DAN MORALES

.XTTORSFY GENLRAL 

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ofthe!Zlttornep

4Beneral %btate ofQexas October 21.1992

Mr.Lionel R. Meno Commissioner ofEducation TexasEducation Agency 1701North CongressAvenue Austin, Texas 78701-1494 Opinion No. DM-175

Re: Whether article VII, section S(d) ofthe TexasConstitution permits the State Board of Education to lend securities owned by the permanent school fund in the mamter and for the purpose set forth in section 15.14ofthe Education Code (RG-425)

Dear Commissioner Meno:
You have requested an opinion regarding the constitutionality of section 15.14 of the Education Code. In 1982, this office concluded that this section violated article VII, sections 4 and 5 of the Texas Constitution. See Attorney General Opinion MW-429(1982). Smce that time, however, both sections 4 and 5 have been amended. You ask whether the amendment that added section S(d) to article W nowmakes section 15.14ofthe Education Code constitutional. We conclude that article VII, section S(d) supersedes Attorney General opinion MW-429. However, because the legislature did not have the authority to adopt section 15.14 in 1979, it is void and is not revived by the adoption of the constitutional amendment in 1987. On the other hand, article VII, section 5(d),by itself, givesthe Board of Education the authority to make the type of investment the legislature tried to authorize in section 15.14, if the investment meets the prudent-person standard. Chapter 15of the Education Code governs the permanent school fund and the available school fund, both established by article VII, section 5 of the Texas Constitution. Section 15.14(a)provides:

The State Board ofEducation is authorized and empowered to contract with a commercial bank or banks to serve both as a custodian of securities in which the state permanent school funds are invested and to lend these securities, under the conditions set out in Subsection (b) ofthis section, to securities brokers and dealers on short-term loan

p. 915Commissioner Lionel Meno -Page2 W-175)

Educ. Code 9 15.14(a). Subsection (b) establishes various requirements for the securities-loan program.,includingrequirements designedto protect againstlosses.

In Attorney General Opinion MW-429, this office concluded that section 15.14violated article WI, sections 4 and 5 of the Texas Constitutionr in twoways. First, section 15.14unconstitutionally permitted the Board ofEducation toperform
an investment function that could be performed only by the official designated in section 4.2 Second, section 15.14 contravened the phrase “the State shall be responsible for all investments” by delegating the investment function to a commercial bank.

In 1987,however, article VII, section 5 was amended to include subsection (d). Subsection (d) states:

Notwithstanding any other provision of this constitution, in managing the assets of the permanent school fund, the State Board of Education may acquire, exchange, sell, supervise, manage, or retain, through procedures and subject to restrictions it establishes and in amounts it considers appropriate, any hind of investment, including investments in the Texas Growth fund created by Article XVI, Section 70, of thii constitution, that persons of ordinary prudence, discretion, and intelligence, exercising thejudgment and care under the circumstances then

p. 916Commissioner Lionel Meno -Page 3 (~1-175)

prevail& aaptire or retain for their own account in the management oftheir affahs, not in regard to speculation but in regard to the permanent disposition oftheir funds, considering the probable income as well as the probable safety of their capital

‘his subsection effectively supplants the decision in Attorney General Opinion MW-429. Although the legislative history of the amendments does not clearly indicate the intent to make the Board of Educatios as opposed to the treasurer, msponsiile for fnvesting the assets of the permanent school fund the plain language ofthe subsection clearly leads to this result: The subsection states that theBooni ofEducutbn has the powerto manage and invest the assets of the permanent schooltimd. The securities-loan program under section 15.14constitutes
an investment of these assets. Attorney General Opinion MW-429 at 3. The subsection also specikally states that it prevails over any contrary constitutional provisions. Therefore, the Board of Education has the authority to make investments under article VII, section 5(d) even though article VII, section 4 appears to give the treasurer the power to invest the assets of the permanent school fund. In addition, the Board ofEducation’s investment authority prevails over the language in article VII, section 4 that purports to make the state responsible for all investments.
Article WI, section 5(d) does not, however, revive section 15.14 of the Education Code. Constitutional provisions operate prospectively. Exparte Sntirh, 548 S.WZd 414 413 (Ten. Grim App. 1977). An amendment to the constitution does not revive an unconstitutional statute unless that amendment expressly adopts
or ratifies the statute. Attorney General opinion hfW40 (1979) at 2; see also Hurchinron

v.Parching,

l26S.W. 1107,1108 (Tex. 1910) (holding a statute constitutional when itwasexpresslyratified byaconstitutional amendment). Neither article WI, section 5(d) nor any of the other constitutional amendments adopted at the
same times contain any language that couldbe interpreted as expressly adopting or ratifying section 15.14ofthe Education Code.

p. 917Commissioner LionelMeno -Page4 WI-175)

On the other hand, we concludethat article VII, section 5(d),by itself, gives t.btBezd oi Education the authority to snakethe type ofinvestment the legislature tried to zilrhorize in section 15.14,assutig that the investment meetsthe prudentperson stanjxd. ktic!e VII, section 5(d) expressly gives the Board of Education the aatboriry to n&e unykind ofprudent investment in managingthe assets ofthe permanent school fund. Because the securities-iorm program constitutes an invesirceat ofthese assets, articie VII, section 5(d) permits the Board ofEducation to use i: eve3 withoutadditional enablinglegislatioc, provided that the program is a pmden; izxestment asdefined byarticle VU,setion 5(d).’

Atic!e VII, seeion 5(d) of the Texas Constitution superse&s Atzorn-y General OpSoa MW49 (1982). However, bt;zuse the iegiislature did not have the authority to adopt sec;inr 15.14 in 1979,it is void azd is not revived by the aSqxicm oftie CO-,s;iiUtiOd amsndment in 1957. On the other lmd, article VII, section5(d) @es the Boa-d ofEducation the ar&oriv to TX&C

any kkd ofp!-c&at inves:ment in managing the assetsoftic permanent scboalfund. This authority includes the aurhi~ to make an investment like the securities-loan pxgam that the legislature attrmpted to authorize in section 15.14, provided that this program meets the prudent-person standard set out in articleWI, section 5(d). 

### Verytrulyyours, /

DAN MORALES Attorney General ofTexasCommissioner Lionel Meno -Page 5 (1X+175)

WILLPRYOR First Assistant Attorney General
MARYKElLER Deputy Assktant Attorney General

RENEAHIcla SpecialAssistantAttorney General
MADELEINE B.JOHNSON Chair, Opinion Committee Prepared byMargaret A.Roll Assistant Attorney General

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