OFFICE OF THE ATTORNEY GENERAL . STATE OF TEXAS 

JOHN CORNYN 

The Honorable J.E. “Buster” Brown 

Chair, Natural Resources Committee 

Texas State Senate 

P.O. Box 12068 

Austin, Texas 787 1 l-2068 

March 27,2002 

Opinion No. JC-0484 

Re: Whether the Texas Council on Environmental 

Technology may award a grant to one of its 

members or to a university that employs a member, 

and related question (RQ-0444-JC) 

Dear Senator Brown: 

Under the common law, if an officer of a governmental body has an interest in a contract 

before the body, the governmental body may not enter the contract. See Tex. Att’y Gen. Op. No. 

JC-0437 (2001) at 4. You question whether conflict-of-interest rules preclude the Texas Council on 

Environmental Technology (the Council) from awarding a grant to a member of the Council, as an 

individual, or to a university that employs a member. * Because we conclude that a grant is subject 

to the strict common-law rule, we determine that a conflict of interest precludes the Council from 

making a grant to either a member or to a university that employs the member. 

You further ask whether a conflict can “be resolved[] either by the member recusing himself 

from the vote on the award of that grant[] or by some other means.” Request Letter, supra, at 2. 

Because the grant is subject to the strict common-law rule, the conflict may not be resolved by 

recusal. 

The Seventy-seventh Legislature added a new chapter 387 to the Health and Safety Code, 

which creates the Council to “establish and administer a new technology research and development 

program.” TEX. HEALTH & SAFETY CODE ANN. 8 387.003(a) (Vernon Supp. 2002); see also Act of 

May 24,2001, 77th Leg., R.S., ch. 967, 8 1 (b), sec. 387.003(a), 2001 Tex. Sess. Law Serv. 1970, 

1984. The Council “consists of [eleven] members appointed by the governor to represent the 

academic and nonprofit communities.” TEX. HEALTH & SAFETY CODE ANN. 8 387.002(a) (Vernon 

Supp. 2002). Council members “serve six-year staggered terms.” Id. The Council must, in 

particular, 

‘Letter from Honorable J.E. “Buster” Brown, Texas State Senate, to Honorable John Comyn, Texas Attorney 

General, at 2 (Oct. 3,200l) (on file with Opinion Committee) [hereinafter Request Letter]. 
The Honorable J.E. “Buster” Brown - Page 2 (JC-0484) 

work to enhance the entrepreneurial and inventive spirit of Texans to 

assist in developing solutions to air, water, and waste problems by: 

(1) identifying and evaluating new technologies and seeking the 

approval of the United States Environmental Protection Agency for 

and facilitating the deployment of those technologies; and 

(2) assisting the commission and the United States Environmental 

Protection Agency in the process of ensuring credit for new, 

innovative, and creative technological advancements. 

Id. 9 387.002(b). The Council also must “establish and administer a new technology research and 

development program,” id. 9 387.003(a), which will “provide grants to . . . support development of 

emissions-reducing technologies that may be used for projects eligible for awards under Chapter 3 86 

[Texas Emissions Reduction Plan] and other new technologies that show promise for commercialization,” id. fj 387.003(b); see also id. 6 387.006 (discussing evidence of commercialization 

potential). Section 387.004 permits the Council to issue “specific requests for proposals . . . or 

program opportunity notices . . . for technology projects to be funded under the program.” Id. 

5 387.004. Section 387.005 lists eligible grant projects: 

(a) Grants awarded under this chapter shall be directed toward a 

balanced mix of: 

(1) retrofit and add-on technologies to reduce emissions from 

the existing stock of vehicles targeted by the Texas emissions 

reduction plan; 

(2) advanced technologies for new engines and vehicles that 

produce very-low or zero emissions of oxides of nitrogen, including 

stationary and mobile fuel cells; 

(3) studies to improve air quality assessment and modeling; 

(4) advanced technologies that promote increased building 

and appliance energy performance; and 

(5) advanced technologies that reduce emissions fi-om other 

significant sources. 

(b) The. . . Council shall identify and evaluate and may consider 

making grants for technology projects that would allow qualifying 

fuels to be produced from energy resources in this state. In 

considering projects under this subsection, the [C]ouncil shall give 
The Honorable J.E. “Buster” Brown - Page 3 (JC-0484) 

preference to projects involving otherwise unusable energy resources 

in this state and producing qualifying fuels at prices lower than 

otherwise available and low enough to make the projects to be funded 

under the program economically attractive to local businesses in the 

area for which the project is proposed. 

(c) In soliciting proposals under Section 387.004 and determining 

how to allocate grant money available for projects under this chapter, 

the . . . Council . . . shall give special consideration to advanced 

technologies and retrofit or add-on projects that provide multiple 

benefits by reducing emissions or particulates and other air pollutants. 

