DAN MORALES

ATTORNEY GENERAL 

## @ffice of tfp attorney

. &Mate of Qexas SeptemberIS,1993 

## Qkneral

HonorableWkR Ftatl8 ChlG lzdwationcommittee Texas State Senate P.O. Box 12068 Austin,Texas 78711 OpinionNo. DM-256

Re: whethex an indepwdent school district may providefree office space and other items to a private, non-profitfoundation (RQ-538)

Dear SenatorBatlilY
On behalfof an independentschool district (whichyou refer to as “the ISD”), you ask whether an independentschool district may provide free 05ce space and other items to a private, non-profit foundation. By way of background, you provide the following iaformation:

Members of the ISD’ sboard of trustees set up a private, non-profit, tax-exempt education foundadon corporation for the purpose of the hncial support of the ISD and its students. The corporation’ s board of directors are the memberswho served on the ISD’ s board of trustees at the time the corporation was fixmded. The ISD alldws the corporation to use an office in the ISD and provides incidental items such as phone% copy machine& and electricity. The corporation reimburses the ISD for such items as long-distsnce phone calls and copy paper. We assume that the independent school district trustea do not receive compensation or any other remunerationfor servingon the board of directors of the foundation. Fibat, you ask if “anISD’ sprovision of a free office and incidentalitems violateJs] any state or federal statutes.* We are not aware of any state or fedaal statute which would prohii an kiependent school district Tom providing fke 05ce space and 05ce services to a kundation such as the one you describe.1 Generally, the trustees of au ind& school district “have the exclusivepower to manage and govem the public ihe schools of the district.” Educ. Code 8 23.26. Article III, section 52(a) of the Texas thnsbtio~ however, generally prohibits independent school districts fiom “grant[i] public money or thing of vah~e,in aid 0s or to” a person or corporation, such as the foundationyou descrii.

‘we&nctcclLaer-tkkgslitycfrektiollshipyaldocrikis~bytbcvay recenuyenactedschooltinax lefoms. see Acts 1993,nd Leg., ch. 347.

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In Attorney General Cpiion MW-373 (1981). this 05ce considered the -p between the University of Texas and the University of Texas Law School Foundation, “a nonprofit corporation with the purpose of supporting the educational dataldng of the Schoolof Law of the Universityof Texas.” Attorney General Opiion MW-373 at 1. The memorandum of tmderstanding between the f&ion and the university stated, in part, that the law school would provide the foundation with 05ce space, utilities, and telephone service. Id. at 5. This 05ce concludedthat the university had the statutory authority to provide the foundation with these items as “terms and wnditions” attached to its donationsunder section 65.31(e) of the Education Code which provides as follows:

The board is specificallyauthorized, upon terms and conditions acceptableto it, to accept and administergifts, grants, or donations of any kind, tiom any source, for the use by the system or any of the componentinstitutionsofthe system. Id. at 2 (quotingEduc. Code 8 65.31(e));ore also id at S-6.
This 05~ then considered whether the terms of the memorandum of understanding would violate article III, section 51, the legislative counterpart of section 52(a). See id. at 8-l 1. The opinionstated that the constitutionalprohibition

requiresthataCCrantbytheuniversitytothefouadstonmussservea public purpose, appropriate to the function of a university~ and that adequate considerationmust flow to the public.

. . . In addition, the unbsity must mahtain some controls over the fbtmdation’ s activities, to enare that the public purpose is acmally achieved.

. . . If these. conditions are met, the grant by the public wtity is not unconstitutional. Id. at 9.
As noted above, section 23.26 of the Education Code vests the trustees of an independent school district with “the exchtsivepower to manage and govern the public kee schools of the district.” Rduc. Code 8 23.26(b). The trustees of an independent school district am authorizedto “receivebequests and donationsor other moneys or fimds coming legallyinto their hands.” Id. #23.26(a); see t&c id. 55 20.482 (authorizingboard of truames to invest giSs made to school district to provide college scholarships),21.903 (authorizingboard of trustees to accept bequests for the benefh of the public schools and providigethat~maybeexpeadedbytnuteeo”for~pplrposed~~bythe donor so long as that purpose is in keepingwith the lawiblputposes of the schools for the be&t of which the donation was made”); Tex. Educ. Agency, 19 T.AC. 561.192 (“[dlonations to a school district shall be used in compliancewith statutory provisions. Donations shsll not be used as a substitute for adequate 6nancirJ support as detined in 0 61.191 of this title (relating to Fiscal Responsibiity)“). In addition, “[a]ll rights and titles to the school property of the district, whether real or personal, shsll be vested in the

