                       December 19, 1990


Dr. W. N. Kirby              OpiniOn   No. JM-1265
Commissioner of Education
Texas Education Agency       Re:    Whether certain funds
1701 N. Congress Avenue      from school-related activities
Austin, Texas 78701-1494     may be used by a school dis-
                             trict to provide scholarships
                             for graduates (RQ-2092)
Dear Dr. Kirby:
     You ask whether, in the absence of a donation, locally
derived monies that have become public school property may
be used for college scholarships awarded by the public
school district.    Specifically, YOU refer to so-called
"activity funds" or "agency funds," which you describe as
the funds considered by this office in an earlier, unrelated
opinion, Attorney General Opinion JM-42 (1983).     In that
opinion, these funds were described as follows:
       [Tlhose monies belonging to various organiza-
       tions such as     the PTA    (Parent-Teachers
       Association), school bands, drill team clubs,
       and athletic booster clubs which are held by
       a school district for safekeeping and ac-
       counting. The monies are not derived from
       taxes but are generally obtained by        an
       organization through solicitation of contri-
       butions, promotions and similar functions for
       the sole benefit of the organization, with
       such monies being the property of the organ-
       ization and not the school districts.     The
       school district merely acts as custodian of
       the monies.
     You advise that, in addition to the above described
funds, nactivity funds" or "agency funds" may include funds
generated by a public school from class ring sales, photos,
student club and class balances, and other activities.
According to your letter,




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             [plublic schools have varying arrangements
             with patron/student groups. In some cases
             surplus monies are transferred to the dis-
             trict and become district property under the
             terms of the custodial agreement; in other
             cases the monies remain the property of the
             patron/student organization and surplus can
             be donated to the district.
     As an example, you enclose a letter from the superin-
tendent of the Aldine Independent School District to the
Texas Education Agency that describes the following fact
situation:
             The district manages agency funds generated
             by school activities.   The district keeps a
             ledger record of the monies deposited from
             each activity. These commingled monies are
             to be used for their students, and the
             balance     remaining    in    the     single
             interest-bearing bank account is      carried
             forward from year to year.
     The superintendent's letter goes on to inquire whether
interest accruing on the funds in the above-described
account may be used for college scholarships. You do not
explain how the interest accrued on the account described in
the superintendent's letter becomes the property of the
school district, but presumably, it is by contractual
agreement and not by donation.1


        1.    Section 21.903 of the   Education Code provides,   in
part:

             (b)   The funds or other property donated or
             the income therefrom may be expended by the
             trustees:

                (1)   for any purpose designated by the
             donor so long as that purpose is in keeping
             with the lawful purposes of the schools for
             the benefit of which the donation was made;
             or

                (2)   for any purpose   authorized by rule
                                              (Footnote Continued)




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Dr. W. N. Kirby - Page 3   (JM-1265)




     Section 20.48 of the Education Code prescribes the
purposes for which funds of the public free school system
may be expended. Subsection (c) of that section enumerates
purposes for which l*[l]ocal school funds from district
taxes, tuition fees of pupils not entitled to free tuition
and Qther local sources" may be used. (Emphasis added.)   In
addition to the purposes specifically enumerated, subsection
(c) provides that such funds may be used "for other purposes
necessary in the conduct of the public schools to be deter-
mined bv the board of tru6tees.l'(Emphasis added.)
     You suggest that an expenditure for scholarship purpos-
es would not appear %ecessaryq' to conduct a public school.
Certainly such an expenditure is not %ecessaryl’   if neces-
sary is taken to mean "indispensable." However, the word
necessary as used in section 20.48      and its predecessor
statute, article 2827, V.T.C.S., has been construed as
permitting such    expenditures   as    medical   inspection,
cafeterias, crossing guards, and the reimbursement         of
certain expenses incurred by school board members.        See
N selev v. Citv of Dallas 17 S.W.2d 36 (Tex. Comm'n App.
lz29, judgm't adopted): &eman     v. Morrow, 34 S.W.2d 654
(Tex. Civ. App. - El Paso 1931, no writ): Attorney General
Opinions JM-490 (1986); H-133 (1973). Other examples could
be cited. None of the expenditures in these examples is,
strictly speaking, indispensable to the conduct of a public
school. In the context of section 20.48, wnecessary" appears
to mean appropriate or conducive to the conduct of a public
school rather than indispensable thereto. Accord Black's
Law Dictionary    928   (6th ed.     1990)   (definition   of
%ecessaryt').
     Determining whether an expenditure is necessary is a
matter for a school board in its sound discretion. Attorney
General Opinion H-133. Moreover, any expenditure of public
funds must serve a true public purpose and not merely
private ends. Tex. Const. art. III, 5 51; ~&,8G. Braden,
T~I=Constitution of the State of Texas.. An Annotated and
Comoarative Analvsis 229-36, and authorities cited therein.


(Footnote Continued)
        of the State Board of Education in the event
        that no specific purpose is designated by the
        donor.




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Dr. W. N. Kirby - Page 4   (JM-1265)




     The encouragement and motivation of students in academ-
ic achievement would seem to be an appropriate function of
the public free schools. Accordingly, it.is not possible to
say, as a matter of law, that a scholarship could not be
structured to further the achievement of a legitimate public
purpose of a school district in its conduct of the public
schools. The use of "activity fundsO'or "agency funds" not
being otherwise restricted, they may be used for college
scholarships found to be Wecessary in the conduct of the
public schoolsO*within the meaning of section 20.48 of the
Education Code. The authority to make such a determination
of fact has been delegated by the legislature to the board
of trustees.

                      SUMMARY
             In the absence of a donation, monies
        derived from various organizations such as
        the PTA, school bands, drill team clubs, and
        athletic booster clubs or generated by a
        public school from class ring sales, photos,
        student club and class balances, and other
        activities ("activity funds" or       "agency
        funds") that have     become public    school
        property may be used for college scholarships
        awarded by the public school district if such
        scholarships are found to be %ecessary     in
        the conduct of the public schoolsn within the
        meaning of section 20.48 of the Education
        Code.   The   authority   to make    such
        determination of fact has been delegated b;




                                   J h
        the legislature to the board of trustees.
                                     Very truly yo

                                         A
                                     JIM     MATTOX
                                     Attorney General of Texas
MARYKELLER
First Assistant Attorney General
LOU MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General




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        Dr. W. N. Kirby - Page 5     (JM-1265)




        RENEA HICKS
        Special Assistant Attorney General
        RICK GILPIN
        Chairman, Opinion Committee
        Prepared by John Steiner
        Assistant Attorney General




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