. 

JIM MATTOX 

Attorney General 

The Attorney General of Texas 

September 25. 1985 

6upreme Court Buildin 

P. 0. Box 12546 

Austin, TX. 7671 l- 2546 

512,4752501 

Telex 9101674.1367 

Telecopier 512/4750266 

Honorable Charles F. Aycock 

Parmer County Attorney 

P. 0. Box 286 

Farwell, Texas 79325 

opinion No. JM-355 

RS: Distribution of proceeds 

from the permanent school fund 

in Parmer County 

714 Jackson. Suite 7M] 

Dallas, TX. 75202.4508 

2141742.6944 

4624 A,bel,a Ave.. Suite 160 

E, Paso, TX. 79905-2793 

9151533.3464 

1001 Texas. Suite 700 

tbuston, TX. 77002-3111 

7131223-5666 

606 Broadway, Suite 312 

,.ubbock. TX. 79401-3479 

666,747.5236 

4309 N. Tenth, Suite B 

~cA,,en, TX. 76501-1665 

5121662-4547 

2CCl Main Plaza, Suite 400 

sari Antonio. TX. 70205-2797 

512n25-4191 

Dear Mr. Aycock: 

YOU ask us several questions relating to the distribution of 

county permanent whool funds pursuant to article VII, section 6b of 

the Texas Constitution. That constitutional provision provides: 

Sec. 6b. Notwithstanding the provisions of 

Section 6, Article VII, Coastirution of the State 

of Texw, any county, acting through the commissione:cs court, may reduce the county permanent 

school f'und of that county and may distribute the 

amount of the reduction to the independent and 

co-n school districts of the county on a per 

scholastic basis to be used solely for ehe 

Purpose,5 of reducing bonded indebtedness of those 

distriws or for making permanent improvemenrs. 

The co&ssioners court shall, however, retain a 

suffici(nlt amount of the corpus of the county 

permanent school fund to pay ad valorem taxes on 

school lands or royalty interests owned at the 

time of the distribution. Nothing in this Section 

affects financial aid to any school district by 

the staw. 

Adopted Nov. 7, 1972. (Emphasis added). 

Article VII, seccimon 6 states that the county permanent school lands 

and the proceeds from their sale "shall be held by said counties alone 

as a trust for the benefit of nublic schools therein: said uroceeds to 

be invested . . . and the cknties shall be reiponsibie for all 

investment 8. . . , IN Tex. Const. arr. VII. 96 (emphasis added). 

You inform w that rhe Parmer County Commissioners Court met with 

the superintenden(:r; of each of the school districts located in Parmer 

County together wL,th numerous board members representing each of the 

districts. The representatives of the various school disrricts were 

p. 1623 
Bonorable Charles F. Aycock .- Page 2 (JM-355 

instructed as to the requimments of article VII, section 6b of the 

Texas Constitution. You also inform us that none of the school 

districts indicated to the commissioners court that the funds would be 

used for reducing bonded iidebtedness, and all but one of the school 

districts indicated that 11: did not intend to use the money for 

permanent improvements. That one school district (Friona Independent 

School District), through its representatives, indicated to the 

commissioners court that in order to comply with the Education Code, 

it would at some point in time make permanent improvements. The 

school district did not sllxuit any plans to the court nor was any 

indication given to the court as to when the improvements might be 

made or the specific nature of the improvements. 

You inform us that the county has invested the school fund in 

certificates of deposit which matured in March 1985. In that regard, 

the Friona Independent Scho,ol District has requested its portion of 

the fund and has indicated that it would create a sinking fund in 

which its share of the permanent school funds would be placed until it 

proceeds with its future plans for permanent improvements. 

You first ask: 

May the commissioners court distribute the 

principal and interest after retaining a sufficient amount of. the principal to pay ad valorem 

taxes to a scho,LL district upon the district's 

statement that it intends to make permanent 

improvements without first ascertaining whether or 

not the permanen: improvements will be made, and 

how much of the district's portion of the permanent school fund will be used in construction of 

the permanant improvements. 

