                           AjWJ.     28, 1947

Hon. A. P. Spacek,    Chairman
9omittee  on School Districts
House of Representatives
Austin, Texas               oplnioa       Ho. V-168




Dear Sir:

          Your request  for        au opinion     by this dapart-
ment upon the above subject         matter    is, 8s fbllews:

              “As Chairman of the Committee on Sohaol
      Districts,     I am submitting    to you House Bill
      #66O by Repress,ntative      C,. B. Noore f’or your
      considerat   ion of the follow lng quest Ions :

            (1)   If this bill      is   coastltutloaal
                  as wrltten,

            (2)   If this bill   becomes a law,
                  would the State Board of Ed-
                  ucatlonhave     authority   to ex-
                  change bonds not ,matured for
                  the new refunding     ~bonds islfiued
                  by the s,atne lncorporat   ion.

             The title    to Nouae Bill   No. 660, 50th Legis-
lature    Is “An Act Amending Article      2789 of the, Revised
Civil   Statutes   af t’he!, State of Texas, as amended by
Chapter, 32, Acts:,uf     the Regular Session     of the 43rd leg-
islature,    and as ‘further     amended by Chapter 331, Acts
bf the Regular     8aebion    $f the 411th bgislature;    and
declaring   au amergmoy.
           Thla titU   s,tates one subject--the      amending
of Article  2789 of the Re,vrise.di Civil Statutes     as, the
aama has be&n ac+en.&ed+ atid, the references      contained
Bon.    A.   P. Spacek,    Page 2, V-168



therein    are accurate,      and in nowise   misleading.         It   is
suf f ielent e

             The amendment contained     in the body of the
Bill   Is an exact reproduction     on Article   2789, as the
same now exists,      save oaly the Bill   omits the final
words,,of  limitation     contained in the present    law, to-
wit :            in case the rate of Interest     on the new
bond8 19 noi less than tha rate of interest         on the
bondr for which they are exchanged, ”

             While the title     states    an appropriate   subject
for   any amendment of Artiole       2789 that would be consti-
tutionally     valid,  there is injected      into the body of
House Bill     660 a provision     that would render the Act un-
const It ut lonal.    We refer   to the broad power conferred
by the body of the Bill        ia deleting    the final   words of
limitation     as to rate of interest       as now contained    in
Art lc le 2789.

              In the present     form of Bouse Bill       660, there-
fore,   the Bill     is invalid,    and If enacted     into law would
be void insofar       as it authorlees      or applies    to any re-
funding at a less rate of interest            than that carried      in
the bonds exchanged.         To permit the State Treasurer,
upon the order of the ,State Board of Education,              to ex-
change bonds, not matured, held by him for the Perman-
ent School Fund, for the new refunding             bonds of the
issuing    corporation,     carrying    a lesser   rate of inter-
est,   would be to violate       Section    4 of Article    VII of
the Constitution,       which declares:

                “The lands herein     set apart to the Pub-
        lic Free School Fund, shall be sold under
        such regulations,        at such times,   and on such
        terms as may be prescribed         by law; and the
        Legislature       shall not have power to grant
        any relief      to purchasers    thereof O The Com-
        troller     shall   invest  the proceeds    of such
        sales,    and of those heretofore       made, as may
        be directed       by the Board of Education      herein
        provided     for,   in the bonda of the United
        States,     the State of Texas,      or counties    in
        said State,       or in such other securities,
        and under such restrictions          as may be pre-
        scribed     by law; and the State,,shall       be res-
        ponsible     for all investments.

           This same question  arose in connection   with
House Bill  Eo, 164 of the 48th Legislature,    which sought
to amend Art lcle 2789, in part,   as follows :
Ron.   R . P. Spacek,                 Page 3,     V-l@



                       New bonds, bear&g        the aama
                 11
                      .    .      .

       or a less rate of interest,        ixay when or-
       dered by the gosernZng board thereof           be
       issued,  either    as term bonds ofi as serial
       bonds 0 * . the wate       Treasurer    sh613j
       when requested     by the govrm&inl; be&Ma bf
       said districta,     amhaag@ baa%a net mtuced
       held by him for the Femacient School Fund
       for the new refunding      bonds ismed      by the
       same incorporation      under the provibions
       of this subdivision,      provided    the interest
       rate shall dot be lowered or the term ex-
       tended withdiut the f,PasJnt of the $tate
       Board of Bdueat ion.

