State Board of Education           Opinion No. O-7362
,hstin, Texas                      Re:   Investment of State
                                                    FreB:&chool
                                         Fpp~_mat)xrnt.
Attention:                               Fund in U. S. bonds.
Hon. Ted R. Alexander
Bond Investment Adviser
Dear Sir:
             We have received your letter   of September 11, 1946,
which is    quoted, in part, as followsr
           “Under Article 2669, Revised Civil Statutes
     of 1925, as amended by Chapter 278, Acts of the
     Regular Session of the Forty-first     Legislature,
     the State Board of Education is authorized and
     empowered to invest the Permanent Free School
     Fund of the State Iin bonds of the United States,
     ***I.   .Articles   2670 through 2675, inclusive
     also relate to the investment of the Permanen-i
     School Fund by the State Board of Education.
           “Offerings   of other eligible    end desirable
     securities    have declined to such an extent that
     there is now a cash balance in the Permanent
     School Fund of over $11,000,000.00       which the Board
     is desirous of investing     in short-term bonds of
     the United States.      In order to purchase United
     States Government Bonds at this time, however the
     Board must go into the ‘open market’ and pure h ase
     from agencies other than the United States Gover-
     ment . This brings up the following       question upon
     which I have been authorized and directed        to re-
     quest your opinion.
           1’1. Is the State Board of Education author-
     imed and empowered to purchase United States gov-
     eknment bonds for the Permanent School Fund from
     agencies other than the United States Government?‘*
          Section 4 of ,Article,,7, Constitution of Texas, @er
which authority the statutes providing for investment of the
Permanent Free School Fund were’ enacted, reads in part, as fol-
lows:
                                                                           -c.

State Board of Education,       page 2     (0-7362)


              u
               . .  .  The Comotroller  shall invest the
        proceeds of such sales and oft those heretofore
        made’as may be directed by the Board of Educa-
        tiot herein provided for in the bonds of tha
        Uni, ed w        the State of Texas, or counties
        in said State: or in such other securities      and
        under such restrict1    ns as may be orescribed   by
        m     . . .I* (Emphasii, added)
              Article   2669 of Vernon’s    Annotated Civil   Statutes
reads    as follows:
               “The State Board of Education is authorized
        and empowered to invest the permanent public free
        school funds of the State in bonds of the United
        States, the State of Texas, or any county thereof,
        and the ltiependent     or common school districts,
        road precincts,    drainage, irrigation   and levee
        districts   in this State,, and the bonds of incor-
        porated cities    and towns, and obligations    and
        pledges of the University     of Texas.”
           It is seen that the authority for the investment of
the fund in bonds of the United States is kuthorized both by
the Constitution    and by the law enacted in pursuance thereof.
It is, therefore     necessary that we examine the statutes to de-
termine whether i here are “restrict ion.9’ which would prohibit
the purchase of such bonds from other than the United States
Government it self.
           ,JLrticle 2670, provides for the examination by the
Attorney General of bonds of certain named subdivisionscof:,the
State.   Article   2671 outlines    the conditions    under which such
bonds may be purahased.      Article   2672 provides that where such
issuing agencies have received the proceeds derived from the
sale of the bonds, they shall thereafter         be esto ped from deny-
ing the validity    of such obligations.      Article   2F3
                                                          73 grants an
option to purchase ‘such bonds to the aboard of Education.         It is
our understanding that a part of Article         2673 gives rise to the
question under aonsideration.        That part reads as follows:
              ,,‘,*     If said Board shall refuse to purchase
        bonds, ol?l;gations     or pledges from such county, city,
        precinct    or district   or the University of Texas or
        the parties to whom the same were issued, then in no
        event shall said Board purchase them from any subse-
        quent owner or holder of the same.”
                        ,-
.


    State Board of Education,    page 3     (0-7362)


               The query now resolves itself as to whether Article
    2673 requires that bonds of the Unit,ed States be purchased di-
    rectly from the issuing agency (i.e.,  the Federal Government).
              Article   2675 provides     as follows:
               ItThe provisions   of the six preceding arti-
         cles (Articles    2669-2674, inclusive)    shall ex-
         tend to any bonds or securities      other than thQ
         bonds of the State or of the United States, in
         which the public school funds are or may be in-
         vested,  as is or may be authorized or prescribed
         by law, and also to any bonds or securities       pur-
         chased with any of the permanent funds set apart
         for the support, maintenance and improvement of
         any asylum or other institution      of this State.”
         (Parenthetical   tiser&on~. and emphasis added)

               This statute,  therefore, expressly excludes bonds of
    the United States from the provisions   of Articles  2669 to 2674,
    inclusive.   Hence, the prohibition. quoted above from Article
    2673 is not applicable   In any sense to such bonds.
              The logic of excepting United States government bonds
    from these restrictions  is evident.   In the first place, the
    State of Texas could have no power or authority relating     to the
    issuance of Federal bonds.   In the second place     if the obliga-
    tions of the United States did not remain invio 3 ate, could it
    be said that any other obligations   would be effective?
                The Board of Education had constitutional     and statu-
    tory authority to invest the Permanent Free School Fund in bonds
    of the United States    and the Legislature    has placed no restric-
    tion upon such InvesCment.     The school fund has now built up a
    balance of several millions    of dollars.    At this time the Only
    way in which United States government bonds may be purchased IS
    through non-governmental   agencies.     Should this fund remai;h;dle
    and make no earning because of this fact?       We think not.
    Constitution   and the laws of Texas do not require that these
    bonds be purchased from the Government; yet, the Board of Educa-
    tion is empowered to purchase such bonds.       We think that this
    grant of power necessarily    carries with it the authority to make
    it effective.
               You are,therefore,   advised that it Is the opinion of
    this department that the State Board of Education in the exercise
    of its discretion   is authorized and empowered to purchase United
State    Board of Education,   page 4    (0-7362)


States    government bonds from agencies     other    than the United
States    Government.
                                    Very truly       yours
                                        ATTORNEYGENERAL
                                                     OFTEXAS
                                    By /s/ George W. Sparks
                                    George W. Sparks, Assistant
mmovm     sm 17, 1946
/s/ Carlos Ashley
FIRST ASSISTANTATTORNEY
                      GENERAL
APPROVED:OPINIONCOMMITTEE
BY:     GK, CHAIRMAN
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