December 19, 1990

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

Education Agency Re: Whether certain funds Commissioner of Texas Education 1701N. CongressAvenue from school-relatedactivities 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 derivedmonies that have becomepublic school property may be used for college scholarshipsawarded by the public school district. Specifically, YOU refer to so-called "activity funds" or "agency funds,"which you describe as the funds consideredby this office in an earlier, unrelated opinion,Attorney General Opinion JM-42 (1983). In that opinion, these fundswere described as follows:

[Tlhosemonies belonging to various organizations such as the **PTA** (Parent-Teachers Association), schoolbands, drill team clubs, and athleticbooster clubswhich 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 solicitationof contributions, promotions and similar functions **for** the sole benefit of the organization, with suchmonies being the property of the organizationand not the schooldistricts. The school districtmerely 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. 6758Dr. W. N. Kirby - Page 2 (JM-1265)

[plublicschools have varying arrangements with patron/student groups. In some cases surplusmonies are transferred to the district and become districtproperty under the terms of the custodial agreement; in other
cases the monies remain the property of the patron/studentorganization and surplus can be donated to the district.

As an example,you enclose a letter from the superintendent of the Aldine IndependentSchool District to the Texas Education Agency that describes the following fact situation:

The districtmanages agency funds generated by school activities. The district keeps a ledger record of the monies deposited from each activity. These commingledmonies are to be used for their students, and the balance remaining in interest-bearing bank accountthe single is carried forward **from** year to year.
The superintendent'slettergoes on to inquire whether interest accruing on the funds in the above-described accountmay be used for college scholarships. You do not explainhow the interestaccrued 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 otherpropertydonated or

the income therefrommay be expended **by** the trustees:
(1) for any purposedesignated by the donor so long as that purpose is in keeping with the lawfulpurposes of the schools for the benefit of which the donationwas made;
or

(2) for any purpose authorizedby rule (FootnoteContinued)

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

Section 20.48 of the Education Code prescribes the purposes forwhich funds of the public free school system may be expended. Subsection (c)of that section enumerates purposes for which l*[l]ocalschool funds from district taxes, tuition fees of pupils not entitled to free tuition and Qther local sources"may be used. (Emphasisadded.) In addition to the purposes specificallyenumerated, subsection (c)provides that such fundsmay be used "for other purposes necessary in the conduct of the public schools to be determined bv the board of tru6tees.l'(Emphasisadded.)

You suggest that an expenditure for scholarshippurposes 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 selevv. 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, indispensableto 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'). Determiningwhether an expenditure is necessary is a matter for a schoolboard in its sound discretion. Attorney General Opinion H-133. Moreover, any expenditure of public fundsmust serve a true public purpose and not merely private ends. Tex. Const. art. III, 5 51; ~&,8G. Braden,

. T~I=Constitution of the State of Texas. An Annotated and ComoarativeAnalvsis 229-36, and authorities cited therein.

(FootnoteContinued)

of the State Board of Education in the event that no specificpurpose isdesignatedby the donor.

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

The encouragement andmotivation of students in academic achievementwould 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 achievementof a legitimatepublic 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 facthas been delegatedby the legislatureto the board of trustees.

SUMMARY

In the absence of a donation, monies derived from various organizations such as the **PTA,** schoolbands, 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 propertymay be used for college scholarships awardedby the public schooldistrict if such scholarshipsare found to be %ecessary in the conduct of the public schoolsnwithin the meaning of section 20.48 of the Education Code. The authority to make such determination of fact has been delegated b; the legislatureto the board of trustees.
Very truly yo 

# J h

A JIM MATTOX Attorney General of Texas

MARYKELLER FirstAssistantAttorney General

LOU **MCCREARY** ExecutiveAssistant Attorney General

JUDGE ZOLLIE STEAKLEY SpecialAssistant Attorney General

p. 6761- . Dr. W. N. Kirby - Page 5 (JM-1265)

RENEA HICKS SpecialAssistantAttorney General

RICK GILPIN Chairman,Opinion Committee
Preparedby John Steiner Assistant Attorney General

P. 6762