B-143573, SEP. 20, 1962

B-143573, SEP. 20, 1962

TO THE TREASURER, STATE OF TEXAS:

THERE HAS BEEN SUBMITTED FOR CONSIDERATION BY THIS OFFICE THE CLAIM OF THE UNITED STATES IN THE SUM OF $160,768.77 ASSERTED BY THE DEPARTMENT OF AGRICULTURE AGAINST THE STATE OF TEXAS ON THE BASIS OF STATE MISUSE OF FEDERAL FUNDS GRANTED AS PART OF THE 1953 EMERGENCY HAY PROGRAM FOR THE RELIEF OF FARMERS AFFECTED BY DROUGHT IN THAT YEAR. THE CLAIM WAS ORIGINALLY SUBMITTED TO THE ATTORNEY GENERAL OF THE UNITED STATES IN 1958 AS UNCOLLECTIBLE BY THE SECRETARY OF AGRICULTURE.

PURSUANT TO REQUEST OF THE DEPARTMENT OF JUSTICE, WE WITHHELD FROM FUNDS OTHERWISE DUE THE STATE OF TEXAS SUFFICIENT FUNDS TO OFFSET THE ALLEGED INDEBTEDNESS. UPON FURTHER REQUEST FROM THE DEPARTMENT THAT WE MAKE SET- OFF AGAINST THE FUNDS THAT WE WERE WITHHOLDING, THE MATTER WAS REFERRED TO THIS OFFICE TO ADJUDICATE THE CLAIM AND DETERMINE WHETHER SUCH SET-OFF IS WARRANTED. THE RECORD DISCLOSES, THROUGH CONSIDERABLE CORRESPONDENCE BETWEEN THE ATTORNEY GENERAL OF THE STATE OF TEXAS AND THE DEPARTMENT OF JUSTICE, THAT THERE ARE TWO SIGNIFICANT POINTS AT ISSUE. WITHOUT RECITING IN DETAIL THE VARIOUS ARGUMENTS AND CONTENTIONS WHICH HAVE BEEN ASSERTED THE ESSENTIAL FACTS IN THE MATTER MAY BE STATED AS FOLLOWS:

ON NOVEMBER 6, 1953, AN AGREEMENT WAS ENTERED INTO BETWEEN THE UNITED STATES AND THE STATE OF TEXAS FOR COOPERATIVE ASSISTANCE TO MAKE HAY AVAILABLE TO FARMERS AND RANCHERS IN DISASTER AREAS OF THE STATE. SEE 42 U.S.C. 1855. UNDER SECTION 4 OF THE AGREEMENT, FEDERAL FUNDS WERE TO BE USED TO DEFRAY 50 PERCENT OF THE ACTUAL TRANSPORTATION COSTS OF HAY MOVED UNDER PUBLISHED TARIFFS OR TO PAY A COMPARABLE AMOUNT FOR HAY MOVED BY CONTRACT CARRIER OR BY THE FARMER'S TRUCK. IN NO EVENT WERE FEDERAL FUNDS TO BE USED FOR PAYMENTS IN EXCESS OF $10 PER TON OF HAY DELIVERED. AT THE TIME OF THE PROGRAM, TEXAS RAILROADS PUBLISHED TARIFFS, FOR EMERGENCY SHIPMENTS, CUTTING IN HALF THE FREIGHT RATES NORMALLY APPLICABLE TO SUCH SHIPMENTS. THE SUBSTANTIAL PORTION OF THE FEDERAL GOVERNMENT'S CLAIM IS BASED UPON THE USE OF FEDERAL FUNDS TO PAY ALL OF THE FREIGHT CHARGES ENCOUNTERED, WHETHER FOR RAIL OR TRUCK SHIPMENTS, RATHER THAN LIMITING PAYMENTS TO 50 PERCENT OF RAIL SHIPMENT CHARGES AND COMPARABLE AMOUNTS FOR TRUCK SHIPMENTS.

