UiNAWFoHD     C. MAHTIN
                                 AUWI-XN.TEXAS          78711
  AProIaNRY OENERAL                    February   17,    1970     -”
                                                                                   52&&

                                                                       =A                 ’
       Honorable J. C. Dingwall                          Opinion No.. M-582
       State Highway Engineer
       Texas Highway Department
       Austin, Texas 78701                               Re:    Questions  conce,rn-
                                                                ing the purchase of
                                                                group insurance for
                                                                State Highway De-
       Dear Mr.   Dingwall:                                     partment employees.

               Your recent request   for an opinion of this office submits ques-
       tions concerning the application of Articles  3. 50 and 3. 51 .of the Texas
       Insurance Code, as amended.      These questions are:

                        “1.    Can the Texas Highway Department partici-
               pate in the premium cost for Highway Department          em-
               ployees and appointive officials under a policy or policies
               of group health, accident,    accidental death and dismem-
               berment,     disability income replacement    and hospital,
               surgical and/or medicalexpense       insaranoe?   ..    ...

                         “2.    Can the Texas Highway Department partici-
               pate in the premium cost of group policies which provide.
               hospital,     surgical and/or medical expense insurance for
               dependents of Highway Department       employees  and ap-
               pointive officials?

                       “3.   Can the Texas Highway Department partici-
               pate in the, premium cost of group life insurance policies
               for Highway Department     employees  and appointive offi-
               cials?

                        “4.   Can the Texas Highway Department procure
               contracts    with 3     insurance company authorized to do, .
               business   in this state and participate in the cost for group
               insurance found to be legal in questions    1, 2 and 3 as
               listed above?




                                    -2771-
Honorable   J.C.     Dingwall,     page 2    (R-582)




                “5.  If the answer to question 4 above is found
       to be negative as it may apply to certain types of in-
       surance companies,      can the Texas Highway Department,
       acting through a Board of Trustees       or similar arrange-
       ment, consisting    of Highway employees      and appointed
       by the Highway Commission,        procure contracts with
       such insurance companies      authorized to do business     in
       this state and participate   in the cost for group insur-
       ance found to be legal in questions     1, 2 and 3 as listed
       above?

                “6. Can the Comptroller  legally pay the pre-
       mium cost under S. B. 574, 61st Legislature,    Regu-
       lar Session,  and as authorized by the Texas Highway
       Department out of the State Highway Fund for such
       group insurance coverage as found legal in questions
       1, 2. 3, 4 or 5 as listed above?”

          Article 3. 50 of the Texas Insurance Code deals with group life
insurance upon public employees.       Article  3. 51 deals with medical and
disability insurance upon State employees      and medical insurance upon the
dependents of such employees.

       Article     3. 50,    Section   1, provides,    in part,   as follows:

                “No policy of group life insurance shall be de-
       livered in this State unless it conforms to one of the
       following descriptions:

                   ‘1. . .

                ‘I( 3) A policy issued to any association        of
       employees      of the United States Government        or any
       subdivision thereof,      provided the majority of the
       members       of such association     are residents of this
       state, an association      of public employees,      an in-
       corporated      city, town or village, an independent
       school district,      common school district,      state
       colleges   or universities,      any association   of state
       employees,       any association    of state, county and
       city, town or village employees,          and any associa-




                                   -2772-
Honorable   J. C.     Dingwall,    page 3 (M-582)




       tion of any combination of state, county or city,
       town or village employees    and any department of
       the state government which employer or associa-
       tion shall be deemed the policyholder      to insure the
       employees    of any such incorporated    city, town or
       village,  or any such independent school district,
       of any common school district,     of any such state
       college or university,   of any such department of
       the state government,    members    of any associa-
       tion of state, county or city, town or village or
       of the United States Ciovernment or any subdivision
       thereof,  provided the majority of such employees
       reside in this state, employees    for the benefit of
       persons other than the policyholder     subject to the
       following requirements:

                    ‘1. .

               l’(b) The premium for a policy issue.d to
       any policyholder  authorized to be such policyholder,
       under Subsection (3) of Section 1, Article 3. 50,
       Texas Insurance Code, may be paid in whole or in
       part from funds contributed by’ the. employer,  ‘or in
       whole or in part from funds contributed by the per-
       sons insured under said policy    . .”

