JIM MAl-TOX 

Attorney General 

Supreme Court Euildin9 

P. 0. BOX 12549 

Austin. TX. 70711. 254S 

5121475~2501 

Telex 9101574-1357 

Telecopier 5121475aS9 

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Dallas, TX. 75202.4508 

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, El Paso. TX. 798052793 

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H~~slon. TX. 77002-3111 

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Lubbock. TX. 79401.3479 

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McAllen, TX. 79501-1995 

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San Antonio, TX. 79205-2797 

5W225419l 

An Equal Opportunity/ 

Affirmative Action Employer 

The Attorney General of Texas 

October 2. 1986 

Mr. John ‘3. Cargile 

Chairman 

Board of Regents 

Texas State Univers:Lty System 

505 Sam Aouston Bui:Lding 

Austin, Texas 787Dl 

Opinion No. 34-551 

Re: Whether Southwest Texas State 

University may expend appropriated 

funds on behalf of real property 

donated in trust, and related 

questions 

Dear Mr. Cargile: 

You ask several questions concerning the Rarold M. Freeman Educational Foundation which was created to make use of certain ranch 

property available to Southwest Texas State University by the medium 

of a testamentary trust. The property is not devised to the state or 

to the university or to a nonprofit corporation that supports the 

educational purposes of the university. Frost National Bank of San 

Antonio is an “Inactive Co-Trustee” and Southwest Texas State 

University is an “3:perating Co-Trustee.” Subject to the conditions of 

the trust, the ranch property is to be used and operated solely for 

farm, ranch, and game management, educational. and experimental 

purposes in connec:t:ion with the educational activities carried on by 

Southwest Texas Sta.te University for the benefit of its students and 

the public. The trust did not receive funds with which to operate the 

trust property except for funds that may be generated by its own 

operation. 

The trust is e’he real owner of the property. The trustees have a 

legal title, coupled with a power that may be exercised subject to the 

conditions of the must. See Parrish v. Looney, 194 S.W.Zd 419, 423 

(Tex. Civ. App. -’ 1946, nowrit). The trust in question contains 

several restrictionq and conditions. As Operating Co-Trustee, South- 

. west Texas State I’niverslty is directed to operate the trust property 

as a self-supporting entity fiscally separate from the university. 

All income earned by the trust shall be retained for the maintenance, 

operation, and improvement of the trust property and expenses of 

administering the trust. The university is directed to pay ad valorem 

taxes and insurance premiums for liability and fire and extended 

coverage insurance: from the funds of the trust. Neither the income 

nor corpus of the trust may be used for or distributed to any individual or institution. including the trustees. The trustees may not 

mortgage, encumber , lease, sell, or exchange any of the trust’s real 

property. On the resignation or removal of the Operating Co-Trustee 

for failure to operate the trust for the specified purposes and 

p. 2442 
Mr. John S. Cargile - Page i (JM-551) 

according to the terms and conditions of the trust, the Inactive 

Co-Trustee is directed tc replace the Operating Co-Trustee with 

another qualifying organimtion or to transfer the property of the 

trust to the Ema Freeman Foundation or to terminate the trust and 

distribute the proceeda of the sale of its assets to former beneficiaries of the Emma Freelam Foundation. 

You ask whether Southwest Texas State University may spend state 

funds appropriated to it to erect permanent improvements on the 

trust’s real property or ta pay operational expenses of the trust and 

purchase equipment and livl!stock necessary to operate the trust. We 

assume that your inquiry relates to authority granted by the Texas 

Constitution, by the Texas statutes , and by the testamentary trust. 

Part of your inquiry Is whether the expenditure of appropriated 

funds to permanently improve the trust real property or to operate the 

trust would violate the pr~bibitions of article III, section 51, and 

article XVI, section 6, J:E the Texas Constitution. Article III, 

section 51, provides, in part, that 

[t]he Legislature: shall have no power to make any 

grant or author::z:e the making of any grant of 

public moneys tc’ any individual, association of 

individuals, municipal or other corporations 

whatsoever. . . , 

Article XVI, section 6, provides, in part, that 

[n]o appropriati~x~ for private or individual 

poses shall be made, unless authorized by 

Constitution. . , . 

purthis 

Both the courts and this office have approved statutes and 

appropriations that authorize grants of public funds to private 

entities so lonn as~the exaenditure is made for the direct accomulishment of a legitimate publ:ic purpose. See Barrington v. Cokinos, 338 

S.W.Zd 133, 140 (Tex. 1963). See alsoState v. City of Austin, 331 

S.W.Zd 737 (Tex. 1960); Davis v. City of Lubbock, 326 S.W.2d 699 (Tex. 

