                                        November     16,1999



The Honorable Bob Hunter                           Opinion No. JC-0146
Chair, Committee on State, Federal and
  International Relations                          Re:     Whether the legislature is authorized to
Texas House of Representatives                     appropriate money to a state agency to transfer to
P. 0. Box 2910                                     a private, out-of-state endowment, and whether a
Austin, Texas 78768-2910                           state university may transfer appropriated funds to
                                                   a private, out-of-state endowment (RQ-OOSZ-JC)



Dear Representative   Hunter:

         Your questions arise from the legislative appropriation of funds to Southwest Texas State
University (“SWTSU” or the “University”) with the understanding that the funds would be
transferred to a National Geographic Society endowment fund. You ask whether the legislature is
authorized to appropriate money to a private, out-of-state endowment and, if so, whether the
University may transfer appropriated funds to a private, out-of-state endowment. We conclude that
the legislature may not appropriate state funds to a state agency to transfer to a private, out-of-state
endowment unless the appropriation satisfies article III, sections 35, 44 and 51 and article VIII,
section 6 of the Texas Constitution.    A state university is not authorized to transfer appropriated
funds to a private, out-of-state endowment unless the state university is authorized to do so by statute
and the transfer comports with article III, section 51. No statute authorizes SWTSU to transfer
 appropriated funds to the National Geographic Society or to enter into a contract regarding such a
transaction.

          The National Geographic Society has offered to establish an endowment fund for funding
geography education in Texas, which would be called the Texas Fund for Geography Education, on
the condition that the state deposit $500,000 in the Society’s state endowment account in
Washington, D.C. See Letter from Honorable Bob Hunter, Chair, Committee on State, Federal and
International Relations, Texas House of Representatives, to Elizabeth Robinson, Office ofthe Texas
Attorney General, at 1 (July 6, 1999) (on tile with Opinion Committee) [hereinafter “Request
Letter”]. The Society would match the state’s contribution to bring the state’s endowment to $1
million.     See id. It appears that the primary purpose of the endowment would be to fund
improvements      in elementary and secondary school geography education in the state. See id.
(attachments from National Geographic Society) (“Income from a state fund will benefit a broad
 array of programs, including professional development institutes for teachers and administrators,
 curriculum materials, exhibitions, and resource collections.“).
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        In 1995, the Seventy-fourth Legislature appropriated $376,242 to SWTSU for each of the
fiscal years ending August 31, 1996 and 1997 for geography education.               See 1995 General
Appropriations Act, 74thLeg., R.S., ch. 1063,1995 Tex. Gen. Laws 5242,5598. The 1995 General
Appropriations Act stated that this appropriation was for “Improvement of Geography Education.”
Id. You explain that the legislature intended for at least some ofthis appropriation to be transferred
to the National Geographic Society’s state endowment program to fund an endowment for the State
of Texas. See Request Letter at 1. You state that the “legislature appropriated $200,000 for the
 1996-97 biennium, with the understanding that when the Texas fund reached $500,000 the Society
would provide matching dollars. Rather than making the appropriation directly to the Society, the
funds were sent to SWTSU along with another large sum of money for various other geography
programs.” Id. However, because SWTSU believes that it is not authorized to transfer the funds to
an out-of-state endowment account, the money intended for the Society remains at the University.
See id.

        You ask the following questions:

                1) Whether a transaction of state funds to a reputable out-of-state
                endowment that will ultimately benefit the state is both an allowable
                and appropriate action of the legislature.

                2) If so, would it be appropriate for SWTSU to transfer the funds
                allocated in 1995 to the National Geographic Society’s Texas Fund
                for Geography Education.

Id. at 2.

         Based on the factual scenario you have described, we assume your first question goes to the
authority of the legislature to appropriate state funds to a state agency to transfer to a private
endowment rather than the authority of the legislature to appropriate money directly to a private
endowment. We also note that your questions involve a 1995 appropriation. Because appropriations
are generally limited to two years in duration, see TEX. CONST.art. VIII, 3 6, the appropriation you
describe has lapsed. Thus, we address the authority of the legislature to appropriate funds in general
terms and do not address the validity of any particular appropriation.