       Article      3. 51,   Section   l(a) provides:

                  “(a) The State of Texas and each of its
       political,    governmental    and administrative      sub-
       divisions,     departments,    agencies,  associations
       of public employees,       and the governing boards and
       authorities     of each state university,    colleges,    com-
       mon and independent school districts          or of any other
       agency or subdivision of the public school system of
       the’;State of Texas are authorized to procure con-
       tracts with any insurance company authorized to do
       business     in this state insuring their respective       em-
       ployees,     or if an association   of public employees      is
       the policyholder,      insuring its respective     members,




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    Honorable   J. C.   Dingwall,     page 4   (M-582)



            or any class or classes        thereof under a policy or
            policies of group health, accident,          accidental death
            and dismemberment,          disability income replacement
            and hospital,     surgical and/or medical expense in-
            surance or a group contract providing for annuities.
            The dependents of any such employees             or association
            members,      as the case may be, may be insured under
            group policies which provide hospital,            surgical and/or
            medical expense insurance.            The insureds’ contri-
            butions to the premiums         for such insurance or an-
            nuities issued to the employer or to an association
            of public employees       as the policyholder      may be de-
            ducted by the employer from the insureds’ salaries
            when authorized in writing by the respective             em-
            ployees so to do.       The premium for the policy or con-
            tract may be paid in whole or in part from funds con-
           tributed by the employer or in whole or in part from
           funds contributed by the insured employees.                When an
            association    of public employees       is the holder of such .
           a policy of insurance or contract,           the premium for em-
           ployees that are members           of such association     may be
           paid in whole or in part by the State of Texas or other
           agency authorized to procure contracts or policies of
           insurance under this section,          or in whole or in part
           from funds contributed by the insured employees               that
           are members        of such association;      provided,   however,
           that any monies or credits received by or allowed to
           the policyholder      or contract holder pursuant to any
           participation     agreement     contained in or issued in con-
           nection with the policy or contract shall be applied to
           the payment of future premiums            and to the pro rata
           abatement of the insured employee’s             contribution there-
           for.

                     “The term employees     as used herein in addi-
            tion to its usual meaning shall include elective and
            appomtive officials  of the state. ‘1

             In reply to your first question we point out that this office has
    previously   approved State financial participation in group health and




                                    -2774-
Honorable   J. C.   Dingwall,    page 5   (M-582)




accident insurance plans for State employees.      Attorney General’s
Opinion M-125 (1967) holds that the expenditure of state funds to pay
the premiums    for certain group insurance contracts for State employees
as a part of their benefits or compensations    is within the realm of pub-
lic purpose.   Based upon the prior opinion of this office,     and the speci-
fic authority granted in the above quoted Article    3. 51, you are advised
that the Texas Highway Department may participate         in the premium cost
for insurance upon Highway Department       employees    under a policy or
policies of group health, accident,  accidental death and dismemberment,
disability income replacement    and hospital,  surgical and/or medical ex-
pense insurance.

         Your second question deals with the State’s participation      in the
payment of premiums        on group hospital, surgical and/or medical expense
insurance upon the dependents of Highway Department          employees,    and
your third question involves the participation’in     the payment of premiums
of group life insurance on the Highway Department employees          themselves.
Your second and third questions involve essentially       the same problems      of
law and will be answered jointly.      Those problems    relate to the constitu-
tionality of the statutes,    and we conclude that the provisions   above quoted
are constitutional.

         In Attorney General’s       Opinion M-l 38 (1967).    it was held that there
was no unconstitutional     gift of public funds in permitting the State to partici-
pate in group life insurance premiums           for State employees.     In Attorney
General’s    Opinion M-408 (1969),        dealing with the subject of insurance
policies for Legislators,      it was held that there was no constitutional        pro-
hibition against the use of State funds to make premium payments on group,
health and accident insurance policies for members             of the Legislature,    but
that there were constitutional       prohibition against the use of State funds for
the payment of premiums         on group life policies for Legislators      and their
dependents and for group health and accident policies covering the dependents
of Legislators.     In that opinion it was pointed out that Section 24 of Article
III of the Constitution of Texas specifically        limits the salary and expenses
which may be paid members           of the Legislature    and that Section 51 of Article
III and Section 6(a) of Article XVI of the Constitution prohibit grants and ap-
propriations    for private or individual purposes.         That opinion held that
there was no constitutional       inhibition against the use of State funds to pay
for sickness and accident insurance for the Legislators            themselves    because:




                                -2775-
r.       .




                 Honorable   J. C.   Dingwall,   page 6   (B-582)



                                 “Such an expenditure   serves a beneficial
                         and useful public or governmental     function in help-
                         ing to assure maximum State service and is di-
                         rectly related to the health and well being of State
                         servants in the performance    of their duties. ”
                         (Emphasis    added. )

                 However,    no such connection      between   the functioning’of    the Legislative
                 branch of the government and the payment of life insurance premiums          upon
                 their lives or the payment of premiums      for health and accident insurance
                 upon the dependents of Legislators     was found to exist, and, since the pay-
                 ments were in excess of the limitations     provided by Section 24 .of Article
                 III of the Constitution this office held that the constitutional inhibitions
                 against appropriations for private or individual         purposes    barred   the .pay-
                 ment of such premiums    by the State.