1959) : Attorney General Tz.nions KW-89 (1979) : E-1260 (1978). Also, 

the &blic entity must re;:eive adequate consideration to avoid making 

a gift or grant of public funds to a private entity in violation of 

article III, section 51. See Attorney General Opinions H-1309 (1978); 

H-403 (1974). When the st:E seeks to accomplish a public purpose by 

granting funds to a private entity, it must maintain adequate control 

over the use of the funds t,o see that the public purpose is achieved. 

See Attorney General Opinions MW-423 (1982); MW-373 (1981). 

- 

No fixed rule del~leates exactly what constitutes a public 

purpose. Public educati~z~ is, however. an essential governmental 

function. Bainey v. Malo:~~, 141 S.W.Zd 713 (Tex. Civ. App. - Austin 

1940. no writ); Attorney General Opinion M-1221 (1972). It is our 

p. 2443 
Hr. John S. Cargile - Page 13 (JM- 559 

opinion that en entity and .a program that contributes to the promotion 

of education serves a public and governmental purpose. See Attorney 

- 

General Opinions MU-373 (19,Bl); H-391 (1969). 

Southwest Texas State University is under the management and 

control of the Board of Regents, Texas State University System. Educ. 

Code OP95.01, 96.41. The board is responsible for the general control 

and management of the universities in the system and, among other 

things, may perform such acts, as in the judgment of c the board, 

contribute to the developsent of the universities in the system and 

the welfare of ‘their studmts. Educ. Code 995.21(a). All approprietions made by the legislamre for the support and maintenance of the 

system universities, for the purchase of land or buildings for the 

universities, for the e::ection or repair of buildings, for the 

purchase of apparatus, libraries , or equipment of any kind, or for any 

other improvement of any kind shall be disbursed under the direction 

and authority of the boartl. Educ. Code 595.28. The board may accept 

donations, gifts, grants, and endowments .for the universities under 

its control to be held in trust and administered by the board for the 

purposes and under the directions, limitatious, and provisions 

declared in writing in tt.e donation, gift, grant, or endowment, not 

inconsistent with the laws of the state or with the objectives and 

proper management of the universities. Educ . Code 195.34. In our 

opinion, the legislature, in delegating such duties to the board, 

authorized the board to determine whether any particular expenditure 

constitutes a valid publi’: purpose. The determination is to be made 

initially by the Board of Begents and, if challenged, ultimately by a 

court. See Attorney General Opinions MW-373 (1981); H-1312 (1978). 

- 

It is our opinion that funds appropriated and allocated for use 

by Southwest Texas State Uuiversity for permanent improvements may be 

used, as provided by article VII. section 17, of the Texas Constitution and by chapter 62 of the Education Code, on the trust reai 

property without violating article III. section 51. or article XVI, 

section 6. The mere fact that improvements are located on land that 

is not owned by the stats!, or the fact that the interest in land is 

subject to reverter or termination, 

facto, 

does not render expenditures, ipso 

violative of the constitution. In Attorney General Opinion 

H-403 (1974). this office determined that the question of constitutionality depends on whet,her the expenditure for a livestock export 

station on leased land was a proper public purpose and in exchange for 

adequate public benefits. See also Attorney General Opinion H-416 

(1974) (Texas Aeronautics Commission may make a grant of state funds 

for improvements on munic:ipal airfield on leased land if grant is for 

a proper public purpose and an adequate consideration). In Attorney 

General Opinion H-655 (l!l75), this office stated that it was aware 

of no constitutional inhtbitlons to the construction of permanent 

improvements by a state university on land subject to a possibility of 

reverter and that, as with improvements on leased land, article III, 

section 51, and its associated provisions would not be violated if the 

expenditure is for a propc:r public purpose and adequate consideration. 

