### T~~A~ORNEY GENERAL

OFTEXAS

Hon. Jesse James Opinion No. O-3724 Acting State Treasurer Re: Authority of the State Board 4stin, Texas of Education to purchase certain bonds. Dear Sir:

Weare in receipt of your letter of June 20, which reads as follows:

“The State Board of Education is purchasing $500,000 of Corpus Christi Independent School District Bonds dated 6-l-41.; Nos. l/500 inclusive at $1,000 each; interest rate 2@ onthe first 50 bonds; 2-3/4$ on the next 80bonds and 3%onthe remaining 370 bonds, payable semi-annually onJune 1st and December 1st of each year.

“Article, 2671 as amended provides that no bonds, obligations or pledges shall be purchased that bear less than 2-l/2$ interest. Bonds Nos. S/50 of the above mentioned series bear only 2*$ interest.

We kindly request that at your very earliest convenience you give usyour written opinion as to whether or not bonds Nos. l/50 of this issue can be legally paid for out of the State Permanent School Pund

.”

Your question Implies that the first fifty bonds, bearing interest at the rate of 2z@, might bewaived bythe Board of tiducation andthe balance of the $500,000 issue purchased under the option afforded by Article 2673 of Vernon’s Annotated Civil Statutes. Briefly, the option given to the State Board of Education provides that before the bonds of any county, city, school district, or other taxing agency, are sold, bids shall be taken onthe total amount desired to be sold andthe best bona fide bid received shall be submitted to the State Board of Bducation said Board having an option of ten days within which to meet said bid, and in the event the bonds are not purchased by the Board, the issuing district, or subdivision, maythen proceed to seil said bonds to the party or parties making the best bona fide bid. Such bids are madeupon the basisHon. Jesse James, page 2 (O-3724)

of bonds offered by the issuing political subdivision,, Ed, if such offering Is bid for as a block, then under ,the XL the Board of Education is required to meet the price ofP~~...i for the bonds as a block. It does not have the authority to purchase thp,bonds so offered under any other conditions. 1;Ic, other words, the Board is not at liher,ty to pass upthe firs~t fifty bonds of the above described issue and exercise its option as to the remaining 

### 450bonds. It must take either all or none of said offering. This it has endeavored to do, treating the offering as one unit of investment, namely, $500,000, said unit beari.ng interest at the coupon r:ztes i;,f 2)$ for the first fifty bonds, 2-j/4$ for the next eighty bonds, and

### 3%for the remai,nder.

For convenience in handling said debt aggregati.ng $500,0OC1has been set u~pin $l,OOC?pieces, rnmbered i to 503, inclusive e The debtor dis,trict is obligated to pay on said debt an average interes,t of 2.90% throughout the life of the debt. Conversely, the State Permanent School Fund, as the
owner of the evidence of the debt, .wil.l earn on its investment an average of 2.90% per annumthroughout the life of the debt. This brings before us the question as to whether hr-ticle 

### 2671.

of Vernon’s Annotated Civil Statutes, which rea,ds, in part, as follows:

“Nobonds) obligations or pledges shall be purchased that bear less than 2$&interest ***II

means that the bonds themselves shall bear acoupon interest rate of not less than 2&s, or does it meanthat no ingestment by the State Board of Education shall ‘bemadewhich will not return as income onthe investment aminimumyield of 2#? Wethink the statute was intended to provide-,a minimumof return onthe investment. Artic1.e 2671 as amended, is merely a secti,on of the law enacted by the Forty-first Legislature, Regular Session, 

### 1929 Chapter 278, page 

### 573, which lawwas an amendment .to the Hcts of 190’; page 215 andwhic:h last namedAct amended .the original’iaw, ‘tots Gf 1905, page 263, governing investment of .the State Permanent School Fund. The entire law relating to this subjec~t m,ustbe read together in order to arrive at the correct legislative intent

. Byreference to this lawwefind that ,theState Board of Education is authorized to pay a premiumfor any bonds authorized by law to be purchased as aninvestment for the School Fund and, likewise, said Board is authorized to purchase bonds at a discount (Art. 

### 267.3), andthen wefind this language:

“The price paid for bonds, obligations and pledges, shall be endorsed thereon at the time the sameare purchased.”- --.

Hon. Jesse James, page 3 (O-3724)

This indicates to us that the investment shall not be determined bythe denomination of the component pieces as prescribed by the Issuing munlclpallty or political subdivision, but by the sumof money lald out by the Permanent School Fund in the purchase of such evidences of debt. It seems clear that the Legislature Intended that all investments madebythe Board in behalf of the permanent School Fund should return not less than 2&%interest
on‘funds so Invested.