                          The above mentioned opinions (M-408           and 138) are to be distinguished.
                 It will be observed that Attorney General’s         Opinion M-408 involved insurance
                 coverage for State Legislators,        whose compensation       and expense allowances
                 are established    and expressly     limited by the Constitution,     while Attorney
                 General’s   Opinion M-138 deals with State employees,            whose salaries    and
                 other rights to compensation        are determined by the Legislature        under power
     .       .   given. it by Section 44 of Artitle III of the Constitution.        In other words,    under
                 the Constitution the Legislature       may fix its own salary or compensation         only
                 within the Constitutional     limitations,   but there are no such limitations      affect-
                 ing the amount of the benefits and compensation           of other state employees.
                 Of course,   the Constitutional     provisions   of Article III, Section 51 and Article
                 XVI, Section 6(a), forbiding grants and appropriations            for private or individual
                 purposes unless authorized by the Constitution,           apply to both Legislators      and
                 public employees.      But we do not deem any of these Constitutional           prohibitions
                 to be applicable to Articles      3. 50 and 3. 51 of the Insurance Code, as amended.
                 What might be considered        a valid “compensation”      to public employees,     if
                 given to Legislators,    might be prohibited by the plain limitations         provided by
                 Section 24 of Article III of the Constitution and thus become an unconstitution-
                 al gift or appropriation   for private purposes.        See Terre11 v. Middleton,       187
S.W. 367, 371-373,   (Tex.    Civ. App. 1916, error ref. 108 Tex. 14, 191 S.W.
1138, reh. den. 108 Tex. 19, 193S.W.            139).

                          Byrd v. City of Dallas,  118 Tex. 28, 6 S.W.2d 738 (1938) involved a
                 constitutional  challenge to the validity of a public employees’ pension program.




                                                 -2776-
. .   .




          Honorable   J. C.     Dingwall,    page 7   (M-582)



          The Court   stated:

                            “It is academic to say the Legislature     has
                  power to pass any law which its wisdom suggests
                  that is not forbidden by some provision of the Con-
                  stitution (federal or state. ) If the pension provided
                  for in this Act is a gratuity or a donation to the bene-
                  ficiary,   it is clearly forbidden by the fundamental
                  law.     On the other hand, if it is a part of the compensa-
                  tion of such employee for services        rendered to the city,
                  or     it be for a public purpose,    then clearly it is a
                  valid exercise     of the legislative power. ‘I (Emphasis
                  added. )

                  In applying the Byrdtest,     our question becomes a matter of de-
          termining whether the legislative     authorization  contained in Articles    ‘3. 50
          and 3. 51, quoted above, for State participation     in the payment of premiums
          for group life insurance upon its employees       or group hospital,   surgical
          and,/or medical expense insurance policies that cover the dependents of its
          employees   may be considered     as a part of the benefits or compensation        for
          such employees    for services   rendered to, the State.   The authorization     for
          these types of expenditures    was first enacted in 1967, by way of amend-
          ment to Articles   3. 50 and 3. 51.  The authorizationjwith     certain additions
          which are not material to this opinion) was specifically      reenacted in 1969,
          subsequent to our 1967 opinion, M-138,        above.

                    We cannot assume that the Legislature        intended to authorize an un-
           constitutional  deed; rather,    it is our duty to interpret the legislative   act so
          as to give it full constitutional     effect, if such be reasonably  possible.
          Friedman v. American       Surety Co. of New York,        137 Tex. 149, 151 S.W.2d
570, 578 (1941); Greene v. Robinson,          111 Tex. 516. 8 S.W.2d 655 (1928);
           53 Tex. Jur. 2d 225, Statutes,      Section 158.    A conclusion that the expendi-
          tures referred to in your questions No. 2 and No. 3 are intended to be part
          of the compensation    for State employees       would render the statutes constitu-
          tional and at the same time give full effect to the clearly expressed          will of
          the Legislature.     We so conclude.

