if the fund runs dry. The Attorney General saw little legal issue there. The transfer did not change the board's duties. And notably, the fund could run short with or without the transfer, because the statute does not guarantee that enough money will always come in to cover claims. In fact, in the then-current year, more had been paid out than had come in. If cash gets tight, the Department of Agriculture has broad rulemaking power to reduce the amounts it pays out on claims or to push harder on getting reimbursements from the dealers who caused the losses. And if the fund ever needs replenishing, that is a decision for the legislature to make through appropriations.

Currency note

This opinion was issued in 1988. 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.

The Produce Recovery Fund provisions in chapter 103 of the Agriculture Code have been amended since 1988, and the fund's structure, fees, and payout rules may differ today. The vested-rights principle the opinion relied on remains a general feature of Texas law, but its application depends on current statutes and cases. Anyone dealing with a produce-claim payment or a fund transfer today should consult the current Agriculture Code and current case law rather than the 1988 provisions cited here.

Who this opinion affected (as of 1988)

The Department of Agriculture and the Produce Recovery Board: The opinion confirmed the transfer was lawful and did not change the board's duties, while noting the department's rulemaking tools for managing cash flow.

Produce dealers and their claimants: The opinion held that the transfer did not impair vested rights while the fund remained solvent, though it left open a narrow future argument if depletion attributable to the transfer ever blocked valid claims.

The legislature: The opinion confirmed the legislature's authority to sweep the surplus and left the decision to replenish a depleted fund to the appropriations process.

Common questions

Could the legislature move money out of the Produce Recovery Fund?
Yes. The Attorney General concluded the transfer of $337,348 to the General Revenue Fund was lawful, because the fund is a statutory (not constitutional) fund and the transfer did not impair any vested rights.

Does the constitutional ban on diverting special funds apply?
No. The constitutional prohibition in article VIII, section 7 applies to constitutional funds, and the Produce Recovery Fund is a statutory fund, so that ban does not apply to it.

What is the limit on the legislature's power here?
Vested rights. The legislature may reduce a statutory benefit as long as it does not impair a right that has already vested. Here, any impairment was only hypothetical because the fund was still solvent.

What happens if the fund runs out of money?
The transfer did not change the board's duties. The Department of Agriculture can reduce claim payouts or pursue reimbursements by rule, and whether to appropriate money to replenish a depleted fund is up to the legislature.

Background and statutory framework

The Produce Recovery Fund is a special trust fund established by Acts 1977, 65th Legislature, chapter 386 (now chapter 103 of the Agriculture Code) for payment of claims against commission merchants and retailers licensed by the Department of Agriculture to handle vegetables and citrus fruit under chapters 101 and 102 of the code. The fund replaced a prior requirement that licensees be bonded, and is maintained with the state treasurer and administered by the department without appropriation. It is funded by license renewal and late-renewal fees (sections 101.008, 102.008), fees levied against licensees for the fund (section 103.001), and fifty percent of certain penalties (sections 101.020, 102.021, 103.013), with interest staying in the fund (section 103.002(e)); no more than ten percent of the fund may be expended in any year for administration of the claims process (section 103.002(d)), and a licensee whose claim is paid must reimburse the fund (section 103.009).

At the end of the 1986-1987 fiscal year, S.B. 6 (Acts 1986, 69th Leg., 3d C.S., ch. 16) transferred $337,348, part of an approximate $525,000 surplus, from the fund to the General Revenue Fund. Section 103.008(e) provides that payments from the fund in a fiscal year may not exceed the amount deposited that year, except that surplus funds remaining at year-end are available to pay claims in succeeding years, but section 1 of S.B. 6 provided that the Act superseded any law restricting expenditure of the transferred funds to a particular purpose.

The Produce Recovery Fund is not a constitutional fund and is therefore not subject to the article VIII, section 7 provision that the legislature shall not have power to borrow, or in any manner divert from its purpose, any special fund that may or ought to come into the Treasury (Gulf Ins. Co. v. James, 185 S.W.2d 966 (Tex. 1945); Brazos River Conservation & Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936)). Although the request and the Comptroller's letter suggested the question turned on whether the fund is a "trust fund," the Attorney General explained (quoting Attorney General Opinion JM-539 (1986)) that even for a statutory trust fund, the Texas Supreme Court has held that so long as no vested right is impaired, an amendment that alters or reduces a benefit granted by statute is permissible (City of Dallas v. Trammell, 101 S.W.2d 1009 (Tex. 1937); see also Woods v. Reilly, 218 S.W.2d 437 (Tex. 1949); Board of Managers of the Harris County Hospital District v. Pension Board of the Pension System for the City of Houston, 449 S.W.2d 33 (Tex. 1970); Devon v. City of San Antonio, 443 S.W.2d 598 (Tex. Civ. App. - Waco 1969, writ ref'd); Attorney General Letter Advisory No. 5 (1973)).