(d) A project that involves publicly or privately owned vehicles 

or vessels is eligible for funding under this chapter if the project 

meets all applicable criteria. 

Id. 5 387.005(a)-(d). The Council “may require cost-sharing for technology projects funded under 

this chapter but may not require repayment of grant money, except that the [Clouncil shall require 

provisions for recapturing grant money for noncompliance with grant requirements. Grant money 

recaptured under the contract provision shall be. . . reallocated for other projects under this chapter.” 

Id. fj 387.007. 

Section 572.05 8 of the Govemrnent Code, which governs agency conflicts of interest in rulemaking and quasi-judicial functions, does not apply to contracts. See TEX. GOV’T CODE ANN. 

5 572.058(a) (V emon 1994); Tex. Att’y Gen. Op. No. JM-671 (1987) at 6; accord Op. Tex. Ethics 

Comm’n Nos. 412 (1998) at 1 n.l,298 (1996) at 2 n.2,220 (1994) at 2 n.3. Under section 572.058, 

an officer of a state agency like the Council with an interest in a decision before the agency must 

disclose the interest and recuse him- or herself from participating in the matter: 

An elected or appointed officer, other than an officer subject 

to impeachment under Article XV, Section 2, of the Texas Constitution [which lists the Governor, Lieutenant Governor, Attorney 

General, Commissioner of General Land Office, Comptroller, and 

certain judges], who is a member of a board or commission having 

policy direction over a state agency and who has a personal or private 

interest in a measure, proposal, or decision pending before the board 

or commission shall publicly disclose the fact to the board or 

commission in a meeting called and held in compliance with Chapter 

551. The officer may not vote or otherwise participate in the 

decision. The disclosure shall be entered in the minutes of the 

meeting. 
The Honorable J.E. “Buster” Brown - Page 4 (JC-0484) 

TEX. GOV’T CODE ANN. 5 572.058(a) (Vernon 1994). This statutory conflict-of-interest provision 

applies only to “rule making and the application of the statute and rules to individual cases.” Tex. 

Att’y Gen. Op. No. JM-671 (1987) at 5. 

In our opinion, a grant from the Council represents a contractual relationship that is not 

subject to section 572.058, even if a formal contract is not executed. Under article III, section 5 1 

of the Texas Constitution, a state agency may not make a grant unless the body has found that the 

grant will serve a public purpose and the body has placed sufficient controls on the transaction to 

ensure that the public purpose is accomplished. See TEX. CONST. art. III, 0 51 (withholding from 

Legislature power to make any grant or to authorize making of any grant of public moneys to 

individual, association, or corporation). This constitutional provision and others like it, see, e.g., id. 

$5 50, 52(a); id. art. VIII, 8 3, are intended to prevent a governmental entity from applying public 

funds to private purposes. See EdgewoodIndep. Sch. Dist. v. Meno, 917 S.W.2d 717,739-40 (Tex. 

1995) (quoting Byrd v. City of Dallas, 6 S.W.2d 738, 740 (Tex. 1928)). Nevertheless, the 

constitution “does not bar a governmental expenditure that benefits a private interest if it is made” 

to directly accomplish a legitimate public purpose. Tex. Att’y Gen. Op. No. JC-0146 (1999) at 2. 

Attorneys general long have interpreted section 51 not to forbid a state agency from expending 

public funds in a way “that benefits a private person or entity if the . . . governing body (i) 

determines that the expenditure serves a public purpose and (ii) places sufficient controls on the 

transaction to ensure that the public purpose is carried out.” Id. A contract that imposes upon a 

recipient an obligation to perform a function benefitting the public may provide adequate control for 

constitutional purposes. See Key v. Comm ‘rs Court of Marion County, 727 S.W.2d 667,669 (Tex. 

App.-Texarkana 1987, no writ) (per curiam); Tex. Att’y Gen. Op. No. JC-0439 (2001) at 2. Because 

of the need for controls on the use of the grant, the grants at issue resemble a contractual relationship 

even though a contract may not be executed. Moreover, the statute itself appears to envision that 

the grants will be made under a contract: section 387.007 directs the Council to “require provisions 

for recapturing grant money for noncompliance with grant requirements. Grant money recaptured 

under the contract provision shall be . . . reallocated for other projects under this chapter.” TEX. 

HEALTH & SAFETY CODE ANN. 5 387.007 (Vernon Supp. 2002). Conversely, a grant is not a rulemaking or quasi-judicial function of the sort that is subject to section 572.058 of the Government 

Code. See TEX. GOV’T CODE ANN. 5 572.058(a) (Vernon 1994); Tex. Att’y Gen. Op. No. JM-671 

(1987) at 5. 