                  Opinion M-l 38, mentioned above, relies,    in part, upon the reason-
          ing advanced in Opinion WW-888,    where this office held that the Board of
          Texas Statr Hospitals and Special Schools was authorized to rent housing
          for the business manager of a state school.   The authorizations   in question




                                            -2777-
.   1




        Honorable   J. C.   Dingwall,    page 8 (~-582)




        (for group life insurance on the employees     and group hospital,   surgical
        and/or medical expense insurance policies covering their dependents)
        involve basic living expenses of State employees.      The Legislature,     in
        enacting these statutes,    was apparently motivated by a desire,    among
        other things, to keep the State employees’     compensation  in line with the
        cost of living.   State participation in group insurance programs     that are
        a normal expense of modern life, in our opinion, must be considered           as
        compensation    for the employee and not a gratuity.    See Friedman    v.
        American    Surety Co. , supra.

                In response to your second and third questions,      you are there-
        fore advised that it is the opinion of this office that the Texas Highway
        Department may participate      in the premium cost of group policies which
        provide hospital,    surgical and/or medical expenses insur.ance for de-
        pendents of Highway Department employees         and appointive officials,  and
        can participate   in the premium cost of group life insurance policies for
        such employees.

                  With regard to your fourth question,     your attention is directed
        ,to Attorney General’s     Opinion WW-986   (1961),    and the authorities   cited
        therein which construe Section 52 of Article III of the Constitution.          Based
        upon such opinion you are advised that the State may not enter ‘into any
         contract whereby it would become a member (or shareholder)             in a mutual
         insurance company.       The language of Section l(a) of Article    3. 51 of the
         Insurance Code authorizing the procurement         of such insurance from “any
         insurance company authorized to do business in this state” must be con-
         strued in the light of the prohibitions  contained in said Section 52 of Article
         III of the Constitution.   We are aware of no restriction,     other than good
        business discernment,       which would prohibit the State from contracting
        with any other type of insurance company.

                 With regard to your fifth question,   it is our opinion that the State
        agency may not authorize trustees to do what it could not do by and for
        itself.   It could not confer upon others a greater authority than it possesses
        under the Constitution and statutes.     Therefore,    in our opinion, the action
        of the State agency, through trustees or other agents,        in purchasing~ in-
        surance in a mutual company would be prohibited by Section 52 of Article
        III of the Constitution.

                Your sixth question,        regarding   the authority   of the Comptroller




                                        -2778-
.   .   1




            Honorable   J. C.   Dingwall,    page 9   (M-582)




            to pay the premium costs suthorixcd by the          Texas Highway Department
            under Articles    3. 50 and 3. 51, (as amended      and reenacted by S. B. 574,
            6lst Legislature,     R. S. , 1969, Ch. 414, p.     1371) is answered in the af-
            firmative.   See Attorney General’s     Opinion     M-138 (1969)  and our answers
            to questions one, two and three above.

                                                SUMMARY

                              By virtue of the specific authority granted
                    in Article   3. 51 of the Texas Insurance Code the Texas
                    Highway Department may participate         in the premium
                    cost for Highway Department        employees   and appointive
                    officials under a policy or policies of group health,
                    accident,   accidental death and dismemberment,          dis-
                    ability income replacement      and hospital,   surgical
                    and/or medical expense insurance.

                               By virtue of Article 3. 51 of the Texas Insurance
                    Code the Texas Highway Department may participate            in
                    the premium cost of group policies which provide hos-
                    pital, surgical,    and/or medical expense insurance for
                    dependents of Highway Department         employees   and ap-
                    pointive officials,   and by virtue of Article 3. 50, said
                    Department may participate       in the premium’cost    of group
                    life insurance policies for such employees       and appointive
                    officials.

                            By virtue of Section52 of Article III of the Consti-
                    tution of Texas a State agency may not enter, eitlier di-
                    rectly nor through trustees or agents into any contract
                    whereby it would become a shareholder       in a mutual in-
                    surance company.      Articles 3. 50 and 3. 51 of the Texas In-
                    surance Code contain no prohibition regarding the authority
                    of the State to contract with any other type of insurance
                    company.

                             The Comptroller    may legally pay the premium costs
                    authorizctl by lhr Texas Highway Ikpartmcnt      under Articles
                    1%.50 and ~3.5 I of the Texas Insurance Code.




                                            -2779-
Honorable   .I.&.   Dingwall,    page 10 (i-582)



Prepared    by Ralph R. Rash
Assistant   Attorney General

APPROVED:
OPINION COMMITTEE

Kerns Taylor,  Chairman
W. E. Allen, Acting Co-Chairman

Wayne Rodgers
Roger Tyler
Ray McGregor
Jack Goodman
Rex White

MEADE F. GRIFFIN
Staff Legal Assistant

ALFRED    WALKER
Executive Assistant

NOLA WHITE
First Assistant




                                -2780-