          Article III ofthe Texas Constitution establishes the legislative branch and establishes certain
 limitations on its powers. A number of constitutional provisions limit the legislature’s authority to
 appropriate state funds to private individuals and corporations, either directly or by statutes
 authorizing expenditures by state or local entities. Section 51, for example, provides that the
 “Legislature shall have no power to make any grant or authorize the making of any grant of public
 moneys to any individual, association of individuals, municipal or other corporations whatsoever.”
 TEX. CONST. art. III, 5 51. Section 52 prohibits the legislature from authorizing any political
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corporation or subdivision of the state “to lend its credit or to grant public money or thing of value
in aid of, or to any individual, association or corporation whatsoever.” Id. $ 52. The purpose of
article III, sections 5 1 and 52 is the same - to prevent the gratuitous application of public funds to
private individuals. See Byrd v. City ofDallas, 6 S.W.2d 738,740 (Tex. 1928); Graves v. Morales,
923 S.W.2d 754, 757 (Tex. App.-Austin 1996, writ denied). But the constitution does not bar a
governmental expenditure that benefits a private interest if it is made for the direct accomplishment
of a legitimate public purpose. See Byrd, 6 S.W.2d at 740. “A transfer of funds for a public purpose,
with a clear public benefit received in return, does not amount to a lending of credit or a grant of
public funds in violation of article III, sections 51 and 52.” Edgewood Zndep. Sch. Dist. v. Meno,
 917 S.W.2d 717,740 (Tex. 1995). For this reason, attorneys general have long opined that sections
 5 1 and 52 do not preclude the state or a political subdivision from making an expenditure of public
 money that benefits a private person or entity if the appropriate governing body (i) determines that
 the expenditure serves a public purpose and (ii) places sufficient controls on the transaction to ensure
 that the public purpose is carried out. See, e.g., Tex. Att’y Gen. Op. Nos. DM-256 (1993) at 2-3;
 JIM-1146 (1990) at 4-5; JM-551 (1986) at 3-4; H-966 (1977) at 2.

          A related limitation, article III, section 44, prohibits the legislature from making grants of
money out of the State Treasury, by appropriation or otherwise, “to any individual, on a claim, real
or pretended, when the same shall not have been provided for by pre-existing law.” TEX. CONST.
art. III, 5 44. This office has construed this provision to preclude the legislature from appropriating
funds unless the appropriation is authorized by pre-existing general law. See, e.g., Tex. Att’y Gen.
Op.Nos.H-12l3(l978)atl;M-l068(l972)at5(”Itissettledasthelawofthisstatethatunderthe
provisions of Section 44 of Article III of the Constitution of Texas, the legislature is prohibited from
appropriating state money unless at the very time the appropriation is made, there is already in force
some pre-existing valid law authorizing the appropriation.“) (emphasis in original) (citing Fort
 Worth Cavalry Club v. Sheppard, 83 S.W.2d 660,668 (Tex. 1935)); see also Bullock v. Calvert, 480
S.W.2d 367,371-72 (Tex. 1972) (holding that even if legislature had appropriated funds to officer
for a particular purpose, officer must also have statutory authority to enter into contract for that
purpose) (citing Fort Worth Cavalry Club v. Sheppard, 83 S.W.2d 660).

         In addition, some constitutional provisions dictate the form oflegislative appropriations. For
 example, article III, section 35 limits the legislature to including in an appropriations act “various
 subjects and accounts, for and on account ofwhich moneys are appropriated.” TEX. CONST.art. III,
 5 35. Article III, section 35 has been construed by the courts to preclude the legislature from
 enacting substantive law in an appropriations act. See Strake v. Court ofAppeals, 704 S.W.2d 746,
 748 (Tex. 1986) (“This Unity-in-Subject Clause has been construed to mean that appropriations is
 a single subject and that any rider to an appropriations bill must relate to the appropriation of funds.
 Any rider dealing with a different subject is general legislation and prohibited by the
 Unity-in-Subject Clause. A rider which attempts to alter existing substantive law is a general law
 which may not be included in an appropriations act.“) (citing Jessen Assocs. v. BuZlock, 53 1 S.W.2d
 593,600-01 (Tex. 1975); Moore Y. Sheppard, 192 S.W.2d 559,561-62 (Tex. 1946)). In addition,
 article VIII, section 6 provides that no money shall be drawn from the State Treasury “but in
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pursuance of specific appropriations made by law.” TEX. CONST. art. VIII, 5 6. Thus, an
appropriation must specify its purpose. SeeNationalBiscuit Co. Y. State, 135 S.W.2d 687,693 (Tex.
1940) (“WI0 particular form of words is required to render an appropriation specific within the
meaning ofthe constitutional provision under discussion. It is sufficient ifthe Legislature authorizes
the expenditure by law, and specifies the purpose for which the appropriation is made.“).

         A legislative appropriation ofstate funds to a state agency to transfer to a private endowment
must comport with the foregoing limitations. Such an appropriation will violate article III, section
5 1 of the Texas Constitution unless the legislature(i) determines that the expenditure serves a public
purpose and (ii) authorizes the state agency to place sufficient contractual controls on the transaction
to ensure that the public purpose is carried out. The authority of the state agency to transfer the
funds and enter into a contract providing the requisite controls must be supported by substantive law.
See TEX. CONST. art. III, $8 35,44. Furthermore, the appropriation must be sufftciently specific.
See id. art. VIII, 3 6.