THE CLAIM FOR $160,768.77 WAS COMPUTED ON THE BASIS OF TOTAL ACTUAL TRANSPORTATION COSTS INCURRED OF $743,016.66 COMPRISED OF $618,658.60 FOR RAIL SHIPMENTS AND $124,358.06 FOR TRUCK SHIPMENTS. THIS INCLUDED DUPLICATE PAYMENTS OF $764.40; FREIGHT OVERCHARGES OF $2,971.83; IMPROPER PAYMENT OF TRANSPORTATION FROM RAIL DELIVERY POINTS TO FARMS, $105.84; AND FREIGHT ON GROUND PEANUT HULLS, COTTONSEED HULLS AND OTHER INELIGIBLE ROUGHAGE AMOUNTING TO $7,832.33 FOR A TOTAL OF $11,674.40. DEDUCTING THESE ITEMS, GROSS TRANSPORTATION CHARGES WERE REDUCED TO $731,342.26 AS BEING PROPER FOR CONSIDERATION UNDER THE PROGRAM. SINCE FEDERAL FUNDS WERE GRANTED FOR THE PAYMENT OF ONLY 50 PERCENT OF THIS COST, THE PORTION PAYABLE FROM STATE AND OTHER FUNDS WAS DETERMINED TO BE $365,671.13. BUT ABOUT 30 CLAIMS AGGREGATING $797.53 WERE PAID FROM FEDERAL FUNDS AT A RATE IN EXCESS OF $10 PER TON. THE AMOUNT PROPERLY PAYABLE FROM FEDERAL FUNDS WAS, THEREFORE, CALCULATED AT $364,873.60. THE SUM OF $704,000 WAS MADE AVAILABLE TO THE STATE, OF WHICH $178,357.63 WAS RETURNED LEAVING A BALANCE OF $525,642.37 OF FEDERAL FUNDS UTILIZED BY THE STATE. THE DIFFERENCE BETWEEN THIS FIGURE AND $364,873.60, THE AMOUNT CALCULATED AS PROPERLY PAYABLE FROM FEDERAL FUNDS, WAS STATED AS THE $160,768.77 INDEBTEDNESS OF THE STATE OF TEXAS TO THE UNITED STATES.

PARAGRAPH 4 OF THE BASIC AGREEMENT PROVIDES, IN PERTINENT PART, THAT:

"THE FUNDS ADVANCED HEREUNDER SHALL BE USED TO DEFRAY FIFTY PERCENT (50 PERCENT) OF THE ACTUAL TRANSPORTATION COST OF HAY MOVED UNDER PUBLISHED TARIFFS OR A COMPARABLE AMOUNT, AS DETERMINED BY THE STATE, FOR HAY MOVED BY CONTRACT CARRIER OR BY THE FARMER OR RANCHER'S TRUCK, BUT IN NO EVENT SHALL THE AMOUNT EXCEED $10 PER TON OF HAY DELIVERED * * *.'

THE STATE TAKES THE POSITION THAT THE QUOTED SECTION IS AMBIGUOUS AND THAT PURSUANT TO THE UNDERSTANDING OF STATE REPRESENTATIVES IT WAS PROPER TO CONSIDER THE NORMAL FREIGHT RATES RATHER THAN THOSE UNDER REDUCED TARIFFS AS THE PROPER MEASURING STICK TO BE APPLIED IN ESTABLISHING THE DOLLAR VALUE OF THE 50 PERCENT LIMITATION. IN OTHER WORDS, THE 50 PERCENT LIMITATION IMPOSED UNDER THE AGREEMENT WAS CONSTRUED AS BEING COMPENSATED FOR BY THE 50 PERCENT REDUCTION IN RAIL TARIFFS AND IT WAS PERMISSIBLE TO USE FEDERAL FUNDS TO PAY 100 PERCENT OF THE FREIGHT CHARGES SUBJECT ONLY TO THE MAXIMUM LIMITATION OF $10 PER TON.

WITH RESPECT TO HAY MOVED UNDER PUBLISHED TARIFFS, WE CANNOT AGREE THAT THE AGREEMENT IS AMBIGUOUS. THE AGREEMENT WAS ENTERED INTO WITH THE KNOWLEDGE THAT RAIL RATES WERE TO BE REDUCED; AND IN VIEW OF THE LANGUAGE EMPLOYED, WE CAN FIND NO BASIS FOR CONCLUDING THAT THE STATE WAS AUTHORIZED TO USE FEDERAL FUNDS TOWARD MORE THAN 50 PERCENT OF THE ACTUAL RATES PUBLISHED.

