DAN MORALES 

.XTTORSFY GENLRAL 

QBffice of the !Zlttornep 4Beneral 

%btate of Qexas 

October 21.1992 

Mr. Lionel R. Meno 

Commissioner of Education 

Texas Education Agency 

1701 North Congress Avenue 

Austin, Texas 78701-1494 

Opinion No. DM-175 

Re: Whether article VII, section S(d) of the 

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 

15.14 of the 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 now makes section 15.14 of the 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, gives the 

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 15 of 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 of Education 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) of this section, to securities 

brokers and dealers on short-term loan 

p. 915 
Commissioner Lionel Meno - Page 2 W-175) 

Educ. Code 9 15.14(a). Subsection (b) establishes various requirements for the 

securities-loan program., including requirements designed to protect against losses. 

In Attorney General Opinion MW-429, this office concluded that section 

15.14 violated article WI, sections 4 and 5 of the Texas Constitutionr in two ways. 

First, section 15.14 unconstitutionally permitted the Board of Education to perform 

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 the judgment and care under the circumstances then 

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

prevail& aaptire or retain for their own account in the 

management of their affahs, not in regard to speculation but in 

regard to the permanent disposition of their 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 of the subsection clearly leads to this result: The subsection states 

that the Booni of Educutbn has the power to manage and invest the assets of the 

permanent school timd. The securities-loan program under section 15.14 constitutes 

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 of Education’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. Ex parte 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, l26 S.W. 1107,1108 (Tex. 1910) (holding a statute constitutional when it was expressly ratified by a constitutional amendment). Neither article 

WI, section 5(d) nor any of the other constitutional amendments adopted at the 

same times contain any language that could be interpreted as expressly adopting or 

ratifying section 15.14 of the Education Code. 

p. 917 
Commissioner Lionel Meno - Page 4 WI-175) 

On the other hand, we conclude that article VII, section 5(d), by itself, gives 

t.bt Bezd oi Education the authority to snake the type of investment the legislature 

tried to zilrhorize in section 15.14, assutig that the investment meets the prudentperson stanjxd. ktic!e VII, section 5(d) expressly gives the Board of Education 

the aatboriry to n&e uny kind of prudent investment in managing the assets of the 

permanent school fund. Because the securities-iorm program constitutes an 

invesirceat of these assets, articie VII, section 5(d) permits the Board of Education 

to use i: eve3 without additional enabling legislatioc, provided that the program is a 

pmden; izxestment as defined by article 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 of tie CO-,s;iiUtiOd amsndment in 1957. On the other 

lmd, article VII, section 5(d) @es the Boa-d of Education the 

ar&oriv to TX&C any kkd of p!-c&at inves:ment in managing 

the assets of tic permanent scboal fund. 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 article WI, section 5(d). 

Very truly yours, / 

DAN MORALES 

Attorney General of Texas 
Commissioner Lionel Meno - Page 5 (1X+175) 

WILL PRYOR 

First Assistant Attorney General 

MARYKElLER 

Deputy Assktant Attorney General 

RENEAHIcla 

Special Assistant Attorney General 

MADELEINE B. JOHNSON 

Chair, Opinion Committee 

Prepared by Margaret A. Roll 

Assistant Attorney General 

p. 919