Court Opinion

ID: 4129921
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:58:03.717933+00
Date Added: 2024-06-11T14:37:36.617886
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QBfficeof tiy Bttornep Qhnecal
                                        &ate of QCexae
DAN MORALES                               October 14,1993
 Al-r”RSEY
        GENERAL

      Honorable Ashley Smith                       opinion No. DM-260
     ‘ClMif
      Committee on Higher Education                Re: Whether M independent school district
      Texas House ofRepresentatives                may use various assets to create an
      P.O. Box 2910                                endowment fimd (RQ-244)
      Austin, Tex~,s 78768-2910

          You have requested an opinion from our 051x. about the creation of a permanent
     endowment fund by a Texas public school district.

             You inform us that the Plan0 independent School District seeks to establish a
     permanent endowment fund for the continuing financial support of its education program.
     You state that the corpus of the fund will be establishedfrom the “designatedlknd balance
     of the general limd, land assets of the School District, proceeds from the sale of land
     owned by the district, bequests from individuals and/or capital expenditures to provide
     education services to the students of the District.” The fund would be managed and
     administered under policies adopted by the board of trustees, accounted for as a trust
     fund, and be subject to all existing controls and auditing requkements currently in effect in
     the district’salxounting system.

            You ask the following questions:
                                  pamenentendowmentfimdkcreatedbyaTexas
               ~licC:&?Lu?
               2. May designated general &nd -                  (that is, general fund
               balance); land assets of the [d]ict (that is, surplus land purchased
               with bond proceeds for kture school sites but no longer needed for
               school sites), and/or proceeds tim the sale of land owned by the
               [d]istrict be used as sources to establish and incmasetllecorpusof-
               the fund?
               3.    Ifso,isrevenuefiomthese       soum!srestridedinanymMner?
               Ifso, how.
             Your questions are general in nature, and you do not ask us to address specific
     statutes or c4x&utionsl provisions. We will discuss statutes that are relevant to this

                                              p. 1356
Honorable Ashley Smith - Page 2         (DM-260)

proposal, but we must caution you that most of the staMes we discuss are set for repeal
effective September 1. 1995, under the following provision of Senate Bii 7 of the 73rd
Legislature:
              Section 8.33. Effective September 1, 1995, the following
          provisions of the Education Code are rqmled:
              (1) Title 1; and
              (2) Title 2, except Chapters 16.20, and 36.
              Section 8.34. Not later than June 1, 1994, the commissioner of
          education shall submit to the legislature a proposed revision *of
          Education Code provisions repealed by Section 8.33 of this article.
        Cur answers to your questions are thus based on statutes currently in et&t, and
will not nm       apply to revised versions of those statutes.

        A school board possesses only the authority expressly or impliedly given it by
statute. Mesquite Indep. Sch Dist. v. Gross, 67 S.W.2d 242 (Tex. 1934) (annexation);
Texas Roofing Co. v. U%itesi&,385 S.W.2d 699 (Ten. Cii. App.-Amarillo 1964, writ
refd n.r.e.) (contmcting). Chapter 23 of the Education Code, applicable to independent
school districts, includes the following provision:
              (a) The trustees shall constitute a body corporate and in the
          name of the school district may acquire and hold real and personal
          property, sue and be sued. and receive bequests and donations or
          other moneys or funds coming legally into their hands.
              (b) The trustees shall have the exclusive power to manage and
          govern the public gee schools of the district.
               (c) AU tights and titles to the school property of the district,
          WhethcrrealorpersonaZshallbeveaedinthetnrsteesllndtheir
          al-rs     in office.
              (d) The trustees may adopt such rules, regulations, and by-laws
          astheydeemProper.
Educ. Code 5 23.26.

