# THEATTORNEYGENERAL OF TEXAS
AUSTIN. TNXAS 78711

January 31, 1975
The Honorable Senfronia Thompson State of Texas House ofRepresentatives Committee on State Scholarship Programs Austin, Taxas 78767 Opinion No. H- 512 Re: Administration of scholarship fund created by article 54.051m, Education Code. Dear Representative Thompson:

You have asked seven questions concerning the administration of the scholarship fund authorized under article 54.051(m), Education Code, which provides that: (m) Twenty-five cents out ofeach hourly charge in Subsection (b) and $1.50out ofeach hourly charge in Subsection (c) ofthis section shall be placed in a scholarship fund at each institution to be administered by that institution toaward scholarships to needy students. Standards for determining need shall be formulated by each institution. No more than 10 percent ofsaid scholarship funds may be allocated to out-of-etate students. You ask: I., Mny individual schools require a student to meet

any standard other than demonstrating sufficient financial need in order toqualify for a,acholarship under section 54.0 51(m)7 2. Ifthe answer to question #l is in the affirmative, may individual schools enact any academic or “character” guidelinea to determine eligibility for such scholarships above and beyond requiring a student to be acceptable for admission, in the case ofnew students, or to maintain sufficient scholastic and disciplinary records to keep them in good standing and not classified in any generally applied probationary status?

p. 2306.

The Honorable Senfronia Thompson page 2 (H-512)

3. Ifthe answer toquestion #2is in the affirmative, may schools enact guidelines that award such scholarships on a competitive basis inwhich a student with greater financial need is less likely to receive a scholarship than another student with lesser financial need, but who might rank higher ina competition onthe basis of academic or other criteria? 4. Inawarding scholarships under 54.051(m), may schools treat students differently onthe basis ofclassification (i.e. freshman-sophomore or graduate- undergraduate) by reserving all or apercentage offunds for use by one class of students only? 5. Ifthe answer toquestion #4 is affirmative, may the percentage offunds set aside for a class ofstudents be determined without regard towhether that percentage is in proportion to the percentage ofall students’ financial need represented by that class of students? 

# 6. Ifa school fails to reserve the proper amount of funds for scholarships from tuition revenue pursuant to 54.051(m) during a semester or fiscal year, must the school compensate for this bydesignating extra funds for scholarships from tuition revenues in subsequent semesters or years? 7. The University of Texas Board ofRegents has adopted rules stating “There shall be established, in accordance with Article 2654c, Section l(a)12, such a scholarship fund at each component institution where and when such afund is deemed appropriate by the chief administrative officer”

. May the governing boards of state institutions ofhigher education grant the authority toadministrative officials to determine not to set up the fund required bylaw?

p. 2307The Honorable Senfronia Thompson page 3 (H-512)

While the language of section 54.051(m) clearly states that the scholarship fund created bythat section is for “needy” students, the institutions are charged with formulating standards for determining need. See Attorney General Opinion M-1129 (1972).

We understand that the amount ofavailable monies in the fund is limited and, in all likelihood, will never be suffient toaward every student all the scholarship aid for which he or she may show financial need. Accordingly, it would seem reasonable that aninstitution may use additiona standards or criteria other than comparative financial need in determining the distribution ofthe echolarship monies so-long as the standards or criteria are reasonable and are designed to effectuate the intent ofthe statute to provide scholarships for needy students. We therefore answer your first question affirmatively.

Questions 2,3,4 and 5concern examples of such additional criteria. We note initially that a determination ofwhether each additional criterion is areasonable one under the guidelines set out above, is dependent onthe facts ofthe particular situation. For example, anadditional standard may be reasonable on its face, butbe unreasonable as administered. Thus, we can only advise you onwhether in ,our opinion the general classes of criteria you mention could be reasonable.

In our opinion, the additional standards ofacademic standing and

“character” could be reasonable standards a school may use in determining

. which needy students receive scholarships. We therefore answer your

second question affirmatively.