p. 2444 
Mr. John S. Cargile - Page li (JH-553 

See also, Attorney General Opinions E-257 (1974) (Parka and Wildlife 

Department could spend state funds to construct facilities on land 

owned by the federal govermeent vithout violating article III, section 

51 because expenditure had valid public purpose and adequate public 

benefit); MW-514 (1982) (Texas Tech University Eealth Sciences Center 

may construct medical school, facilities on land subject to rights of 

reversion without violating article III, section 51). Cf. Attorney 

General Opinion C-395 (1961i) (prohibition In article VIIzection 17 

against use of general revenue fund for permanent improvements by 

designated universities did not apply to construction of building on 

state-owned land for museum .that is a separate entity but administered 

by a university). 

The authority of the university to spend state funds to imp,rove 

or operate the trust propsarty is determined not only by the Texas 

Constitution and statutes bsut also is determined by the terms and 

conditions of the trust. ‘The trustee of a testamentary trust can 

exercise only such auth0rit.y as Is vested in him by the will under 

which he acts. Williams v. .Smith. 200 S.W.2d 201. 207 (Tex. Civ. App. 

-- 

- Galveston 1947),~ rev’d. on other grounds 206 S.W.Zd 208. As we 

previously mentioned, artic1.e 95.34 of the Education Code authorizes 

the Board of Regents to accept donations, gifts, grants, and endowments for the universities under its control to be administered for 

the purposes and under the directions, limitations. and provisions 

declared in writing in the donation, gift. grant, or endowment. 

The will that creates the trust in question directs. the university, as the Operating Co-Trustee, to manage and operate the 

day-to-day and long-term operations of the trust property as a selfsupporting entity fiscally separate from the operation of Southwest 

Texas State University. It appears that the terms of thee will 

preclude the university’s ua,e of its own funds for the improvement or 

operation of the trust property as a laboratory in support of its 

agricultural and range management educational programs. See Attorney 

General Opinion MW-425 (19.82) (funds donated to Pan bxcan University may be used only fcr purposes authorized by the donor pursuant 

to section 112.34 of the E,ducation Code). However, to carry out the 

purposes of a trust, a cocrt may direct or permit the trustee to do 

acts that are not authorlzt,d or that are forbidden by the terms of the 

trust if, because of circumstances not known or anticipated by the 

settler, compliance with t.he terms of the trust would defeat or 

substantially impair the accomplishment of the purposes of the trust. 

See Property Code 1112.054; Smith v. Drake, 94 S.W.2d 236, 238 (Tex. 

civ. App. - Austin 1936, no writ). 

In addition to the provision of the will specifying that the 

trust and trust property ‘be operated as a self-supporting entity 

fiscally separate from the university, the will also provides that the 

university, as the Operating Co-Trustee, shall. from the trust fund, 

discharge all obligations of the trust, including without limitation, 

property costs such as ad valorem taxes and insurance premiums for 

p. 2445 
. I 

Mr. John S. Cargile - Page 5 (JM- 5S4 

general liability and fi::e and extended coverage insurance on the 

improvements. Hence, it appears that the terms of the trust also 

preclude the university’s use of appropriated funds to purchase 

insurance. You Inquire, however, whether the university may spend 

appropriated funds to purchase fire and extended coverage insurance as 

required by the will. 

It is the policy of this state that the state shall carry its 

own insurance on state buildings and contents and that no insurance 

policies be purchased on my of the public buildings of this state or 

their contents. See Senate Concurrent Resolution No. 3, Acts 1921, 

37th Leg.. 2nd Cx, at 369. In view of the legislative intent 

expressed in that resolution, this office in Attorney General Opinion 

M-1257 (1972) determined that Tyler State College could not purchase 

fire and extended coverage insurance on college buildings or their 

contents. See also Attorney General Opinions C-193 (1963); O-6246 

(1944). The state has continued to self-insure its own property for 

fire and extended coverag,! Insurance and makes special appropriations 

to repair and replace facjlities and equipment destroyed or damaged by 

such events as fire, flood, windstorm, and hurricane. For instance, 

chapter 21, appropriates ,funds to Southwest Texas State University to 

repair or replace propert)’ damaged or destroyed by a flood on June 20, 

1981. Acts 1981, 67th LelI,,, 1st C.S., ch. 21, at 239. See also Acts 

1981. 67th Leg., chs. 628, 585, 83 (appropriations to Pan American 

University for damage caused by hurricane, to North Texas State University for wind damage, and to Texas Forest Service of Texas A h M 