Rather, a grant from the Council is subject to a strict common-law conflict-of-interest rule 

that flatly prohibits a governmental body from entering a contract in which one of its members has 

a personal pecuniary interest. See Tex. Att’y Gen. Op. No. JC-0437 (2001) at 4; Tex. Att’y Gen. 

LO-97-052, at 3 (quoting Tex. Att’y Gen. LO-93-12, at 2). The Texas Court of Appeals enunciated 

the common-law rule in Meyers v. Walker: 

If a public official directly or indirectly has a pecuniary interest in a 

contract, no matter how honest he may be, and although he may not 

be influenced by the interest, such a contract so made is violative of 

the spirit and letter of our law, and is against public policy. 
The Honorable J.E. “Buster” Brown - Page 5 (JC-0484) 

Meyers v. Walker, 276 S.W. 305,307 (Tex. Civ. App.-Eastland 1925, no writ); accord Tex. Att’y 

Gen. Op. No. JC-0437 (2001) at 4; cJ: City of Edinburg v. Ellis, 59 S.W.2d 99, 99-100 (Tex. 

Comm’n App. 1933, holding approved) (applying rule in municipal context); Int ‘I Bank of 

Commerce ofLaredo v. Union Nat ‘1 Bankoflaredo, 653 S.W.2d 539,547 (Tex. App.-San Antonio 

1983, writ refd n.r.e.) (same); Delta Elec. Constr. Co. v. City of San Antonio, 437 S.W.2d 602,609 

(Tex. Civ. App.-San Antonio 1969, writ ref d n.r.e.) (same). 

Under the strict common-law rule, even a very small pecuniary interest may constitute a 

prohibited financial interest in a public contract. See Tex. Att’y Gen. Op. No. JM-8 17 (1987) at 2; 

JM-671 (1987) at 3; JM-424 (1986) at 4; Tex. Att’y Gen. LO-97-052, at 2. Indeed, “[m]ere 

employment is sufficient to trigger” the common-law conflict-of-interest rule. Tex. Att’y Gen. Op. 

No. DM-18 (1991) at 2. Moreover, the strict common-law rule reaches a public official’s indirect, 

as well as direct, pecuniary interests. See Bexar County v. Wentworth, 378 S.W.2d 126, 128-29 

(Tex. Civ. App.-San Antonio 1964, writ ref d n.r.e.); Tex. Att’y Gen. Op. Nos. JM-8 17 (1987) at 2; 

JM-671 (1987) at 3; Tex. Att’y Gen. LO-97-052, at 2. A contract that violates the strict commonlaw rule is void even if the interested official recused him- or herself. See Tex. Att’y Gen. LO-97- 

052, at 3 (quoting Tex. Att’y Gen. LO-93-12, at 2 and Delta Elec. Constr. Co. v. City of San 

Antonio, 437 S.W.2d 602,608-09 (Tex. Civ. App.-San Antonio 1969, writ ref d n.r.e.)). 

We consequently conclude that the Council may not award a grant to one of its members. 

A Council member has a direct pecuniary interest in a grant, and the common-law rule prohibits the 

grant. Even if the member were to recuse him- or herself, the contract would be void. 

We likewise conclude that the Council may not award a grant to a university that employs 

a Council member. While the strict common-law rule has been applied to preclude contracts 

between a governmental entity and a private entity in which a public official has an interest, we have 

found no Texas authorities considering its applicability to a contract between two governmental 

entities. Nevertheless, it is consistent with the strict common-law rule to extend it to prohibit a 

contractual grant relationship between two governmental entities where an employee of a grant 

recipient sits on the governing board of the organization distributing grants. In either context, the 

rule “guards against competing interests of a public official which would ‘prevent him from 

exercising absolute loyalty and undivided allegiance to the best interest’ of the governmental entity 

he serves .” See Tex. Att’y Gen. Op. No. H-1309 (1978) at 2 (quoting Miller v. Martinez, 82 P.2d 

519 (Dist. Ct. App. Cal. 1938)) (extending policy against dual agency to transaction involving 

governmental entity); see also Tex. Att’y Gen. Op. No. JC-0407 (2001) at 6 (same). Certainly, if 

the Council member is a university employee designated to conduct the research that will be funded, 

the Council member has a pecuniary interest in the grant. But even if the Council member is not 

designated to conduct the research, he or she has a direct or indirect pecuniary interest in the grant: 

for example, one research project may lead other organizations to fund similar research projects at 

the same university; the grant funds may be used to purchase improved equipment for the research 

project that may later be used by other university faculty; or the university may enjoy increased 

prestige for its work in the particular area of research, which may translate into salary increases. CJ: 

Pitts v. Larson, - N. W.2d -, 2001 WL 1658279, *3 (S.D. 2001) (stating that state legislator who 
The Honorable J.E. “Buster” Brown - Page 6 (JC-0484) 

was employed by South Dakota State University Cooperative Extension Service had “indirect 

interest” in legislature’s appropriation to extension service); Tex. Att’y Gen. Op. No. JC-00 18 (1999) 

at 3 (and opinions cited therein) (concluding that housing authority employee who owns home in 

housing project has interest in project); JM-884 (1988) at 2 (stating that member of Texas 

Commission for the Deaf has pecuniary interest in contract between Commission and local nonprofit 

organization that provides services to Commission if member is compensated by local organization). 

