             T~~A~ORNEY                           GENERAL
                            OFTEXAS




Hon. Jesse James                    Opinion No. O-3724
Acting State Treasurer              Re:    Authority   of the State Board
4stin,   Texas                      of Education     to purchase  certain
                                    bonds.
Dear Sir:

             We are    in receipt     of   your    letter   of June 20,   which
reads    as follows:

              “The State Board of Education     is purchasing
        $500,000 of Corpus Christi    Independent    School Dis-
        trict  Bonds dated 6-l-41.;  Nos. l/500   inclusive    at
        $1,000 each; interest    rate 2@ on the first       50
        bonds; 2-3/4$   on the next 80 bonds and 3% on the
        remaining  370 bonds, payable    semi-annually    on June
        1st and December 1st of each year.

               “Article,    2671 as amended provides     that no
        bonds,    obligations    or pledges    shall be purchased
        that bear less than 2-l/2$        interest.     Bonds Nos.
        S/50 of the above mentioned         series   bear only 2*$
        interest.

                We kindly  request that at your very earliest
        convenience    you give us your written opinion  as to
        whether or not bonds Nos. l/50 of this issue can be
        legally   paid for out of the State Permanent School
        Pund . ”

             Your question    Implies       that the first       fifty   bonds,
bearing   interest    at the rate of 2z@, might be waived by the
Board of tiducation      and the balance        of the $500,000 issue
purchased    under the option afforded           by Article      2673 of
Vernon’s    Annotated Civil     Statutes.        Briefly,     the option
given to the State Board of Education               provides     that before
the bonds of any county,        city,     school    district,      or other
taxing   agency,   are sold,    bids shall be taken on the total
amount desired     to be sold and the best bona fide bid re-
ceived   shall be submitted       to the State Board of Bducation
said Board having an option of ten days within which to
meet said bid,     and in the event the bonds are not purchased
by the Board, the issuing         district,      or subdivision,        may then
proceed   to seil    said bonds to the party or parties                making
the best bona fide bid.        Such bids are made upon the basis
Hon.   Jesse   James,   page 2      (O-3724)


of bonds offered      by the issuing     political        subdivision,,    Ed,
if such offering      Is bid for as a block,           then under ,the XL
the Board of Education        is required     to meet the price         ofP~~...i
for the bonds as a block.           It does not have the authority             to
purchase thp,bonds       so offered    under any other conditions.               1;Ic,
other words,      the Board is not at liher,ty          to pass up the firs~t
fifty    bonds of the above described         issue and exercise         its
option    as to the remaining      450 bonds.        It must take either
all or none of said offering.           This it has endeavored           to do,
treating    the offering     as one unit of investment,            namely,
$500,000,     said unit beari.ng interest        at the coupon r:ztes i;,f
2)$ for the first      fifty    bonds,  2-j/4$     for the next eighty
bonds, and 3% for the remai,nder.

              For convenience    in handling  said debt aggregati.ng
$500,0OC1 has been set u~p in $l,OOC? pieces,        rnmbered i to 503,
inclusive    e The debtor dis,trict    is obligated    to pay on said
debt an average interes,t      of 2.90% throughout     the life   of the
debt.     Conversely,   the State Permanent School Fund, as the
owner of the evidence       of the debt, .wil.l earn on its invest-
ment an average of 2.90% per annum throughout            the life  of the
debt.     This brings before    us the question     as to whether hr-ti-
cle 2671.of Vernon’s       Annotated Civil   Statutes,    which rea,ds,
in part,    as follows:

             “No bonds) obligations  or pledges  shall be
       purchased  that bear less than 2$& interest    ***II

means that the bonds themselves           shall bear a coupon interest
rate of not less than 2&s, or does it mean that no ingest-
ment by the State Board of Education            shall ‘be made which
will not return as income on the investment               a minimum yield
of 2#?       We think the statute       was intended    to provide-,a     mini-
mum of return on the investment.            Artic1.e 2671     as amended,
is merely a secti,on      of the law enacted by the Forty-first
Legislature,     Regular Session,       1929 Chapter 278, page 573,
which law was an amendment .to the Hcts of 190’;              page 215
and whic:h last named Act amended .the original’iaw,               ‘tots Gf
1905, page 263, governing         investment    of .the State Permanent
School Fund.       The entire   law relating      to this subjec~t m,ust be
read together      in order to arrive      at the correct     legislative
intent . By reference       to this law we find that ,the State Board
of Education     is authorized     to pay a premium for any bonds
authorized     by law to be purchased       as an investment      for the
School Fund and, likewise,          said Board is authorized         to pur-
chase bonds at a discount         (Art. 267.3),and then we find this
language:
             “The price paid for bonds, obligations                and
       pledges,  shall be endorsed thereon  at the              time
       the same are purchased.”
 -     --.




Hon.     Jesse   James,   page   3   (O-3724)


This indicates    to us that the investment        shall not be determined
by the denomination    of the component pieces         as prescribed by the
Issuing  munlclpallty    or political    subdivision,     but by the sum of
money lald out by the Permanent School Fund in the purchase            of
such evidences    of debt.   It seems clear that the Legislature
Intended that all investments        made by the Board in behalf     of the
permanent School Fund should return not less than 2&% interest
on ‘funds so Invested.