It is important to note that under article VII, section 6 of the Texas 

Constitution counties are trustees of school lands for the benefit of 

the schools. Tex. Const. art. VII, 96. As the governing board of the 

county, the commissioners court acts as trustee in distributing the 

school fund under article VII, section 6b of the constitution. See 

Attorney General Opinions H-878 (1976); H-391, H-239 (1974); M-1104 

(1972). As trustees, the:.r powers must be strictly construed, and 

they may neither divest themselves of the powers conferred nor assume 

powers not conferred. Set! Potter County v. C. C. Slaughter Cattle 

CO., 254 S.W. 775 (Tax. i%iim'n App.. - Sec. B, 1923, opinion adopted). 

Section 6b lodges discretion of how and when to distribute the 

county school fund in the wmmissioners court. Tex. Const. art. VII, 

§6b. Neither the time of the distribution nor the manner of 

distribution is specified :Ln the constitutional provision. On the 

contrary, the purposes for which the fund may be distributed are 

p. 1624 
Honorable Charles F. Aycock - Page 3 (JM-355) 

clearly expressed. Id. Thus, the answer to your first question 

depends on what stan=d is applied to a tmstee exercising his 

discretion to distribute test funds to the beneficiaries. 

In exercising discretionary powers, the tmstee must act within 

the "bounds of a reasonatle judgment." See First National Bank of 

Beaumont V. Howard, 229 S.W.2d 781, 783 (Tz 1950). We believe that 

under this standard, a trustee is required to manifest the care, 

skill, prudence, and diligence of an ordinary prudent wan engaged in 

similar business affairs. Cf. Attorney General Opinion M-1104 (1972) 

(prudent wan standard is applicable to investments). Inplicit within 

this standard is a duty tc investigate and ascertain facts to make an 

informed judgment. Therefore, in response to your first question we 

conclude that it is within the cowmissioners court's duty as trustee 

to ascertain whether permanent improvements will be made and how much 

of the school district's portion of the permanent school fund will be 

used in the construction of permanent improvements before funds are 

distributed to school dist~c:tcts. 

You next ask whether ,s school district may receive its portion of 

the fund and create a sinking fund or reinvest the funds in a 

certificate of deposit until it proceeds with its plans for permanent 

improvements. We believe that this situation is possible only if 

there is a justifiable expectation on the part of the county 

commissioners that the fund. will be used within a reasonable time to 

satisfy the constitutional purposes. See Attorney General Opinion 

H-878 (1976). To distribute permanent school funds to a school 

district for the purpose of allowing the school district to invest the 

funds or establish a sinktug fund with no impending expectation that 

the funds will be used for the constitutional purposes within a 

reasonable time would be cnrtrary to the intent and purpose of article 

VII. section 6b. See Pal:terson v. City of Dallas, 355 S.W.2d 838 

(Tex. Civ. App. -ml=-1962, writ ref'd n.r.e.) (interpretation 

should not thwart legislative intent); appeal dismissed per curiam, 83 

S.Ct. 873 (1963). 

Article VII, section 6b outlines standards for members of the 

commissioners court for t'he investment of the school funds. The 

constitution wakes no provision governing investments by a school 

district. General tmst principles provide that a tmstee cannot 

delegate the authority that has been conferred upon him. See West v. 

Dapgood, 174 S.W.2d 963 (Tex. 1943) (trustee nay onlydelegate 

mechanical or ministerial BIXS). 

However, this office briefly discussed a limited circumstance in 

which a school district sought permission to deposit its portion of 

the county school fund in .an interest bearing account. See Attorney 

General Opinion H-878 (1975'). In that opinion, it was argued that 

p. 1625 
Honorable Charles F. Aycock '- Page 4 (JM-355) 

logically, the dj.stribution of funds could not be 

immediately applLed towards reduction of bonded 

indebtedness or construction of permanent improvements and that investing the funds in the interim 

period would insure that no earnings would be lost 

to the school chjldren of the county. 

