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Fiscal Matters
Federal Funds

A state agency may accept a payment or grant of funds from the federal government if the agency has specific or implied statutory authority to do so.

If a state agency or institution named in the General Appropriations Act (GAA) has statutory authority to accept federal funds, then the funds are appropriated to the receiving agency or institution. The agency or institution may expend the funds for the purposes for which federal grant, allocation, aid, payment or reimbursement was made.

Except for an institution of higher education, federal funds may not be expended for a strategy or function unless it was reviewed by the state Legislature and the strategy or function:

  • Is authorized by specific language in the GAA, or
  • Is encompassed in an agency’s budget structure as established in the GAA.

Note: The preceding paragraph (including its two bullets) does not apply to an entity or appropriation in Article X of the GAA.

Under the State Funds Reform Act, upon deposit in the state treasury, funds received from the United States government become state moneys and are subject to all applicable limitations and restrictions unless there is a clear manifestation of congressional intent for those limitations and restrictions not to apply.

If that intent is clearly manifested, then a determination must be made whether Congress:

  • Pre-empted state law, or
  • Simply enacted a condition for the state’s acceptance of federal funds that the state may reject and forgo the funds.

Sources [+]

Article IX, Section 8.02(a), (b)(2) and Article X, Section 2(a) of the General Appropriations Act; Opinion of Texas Attorney General Nos. JC-161 (1999), DM 331 (1995), DM-288 (1994), JM 772 (1987), JM 716 (1987), MW-395 (1981), MW-191 (1980), H 1318 (1978), H 777 (1976), M 125 (1967), C 530 (1965).

Acceptance of federal funds by the Comptroller

The Comptroller may accept federal money for a state agency not otherwise restricted by statute or by rider or special provision in the GAA if the agency certifies to the Comptroller that the agency will be responsible for compliance with applicable federal and state law.

The Comptroller is required to execute instruments necessary to accept money, gifts or assets authorized by federal law to be paid to the state:

  • In lieu of taxes, or
  • As a gift by the Secretary of Housing and Urban Development or any federal agency.

The funds received must be deposited in the general revenue fund.

Sources [+]

Texas Government Code Sections 403.012, 403.0121