                         QBfficeof the !Zlttornep4Beneral
                                     %btateof Qexas
DAN MORALES                            October 21.1992
 .XTTORSFY
       GENLRAL
     Mr. Lionel R. Meno                    Opinion No. DM-175
     Commissioner of Education
     Texas Education Agency                Re: Whether article VII, section S(d) of the
     1701 North Congress Avenue            TexasConstitution permits the State Board
     Austin, Texas 78701-1494              of Education to lend securities owned by
                                           the permanent school fund in the mamter
                                           and for the purpose set forth in section
                                           15.14 of the Education Code (RG-425)

     Dear Commissioner Meno:

             You have requested an opinion regarding the constitutionality of section
     15.14 of the Education Code. In 1982, this office concluded that this section
     violated article VII, sections 4 and 5 of the Texas Constitution. See Attorney
     General Opinion MW-429 (1982). Smce that time, however, both sections 4 and 5
     have been amended. You ask whether the amendment that added section S(d) to
     article W now makes section 15.14 of the Education Code constitutional. We con-
     clude that article VII, section S(d) supersedes Attorney General opinion MW-429.
     However, because the legislature did not have the authority to adopt section 15.14
     in 1979, it is void and is not revived by the adoption of the constitutional
     amendment in 1987. On the other hand, article VII, section 5(d), by itself, gives the
     Board of Education the authority to make the type of investment the legislature
     tried to authorize in section 15.14, if the investment meets the prudent-person
     standard.

            Chapter 15 of the Education Code governs the permanent school fund and
     the available school fund, both established by article VII, section 5 of the Texas
     Constitution. Section 15.14(a) provides:
                   The State Board of Education is authorized and empowered
               to contract with a commercial bank or banks to serve both as a
               custodian of securities in which the state permanent school
               funds are invested and to lend these securities, under the
               conditions set out in Subsection (b) of this section, to securities
               brokers and dealers on short-term loan



                                            p. 915
Commissioner Lionel Meno - Page 2      W-175)




Educ. Code 9 15.14(a). Subsection (b) establishes various requirements for the
securities-loan program., including requirements designed to protect against losses.

        In Attorney General Opinion MW-429, this office concluded that section
15.14 violated article WI, sections 4 and 5 of the Texas Constitutionr in two ways.
First, section 15.14unconstitutionally permitted the Board of Education to perform
an investment function that could be performed only by the official designated in
section 4.2 Second, section 15.14 contravened the phrase “the State shall be
responsible for all investments” by delegating the investment function to a
commercial bank.

       In 1987, however, article VII, section 5 was amended to include subsection
(d). Subsection (d) states:
               Notwithstanding any other provision of this constitution, in
          managing the assets of the permanent school fund, the State
          Board of Education may acquire, exchange, sell, supervise,
          manage, or retain, through procedures and subject to restrictions
          it establishes and in amounts it considers appropriate, any hind
          of investment, including investments in the Texas Growth fund
          created by Article XVI, Section 70, of thii constitution, that
          persons of ordinary prudence, discretion, and intelligence,
          exercising the judgment and care under the circumstances then




                                       p. 916
Commissioner Lionel Meno - Page 3      (~1-175)




          prevail& aaptire or retain for their own account in the
          management of their affahs, not in regard to speculation but in
          regard to the permanent disposition of their funds, considering
          the probable income as well as the probable safety of their
          capital

       ‘his subsection effectively supplants the decision in Attorney General
Opinion MW-429. Although the legislative history of the amendments does not
clearly indicate the intent to make the Board of Educatios as opposed to the
treasurer, msponsiile for fnvesting the assets of the permanent school fund the
plain language of the subsection clearly leads to this result: The subsection states
that the Booni of Educutbn has the power to manage and invest the assets of the
permanent school timd. The securities-loan program under section 15.14 constitutes
an investment of these assets. Attorney General Opinion MW-429 at 3. The
subsection also specikally states that it prevails over any contrary constitutional
provisions. Therefore, the Board of Education has the authority to make invest-
ments under article VII, section 5(d) even though article VII, section 4 appears to
give the treasurer the power to invest the assets of the permanent school fund. In
addition, the Board of Education’s investment authority prevails over the language
in article VII, section 4 that purports to make the state responsible for all
investments.

        Article WI, section 5(d) does not, however, revive section 15.14 of the
Education Code. Constitutional provisions operate prospectively. Ex parte Sntirh,
548 S.WZd 414 413 (Ten. Grim App. 1977). An amendment to the constitution
does not revive an unconstitutional statute unless that amendment expressly adopts
or ratifies the statute. Attorney General opinion hfW40 (1979) at 2; see also
Hurchinron   v.Parching,  l26S.W. 1107,1108 (Tex. 1910) (holding a statute constitu-
tional when it was expressly ratified by a constitutional amendment). Neither article
WI, section 5(d) nor any of the other constitutional amendments adopted at the
same times contain any language that could be interpreted as expressly adopting or
ratifying section 15.14 of the Education Code.




                                      p. 917
Commissioner Lionel Meno - Page 4 WI-175)




        On the other hand, we conclude that article VII, section 5(d), by itself, gives
t.bt Bezd oi Education the authority to snake the type of investment the legislature
tried to zilrhorize in section 15.14,assutig that the investment meets the prudent-
person stanjxd.     ktic!e VII, section 5(d) expressly gives the Board of Education
the aatboriry to n&e uny kind of prudent investment in managing the assets of the
permanent school fund. Because the securities-iorm program constitutes an
invesirceat of these assets, articie VII, section 5(d) permits the Board of Education
to use i: eve3 without additional enabling legislatioc, provided that the program is a
pmden; izxestment as defined by article VU, setion 5(d).’




               Atic!e VII, seeion 5(d) of the Texas Constitution super-
          se&s Atzorn-y General OpSoa MW49 (1982). However,
          bt;zuse the iegiislature did not have the authority to adopt
          sec;inr 15.14 in 1979, it is void azd is not revived by the
          aSqxicm of tie CO-,s;iiUtiOd amsndment in 1957. On the other
          lmd, article VII, section 5(d) @es the Boa-d of Education the
          ar&oriv to TX&Cany kkd of p!-c&at inves:ment in managing
          the assets of tic permanent scboal fund. This authority includes
          the aurhi~      to make an investment like the securities-loan
          pxgam that the legislature attrmpted to authorize in section
          15.14, provided that this program meets the prudent-person
          standard set out in article WI, section 5(d).

                                                   Very truly yours,            /



                                                   DAN      MORALES
                                                   Attorney General of Texas
Commissioner Lionel Meno - Page 5     (1X+175)




WILL PRYOR
First Assistant Attorney General

MARYKElLER
Deputy Assktant Attorney General

RENEAHIcla
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Margaret A. Roll
Assistant Attorney General




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