Finally, under the common-law rule, the interested Council member’s recusal will not 

affect the fact that the contract is void. See Tex. Att’y Gen. LO-97-052, at 3 (quoting Tex. Att’y 

Gen. LO-93-12, at 2 and Delta Constr. Elec. Co., 437 S.W.2d at 608-09). 

Of course, the legislature may adopt a statute that overcomes the common-law conflict-ofinterest rule in this circumstance. See Tex. Att’y Gen. Op. No. JC-0225 (2000) at 3 (stating that 

legislature may adopt statute that overcomes common-law incompatibility doctrine). The statutes 

governing the Telecommunications Infrastructure Fund, for instance, explicitly address a situation 

in which a member of the Telecommunications Infrastructure Fund Board may be employed by an 

entity applying for a grant or loan from the board: 

If a board member is an employee of an entity that applies for 

a grant or loan under this subchapter, the board member, before a vote 

on the grant or loan, shall disclose the fact of the member’s 

employment. The disclosure must be entered into the minutes of the 

meeting. The board member may not vote on or otherwise participate 

in the awarding of the grant or loan. If the board member does not 

comply with this subsection, the entity is not eligible for the grant or 

loan. 

TEX. UTIL. CODE ANN. 5 57.047(e) (Vernon Supp. 2002). 

Section 5 1.923 of the Education Code, which concerns the qualifications of a business entity 

that shares a member or director with a regent of an institution of higher education, does not affect 

our conclusion. See TEX. EDUC. CODE ANN. 8 5 1.923 (Vernon 1996). Subsection (b) states that “[a] 

nonprofit corporation is not disqualified from entering into a contract or other transaction with an 

institution of higher education even though one or more members of the governing board of the 

institution of higher education also serves as a member or director of the nonprofit corporation.” Id. 

5 5 1.923(b). Subsection (d) permits an institution of higher education to enter “a contract or other 

transaction described in this section if any board member having an interest described in this section 

in the contract or transaction discloses that interest in a meeting held in compliance with Chapter 

55 1, Government Code, and refrains from voting on the contract or transaction.” Id. 8 5 1.923(d). 

For the purposes of section 5 1.923, a “nonprofit corporation” is “any organization exempt from 

federal income tax under Section 501 of the Internal Revenue Code of 1986 that does not distribute 

any part of its income to any member, director, or officer.” Id. 5 51.923(a) [footnote omitted]. A 

nonprofit corporation is a private entity and is, therefore, distinguishable from a public entity. See 
The Honorable J.E. “Buster” Brown - Page 7 (JC-0484) 

Tex. Att’y Gen. Op. No. JM-852 (1988) at 3; Tex. Att’y Gen. LO-95-014, at 3. A state agency is 

a public entity. See Tex. Att’y Gen. LO-95-014, at 3. This office construes section 5 1.923 according 

to its clear terms. See RepublicBankDallas, N.A. v. Interkal, Inc., 691 S.W.2d 605,607 (Tex. 1985) 

(directing that statute be construed according to its plain language); Bouldin v. Bexar County 

Sheriff’s Civil Serv. Comm ‘n, 12 S.W.3d 527,529 (Tex. App.-San Antonio 1999, no pet.) (stating 

that court may not insert additional words into statute unless it is necessary to effect clear legislative 

intent). Given that the Council is a state agency, and hence, a public entity, it may not enter a 

contractual relationship, including a grant of money, with a university under section 5 1.923 of the 

Education Code. 
The Honorable J.E. “Buster” Brown - Page 8 (JC-0484) 

SUMMARY 

A grant made under chapter 387 of the Health and Safety 

Code is subject to the strict common-law rule prohibiting conflicts of 

interest. See TEX. HEALTH & SAFETY CODE ANN. ch. 387 (Vernon 

Supp. 2002). Consequently, the Texas Council on Environmental 

Technology may not award a grant if a member has a direct or 

indirect pecuniary interest in the grant, including a grant to the 

member him- or herself or a grant to the university that employs the 

member. The interested Council member’s recusal will not affect the 

fact that the contract is void. 

Attorney General of Texas 

HOWARD G. BALDWIN, JR. 

First Assistant Attorney General 

NANCY FULLER 

Deputy Attorney General - General Counsel 

SUSAN DENMON GUSKY 

Chair, Opinion Committee 

Kymberly K. Oltrogge 

Assistant Attorney General, Opinion Committee