No vested rights would be impaired by the S.B. 6 diversion unless and until the fund is actually depleted, and then only to the extent the depletion and resulting insufficiency for meeting claims is attributable to the diversion. Because the fund remained viable, with a balance of approximately $141,600 as of March 8, 1988, and neither the request nor the Comptroller's letter discussed any vested-rights impairment, the Attorney General declined to hypothesize circumstances under which impairment might occur or to rule the transfer unlawful based on only potential impairments.

On the second question, whether depletion would alter the Produce Recovery Board's responsibility for awarding payment on valid claims, the board advises the department on all matters relating to the fund and conducts hearings on disputed claims (sections 103.003 et seq.). Assuming the transfer was lawful (no vested rights impaired), the Attorney General did not believe the board's legal responsibilities were altered by the transfer. Even apart from S.B. 6, chapter 103 does not guarantee against depletion: for fiscal 1987-1988 through March 1, 1988, $47,422.75 had come into the fund while $99,396.05 had been paid out, a shortfall attributable to the statutory scheme rather than the transfer. The department, on the board's advice, has broad rulemaking authority (section 103.004) to confront cash-flow difficulties by reducing amounts paid out on claims (section 103.008 generally sets ceilings on payouts), and may seek to increase reimbursements (section 103.009). Whether appropriations should be made to replenish a depleted fund is within the legislature's purview.

Citations

Statutory and constitutional authority:

• Chapter 103, Agriculture Code (Produce Recovery Fund; claims, funding, and administration)
• Section 103.008, Agriculture Code (limits on payments; surplus available in succeeding years)
• Section 103.002, Agriculture Code (interest stays in fund; administrative-expense cap)
• Section 103.009, Agriculture Code (licensee reimbursement of the fund)
• Article VIII, section 7, Texas Constitution (prohibition on diverting a special fund; inapplicable to statutory funds)

Cases:

• Gulf Ins. Co. v. James, 185 S.W.2d 966 (Tex. 1945) (Texas Supreme Court; constitutional special-fund protection)
• Brazos River Conservation & Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936) (Texas Supreme Court; special funds)
• City of Dallas v. Trammell, 101 S.W.2d 1009 (Tex. 1937) (Texas Supreme Court; statutory benefit may be reduced if no vested right is impaired)
• Woods v. Reilly, 218 S.W.2d 437 (Tex. 1949) (Texas Supreme Court; vested rights in statutory benefits)
• Devon v. City of San Antonio, 443 S.W.2d 598 (Tex. Civ. App. - Waco 1969, writ ref'd) (Texas appellate court; vested rights)

Prior Attorney General materials referenced: JM-539 (1986); Attorney General Letter Advisory No. 5 (1973).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-946
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0946.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative. The page-1 header renders the opinion number as "JR-946"; the opinion is JM-946.

August 25, 1988

Honorable Jim Hightower
Commissioner of Agriculture
P.O. Box 12847
Austin, Texas 78711

Opinion No. JM-946

Re: Authority of the legislature to transfer funds from the Produce Recovery Fund Board into the General Revenue Fund (RQ-1377)

Dear Mr. Hightower:

An act of the 69th Legislature provided for the transfer of $337,348 from the Produce Recovery Fund (hereinafter "the fund") to the General Revenue Fund at the end of the 1986-1987 fiscal year. Acts 1986, 69th Leg., 3d C.S., ch. 16 (hereinafter "S.B. 6"). You ask whether the legislature had authority to make such transfer.

The Produce Recovery Fund is a "special trust fund" established by Acts 1977, 65th Legislature, chapter 386 (now chapter 103 of the Agriculture Code) for the payment of claims against commission merchants and retailers licensed by the Department of Agriculture to "handle" vegetables and citrus fruit under chapters 101 and 102 of the code. The fund provisions replaced a prior requirement that licensees be bonded. The fund is maintained "with the state treasurer" and "administered by the department, without appropriation." License renewal fees and late license renewal fees under sections 101.008 and 102.008, fees levied against licensees specifically for the fund under section 103.001, and fifty percent of penalties assessed under sections 101.020, 102.021 and 103.013, go into the fund. Interest earned on such money stays in the fund. Section 103.002(e). Section 103.009 provides that if the department pays from the fund a claim against a licensee, the licensee shall reimburse the fund on a schedule to be determined by rule of the department. Section 103.002(d) provides that no more than ten percent of the fund may be expended in any year for administration of the claims process.

According to information given in your request, the $337,348 dollars transferred from the fund by S.B. 6 was part of an approximate $525,000 surplus remaining in the fund at the end of the 1986-1987 fiscal year. Section 103.008 provides in subsection (e):

Payments from the fund during a fiscal year may not exceed the amount of money deposited into the fund during that fiscal year, except that surplus funds remaining at the end of each fiscal year are available for the payment of claims during any succeeding year.

