Untitled Texas Attorney General Opinion

@ffice of tfp attorney Qkneral . &Mate of Qexas DAN MORALES ATTORNEY GENERAL September IS,1993 Honorable WkR Ftatl8 OpinionNo. DM-256 ChlG lzdwationcommittee Re: whethex an indepwdent school district Texas State Senate may provide free office space and other items to P.O. Box 12068 a private, non-profit foundation (RQ-538) Austin, Texas 78711 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 memberswho served on the ISD’sboard 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 specificallyauthorized, 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 “receivebequests 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 Q23.26(c). Trustees hold school district property in trust for school purposes. Texas Antiquities Coumr. v. Dallas Corm@Community 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 considerationwould Sow to the public; or whether the trustees would mainminsufiicientcontrols over the foundation’sactivities,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’sboard.” 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. Conflictsof 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-lawwnflicts 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 Honorablewikn 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 GovernmentCode. (c) For purposes of this section, a person has a substamial intaestinabusinessanityifthepersonhasasubssamialimerrstin the busiws.9entity 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 individualtrustee 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. (“Whethera particularset 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’sprovision 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 MADELBINEB. JOHNSON Chair, Opiion Committee p. 1332