Opinion ID: 1723051
Heading Depth: 2
Heading Rank: 4

Heading: Lending of credit or grant of public money

Text: The Sterling City and Crockett County districts argue that the Senate Bill 7 financing system is invalid because it authorizes or requires districts to lend credit or grant public funds in violation of article III, sections 51 and 52 of the Texas Constitution. Those provisions, they argue, prohibit the use of local tax revenues for the aid of a separate political subdivision in lieu of needed state funds. See generally San Antonio Indep. Sch. Dist. v. Board of Trustees, 204 S.W.2d 22, 25 (Tex.Civ.App.El Paso 1947, writ ref'd n.r.e.) (A city cannot donate its funds to an independent municipal corporation such as an independent school district.). Section 51 of article III prohibits the Legislature from authorizing a grant of public moneys to any individual, association of individuals, municipal or other corporations whatsoever, with certain exceptions. Section 52(a) of article III serves a related purpose; it prohibits the Legislature from authorizing a political subdivision to lend its credit or to grant public money or thing of value in aid of, or to any individual, association, or corporation whatsoever, or to become a stockholder in such corporation, association or company. [22] Generally speaking, both sections are intended to prevent the application of public funds to private purposes; in other words, to prevent the gratuitous grant of such funds to any individual, corporation, or purpose whatsoever. Byrd v. City of Dallas, 118 Tex. 28, 6 S.W.2d 738, 740 (1928). Chapter 36 of the Texas Education Code, as amended by Senate Bill 7, does not authorize the use of public funds for private purposes, or any gratuitous grant of public funds. When a district with wealth in excess of $280,000 per student chooses to reduce its wealth through either option 3 (purchasing of average daily attendance credits) or option 4 (contracting for the education of nonresident students), some funds must be transferred outside the district. See TEX.EDUC.CODE §§ 36.094, .121. Such a transfer, however, is not for private purposes, nor is it a gratuity; rather, it is the price the voters in the school district choose to pay for the preservation of the district's current boundaries. A transfer of funds for a public purpose, with a clear public benefit received in return, does not amount to a lending of credit or grant of public funds in violation of article III, sections 51 and 52.