University System for wine,storm damage); Acts 1979, 66th Leg., ch. 20, 

at 30 (appropriation to Srm Houston State University for damage caused 

by fire). 

The governing bodies of state universities are creatures of 

statute and may exercise only powers delegated to them by the legislature. See Attorney Genera.1 Opinion MW-475 (1982). The legislature 

has notauthorized Southwest Texas State University to purchase fire 

and extended coverage insurance for the university’s property. We are 

not aware of a statute tha,t authorizes the university to purchase insurance on property belonging to a trust that the university operates 

in connection with its educ:stional activities. 

You also inquire wt.ether article V. section 56, of the 1985 

General Appropriations Act or any other state law prevents the 

university from spending appropriated funds to purchase liability 

insurance covering tort claims that may arise from its operation of 

the trust property. 

The Texas Tort Claims Act generally authorizes a governmental 

unit to purchase liability insurance to cover its operations. The 

provision in section 9 ol: article 6252-19, V.T.C.S., now codified as 

section 101.027(a) of the Civil Practice 6 Remedies Code, provides 

that 

p. 2446 
Hr. John S. Cargile - Page 6 (J&551) 

[e]ach governmental unit may purchase insurance 

policies protect:tng the unit and the unit’s 

employees against claims under this chapter [Texas 

Tort Claims Act]. 

Ewever, the legislature clxlsistently has provided that none of the 

funds appropriated in the biennial General Appropriations Act may be 

expended for the purpose of purchasing policies of insurance covering 

claims arising under the Tex,as Tort Claims Act. See Acts 1985. 69th 

Leg., art. V, ch. 980, 5515;; Attorney General Opinion H-900 (1976). 

The restriction in article V, section 56, of the Appropriations Act 

applies only to claims under the Tort Claims Act and does not apply to 

liability insurance purchas’rd under article 6252-19a. V.T.C.S. Article 

6252-19a provides that 

[t]he State Depa::tments or Agencies who own and 

operate motor vehicles, aircraft and motorboats or 

watercraft of all. types and sizes shall have the 

authority to insure their officers and employees 

from liability arising out of the use, operation 

and maintenance of such automobiles, trucks, 

tractors, power equipment, aircraft and motorboats 

or watercraft used or which may be used in the 

operation of such Department or Agency. 

There is a distinction between appropriations for claims arising 

under the Torts Claims Act and those arising under article 6252-19a 

and the common law. See Attorney General Opinion H-158 (1973). See 

also Attorney General Opfnions M-1257 (1972) (college may pay premiums 

onliability insurance on college owned vehicles under article 

6252-19a); M-1215 (1972) (Parks and Wildlife Department may purchase 

liability Insurance under article 6252-19a since prohibition against 

use of appropriated funds applied only to-insurance coverage purchased 

under Torts Claims Act); t&521 (1969) (Appropriations Act prohibited 

purchase of insurance cove.ring liability under Torts Claims Act); 

M-559 (1970) (Highway Department may purchase liability insurance as 

provided by article 6252-19a). 

Hovever , article 6252..1.9a permits only the purchase of insurance 

to cover liability incurred by the operation of a state-owned vehicle. 

See Attorney General Opin:.on H-559 (1970). It is our opinion that 

neither article 6252-19a nt’r any other statute authorizes the expenditure of appropriated funds to purchase liability insurance covering 

tort claims that may arise from the operation of the trust property. 