      An “endowment 5nd” is a fimd from which the income may be expended, but
whose principal must remain intact. TEXAS EDUCATIONAGENCY.PlNANClAL

                                       p.   1357
Honorable Ashley Smith - Page 3         (~11-260)

ACtXNNTING MANLJAL,BuLLETPI 679 Appendix A (February 15. Ml).’                We Snd no
statute that expremly authorizes a school district to establish an endowment tbnd,
although the board may have some implied authority to place particular assets in one. A
school board has express authority under section 23.26 of the Education Code “to receive
bequests and donations,” “to msnage and govern the public fine schools in the district,”
and to “adopt such rules, regulations, and bylaws as they deem proper,” as long as they are
consistent with law.1 Section 21.903 pennits a school board to use donated fbnds or other
property, or the income therefrom for any purpose designated by the donor, so long as
the purpose is in keeping with the lawful purposes of the schools. Set uLrwEduc. Code
0 20.482 (sqlmol board may invest a gig, devise, or bequest to the district for college
scholarships for its graduates). Under these provisions, we believe a school board could
establish an endowment fimd for educational purposes with mon9 willed or donated for
that purpose. Id 5 23.26. We will look next at the statutes applicable to the particular
assets you mention to determine whether the board may place them in an endowment
fund.

        You first ask about placing “designated general fund reserves” or “general fund
balance”in an endowment fund. The general fiurd of a school district is used to tlnance
the ordii     operations of a school district. TEXASEDUCATION AGENCY, supa. The
school district contemplates setting aside a portion of the general iimd to place in the
endowment fund, or using assets remiining in the general fund at the end of the fiscal year
for that purpose. The school board thus contemplates setting aside revenues collected in
this year to support the schools in future years.’

        The following provision controls the expenditure of public Cmds for the operation
of a school district:
             (a) ThepublicfreeschoolibndsshaUnotbeexpendedexceptas
          providedhthissection.

               (b) The state and county available tirnds shag be used
          exclusively for the payment of teachers’and superintendents’salaries,
          fees for taking the scholastic census, and interest on money borrowed
          on short time to pay salaries of teachers and superintendents . . . .

        ‘TheF~AcFoontingMnrmal,doptcdbyrrf~rrtbc~~~nrk,19T.AC
0 109.61.Ou outtk re@eme& forbudsaing aaumtiing,finaacia rcponing,8~6tit@        rppticsble
to s&ool dieicb. 19T.A.C Q 109.1;cccEduc.Code$523.42(b)@&cl mustbe prcpral -            to
ridessod rcgulationr
                   of StateBard of Edwatioo),23.48(b)(schooldiskia acanting s@om mud med
minimummpirunen~~prc&bed by State&ant ef Ednmtton),23.4Fi(d)(wtborityef StateBoardd
EdUC8IiOOIOClI8blilh~repor(iagrcquirrmentr).
                v. V#lhwsi~Intend&die L.eagw,616SW.26 im (Ta. 1981);McL8m I&p. Sh.
        ‘snl~lvm,
Dist.Y.Andims, 333s.w.2d 886(Ta. civ. App-Amaltuo 1960,110
                                                        writ).

                                        p.   1358
Honorable Ashley Smith - Page 4         (DM-260)

              (c) Local school funds from district tax- tuition fees of pupils
          not en&d to free tuition and other local sources may be used for
          the purposes enumerated for state and county timds and fbr
          purchasing appliances and supplies, for the payment of imumncc
          premiums, janitors and other employeas, for buying school sites,
          buying, buuding and repsiring and renting school houset&sandfor
          uther putposes necessury in daeconduct of the public schook to be
          &termined by ihr board of mcstecs . . . , provided, that when the
          state available school fund in any nity or district is a&icient to
             . .
          mamtam the schools thereof in any year for at least eight months, and
          leave a surplus, such surplus may be expended for the purposes
          mentioned herein.
Educ. Code 5 20.48 (emphasis added).         The itaUcizad language of se&ion 20.48(c)
appears to give the board of trustees broad authority to decide how to spend school fimds.
However, other provisions of law may restrict this authority.