Manifestly, the framers of the Constitution had In mind providing some sort of fixed income for the operation of the schools of the State. Section 5of titicle 7of the Constitution provides, In part, as follows:

“The principal of all bonds and other funds, andthe princlpaI arising from the sale of lands hereinbefore set apart to said School Fund, shall be the Permanent School Fund, and all the interest derivable therefrom *** shall be the Available School Fund ***‘IO
Responsive to this constitutional mandate the Legislature has endeavored to provide aminimumof income for the Available Fund, andwe conclude that the language contained in Article 2671, su-

“Nobonds obligations or pledges shall be purchased that gi:j? less than’2@ lnterest I’is Intended as the leglslative dlrection that the Board of Education, In making investments as provided by law, shall makeno investment yielding less than 2*$ Interest onthe amount so invested.

Under date of July 23, 1937, the Honorable Joe J. Ksup, Assistant Attorney General, ln an opinion addressed to the Honorable Ghent Sanderford, President, State Board of Education, reached the conclusion above set forth. Wequote, in part, from his opinion --

“Weare of the opinion that the phrase ‘bear less than 3%interest’ means that the State Board shall realize 3$ onthelr investment. Wedonot feel that the coupon face shall evidence $ lnteresto In view of the fact that these statutes were enacted for the protection of the school funds of the State, we cannot see howwe can consistently arrive at any other legislative intent.”

Since the above quoted opinion was rendered? Article 2671 has been amended, *lowering Interest from 3%to 22,%- In this conaection wefind further support for the conclusion herein reached in the emergency clause of the law amending Article 

### 2671;which clause reads as follows:Hon. Jesse James, page 4 (O-3724)

“The fact that prevailing Interest rates on shorter maturity bonds in the case of agreat manydesirable investments Is less than 

### 3$,and the fact that under the present law the State Board of Education Is not permitted to Invest in these securities because of the fact that the present law requires a of 

### 3$,creates an emergency ***.I

It will be noted In this quotation that the Leglslature has used the word “yield” which we flna by reference to Webster’s International Dictionary to be asynonym of the word

“bear”; therefore, wethink that the legislative intendnent In Article 

### 2671,as above quoted, was that no bonds, obligations
or pledges

, shall be purchased yielding less than 2s interest.

Following receipt of the above quoted opinion the State Board of Education proceeded from that day forward to Invest its funds on such abasis aswould yield not less than the minimumamount provlaed by statutes. In someinstances this yield was determined by the payment of apremium for bonds
so purchased, and In others It was reached through the purchase of bonds at adiscount, but according to the records of the State Board of Education, nobonds have been purchased yielding less than the statutory mlnlmum. Weare Informed by the State Board of Education that this has been their practice for the years following the obtaining of the Attorney General’s opinion interpreting Article 

### 2671relative to the minimumamount of interest that might be borne by bonds so purchased.

This practice was being followed by the Board of Education at the time Article 

### 2671was amendedby the Acts of the Forty-sixth Legislature, Regular Session, 

### 1939,and in accordance with the decision of the Supreme Court In the case of Federal Crude Oil vs. Youht-Lee Oil Company, et al., 

### 52S.W. (2d) 56, such amendmentby the Legislature will be presumed to have been madewith knowledge of the Interpretation placed upon Article 

### 2671by the Attorney General andthe Board of Education. Judge Leady used the following language in that case:

“Where the officers of the State government during
along period of years have construed a statute of doubtful Import, andthe sameIs later reenacted by the Legislature in substantially the sameform, it will be presumed that the law-making body knewof the constructicn placed upon its language by Its officers, andthat if it was not satisfied that Its Intention had been rightly interpreted, It would have so changed the verbiage of the Act as to have shown clearly a contrary intention.”Hon. Jesse James, page 

### 5 (O-3724)

In support of this statement Judge Leddy cited the cases of Houston andT. C. R. Co., v. State of Texas, 

### 95Tex. 

### 521. 6AR, W. 

### 777:Galveston H.& S. A.Ry. Co. v. State, 

### 17

### S.W. 67;Stephens County v. Hessler, 

### 16S.W. (Jd) 804. Therefore, the presumption being In favor of the interpretation placed upon the statute by the Attorney General andthe Board of Education, wethink It conclusive onthis department to hold that by the amendment of 

### 1939,the Legislature In effect, approved the construction placed upon Article 

### ii671 by the Attorney General andthe Board of Education.

Accordingly, you are advised that in our opinion bonds nr?mberedl/50, inclusive, bearing interest at the face rate of 2+$ can be legally paid for out of State Permanent School Funds,
so long as such bonds constitute apart of the entire unit of Investment, namely, $500 000, and so long as the Income yield
onthe total sumInvested Is not less than 2&g.

Trusting that the foregoing fully answers your Inquiry,
we are
Yours very truly

ATTORNEY

GENERAL

OFTEXAS By,/s/ Clarence E. Crowe Clarence E. Crowe, Assistant

APPROVED

JUL1, 1941 /s/ Gerald C. Mann ATTORNEY

GENERAL

CS’TEXAS
(This opinion considered and approved in limited conference)

CEC-s:wb

.