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Restricted Expenditures
Settlements and Judgments

Provisions of the General Appropriations Act (GAA), Article IX, Section 16.04

Cases brought against state agencies by persons claiming harm or damage due to the actions or negligence of the state are often resolved through two types of actions:

  • Negotiated or mediated settlement, or
  • A judgment issued by a court.

The Legislature has authorized state agencies to make settlement and judgment payments out of their agency appropriations for cases brought against the state in a state or federal court.

If the attorney general prosecuted or defended a settlement or judgment obtained against the state or a state agency, funds appropriated to the agency by the General Appropriations Act (GAA) may be used to pay the settlement or judgment, if:

  • The expenditure complies with Article IX, Section 16.04 of the GAA, or
  • An item of appropriation in the GAA or other law specifically provides funds and authorization for an agency to pay the settlement or judgment.

Note: the above does not apply to a cause of action arising under Chapter 105, Civil Practice and Remedies Code.

Agencies may pay a settlement or judgment if:

  • The payment is approved by the attorney general and governor.
  • In the case of a judgment, the judgment is rendered in a federal or state court and an appeal or rehearing, or an application for an appeal or rehearing, is not pending, and the time limitations for an appeal or rehearing have expired.
  • In the case of a judgment, the payment would be made in full satisfaction of the judgment.
  • The payment of a settlement or judgment does not exceed $250,000.
  • The payment of a settlement or judgment does not exceed one percent of the total amount of funds, excluding federal funds, appropriated to the agency for expenditure by that agency for that fiscal year.
  • The payment of a settlement or judgment would not cumulatively exceed 10 percent of the total amount of funds available for expenditure by that agency for that fiscal year.
  • The person receiving the payment executes a release and releases the state from any further claims against the state.

State agencies must report a claim for property damage to the Attorney General's Office no later than the second working day after the date the agency receives the claim.

Sources [+]

General Appropriations Act. (GAA), Article IX, Section 16.04(a)–(d), (f)

Certain Settlement Agreements Prohibited

A state agency may not enter into a settlement of a claim or action against the agency if:

  • The amount of the settlement is equal to or greater than $30,000;
  • A condition of the settlement requires a party seeking affirmative relief against the agency to agree not to disclose any fact, allegation, evidence or other matter to any other person, including a journalist or other member of the media; and,
  • The money that would be used to pay the settlement is derived from taxes collected by a state agency, received from the state or is insurance proceeds received from an insurance policy for which the premium was paid with taxes collected by a state agency.

A settlement agreement that violates this prohibition is void and unenforceable.

This provision does not affect information that is privileged or confidential under other law.

Sources [+]

Civil Practice and Remedies Code Sections 116.002 and 116.003.

Pre-Litigation Claims

Pre-litigation claims can be paid with COBJ 7221 and do not require settlement by the OAG or the Governor’s signature. An agency must still submit an agency authorization letter and a purchase voucher and a copy of the settlement to the Comptroller’s office.

Appropriation to the Comptroller to pay certain judgments and settlements

The Legislature provides funds to the Comptroller’s office to pay certain settlements and judgments, including:

  • Medical malpractice claims against institutions of higher education under Chapter 59, Texas Education Code.
  • Settlements and judgments related to governmental liability under the Texas Tort Claims Act.

    Note: Attorney fees are not payable with state funds under this Act.

  • Settlements and judgments related to state liability for the conduct of public servants under Chapter 101 and Chapter 104, Civil Practice and Remedies Code, including indemnification for criminal prosecution under Section 104.0035, Civil Practice and Remedies Code.
  • Settlements approved and judgments issued by federal courts.

With the exception of medical malpractice claims, settlements and judgments must be paid from local funds first, then from the general revenue fund (GR). The vouchers must be prepared, verified and signed by the paying agency and signed by the governor.

Agencies will be required to reimburse the GR from special or local funds as those funds become available. If special or local funds are available, those funds should be used before GR funds to pay settlements and judgments.

The Office of the Attorney General prepares a transmittal letter addressed to the Comptroller's office Fiscal Management Division, authorizing payment of a settlement or judgment.

Settlements arising under the Texas Tort Claims Act

A state agency may not agree to a settlement under the Texas Tort Claims Act (TTCA) unless the governor determines the settlement to be in the best interests of the agency. This restriction does not apply to an agency that has acquired insurance under the TTCA.

Sources [+]

Texas Education Code, Chapter 59; Civil Practice and Remedies Code Sections 116.002 and 116.003, Chapters 104 and 105; General Appropriations Act, Strategy A.1.5 and Riders 4 and 5 in the appropriations to Fiscal Programs – Comptroller of Public Accounts.

Documentation Requirements [+]

  1. A purchase voucher submitted to pay a settlement, judgment or claim must be drawn by the involved state agency and approved by the attorney general by letter and the governor by signature on the voucher. This includes claims made in federal court, claims under Chapter 101, 104 or 105, Civil Practice and Remedies Code, or an eligible medical malpractice claim under Chapter 59, Education Code.
  2. Comptroller objects 7221, 7225, 7226 or 7229 must be used.
  3. Comptroller object 7241 must be used for pre-judgment or post-judgment interest.

Appropriation Year Determination for Settlements and Judgments

An agency must charge a settlement or judgment to the appropriation year in which the claim was finalized and approved by both the Governor and the Attorney General. For this purpose, the Comptroller’s office uses the date of the transmittal letter received from the Attorney General as the final approval date.

In the event that settlement or judgment requires legislative approval, the legislature will decide the appropriation year.

Other resources

For more information on settlements and judgments, see Settlement and Judgment Processing Guidelines (FPP E.041).