         The authority of SWTSU to transfer funds to theNational Geographic Society depends upon
similar concerns. The authority of the legislature to authorize a state university to transfer state
funds is limited by article III, sections 51 and 52, and any transfer of funds from a state university
to a private entity must satisfy those limitations. However, these constitutional provisions do not
affirmatively authorize expenditures. State universities are creatures of statute and their authority
to expend funds must be expressly provided or necessarily implied by statute. See Tex. Atty. Gen.
Op. Nos. JM-551 (1986) at 5; MW-475 (1982) at l-2 (“The governing bodies of state universities
are creatures of statute and may constitutionally exercise only powers properly delegated to them
by the legislature.“) (citing Foley v. Benedict, 55 S.W.2d 805 (Tex. 1932)). This offtce has been
particularly concerned that the authority of a state university to grant funds to other public and
private entities be provided by statute. See Tex. Att’y Gen. Op. No. MW-532 (1982) at 1
(concluding that agency of Texas A&M University System lacked authority to grant state funds to
private landowners).    No statute authorizes SWTSU to transfer funds to the National Geographic
Society for the Texas Fund for Geography Education.

          SWTSU is an institution ofhigher education under the management and control of the Board
ofRegents ofthe Texas State University System, see TEX. EDUC. CODEANN. 5 96.41 (Vernon 1991),
and the Board of Regents is specifically vested with the authority to disburse appropriations made
by the legislature for the support and maintenance of the system universities.      See id. § 95.28.
Chapter 95 of the Education Code generally vests the Texas State University System Board of
Regents with the organization, control, and management of the state university system. See id.
5 95.01. That chapter gives the board broad authority to control and manage the universities in the
system, to construct, equip and repair buildings, to make purchases, to employ personnel, to perform
acts that “contribute to the development of the universities in the system or the welfare of their
students,” and to adopt rules for the operation, control, and management ofthe university system and
its institutions. Id. 3 95.21; see also id. $5 95.30 (power of eminent domain); 95.31 (power to
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acquire land); 95.33 (authority to manage property); 95.36 (authority to manage and lease land);
95.34 (authority to accept donations, gifts, grants and endowments).

        Although its authority is broad, the Board of Regent’s authority is generally limited to the
system and its component universities. No provision in chapter 95 expressly authorizes the Board
of Regents to expend funds for statewide elementary and secondary geography education generally
or, more specifically, to transfer funds to or to contract with the National Geographic Society for that
purpose. Nor may this authority be implied from any express provision. See Tex. Att’y Gen. Op.
No. H-13 12 (1978) at 1 (concluding that Texas State University System Board of Regents authority
to purchase food and beverages could be implied from express authority to purchase necessary
supplies under section 95.21 of the Education Code).

         The 1995 appropriation of funds to SWTSU for geography education merely stated that this
appropriation was for “Improvement of Geography Education.” See 1995 General Appropriations
Act, 74th Leg., R.S., ch. 1063, 1995 Tex. Gen. Laws 5242, 5598. On its face, this item of
appropriation could have been for improvement of geography education at the university as easily
as it could have been for the improvement of statewide elementary and secondary geography
education. Furthermore, this item of appropriation made no mention of the National Geography
Society. Nor did the 1995 General Appropriations Act contain a rider detailing the use of this item
of appropriation.   Moreover, as we have explained, the authority of a state agency, such as a state
university, to transfer state funds to a private endowment and enter into a related contract must be
supported by substantive law and cannot be based solely on an inspecific appropriation or rider. See
TEX. CONST.art. III, @ 35,44; id. art. VIII, 5 6.

         In sum, we conclude that the legislature may not appropriate funds to a state agency to
transfer to a private endowment unless the legislature (i) determines that the expenditure serves a
public purpose and (ii) requires the agency to place sufficient contractual controls on the transaction
to ensure that the public purpose is carried out. The authority of the state agency to transfer the
funds and enter into a contract providing the requisite controls must be supported by substantive law.
SWTSU lacks statutory authority to transfer appropriated state funds to the National Geographic
Society for the Texas Fund for Geography Education or to enter into a contract with the National
Geographic Society regarding such a transaction.
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                                         SUMMARY

                        The legislature may not appropriate funds to a state agency to
               transfer to a private endowment unless the legislature (i) determines
               that the expenditure serves a public purpose and (ii) requires the
               agency to place sufficient contractual controls on the transaction to
               ensure that the public purpose is carried out. See TEX. CONST.art. III,
               $5 5 1,52. The authority of the state agency to transfer the funds and
               enter into a contract providing the requisite controls must be
               supported by substantive law. See id. $5 35,44. Southwest Texas
               State University lacks statutory authority to transfer appropriated
               state funds to the National Geographic Society for a Texas Fund for
               Geography Education to benefit elementary and secondary geography
               education in the state or to enter into a contract with the National
               Geographic Society regarding such a transaction.




                                              Attorney General of Texas



ANDY TAYLOR
First Assistant Attorney General

CLARK RENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General - Opinion Committee
