December 19, 1990 

Dr. W. N. Kirby OpiniOn No. JM-1265 

Education 

Agency Re: Whether certain funds 

Commissioner of 

Texas Education 

1701 N. Congress Avenue from school-related activities 

Austin, Texas 78701-1494 may be used by a school district to provide scholarships 

for graduates (RQ-2092) 

Dear Dr. Kirby: 

You ask whether, in the absence of a donation, locally 

derived monies that have become public school property may 

be used for college scholarships awarded by the public 

school district. Specifically, YOU refer to so-called 

"activity funds" or "agency funds," which you describe as 

the funds considered by this office in an earlier, unrelated 

opinion, Attorney General Opinion JM-42 (1983). In that 

opinion, these funds were described as follows: 

[Tlhose monies belonging to various organizations such as the PTA (Parent-Teachers 

Association), school bands, drill team clubs, 

and athletic booster clubs which are held by 

a school district for safekeeping and accounting. The monies are not derived from 

taxes but are generally obtained by an 

organization through solicitation of contributions, promotions and similar functions for 

the sole benefit of the organization, with 

such monies being the property of the organization and not the school districts. The 

school district merely acts as custodian of 

the monies. 

You advise that, in addition to the above described 

funds, nactivity funds" or "agency funds" may include funds 

generated by a public school from class ring sales, photos, 

student club and class balances, and other activities. 

According to your letter, 

P. 6758 
Dr. W. N. Kirby - Page 2 (JM-1265) 

[plublic schools have varying arrangements 

with patron/student groups. In some cases 

surplus monies are transferred to the district and become district property under the 

terms of the custodial agreement; in other 

cases the monies remain the property of the 

patron/student organization and surplus can 

be donated to the district. 

As an example, you enclose a letter from the superintendent of the Aldine Independent School District to the 

Texas Education Agency that describes the following fact 

situation: 

The district manages agency funds generated 

by school activities. The district keeps a 

ledger record of the monies deposited from 

each activity. These commingled monies are 

to be used for their students, and the 

balance remaining in 

interest-bearing bank account 

the single 

is carried 

forward from year to year. 

The superintendent's letter goes on to inquire whether 

interest accruing on the funds in the above-described 

account may be used for college scholarships. You do not 

explain how the interest accrued on the account described in 

the superintendent's letter becomes the property of the 

school district, but presumably, it is by contractual 

agreement and not by donation.1 

1. Section 21.903 of the Education Code provides, in 

part: 

(b) The funds or other property donated or 

the income therefrom may be expended by the 

trustees: 

(1) for any purpose designated by the 

donor so long as that purpose is in keeping 

with the lawful purposes of the schools for 

the benefit of which the donation was made; 

or 

(2) for any purpose authorized by rule 

(Footnote Continued) 

p. 6759 
Dr. W. N. Kirby - Page 3 (JM-1265) 

Section 20.48 of the Education Code prescribes the 

purposes for which funds of the public free school system 

may be expended. Subsection (c) of that section enumerates 

purposes for which l*[l]ocal school funds from district 

taxes, tuition fees of pupils not entitled to free tuition 

and Qther local sources" may be used. (Emphasis added.) In 

addition to the purposes specifically enumerated, subsection 

(c) provides that such funds may be used "for other purposes 

necessary in the conduct of the public schools to be determined bv the board of tru6tees.l' (Emphasis added.) 

You suggest that an expenditure for scholarship purposes would not appear %ecessaryq' to conduct a public school. 

Certainly such an expenditure is not %ecessaryl’ if necessary is taken to mean "indispensable." However, the word 

necessary as used in section 20.48 and its predecessor 

statute, article 2827, V.T.C.S., has been construed as 

permitting such expenditures as medical inspection, 

cafeterias, crossing guards, and the reimbursement of 

certain expenses incurred by school board members. See 

N selev v. Citv of Dallas 17 S.W.2d 36 (Tex. Comm'n App. 

lz29, judgm't adopted): &eman v. Morrow, 34 S.W.2d 654 

(Tex. Civ. App. - El Paso 1931, no writ): Attorney General 

Opinions JM-490 (1986); H-133 (1973). Other examples could 

be cited. None of the expenditures in these examples is, 

strictly speaking, indispensable to the conduct of a public 

school. In the context of section 20.48, wnecessary" appears 

to mean appropriate or conducive to the conduct of a public 

school rather than indispensable thereto. Accord Black's 

Law Dictionary 928 (6th ed. 1990) (definition of 

%ecessaryt'). 

Determining whether an expenditure is necessary is a 

matter for a school board in its sound discretion. Attorney 

General Opinion H-133. Moreover, any expenditure of public 

funds must serve a true public purpose and not merely 

private ends. Tex. Const. art. III, 5 51; ~&,8 G. Braden, 

T~I= Constitution of the State of Texas. . An Annotated a nd 

Comoarative Analvsis 229-36, and authorities cited therein. 

(Footnote Continued) 

of the State Board of Education in the event 

that no specific purpose is designated by the 

donor. 

p. 6760 
Dr. W. N. Kirby - Page 4 (JM-1265) 

The encouragement and motivation of students in academic achievement would seem to be an appropriate function of 

the public free schools. Accordingly, it. is not possible to 

say, as a matter of law, that a scholarship could not be 

structured to further the achievement of a legitimate public 

purpose of a school district in its conduct of the public 

schools. The use of "activity fundsO' or "agency funds" not 

being otherwise restricted, they may be used for college 

scholarships found to be Wecessary in the conduct of the 

public schoolsO* within the meaning of section 20.48 of the 

Education Code. The authority to make such a determination 

of fact has been delegated by the legislature to the board 

of trustees. 

SUMMARY 

In the absence of a donation, monies 

derived from various organizations such as 

the PTA, school bands, drill team clubs, and 

athletic booster clubs or generated by a 

public school from class ring sales, photos, 

student club and class balances, and other 

activities ("activity funds" or "agency 

funds") that have become public school 

property may be used for college scholarships 

awarded by the public school district if such 

scholarships are found to be %ecessary in 

the conduct of the public schoolsn within the 

meaning of section 20.48 of the Education 

Code. The authority to make such 

determination of fact has been delegated b; 

the legislature to the board of trustees. 

Very truly yo J A h 

JIM MATTOX 

Attorney General of Texas 

MARYKELLER 

First Assistant Attorney General 

LOU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

p. 6761 
- . 

Dr. W. N. Kirby - Page 5 (JM-1265) 

RENEA HICKS 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by John Steiner 

Assistant Attorney General 

P. 6762