DAN MORALES 

ATTORNEY GENERAL 

@ffice of tfp attorney 

. &Mate of Qexas 

September IS,1993 

Qkneral 

Honorable WkR Ftatl8 

ChlG 

lzdwationcommittee 

Texas State Senate 

P.O. Box 12068 

Austin, Texas 78711 

Opinion No. DM-256 

Re: whethex an indepwdent school district 

may provide free office space and other items to 

a private, non-profit foundation (RQ-538) 

Dear Senator BatlilY 

On behalf of an independent school district (which you refer to as “the ISD”), you 

ask whether an independent school 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’s board 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 members who 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 remuneration for serving on the board of directors of the foundation. 

Fibat, you ask if “an ISD’s provision of a free office and incidental items 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 exclusive power 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 

foundation you descrii. 

‘we&nctcclLaer-tkkgslitycfrektiollshipyaldocrikis~bytbcvay 

recenuy enacted school tinax lefoms. see Acts 1993,nd Leg., ch. 347. 

p. 1327 
Honorable WtiamR. RatliE - Page 2 (~~-256) 

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 School of Law of the University of 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 concluded that the university 

had the statutory authority to provide the foundation with these items as “terms and 

wnditions” attached to its donations under section 65.31(e) of the Education Code which 

provides as follows: 

The board is specifically authorized, upon terms and conditions 

acceptable to it, to accept and administer gifts, grants, or donations 

of any kind, tiom any source, for the use by the system or any of the 

component institutions of the system. 

Id. at 2 (quoting Educ. 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 opinion stated that the constitutional prohibition 

requiresthataCCrantbytheuniversitytothefouadstonmussservea 

public purpose, appropriate to the function of a university~ and that 

adequate consideration must 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 exchtsive power 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 authorized to “receive bequests and donations or other moneys or fimds 

coming legally into their hands.” Id. # 23.26(a); see t&c id. 55 20.482 (authorizing board 

of truames to invest giSs made to school district to provide college scholarships), 21.903 

(authorizing board 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 keeping with the lawibl putposes 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 compliance with 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 

p. 1328 
Honorable Wtiam R Ratlitf - Page 3 (DM-256) 

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.2d 924 (Tex. 1977); Low v. City of Dallas, 40 S.W.2d 20 (Tex. 1931); Attorney 

Oeneml Opinion I’M-958 (1988). Thus, the use of school property must serve a school 

pupose. 

We believe that section 23.26 of the Education Code authorizes the trustees of an 

independent school 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 question whether the constitution permits the 

trustees to supply the foundation with office. space and the use of other school property is 

another matter. We have not been provided with su5cient fbcts to determine whether this 

would serve a public purpose, appropriate to the tbnction of an independent school 

district; whether adequate consideration would Sow to the public; or whether the trustees 

would mainmin sufiicient controls over the foundation’s activities, to ensure that the public 

purpose is actually achieved. This determination is one to be made by the board of 

trustees in the first instanw. See Attorney Oeneral Opiion MW-373 at 9. 

Next, you ask if”members of the ISITs board of trustees [can] also be members of 

the corporation’s board.” As noted above, we assume that the independent school district 

trustees do not receive compensation or any other remuneration for sendng on the board 

of directors of the foundation. Conflicts of interest on the part of local public 05cials 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 involving the 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 nonprofit cotporation or other nonprofit entity. 

Because chapter 171 generally preempts common-law wnflicts 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 

p. 1329 
Honorable wikn R Ratlitf - Page 4 (DM-256) 

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 specifically governs certain wntlicts of interest on the part of 

school district trustees. See Acts 1993, 73d Leg., ch. 964, 8 2 (eff. June 19, 1993). 

Section 23.201 of the Education Code provides as follows: 

(a) TheboardoftrusteeoofaschooldirtrictmaynotQlterinto 

awntractwithatnrstaofthedirtrict,therpouseofatrustee,ora 

businementityinwhichatrusteeortbespouseofatrusteehasa 

sign&ant interest tmtil the trusteek current term has expired or until 

thetrusteehasresignedanda swcessorhasbeenchosento5lthe 

vacancy.... 

(b) In this section, the term “business entity” has the meaning 

provided by Section 171.001. Local Government Code. 

(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 

individual trustee might benefit gem a particular wntract. 

Attorney General Opiion DM-240 at 5 (1993). &though we Snd it highly unlikely that 

an independent school district trustee who serves on the board of directors of a non-profit 

fotmdation without wmpemation or any other remuneration has a %igmScant” interest in 

the foundation, such a detentkation requires the resolution of factual issues and is 

therefore beyond the purview of the opinion process. See id. (“Whether a particular set of 

cirwm&mces are included within the meaning of ‘significant interest’ requires the 

resohttion of tkctual issues not appropriate to the opinion process.“) 

Although an independent school district trustee 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). 

p* 1330 
Honorable Ww R RathtT - Page 5 W-256) 

derrliagswiththeschwldistrictifheorshedaswwitbwtcompearationor~other 

remtmeratioq see supru note 2, qre caution that section 171.009 of 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 independem school district and the foundation are at odds. In particular, 

astheresuitofsuchasituation,atrustee,inhisorhercapachyasdirectorofthe 

foundation, could become the subject of a civil suit for breach of his or her fiduciary duty 

to the private, non-profit corporation. See Block v. Slate; 718 S.W.2d 409,415 (Ta. 

App.-Houston [lst Dist.] 1986 no writ) (holding that directors of non-profit wrporation 

bmached their fiduciary duty). Therefore, a trustee would be well-advised to avoid 

cagaeiag in conduct which might give rise to such a cause of action. 

Fii, you ask if “an ISD’s provision 0 of free 05ce [space] and incidental items 

violate[s]l either an order entered by the federal district court in United Stutes 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 policies and 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 United States 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 discriminatory msnner and to reduce their lintding. See id. at 446. Si 

1970, numerous additional orders have been issued in the action. See generui~ United 

Stares v. 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 

p. 1331 
Honorable WilliamR Ratliff - Page 6 (~~-256) 

thefbu&tionwith05ce~andtheuse-0fothasclloolpro~ 

dependsuponwhethtbiswouldserveapublicpurpore,appropriate 

totheihctionofanindependentschooldistri~whetberadequate 

wnsideration would flow to the public; and, whether the board 

would maintab stdlicient wntrols 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 business with 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 General of Texas 

WILL PRYOR 

FtiAshtantAttomeyGeaaal 

MARYKELLBR 

Deputy Attorney Oeneral fix Litigation 

RENBAHIcK!s 

StateSokitor 

MADELBINE B. JOHNSON 

Chair, Opiion Committee 

p. 1332