                             @ffice of tfp attorney Qkneral
                                        . &Mate of Qexas
DAN MORALES
 ATTORNEY
      GENERAL                              September IS,1993

     Honorable WkR       Ftatl8                       OpinionNo. DM-256
     ChlG
     lzdwationcommittee                               Re: whethex an indepwdent school district
     Texas State Senate                               may provide free office space and other items to
     P.O. Box 12068                                   a private, non-profit foundation (RQ-538)
     Austin, Texas 78711

     Dear Senator BatlilY

             On behalf of an independent school district (which you refer to as “the ISD”), you
     ask whether an independent school district may provide free 05ce space and other items
     to a private, non-profit foundation. By way of background, you provide the following
     iaformation:
                Members of the ISD’s board of trustees set up a private, non-profit,
                tax-exempt education foundadon corporation for the purpose of the
                hncial support of the ISD and its students. The corporation’s
                board of directors are the memberswho served on the ISD’sboard of
                trustees at the time the corporation was fixmded. The ISD alldws
                the corporation to use an office in the ISD and provides incidental
                items such as phone% copy machine& and electricity. The
                corporation reimburses the ISD for such items as long-distsnce
                phone calls and copy paper.
    We assume that the independent school district trustea do not receive compensation or
    any other remuneration for serving on the board of directors of the foundation.

           Fibat,you ask if “an ISD’s provision of a free office and incidental items violateJs]
    any state or federal statutes.* We are not aware of any state or fedaal statute which
    would prohii an kiependent school district Tom providing fke 05ce space and 05ce
    services to a kundation such as the one you describe.1 Generally, the trustees of au
    ind&         school district “have the exclusive power to manage and govem the public
    ihe schools of the district.” Educ. Code 8 23.26. Article III, section 52(a) of the Texas
    thnsbtio~     however, generally prohibits independent school districts fiom “grant[i]
    public money or thing of vah~e,in aid 0s or to” a person or corporation, such as the
    foundation you descrii.


            ‘we&nctcclLaer-tkkgslitycfrektiollshipyaldocrikis~bytbcvay
    recenuy enacted school tinax   lefoms. see Acts 1993,nd Leg., ch. 347.



                                                 p.     1327
Honorable WtiamR. RatliE - Page 2              (~~-256)




       In Attorney General Cpiion MW-373 (1981). this 05ce considered the
-p            between the University of Texas and the University of Texas Law School
Foundation, “a nonprofit corporation with the purpose of supporting the educational
dataldng of the School of Law of the University of Texas.” Attorney General Opiion
MW-373 at 1. The memorandum of tmderstanding between the f&ion                   and the
university stated, in part, that the law school would provide the foundation with 05ce
space, utilities, and telephone service. Id. at 5. This 05ce concluded that the university
had the statutory authority to provide the foundation with these items as “terms and
wnditions” attached to its donations under section 65.31(e) of the Education Code which
provides as follows:
                 The board is specificallyauthorized, upon terms and conditions
            acceptable to it, to accept and administer gifts, grants, or donations
            of any kind, tiom any source, for the use by the system or any of the
            component institutions of the system.
Id. at 2 (quoting Educ. Code 8 65.31(e)); ore also id at S-6.

       This 05~ then considered whether the terms of the memorandum of
understanding would violate article III, section 51, the legislative counterpart of section
52(a). See id. at 8-l 1. The opinion stated that the constitutional prohibition
            requiresthataCCrantbytheuniversitytothefouadstonmussservea
            public purpose, appropriate to the function of a university~and that
            adequate consideration must flow to the public. . . . In addition, the
            unbsity     must mahtain some controls over the fbtmdation’s
            activities, to enare that the public purpose is acmally
            achieved. . . . If these. conditions are met, the grant by the public
            wtity is not unconstitutional.
Id. at 9.

         As noted above, section 23.26 of the Education Code vests the trustees of an
independent school district with “the exchtsive power to manage and govern the public
kee schools of the district.” Rduc. Code 8 23.26(b). The trustees of an independent
school district am authorized to “receivebequests and donations or other moneys or fimds
coming legally into their hands.” Id. # 23.26(a); see t&c id. 55 20.482 (authorizing board
of truames to invest giSs made to school district to provide college scholarships), 21.903
(authorizing board of trustees to accept bequests for the benefh of the public schools and
providigethat~maybeexpeadedbytnuteeo”for~pplrposed~~bythe
donor so long as that purpose is in keeping with the lawibl putposes of the schools for the
be&t of which the donation was made”); Tex. Educ. Agency, 19 T.AC. 561.192
(“[dlonations to a school district shall be used in compliance with statutory provisions.
Donations shsll not be used as a substitute for adequate 6nancirJ support as detined in
0 61.191 of this title (relating to Fiscal Responsibiity)“). In addition, “[a]ll rights and
titles to the school property of the district, whether real or personal, shsll be vested in the


                                          p.     1328
Honorable Wtiam R Ratlitf - Page 3 (DM-256)




trustees.” Educ. Code Q23.26(c). Trustees hold school district property in trust for
school purposes. Texas Antiquities Coumr. v. Dallas Corm@Community College Dist.,
554 S.W.2d 924 (Tex. 1977);Low v. City of Dallas, 40 S.W.2d 20 (Tex. 1931); Attorney
Oeneml Opinion I’M-958(1988). Thus, the use of school property must serve a school
pupose.