Since there is no statutoq authority for the payment of such premiums 

by a state university, l.i,ability insurance to cover tort claims 

arising from the universit:r”s operation of the trust property may not 

be purchased with appropriated funds. See Attorney General Opinions 

- 

H-1318 (1978); D-742 (1975:. 

p. 2447 
Hr. John S. Cargile - Page 7 (JM-551, 

You ask whether the trust property is eligible for exemption from 

ad valorem property taxes under section 11.11 or any ,other section of 

the Tax Code. We conclude that the trust property in question is not 

taxable. 

Article VIII, section 2, of the Texas Constitution authorizes the 

legislature to exempt from taxation public property used for public 

purposes. All real and tangible personal property that this state 

has jurisdiction to tax is taxable unless exempt by law. Tax Code 

511.01(a). Effective January 1, 1984, section 11.11 of the Tax Code 

was amended by adding subsection (e), which provides that 

property that is held or dedicated for the support, 

maintenance, or benefit of an institution of higher 

education as defined by section 61.003(7), Texas 

Education Code, b,ut is not rented or leased for 

compensation to L. private business enterprise to be 

used by it for a purpose not related to the performance of the duties and functions of the state or 

is not rented or leased to provide private residential housing to members of the public other than 

students and employees of the state is not taxable. 

As now defined by section 61.003(S) of the Education Code, instead of 

section 61.003(7), an “institution of higher education” includes a 

public senior college or university such as Southwest Texas State 

University. 

It is our opinion t!rat the property in question is held and 

dedicated by the terms of the trust for the support and benefit of 

Southwest Texas State Unive,rsity. The Texas Supreme Court has stated 

that the word “dedicate” ,:learly means to appropriate and set apart 

one’s private property to some public use. Vlscard& v. Pajestka, 576 

S.W.2d 16. ia (Tex. 19781, Virtually the ‘same definition appears in 

Ford v. Moren. 592 S.W.2d 385, 390 (Tex. Civ. App. - Texarkana 1979, 

writ ref’d n.r.e.). Not cnly is the property belonging to the trust 

not rented or leased for compensation to a private business enterprise 

to be used for a purpose not related to the performance of the duties 

and functions of the state! or to provide private residential housing 

to members of the public, ‘but the terms and conditions of the trust 

prohibit the trustee from renting or leasing any of the trust’s real 

property. As previously Ilointed out, the terms of the trust provide 

that Southwest Texas State University may use and operate the property 

solely for farm. ranch, and game management, educational, and experimental purposes in connecl:ion with the educational activities of the 

university for the benefj.t of its students or the general public. 

Hence, it is our opinion t’vlt section 11.11(e) of the Tax Code exempts 

the trust property from ad valorem taxes. 

You ask about other sections of the Tax Code that may exempt the 

trust property from ad valorem taxes. Therefore, we mention that 

p. 2448 
Mr. John S. Cargile - Page 3 W-551) 

section 11.16 provides that farm products. vhich includes livestock 

and poultry, in the hands of the producer are exempt from taxation. 

Also, implements of husbandry used in the production of farm and ranch 

products are exempt from ad ,valorem taxation. Tax Code 111.161. 

SUMMARY 

A state university serving as trustee of. a 

testamentary trust created to make ranch property 

available to the university to use in its educatio* 

programs may speai appropriated funds for permanent 

improvements and operation of the trust vithout 

violating the Texs,s Constitution or statutes, so long 

as the expenditure is for a proper public purpose and 

an adequate consi(.eratlon. If the terms of the trust 

prohibit the us,? of appropriated funds by the 

trustee, a court has the power to direct or permit 

the trustee to deviate from terms of the trust that 

would defeat or substantially impair the accompllshment of the purpcses of the trust. The legislature 

has not authorizetl the university to purchase general 

liability or fire .and extended coverage insurance on 

property belonging to a trust that the university 

operates in connection with its educational sctivities, and insurance for the trust may not be purchased with appropriated funds. The property of the 

trust in question ,is exempt from ad valorw taxation 

under section 11.:.1.(e) of the Tax Code. 

. 

Attorney General of Texas 

JACK AIGHTOWER 

First Assistant Attorney General 

MARY KELLER 

Executive Assistant Attornay General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Nancy Sutton 

Assistant Attorney General 

p. 2449