THEATTORNEYGENERAL 

OF TEXAS 

AUSTIN. TNXAS 78711 

January 31, 1975 

The Honorable Senfronia Thompson 

State of Texas House of Representatives 

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 of each hourly charge 

in Subsection (b) and $1. 50 out of each hourly charge 

in Subsection (c) of this section shall be placed in a 

scholarship fund at each institution to be administered 

by that institution to award scholarships to needy 

students. Standards for determining need shall be 

formulated by each institution. No more than 10 

percent of said 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 to qualify for a ,acholarship under section 

54.0 51 (m) 7 

2. If the 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 of new 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. If the answer to question #2 is in the affirmative, 

may schools enact guidelines that award such scholarships on a competitive basis in which 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 in a competition on the basis of 

academic or other criteria? 

4. In awarding scholarships under 54.051(m), may 

schools treat students differently on the basis of classification (i. e. freshman-sophomore or graduate- undergraduate) by reserving all or a percentage of funds for 

use by one class of students only? 

5. If the answer to question #4 is affirmative, may 

the percentage of funds set aside for a class of students 

be determined without regard to whether that percentage 

is in proportion to the percentage of all students’ financial 

need represented by that class of students? 

6. If a 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 by designating extra funds 

for scholarships from tuition revenues in subsequent 

semesters or years? 

7. The University of Texas Board of Regents 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 a fund is deemed appropriate by the chief 

administrative officer”. May the governing boards of 

state institutions of higher education grant the authority 

to administrative officials to determine not to set up 

the fund required by law? 

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

While the language of section 54.051(m) clearly states that the 

scholarship fund created by that 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 of available monies in the fund is 

limited and, in all likelihood, will never be suffient to award every student 

all the scholarship aid for which he or she may show financial need. 

Accordingly, it would seem reasonable that an institution may use additiona 

standards or criteria other than comparative financial need in determining 

the distribution of the echolarship monies so-long as the standards or 

criteria are reasonable and are designed to effectuate the intent of the 

statute to provide scholarships for needy students. We therefore answer 

your first question affirmatively. 

Questions 2,3,4 and 5 concern examples of such additional criteria. 

We note initially that a determination of whether each additional 

criterion is a reasonable one under the guidelines set out above, is dependent 

on the facts of the particular situation. For example, an additional standard 

may be reasonable on its face, but be unreasonable as administered. Thus, 

we can only advise you on whether in ,our opinion the general classes of 

criteria you mention could be reasonable. 

In our opinion, the additional standards of academic 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 3 concerns the situation in which a student with lesser 

financial need is awarded a scholarship rather than a, student with greater 

financial need because of the use of criteria other than need. In our opinion, 

such a method of awarding scholarships would be acceptable so long as 

all recipients of the scholarships did in fact 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. 2308 
The Honorable Senfronia Thompson page 4 ,(ti-512,) 

Questions four and five concern the practice of a school of reserving all or a portion of the scholarship funds for us~e by one class of students, 

e.g., freshmen, sophomore, graduate, without regard to the percentage 

of all students’ financial need represented by the class of students. This 

practice in effect imposes an additional criteria on the scholarehip applicant, 

that he,or ehe be.within a specified class. 

” 

It is not with&the purview of this office to suggest the best method 

of administering the scholarship funds. There may be valid reasons fora 

school to reserve a portion of its scholarship funds for each class: for 

example, a school may wish to reserve enough funds to provide eontinui.ng 

financial aid to deserving 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 of funds among the claseee must be baaed on reasonable clasaifications and be designed to effectuate the intent of article 54.051(m). 

Your sixth.queetion concerns the failure of a school to reserve the 

proper amount of funds for scholarships from tuition revenue pursuant to 

article 54.051(m). We construe the “shall” language used by the Legislature in article 54.051(m) as mandatory; thus, the schools are required to’ 

set aside the amount called for. Yet, no penalties for failure to comply 

with the statute are provided. To our knowledge there is no authority in 

the general law which requires a school to compensate for the failure to 

reserve the proper amount of funds for scholarships by designating extra 

funds for scholarships,from subsequent tuition revenues. In addition, the 

scholarship fund established by section 54.051(m) is appropriated to the 

various schools by Acts 1973, 63rd Leg., chapter 659, section 17, p. 2149, 

which provides: 

Sec. 17. INSTITUTIONAL FUNDS REAPPROPRIATED. 

All balancee in the institutional funds of the several state 

institutions of higher education named in this Article, at 

the close of the 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, 1973 and 1974, are hereby reappropriated for 

the operation, maintenance, and improvement of the respective atate institutions. 

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

This is a general appropriation rather than a line item; consequentlythe 

Legislature has provided no practical check on how 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 no law 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 to your seventh question, article 2654c, V. T. C. S., 

was repealed by the enactment of the Education Code (Acts 1971, 62nd Leg., 

ch. 1024, p. 3319) and is now substantively article ~54.051,: Education Code. 

Governing Boards of institutions of higher education may grant the authority 

to administer scholarship funds to administrative officia’lr,, butt such .’ 

officials may not ignore the mandate of article 54.051(m), which provides 

that a certain portion of tuition 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 

by article 54.051(m), Education Code, so long as the 

standards are reasonable and designed to effectuate the 

intent of the statute to provide scholarships for needy 

students. The Legielature has not provided a mechanism 

to require schools to designate extra funds from subsequent tuition revenues when the school fails to reserve 

the proper amount of money for scholarships. Governing 

Boards of state iastitutions of higher education may not 

grant to administrative officials the authority to determine 

not to set up the scholarship fund established by article 

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