        We believe that section 23.26 of the Education Code authorizes the trustees of an
independent school district to accept donations and other gifls Tom a private foundation,
and to supply the foundation with office space and the use of other school property,
assuming a school purpose is served. The question whether the constitution permits the
trustees to supply the foundation with office.space and the use of other school property is
another matter. We have not been provided with su5cient fbcts to determine whether this
would serve a public purpose, appropriate to the tbnction of an independent school
district; whether adequate considerationwould Sow to the public; or whether the trustees
would mainminsufiicientcontrols over the foundation’sactivities,to ensure that the public
purpose is actually achieved. This determination is one to be made by the board of
trustees in the first instanw. See Attorney Oeneral Opiion MW-373 at 9.

        Next, you ask if”members of the ISITs board of trustees [can] also be members of
the corporation’sboard.” As noted above, we assume that the independent school district
trustees do not receive compensation or any other remuneration for sendng on the board
of directors of the foundation. Conflictsof interest on the part of local public 05cials are
regulated by chapter 171 of the Local Govemment Code, which preempts common-law
con5cts of interests as applied to local public 05cials. See Local Gov’t Code
0 171.007(a). This chapter applies to trustees of independent school districts, see id.
8 171.001(l). and generslly requires an official who has a “substantial interest in a
business entity.” see id. Q 171.002. to disclose that interest and to refrain from
participating in actions involving the entity, see id. 0 171.004. Section 171.099 provides
as follows:
                Itshallbe.law5lforalocalpublico5cisltoserveasamember
           of the board of directors of private, nonprofit corporations when
           such 05cials receive no compensation or other remuneration from
           the nonprofit cotporation or other nonprofit entity.
Because chapter 171 generally preempts common-lawwnflicts of interest,s we conclude
thatsectionl71.009pamitrImindependaa~hooldistricttrusteetoBerveasadirectorof


        zlo Attomcy GwenI optrdon IM-1006 (1989) (dad hmuuy 12. 1989). this oilice atached
tlmttkoommml8wdcMtliclsofdrcstddoalagcncyprohibited8mcmbMob~~
~wortfrom~~~titlmutwmpoamtiMMthboarddrnotlproZit


chsprcrl7lwpIinspplisable~~thecountyjudgcwarnotcompcnsatcdforhirEavics,udthttbe
common law of cwflicts of tntatst tbcrcfon amtinocd to apply. See a/so Attorney Gcnaal opinion
H-1309 (1978). The lcgislaturc, in amcting section 171.009 in 1989, qqca~~ to have ovunded this


                                          p.   1329
Honorablewikn         R Ratlitf - Page 4      (DM-256)




the foundation, provided he or she receives no wmpensation or other mmunenmon for
doingso.                                        .
       In additioq we note that the legislature recent@ enacted an amendment to the
Education Code which specifically governs certain wntlicts of interest on the part of
school district trustees. See Acts 1993, 73d Leg., ch. 964, 8 2 (eff. June 19, 1993).
Section 23.201 of the Education Code provides as follows:
                  (a) TheboardoftrusteeoofaschooldirtrictmaynotQlterinto
             awntractwithatnrstaofthedirtrict,therpouseofatrustee,ora
             businementityinwhichatrusteeortbespouseofatrusteehasa
             sign&ant interest tmtil the trusteek current term has expired or until
             thetrusteehasresignedanda       swcessorhasbeenchosento5lthe
             vacancy....
                 (b) In this section, the term “business entity” has the meaning
             provided by Section 171.001.Local GovernmentCode.
                  (c) For purposes of this section, a person has a substamial
             intaestinabusinessanityifthepersonhasasubssamialimerrstin
             the busiws.9entity for purposes of Chapter 171, Local Government
             Code.
                (d) This section prevails over Chapter 171. Local Government
             Code, to the extent of any wntlict.
This office mcently considered this provision and the meaning of the term “signi6cant
inme&- wncl~ginpertinent       part:
             the intenf of this legislation was to proscrii selfdealing. In
             applying section 23.201, one should focus on the extent to which an
             individualtrustee might benefit gem a particular wntract.
Attorney General Opiion DM-240 at 5 (1993). &though we Snd it highly unlikely that
an independent school district trustee who serves on the board of directors of a non-profit
fotmdation without wmpemation or any other remuneration has a %igmScant”interest in
the foundation, such a detentkation requires the resolution of factual issues and is
therefore beyond the purview of the opinion process. See id. (“Whethera particularset of
cirwm&mces are included within the meaning of ‘significant interest’ requires the
resohttion of tkctual issues not appropriate to the opinion process.“)

       Although an independent school district trustee is no longer prohiied by common
law from serving as a director of a privatq non-profit wtporation which has business


opinioqUlartwithrrrpctu,localplblicofficials’rerviccontbcboardsatpmnts~~t
cqomti~ns.    See Acts 1989,‘Ilsl Le& ch. 475.0 2, at 1648 (ce: Au& 28,1989).