            Manifestly,    the framers of the Constitution          had In mind
providing   some sort of fixed       income for the operation       of the
schools   of the State.      Section    5 of titicle 7 of the      Constitution
provides,   In part,    as follows:

                “The principal     of all bonds and other funds,
         and the princlpaI      arising   from the sale of lands
         hereinbefore     set apart to said School Fund, shall
         be the Permanent School Fund, and all the interest
         derivable    therefrom    *** shall be the Available
         School Fund ***‘IO

Responsive     to this constitutional     mandate the Legislature       has en-
deavored to provide        a minimum of income for the Available        Fund,
and we conclude      that the language     contained    in Article   2671, su-
        “No bonds    obligations   or pledges     shall be purchased that
gi:j? less than’2@       lnterest I’ is Intended as the leglslative        dl-
rection    that the Board of Education,        In making investments      as
provided    by law, shall make no investment         yielding   less than 2*$
Interest     on the amount so invested.

             Under date of July 23, 1937, the Honorable       Joe J. Ksup,
Assistant    Attorney  General,   ln an opinion  addressed   to the Hon-
orable    Ghent Sanderford,   President,  State Board of Education,
reached the conclusion      above set forth.    We quote,  in part,  from
his opinion    --

                “We are of the opinion    that the phrase ‘bear
         less than 3% interest’     means that the State Board
         shall realize    3$ on thelr   investment.     We do not
         feel   that the coupon face shall     evidence   $ lnter-
         est o In view of the fact that these statutes          were
         enacted for the protection      of the school    funds of the
         State,   we cannot see how we can consistently        arrive
         at any other legislative     intent.”

            Since the above quoted opinion was rendered?      Article
2671 has been amended, *lowering    Interest  from 3% to 22,%- In
this  conaection   we find further  support for the conclusion     here-
in reached    in the emergency clause   of the law amending Article
2671; which clause reads as follows:
Hon.   Jesse   James,   page 4   (O-3724)


             “The fact that prevailing      Interest  rates    on
       shorter  maturity   bonds in the case of a great
       many desirable    investments   Is less than 3$, and
       the fact that under the present       law the State
       Board of Education     Is not permitted    to Invest
       in these securities     because  of the fact that the
       present  law requires    a        of 3$, creates     an
       emergency *** .I

             It will    be noted In this quotation      that the Leglsla-
ture has used the word “yield”          which we flna by reference      to
Webster’s    International     Dictionary     to be a synonym of the word
“bear”;   therefore,     we think that the legislative       intendnent     In
Article   2671, as above quoted, was that no bonds, obligations
or pledges , shall be purchased         yielding   less than 2s    interest.

            Following     receipt    of the above quoted opinion         the
State Board of Education         proceeded   from that day forward to
Invest its funds on such a basis as would yield               not less than
the minimum amount provlaed          by statutes.     In some instances
this yield was determined         by the payment of a premium for bonds
so purchased,     and In others      It was reached through the purchase
of bonds at a discount,        but according      to the records     of the
State Board of Education,         no bonds have been purchased          yielding
less than the statutory         mlnlmum.    We are Informed by the State
Board of Education      that this has been their         practice    for the
years following     the obtaining      of the Attorney     General’s     opin-
ion interpreting      Article    2671 relative     to the minimum amount
of interest    that might be borne by bonds so purchased.

             This practice    was being followed    by the Board of Edu-
cation    at the time Article    2671 was amended by the Acts of the
Forty-sixth     Legislature,   Regular Session,    1939, and in accord-
ance with the decision       of the Supreme Court In the case of
Federal    Crude Oil vs. Youht-Lee      Oil Company, et al.,    52 S.W.
(2d) 56, such amendment by the Legislature          will  be presumed to
have been made with knowledge of the Interpretation            placed upon
Article    2671 by the Attorney General and the Board of Education.
Judge Leady used the following        language   in that case:

               “Where the officers       of the State government during
       a long period      of years have construed      a statute   of
       doubtful     Import,    and the same Is later    reenacted    by the
       Legislature      in substantially     the same form, it will     be
       presumed that the law-making body knew of the construc-
       ticn placed upon its language by Its officers,             and that
       if it was not satisfied         that Its Intention    had been
       rightly    interpreted,     It would have so changed the verb-
       iage of the Act as to have shown clearly            a contrary   in-
       tention.”
Hon.    Jesse    James,    page    5    (O-3724)

In support  of this statement Judge Leddy cited the cases of
Houston and T. C. R. Co., v. State of Texas, 95 Tex. 521.
6A R, W. 777: Galveston H.& S. A. Ry. Co. v. State, 17 S.W.
67; Stephens County v. Hessler,    16 S.W. (Jd) 804.     Therefore,
the presumption   being In favor of the interpretation      placed
upon the statute   by the Attorney  General and the Board of
Education,  we think It conclusive   on this department to hold
that by the amendment of 1939, the Legislature        In effect,
approved the construction   placed upon Article    ii671by the
Attorney General and the Board of Education.

            Accordingly,     you are advised that in our opinion   bonds
nr?mbered l/50,   inclusive,    bearing  interest at the face rate of
2+$ can be legally      paid for out of State Permanent School Funds,
so long as such bonds constitute        a part of the entire  unit of
Investment,    namely, $500 000, and so long as the Income yield
on the total    sum Invested    Is not less than 2&g.

                Trusting    that   the    foregoing        fully   answers    your   Inquiry,
we are

                                                   Yours    very   truly

                                                   ATTORNEYGENERALOF TEXAS

                                                   By, /s/  Clarence E. Crowe
                                                   Clarence   E. Crowe, Assistant

APPROVEDJUL 1, 1941
/s/ Gerald C. Mann
ATTORNEYGENERALCS’TEXAS

(This    opinion     considered        and approved        in limited      conference)

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