       L.ocal school funds derive largely t?om school district property tax revenues.
Edgewoodlnrdep.Sch. Dtst. v. Kirby, 777 S.W.2d 391 (Tax. 1989). This system has been
declared unconsthutional because it is not fiscally neutral, since students in low property
wealth districts do not have access to iitnds substantially equal to those available to
students in high properly wealthdistricts. Kirby, 777 S.W.2d at 397, see also cmrdlran-
Fmmers Branch It&p. Sch. Dist., 826 S.W.2d 489 flex. 1992); &igewo& In&p. sch.
Dist. v. Kirby, 804 S.W.2d 491 (Tex. 1991). Racently adopted legislation on school
financing is before the courts. w             v. Meno. No. 362516 (Dist. Ct. of Travis
County, 250th Judicial Dist. of Texas, plaintiffs motion for declaratory judgment and
injunction Sled June II, 1993) (chsllenge to the constitutionaUtyof S.B. 7, Ants 1993,
73d Leg.). The snhool district’sproposal to use cutrent local tax revenues to establish an
cndowmcnt tknd for the future support of the district’s schools raises issues that implicate
the issues before the court. We camtot address this question while the constitutionaUtyof
the school financing system remsins the subject of litigation. Ser Attorney General
opinions hlW-205 (1980); V-291 (1947) (the attorney general will not issue an advisory
opinion addressing a question in litigation).

       Weturntoyourquestionsaboutplacingtheprooeedstromnalpropatyrrlesin
anendowmentfimd. Propatyofa~hooldistrictmaybeconveyedo~inthemanna
provided by law. lkmro Ro&cr.r Co. v. Chilton In&p. Sch. Dist.. 647 S.W.2d 726
(Tex. App.-Waco 1983. writ refd n.r.e.); Crouch v. Posey, 69 SW. 1001 (Tex. Cii.

                                         p.   1359
Honorable Ashley Smith - Page 5             (DM-260)

App.-1902, no writ). Section 23.30 of the Education Code, the primary statute
governing sales of school district property, provides in part:
                (a) The board of trustees of any independent school district
             may, by resolution, authorize the sale of any property, other than
             minerals, held in trust4 for fke school purposes.
                  . . . .

                 (c) The proceeds of such sale shall be used for the pmchase of
             more convenient and more desirable school property or for the
             wnstruct~on or repairing of school buildings or deposited to the
             credit of the local msintenance fimd of the district. Footnote
             added.]
       An independent school district may sell its land only if the proceeds are used
according to section 23.30(c). Attorney General Opiions JM-1000 (1988) at 4; C-1570
(1939) at 3-5 (construing predecessor statute). These purposes do not include placement
in a permanent endowment tknd for the “continuing Snancial support of. . . the
educational program.”

        Chapter 20, subchapter F of the Education Code authorizes a school board to sell
surplus real property and issue revenue bonds. Educ. Code 8 20.922, see id.
$5 20.921- 20.927 (subchapter F). The prodeeds from the sale are subject to restrictions
similar to those applicable under section 23.30; they must be used for (1) constructing or
equipping school buildings or purchasing buildings sites or (2) payment of principal,
interest, and premium on any bonds issued under subchapter F. Thus, the proceeds of
land sold under chapter 20. akhapter F of the Education Code, may not be placed in an
endowment fund.

        Accordingly, we conclude that a school district may not place the proceeds from
the sale of land owned by the district in an endowment fimd. This 05ce will not issue an
advisory opinion on whether a school district may allocate current local tax revenues to an
endowment &mdfor the Ware support of the district’s schools while the constitutionality
of the school tinancing system remsins the subject of litigation.

           ‘Schooldisutct~heldlytbebn’Iceairkldiatmrtfor~pnpaa.              Lmev.Ci(vof
Lkllos, 40 S.W.2d20 (1931);ax ah TexasAntiqvities
                                                Gmm. v. DollpI Cm&’ Gmwmi(v CdkF,
554 S.W.2d 924 (Ta. 1971);Aaany Gamal opinion JU-958 (1988) (~l@g on Low v. Ci@ of
Dollas).

                                             p.   1360
Honorable Ashley Smith - Page 6        (D&260)

                                   SUMMARY
              The board of trustees of a school district may establish an
          endowment fimd for educational purposes with money willed or
          donated for that purpose. The school board may not place the
          proceeds from the sale of land owned by the district in an endowment
          iimd. This office will not issue an advisory opinion on whether a
          school district may allocate current local tax revenues to an
          endowment fund for the future support of the district’sschools while
          the constitutionality of the school kancing system remains the
          subject of litigation.

                                                    DAN      MORALES
                                                    Attorney General of Texas
WILL PRYOR
First Assistant Attorney General

MARYKEJLER
Deputy Attom General for Litigation

RENEAHICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, opinion Committee

Prepamd by Susan L. Garrison
Assistant Attorney General

                                        p.   1361