HOWEVER, AS TO HAY MOVED BY TRUCK, NOT UNDER PUBLISHED TARIFFS, WE DO CONCUR THAT THE LANGUAGE SET FORTH IN THE AGREEMENT IS AMBIGUOUS. BASED UPON THE EVIDENCE OF RECORD, INCLUDING STATEMENTS BY THE UNITED STATES DEPARTMENT OF AGRICULTURE REPRESENTATIVES WHO NEGOTIATED THE AGREEMENT, WE BELIEVE THE STATE WAS JUSTIFIED IN ASSUMING THAT THE "COMPARABLE RATE" INTENDED WAS TO BE ONE IN LIEU OF ACTUAL COSTS. THE REASON FOR INTRODUCING A COMPARABLE RATE IN THE CASE OF TRUCK HAULS WOULD APPEAR TO HAVE BEEN SOLELY FOR THE PURPOSE OF ESTABLISHING A REASONABLE CHARGE UPON WHICH TO BASE FEDERAL PARTICIPATION. UNDER THIS INTERPRETATION, IT WAS PROPER FOR THE STATE TO HAVE USED FEDERAL FUNDS TO REIMBURSE TRUCK SHIPMENT EXPENSES UP TO 50 PERCENT OF NORMAL RAIL RATES OR $10 WHICHEVER WAS LESS. THE STATE CONTENDS THAT IN NO CASE WAS THIS MAXIMUM EXCEEDED; AND IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY, WE ARE REDUCING THE CLAIM BY $62,179.03 (50 PERCENT OF TRUCK SHIPMENT COSTS OF $124,358.06), THE AMOUNT INCLUDED THEREIN FOR TRUCK TRANSPORTATION EXPENSES.

THE CLAIM IS FURTHER REDUCED BY $5,837.20 (50 PERCENT OF $11,674.40), THE AMOUNT INCLUDED THEREIN COVERING DUPLICATE PAYMENTS, FREIGHT OVERCHARGES, TRANSPORTATION FROM RANCH TO RANCH AND RAIL POINT TO RANCH, AND TRANSPORTATION ON ROUGHAGE OTHER THAN HAY. IN VIEW OF THE OVERALL PROGRAM PURPOSES AND SINCE THE STATE'S PROGRAM REGULATIONS -- WHICH WERE SUBMITTED TO THE UNITED STATES DEPARTMENT OF AGRICULTURE AND NOT QUESTIONED--- DEFINED HAY AS "HAY OR ROUGHAGE WHICH IS SUITABLE FOR FEEDING LIVESTOCK," WE DO NOT CONSIDER IT APPROPRIATE TO RELY, AT A LATER DATE, UPON A STRICT DEFINITION OF THE WORD HAY TO DISALLOW RELATIVELY SMALL EXPENDITURES FOR ROUGHAGE SHIPMENTS THAT CLEARLY SERVED THE OBJECT OF THE PROGRAM. AND AS TO THE SMALL AMOUNTS OF ERRONEOUS PAYMENTS MADE BY THE STATE, WE DO NOT BELIEVE THE STATE SHOULD BE HELD RESPONSIBLE BEYOND THE EXERCISE OF DILIGENT EFFORTS TO RECOUP THE OVERPAYMENTS AND REFUND TO THE FEDERAL GOVERNMENT ITS SHARE OF AMOUNTS COLLECTED.

ACCORDINGLY, IT IS CONCLUDED THAT THE STATE OF TEXAS IS INDEBTED TO THE UNITED STATES IN THE AMOUNT OF $92,752.54 COMPUTED AS FOLLOWS:

TABLE

FEDERAL FUNDS ADVANCED $704,000.00

LESS: AMOUNTS REFUNDED 178,357.63

FEDERAL FUNDS TO BE ACCOUNTED FOR $525,642.37

TOTAL RAIL TRANSPORT COSTS $618,658.60

LESS: PORTION PAYABLE FROM

OTHER THAN U.S. FUNDS 309,329.30

----------- $309,329.30

PAYMENT IN EXCESS OF $10/TON 797.53

$308,531.97

ADD: TOTAL TRUCK TRANSPORT

COSTS 124,358.06

AMOUNT PROPERLY PAYABLE

FROM FEDERAL FUND 432,889.83

AMOUNT DUE $ 92,752.54

SINCE THE RECORD DISCLOSES THAT THERE IS LITTLE LIKELIHOOD OF PAYMENT BEING MADE BY THE STATE, THE AMOUNT OF THE INDEBTEDNESS WILL BE SET-OFF AGAINST FUNDS OTHERWISE DUE FROM THE FEDERAL GOVERNMENT TO THE STATE.