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trustees.” Educ. Code Q 23.26(c). Trustees hold school district property in trust for school purposes. Texas Antiquities Coumr.v. Dallas Corm@ Commun ity College Dist., 554 S.W.2d924 (Tex. 1977);Low v. City ofDallas, 40 S.W.2d20 (Tex. 1931);Attorney Oeneml Opinion I’M-958(1988). Thus, the use of school property must serve a school pupose.
We believethat section 23.26 of the EducationCode authorizes the trustees of an independentschool district to accept donations and other gifls Tom a private foundation, and to supply the foundation with office space and the use of other school property, assuming a school purpose is served. The questionwhether the constitution permits the trustees to supplythe foundationwith office. space and the use of other school property is another matter. We havenot been providedwith su5cient fbctsto determinewhetherthis would serve a public purpose, appropriate to the tbnction of an independent school district; whether adequate considerationwould Sow to the public;or whether the trustees would mainminsufiicientcontrols over the foundation’ s activities,to ensurethat the public purpose is actually achieved. This determination is one to be made by the board of trustees in the first instanw. See Attorney OeneralOpiion MW-373at 9.
Next, you ask if

”members of the ISITsboard of trustees [can] also be membersof the corporation’ s

board.” As noted above, we assumethat the independentschool district trustees do not receive compensationor any other remunerationfor sendng on the board of directors of the foundation. Conflictsof interest on the part of local public05cials are regulated by chapter 171 of the Local Govemment Code, which preempts common-law con5cts of interests as applied to local public 05cials. See Local Gov’t Code 0 171.007(a). This chapter applies to trustees of independent school districts, see id. 8 171.001(l). and generslly requires an official who has a “substantial interest in a business entity.” see id. Q 171.002. to disclose that interest and to refrain from participating in actions involvingthe entity, see id. 0 171.004. Section 171.099 provides
as follows: Itshallbe.law5lforalocalpublico5cisltoserveasamember

of the board of directors of private, nonprofit corporations when such 05cials receive no compensation or other remuneration from the nonprofitcotporation or other nonprofitentity.
Because chapter 171 generally preempts common-lawwnflicts of interest,s we conclude thatsectionl71.009pamitrImindependaa~hooldistricttrusteetoBerveasadirectorof

zlo Attomcy GwenI optrdon IM-1006 (1989) (dad hmuuy 12. 1989). this oilice atached tlmttkoommml8wdcMtliclsofdrcstddoalagcncyprohibited8mcmbMob~~ ~wortfrom~~~titlmutwmpoamtiMMthboarddrnotlproZit

chsprcrl7lwpIinspplisable~~thecountyjudgcwarnotcompcnsatcdforhirEavics,udthttbe
common law of cwflicts of tntatst tbcrcfon amtinocd to apply. See a/so Attorney Gcnaal opinion H-1309 (1978). The lcgislaturc, in amcting section 171.009 in 1989, qqca~~ to have ovunded this

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the foundation, provided he or she receives no wmpensation or other mmunenmon for doingso.

. In additioq we note that the legislature recent@enacted an amendment to the Education Code which specificallygoverns certain wntlicts of interest on the part of school district trustees. See Acts 1993, 73d Leg., ch. 964, 8 2 (eff. June 19, 1993). Section23.201 of the EducationCode providesas follows:

(a) TheboardoftrusteeoofaschooldirtrictmaynotQlterinto awntractwithatnrstaofthedirtrict,therpouseofatrustee,ora businementityinwhichatrusteeortbespouseofatrusteehasa sign&ant interest tmtilthe trusteek current term has expired or until thetrusteehasresignedanda swcessorhasbeenchosento5lthe vacancy.... (b) In this section, the term “businessentity” has the meaning provided by Section 171.001.Local GovernmentCode. (c) For purposes of this section, a person has a substamial intaestinabusinessanityifthepersonhasasubssamialimerrstin the busiws.9

entity for purposes of Chapter 171, Local Government Code. (d) This section prevails over Chapter 171. Local Government Code, to the extent of any wntlict. This office mcently considered this provision and the meaning of the term “signi6cant inme&- wncl~ginpertinent part:

the intenf of this legislation was to proscrii selfdealing. In applying section 23.201, one should focus on the extent to which an individualtrustee mightbenefitgem a particularwntract. Attorney General Opiion DM-240 at 5 (1993). &though we Snd it highlyunlikely that
an independentschool district trustee who serves on the board of directors of a non-profit fotmdationwithout wmpemation or any other remunerationhas a %igmScant” interest in the foundation, such a detentkation requires the resolution of factual issues and is therefore beyond the purviewof the opinionprocess. See id. (“Whetheraparticular set of cirwm&mces are included within the meaning of ‘significant interest’ requires the resohttion of tkctual issues not appropriateto the opinionprocess.“) Although an independentschooldistricttrustee is no longer prohiied by common law from serving as a director of a privatq non-profit wtporation which has business

opinioqUlartwithrrrpctu,localplblicofficials’rerviccontbcboardsatpmnts~~t cqomti~ns. See Acts 1989, ‘ Ilsl Le& ch. 475.0 2, at 1648 (ce: Au& 28,1989).