                This Be rtment,       in SPinion No.                            O-5213, held
that House       Bill    1r 4 of tkw 48th ~$lslature,                              was cen-
stitutionslly         inval,i&,  sayiw:

                “The abave+quoted    se~ction of Article
       VII of the CodstitutZon         vwts      iki the :Comp-
       troller,      under the aireotion       of the Board
       of Baucation      the power -- jurisdibtion           --
       to invest      the proceeds   of the sales of he,r
       public     free school   landa in the bonds there-
       in stated,      or in such other ser;urities          under
       such restrictions       as oay be Prescribed          by
       LawD This vesiture         of jurlsdiatloa        is ex-
       clusive,      and the power end discretion           there-
       in conferred      may not be exeroiaed          in any
       other way,

               “The provision      that such investments         in
       the securities       therein    mentioned,       ‘under such
       restrictions       as may be prescribed         by law’ nec-
       essarily     means   restrictions       prescribed     by law
       in aid or furtherance          of the exercise        of the
       jurisdiction       and powers confarred,          and not in
       denial    or destruction       thereof.      Thus, the leg-
       islature            might       prescribe     under          this    clause      the
       relative            or at&&xl* uMulbQ,a ef t,ha Btifferrat
       clarses            of pertnWgib36 iWostMsnt*,    t&3 matur-
       ities      ena rcstes            af iixtiswb~       sf       such    dwwiti13s,
       and the            like,       but   it   Would hare ~10 pcYtt%rto
       substitute              its     ~lsoseti~~        ror    t&at       of    the   fkdup-
       troller,  under the                   direction         of    the Board         of
       E&cat iaa o
Hon. R.     P. Spacek,     Page 4, V-168



                “the concluding      words of the section
        above quoted are very significant.               ‘The
        State shall ba responalble            for all Invest -
        msnts’ can only maan that when the Board
        of Education,       acting   through the Comptrol-
        ler,   has invested       In securities     authorized
        therein,     in other words, has exercised            its
        jurisdiction       there conferred,       the State
        shall make good any and all losses               to the
        Public Free School Fund to the extent               of
        a guarantor      of the aecurlties.         This lia-
        bility     of the State generally         Is a constl-
        t ut ional   one, and the Legislature          is power-
        less to absolve        it therefrom.       The sanctity
        of our Public Free Sohool Fund is such that
        the people through the Constitution               have in
        this emphatic manner seen Sit to protect                  it
        so far as is humanly or governmentally                pos-
        s ible s

              “When the Board of Education          and the
        Comptroller     have acted in the exercise        of
        the power conferred        upon them, and have made
        investments     in certain    seourltLes,    within
        the scope of that power, they have exercised
        their  jurisdiction,       and the benefits     of such
        Investments     Instantly    become indelibly     fixed
        in the Public Free School Fund of the State,
        to the protection       of which i,he State’s     finan-
        cial  resources      are pledged.

           It follows,   from what we have said,     that if
House Bill  No. 660 should become a law, as written,        the
State Board of Education     would have no authority     to ex-
change bonds unmatured for new refunding     bonds issued
by the same issuer,    but at a lesser, rate of interest.




             Rouse Bill No. 660,    50th Legislature,
        as it is written,    if the same were enacted
        into law, would be in violation      of Section
        4 of Article   VII of the Constitution    of Tex-
        as insofar   as It may authorize   the exchange
        of bonds owned by the State Board      of Educa-
Hon.   R. P. Spacek,   Page 5,   V-168



       tloo for refundlrq  boada issued by the
       sams lmuer,   but at a. lesser rate of ia-
       terest .

                                   Yours   vel’7   truly,

                             ATTORNEYOXVERJU oFma




                                                   Ocle Speer -   .
                                                    Assistant




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