Question 3concerns the situation in which a student with lesser financial need is awarded a scholarship rather than a,student with greater financial need because ofthe use ofcriteria other than need. In our opinion, such a method ofawarding scholarships would be acceptable solong as all recipients ofthe scholarships did infact require financial aid and the additional criteria were reasonable. Indeed, such a result would be inevitable given our opinion that criteria other than financial need may be used in the determination of scholarship awards. We therefore answer question three affirmatively.

p. 2308The Honorable Senfronia Thompson page 4 ,(ti-512,)

Questions four and five concern the practice ofa school ofreserving all or 

### aportion ofthe scholarship funds for us~eby one class of students, e.g., freshmen, sophomore, graduate, without regard to the percentage ofall students’ financial need represented by the class of students. This practice in effect imposes anadditional criteria onthe scholarehip applicant, that he,or ehe be.within a specified class. ”

Itis not with&the purview ofthis office to suggest the best method ofadministering the scholarship funds. There may be valid reasons fora school to reserve 

### aportion ofits scholarship funds for each class: for example, a school may wish to reserve enough funds toprovide eontinui.ng financial aid todeserving students as they progress from freshman’ to ‘

. Senior status. Thus, it is our opinion that nothing in article 54.051(m) precludes a school from administering scholarehip funds as described in questions four and five. Of course, as we have stated, any such allocations offunds among the claseee must bebaaed on reasonable clasaifications and be designed to effectuate the intent ofarticle 54.051(m).

Your sixth.queetion concerns the failure ofa school to reserve the proper amount offunds for scholarships from tuition revenue pursuant to article 54.051(m). We construe the “shall” language used bythe Legislature in article 54.051(m) as mandatory; thus, the schools are required to’ set aside the amount called for. Yet, nopenalties for failure to comply with the statute are provided. To our knowledge there is noauthority in the general law which requires a school to compensate for the failure to reserve the proper amount offunds for scholarships bydesignating extra funds for scholarships,from subsequent tuition revenues. Inaddition, the scholarship fund established by section 54.051(m) is appropriated to the various schools byActs 1973, 63rd Leg., chapter 659, section 17, p. 2149, which provides: Sec. 17. INSTITUTIONAL FUNDS REAPPROPRIATED.

All balancee in the institutional funds ofthe several state institutions ofhigher education named in this Article, at the close ofthe fiecal year ending August 31, 1973, including balances in their revolving funds at that time, and the income to aaid funds during the fiscal years beginning September 1, 1973and 1974, are hereby reappropriated for the operation, maintenance, and improvement ofthe respective atate institutions.

p. 2309The Honorable Senfrhia Thompson page 5 (H-512)

This is a general appropriation rather than aline item; consequentlythe Legislature has provided nopractical check onhow the money is spent. Thus, although the schools are required by section 54.051(m) to set aside there specific amounts for scholarships, we find nolaw which provides,a penalty or specific remedy for past failures. to do so. Absent such law., we therefore must answer your sixth question negatively.’

With reference toyour seventh question, article 2654c, V. T. C.S., was repealed by the enactment ofthe Education Code (Acts 1971, 62nd Leg., ch. 1024, p. 3319) and is now substantively article ~54.051,: Education Code. Governing Boards ofinstitutions ofhigher education may grant the authority toadminister scholarship funds toadministrative officia’lr,, buttsuch

.’ officials may not ignore the mandate ofarticle 54.051(m), which provides that a

### certain portion oftuition charges shall be placed in a scholarship fund for needy 6tUd8nt#. SUMMARY An institution may use additional standards other than financial need in distributing the scholarship fund established byarticle 54.051(m), Education Code, so long as the standards are reasonable and designed to effectuate the intent ofthe statute to provide scholarships for needy students. The Legielature has not provided amechanism to require schools to designate extra funds from subsequent tuition revenues when the school fails to reserve the proper amount ofmoney for scholarships. Governing Boards ofstate iastitutions ofhigher education may not grant toadministrative officials the authority to determine not to set upthe scholarship fund established byarticle 54.051(m). Very truly yours, 

# u Attorney General of Texas

p. 2310. ., .

The Honorable Senfronis Thompson page 6 (H-512)

APPROVED:

Opinion Committee

p. 2311