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derrliagswiththeschwldistrictifheorshedaswwitbwtcompearationor~other remtmeratioq see supru note 2, qrecautionthat section 171.009of the Local Gowmment Code does not newmar@ insulate the kustee from the possible legal wnsequences of a wntlict of interest which might arise with respect to a particular matter in which the interests of the independemschool district and the foundation are at odds. In particular, astheresuitofsuchasituation,atrustee,inhisorhercapachyasdirectorofthe foundation,could becomethe subject of a civil suit for breach of his or her fiduciaryduty to the private, non-profit corporation. See Block v. Slate; 718 S.W.2d409,415 (Ta. App.-Houston [lst Dist.] 1986no writ) (holdingthat directors of non-profit wrporation bmached their fiduciary duty). Therefore, a trustee would be well-advised to avoid cagaeiag in conductwhichmightgive rise to such a cause of action. Fii, you ask if “an ISD’ s provision 0 of free 05ce [space] and incidentalitems violate[s]l either an order entered by the federal district court in UnitedStutes v. Tours, Cii. A No. 5281 (E.D. Tar.), or Texas Education Agency (“TEA”) re@ements resulhg ikom that order. United Stutes v. Texm was fled on March 6, 1970. In late 1970,the fweral district wurt found that the policiesand practices of TEA had frequently encouraged or resulted in the wntinuation of the vestiges of racially wgregated education in Texas. UnitedStates v. Teuzr, 321 F. Supp. 1043, 1057 (E.D. Tert. 1970), afd, 447 F.2d 441 (5th Cii. 1971), cert. denied, 404 U.S. 1206 (1972). Thereafter, an order was issued encompassing student assignments and transfers, and district boundaries. In addition, orders were included regardiig students, faculty, statf, transportation, cxtmamicular actiwSs, and facilities. See UnitedStates v. Teurs, 447 F.2d 44l(Sth Cir. 1971). These orders mquired TEA to take numerous actions to facilitate and encourage dewgmgaGon. TEA was prohiiied, for example,from permitting school extmamicular activities which would result in segregation or diswminadon. See id. at 445-96. TEA
was ordered to suspend the accreditation of school districts opemting extmwniwlar activities in a discriminatorymsnner and to reduce their lintding. See id. at 446. Si 1970, numerous additional orders have been issued in the action. See generui~ United Staresv. Teu~, 628 F. Supp. 304.306-07 (E.D. Tex. 1985). GiventheaaensivescopeoftheseordasrrndtheVCfYminimalfa*sywhave provided, this office is unable to determine whether the relationship behveen the independent school district and the foundation violates any of the. wurt’ s orders. The independent school district’ s wncuns with respect to wmpliance with the orders in Unifed stares v. Tems would be more appropriately directed to the TEA in the 6rst

SUMMARY
Section 23.26 of the Education Code authorizes the board of trustees of an independent school district to accept donations and other gifls corn a private foundation, and to supply the foundation with 051x space and the use of other school property, assuming a school purpose is served. The question whether article III, section 52(a) of the Texas Constitution prohibits the board from supplying

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thefbu&tionwith05ce~andtheuse-0fothasclloolpro~ dependsuponwhethtbiswouldserveapublicpurpore,appropriate totheihctionofanindependentschooldistri~whetberadequate wnsideration would flow to the public; and, whether the board would maintab stdlicientwntrols over the foundation% acdvitie to Gllt?UEthtttthCpUbliCpurpoSCiSWtUallyflC$iCVCd.

Section 171.009 of the Local Government Code pmits the tnudaofmindependent~~ldistricttosave~a~orofa private, non-profit corporation whickdoes businesswith the school district, provided he or she raceives no compensation or oh-r mmmemtion fix doing so. The determhation whether section 23.201 of the Education Code prohiiits the board of trustees of an i&pendeatt school district from entering into a contract with a businessatityforwhichatrustee~~onitsboardof~o~ without compensation or any othe-r remuneration reqdres the resolution of factual issues and is there&e beyond the purview of theopinionprowss.

DAN MORALES Attorney Generalof Texas

WILL PRYOR FtiAshtantAttomeyGeaaal

MARYKELLBR Deputy Attorney Oeneralfix Litigation
RENBAHIcK!s StateSokitor
MADELBINEB. JOHNSON Chair, Opiion Committee

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