                                            p* 1330
Honorable Ww       R RathtT - Page 5         W-256)




derrliagswiththeschwldistrictifheorshedaswwitbwtcompearationor~other
remtmeratioq see supru note 2, qre caution that section 171.009 of the Local Gowmment
Code does not newmar@ insulate the kustee from the possible legal wnsequences of a
wntlict of interest which might arise with respect to a particular matter in which the
interests of the independem school district and the foundation are at odds. In particular,
astheresuitofsuchasituation,atrustee,inhisorhercapachyasdirectorofthe
foundation, could become the subject of a civil suit for breach of his or her fiduciary duty
to the private, non-profit corporation. See Block v. Slate; 718 S.W.2d 409,415 (Ta.
App.-Houston [lst Dist.] 1986 no writ) (holding that directors of non-profit wrporation
bmached their fiduciary duty). Therefore, a trustee would be well-advised to avoid
cagaeiag in conduct which might give rise to such a cause of action.

         Fii,    you ask if “an ISD’sprovision 0 of free 05ce [space] and incidental items
violate[s]l either an order entered by the federal district court in United Stutes v. Tours,
Cii. A No. 5281 (E.D. Tar.), or Texas Education Agency (“TEA”) re@ements
resulhg ikom that order. United Stutes v. Texm was fled on March 6, 1970. In late
 1970, the fweral district wurt found that the policies and practices of TEA had frequently
encouraged or resulted in the wntinuation of the vestiges of racially wgregated education
in Texas. UnitedStates v. Teuzr, 321 F. Supp. 1043, 1057 (E.D. Tert. 1970), afd, 447
F.2d 441 (5th Cii. 1971), cert. denied, 404 U.S. 1206 (1972). Thereafter, an order was
issued encompassing student assignments and transfers, and district boundaries. In
addition, orders were included regardiig students, faculty, statf, transportation,
cxtmamicular actiwSs, and facilities. See United States v. Teurs, 447 F.2d 44l(Sth Cir.
1971). These orders mquired TEA to take numerous actions to facilitate and encourage
dewgmgaGon. TEA was prohiiied, for example, from permitting school extmamicular
activities which would result in segregation or diswminadon. See id. at 445-96. TEA
was ordered to suspend the accreditation of school districts opemting extmwniwlar
activities in a discriminatory msnner and to reduce their lintding. See id. at 446. Si
1970, numerous additional orders have been issued in the action. See generui~ United
Stares v. Teu~, 628 F. Supp. 304.306-07 (E.D. Tex. 1985).

       GiventheaaensivescopeoftheseordasrrndtheVCfYminimalfa*sywhave
provided, this office is unable to determine whether the relationship behveen the
independent school district and the foundation violates any of the. wurt’s orders. The
independent school district’s wncuns with respect to wmpliance with the orders in
Unifed stares v. Tems would be more appropriately directed to the TEA in the 6rst

                                   SUMMARY

               Section 23.26 of the Education Code authorizes the board of
          trustees of an independent school district to accept donations and
          other gifls corn a private foundation, and to supply the foundation
          with 051x space and the use of other school property, assuming a
          school purpose is served. The question whether article III, section
          52(a) of the Texas Constitution prohibits the board from supplying


                                        p.     1331
Honorable WilliamR Ratliff - Page 6            (~~-256)




          thefbu&tionwith05ce~andtheuse-0fothasclloolpro~
          dependsuponwhethtbiswouldserveapublicpurpore,appropriate
          totheihctionofanindependentschooldistri~whetberadequate
          wnsideration would flow to the public; and, whether the board
          would maintab stdlicient wntrols over the foundation%acdvitie to
          Gllt?UEthtttthCpUbliCpurpoSCiSWtUallyflC$iCVCd.



               Section 171.009 of the Local Government Code pmits the
          tnudaofmindependent~~ldistricttosave~a~orofa
          private, non-profit corporation whickdoes business with the school
          district, provided he or she raceives no compensation or oh-r
          mmmemtion fix doing so. The determhation whether section
          23.201 of the Education Code prohiiits the board of trustees of an
          i&pendeatt school district from entering into a contract with a
          businessatityforwhichatrustee~~onitsboardof~o~
          without compensation or any othe-r remuneration reqdres the
          resolution of factual issues and is there&e beyond the purview of
          theopinionprowss.




                                                            DAN      MORALES
                                                            Attorney General of Texas

WILL PRYOR
FtiAshtantAttomeyGeaaal

MARYKELLBR
Deputy Attorney Oeneral fix Litigation

RENBAHIcK!s
StateSokitor

MADELBINEB. JOHNSON
Chair, Opiion Committee




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