Id. The opinion concluded that an investment by a school district was 

Frmissible as long as the resulting income (interest) and the 

principal are not expended except as directed by [article VII, sec. 

6bl." Attorney General 0p:tnion H-878. The opinion clearly suggested 

that the investment would te temporary and that a determination by the 

county commissioners had been made to distribute the funds for the 

constitutional purpose. IIf! believe that only under these limited 

circumstances may the schocN1 district be allowed to invest its portion 

of the fund once distributcld, by the county. 

Finally you ask: 

If the commisr;i.oners court elects to distribute 

the corpus and ,Lnterest of the permanent school 

fund to those districts satisfying the requirements of article VII, is it incumbent upon each 

school district to determine the number of persons 

residing in the !school district eligible by age 

for free education whether the persons *re 

enrolled in private or public schools and then 

present that data to the commissioners court so 

that the commiss'toners court can make the distribution on a per wholastic basis. 

Article VII, section. 6b of the Texas Constitution provides that when 

more than one school distl:ict is located in the county, the commissioners court is requirei. to distribute the funds to the various 

school districts on w a pel' scholastic basis." Tex. Coast. Art. VII, 

56b. In Attorney General Opinion H-47 (1973). this office defined the 

phrase "on a per scholastic basis" as "on the basis of the number of 

persons residing in the school district eligible by age for free 

education." The computation of students on a per scholastic basis has 

no relation to the avera$;e: daily attendance. See Attorney General 

Opinion H-47 (1973); hut s(?e Educ. Code 016.006. - --- 

Prior to 1975. the l@!gislature had provided for the taking of a 

scholastic census whereby the number of students of scholastic age 

residing in a particular rrchool district could be determined, but in 

1975 the provision was repealed. See Educ. Code 514.02, repealed by 

Acts 1975, 64th Leg., ch. (4, §l. at, eff. Feb. 13, 1975. We have 

not found nor have you ini'ormed us of any official method by which a 

tabulation may be made whereby the county funds may he distributed in 

p. 1626 
Ronorable Charles F. Aycod. - Page 5 (JM-355) 

compliance with the constitutional requirement. See Love v. City of 

Dallas, 40 S.W.2d 20 (Tex. 1931); see also Attorney General Opinion 

H-47 (1973). Since sectlone: 6 and 6b of the constitution are directed 

to the county commissione:rs court, we believe that it is incumbent 

upon the county commissioners as trustees of the fund to formulate a 

method to determine the scholastic population within a school 

district. Again, we advise that these commissioners are required to 

manifest the care, skill, p:cudence, and diligence of ordinary prudent 

persons engaged in similar t#usiness affairs. 

SUMMARY 

Before distributing the funds to school 

districts, the ctmrmissioners court, as trustees of 

the county school fund, is under a duty to 

investigate whe,cller or not certain permanent 

improvements will be made by a school district. 

In ascertaining this information, the commissioners court 111 required to manifest the care, 

skill, prudence, and diligence of an ordinary 

prudent man engat:ed in similar business affairs. 

Before funds are distributed to any school 

district in the county, the commissioners court 

must satisfy itself that the funds will he used 

within a reasonzble time for either of the constitutional purposes. 

It is incumbe~nt upon the county commissioners 

as trustees of the fund to formulate a method to 

determine the scholastic population within a 

school district. 

Ve 4 

JIM MATTOX 

Attorney General of Texas 

TOM GREEN 

First Assistant Attorney General 

DAVID R. RICHARDS 

Executive Assistant Attorney General 

ROBERT GRAY 

Special Assistant Attorney General 

p. 1627 
, 

Honorable Charles F. Aycock - Page 6 (33-355) 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Tony Guillory 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Rick Gilpin, Chairman 

Colin Carl 

Susan Garrison 

Tony Guillory 

Jim Moellinger 

Jennifer Riggs 

Nancy Sutton 

Sarah Woelk 

p. 1628