Section 1 of Senate Bill 6, however, provided in part that "this Act supersedes any law restricting the expenditure of [the transferred funds] to a particular purpose."

The Produce Recovery Fund is not a "constitutional fund," and is thus not subject to the provision of Texas Constitution article VIII, section 7 that "[t]he legislature shall not have power to borrow, or in any manner divert from its purpose, any special fund that may, or ought to, come into the Treasury." Gulf Ins. Co. v. James, 185 S.W.2d 966 (Tex. 1945); Brazos River Conservation and Reclamation District v. McCraw, 91 S.W.2d 665 (Tex. 1936).

Your request letter and the letter we have received from the Comptroller's office in connection with your request both suggest that resolution of the question whether the Produce Recovery Fund is in fact a "trust fund" should be dispositive of your question as to the propriety of the Legislature's diversion of the $337,348 from the fund to the General Revenue Fund.

However, as Attorney General Opinion JM-539 (1986) stated:

[E]ven in the case of a statutory trust fund, the Texas Supreme Court has ruled that, so long as no vested right is impaired, an amendment that serves to alter or reduce a benefit heretofore granted by statute is permissible. (Emphasis added.)

City of Dallas v. Trammell, 101 S.W.2d 1009 (Tex. 1937). See also Woods v. Reilly, 218 S.W.2d 437 (Tex. 1949); Board of Managers of the Harris County Hospital District v. Pension Board of the Pension System for the City of Houston, 449 S.W.2d 33 (Tex. 1970); Devon v. City of San Antonio, 443 S.W.2d 598 (Tex. Civ. App. - Waco 1969, writ ref'd); and Attorney General Letter Advisory No. 5 (1973).

Clearly, no vested rights will have been impaired by the S.B. 6 diversion unless and until the fund is actually depleted, and then only to the extent that the fund's depletion and consequent insufficiency for meeting claims is attributable to the diversion of fund moneys by S.B. 6. Your request letter indicates, however, that the fund is still viable, having a balance of approximately $141,600 as of March 8, 1988, the date of your request.

Neither your request nor the comptroller's letter discuss whether any vested rights have been or will be impaired by the S.B. 6 diversion.

Given the highly speculative nature of any argument that actual claimants' rights might eventually be impaired by virtue of the S.B. 6 transfer, we decline to hypothesize circumstances under which such impairments might occur or to rule whether the S.B. 6 transfer was unlawful as a result of such at present only potential impairments of vested rights.

You also ask:

If the legislature does have the authority to make such a transfer, and the Fund is depleted, what is the Board's responsibility as to the awarding of payment on valid claims?

The board you refer to is the Produce Recovery Board, which has the duty of advising the department on "all matters relating to the fund" and of conducting hearings on disputed claims. Sections 103.003 et seq.

We have difficulty discerning any legal issues presented by your second question. Particularly under the circumstances assumed by your question, that the S.B. 6 transfer was lawful -- i.e. that no vested rights have been or will be impaired -- we do not believe that the board's legal "responsibilities" are altered by virtue of the S.B. 6 transfer.

Even apart from the operation of S.B. 6, there is no guarantee under the statutory scheme of chapter 103 that the fund will not be depleted. Your request letter indicates, for example, that for the fiscal year 1987-1988 up to the date of your letter (March 1, 1988) $47,422.75 had come into the fund while $99,396.05 had been paid out. It is obvious that such a revenue shortfall vis a vis expenditures is not the result of the diversion of funds under S.B. 6, but is a result, rather, of the statutory scheme of chapter 103 which makes no provision to assure that the fund has sufficient revenues to meet claims and administrative expenses.

The Department of Agriculture acting on the advice of the board appears to have broad rule making authority under section 103.004 for confronting such cash flow difficulties by reducing the amounts paid out in claims under section 103.008. The latter section generally only sets ceilings on such payouts on claims. Amounts or percentages of claims to be paid out could, we think, be reduced by administrative rule.

Also, the department may seek, via its rule making authority under section 103.009 and perhaps by more diligent efforts generally, to increase the amounts obtained in reimbursements under that section.

Whether appropriations should be made to replenish the fund if depleted is of course a matter within the purview of the legislature.

SUMMARY

The transfer of $337,348 from the Produce Recovery Fund to the General Revenue Fund by operation of Senate Bill 6, 3rd Called Session, 69th Legislature, was lawful so long as it did not impair any vested rights. The transfer might result in impairment of vested rights of certain claimants, if the transfer results in depletion of the Produce Recovery Fund such that their claims cannot be paid. That any vested rights will be impaired is, however, only a hypothetical possibility since the fund is at present still viable.

S.B. 6 did not alter the legal responsibility of the Produce Recovery Board in administering the fund.

Whether appropriations should be made to replenish the fund if depleted, is of course a matter within the purview of the legislature.

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

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General