   .




                                  The Attorney        General of Texas
                                                September 25. 1985
JIM MATTOX
Attorney General


6upreme Court Buildin
                                 Honorable Charles F. Aycock            opinion No. JM-355
P. 0. Box 12546                  Parmer County Attorney
Austin, TX. 7671 l- 2546         P. 0. Box 286                          RS:   Distribution of proceeds
512,4752501                      Farwell, Texas    79325                from the permanent school fund
Telex 9101674.1367
                                                                        in Parmer County
Telecopier 512/4750266

                                 Dear Mr. Aycock:
714 Jackson. Suite 7M]
Dallas, TX. 75202.4508                YOU ask us several questions relating to the distribution of
2141742.6944
                                 county permanent whool funds pursuant to article VII,   section 6b of
                                 the Texas Constitution. That constitutional provision provides:
4624 A,bel,a   Ave.. Suite 160
E, Paso, TX. 79905-2793                       Sec. 6b. Notwithstanding the provisions of
9151533.3464                               Section 6, Article VII, Coastirution of the State
                                           of Texw,    any county, acting through the com-
1001 Texas. Suite 700
                                           missione:cscourt, may reduce the county permanent
tbuston, TX. 77002-3111
                                           school f'undof that county and may distribute the
7131223-5666                               amount of the reduction to the independent and
                                           co-n    school districts of the county on a per
                                           scholastic basis to be used solely for ehe
606 Broadway, Suite 312
                                           Purpose,5of reducing bonded indebtedness of those
,.ubbock. TX. 79401-3479
666,747.5236
                                           distriws or for making permanent improvemenrs.
                                           The co&ssioners    court shall, however, retain a
                                           suffici(nlt amount of the corpus of the county
 4309 N. Tenth, Suite B                    permanent school fund to pay ad valorem taxes on
 ~cA,,en, TX. 76501-1665
                                           school lands or royalty interests owned at the
 5121662-4547
                                           time of the distribution. Nothing in this Section
                                           affects financial aid to any school district by
 2CClMain Plaza, Suite 400                 the staw.
 sari Antonio. TX. 70205-2797              Adopted Nov. 7, 1972. (Emphasis added).
 512n25-4191

                                 Article VII, seccimon6 states that the county permanent school lands
                                 and the proceeds from their sale "shall be held by said counties alone
                                 as a trust for the benefit of nublic schools therein: said uroceeds to
                                 be invested . . . and the cknties      shall be reiponsibie for all
                                 investment8. . . ,IN Tex. Const. arr. VII. 96 (emphasis added).

                                      You inform w that rhe Parmer County Commissioners Court met with
                                 the superintenden(:r;
                                                     of each of the school districts located in Parmer
                                 County together wL,th numerous board members representing each of the
                                 districts. The representatives of the various school disrricts were




                                                           p. 1623
Bonorable Charles F. Aycock .-Page 2   (JM-355




instructed as to the requimments of article VII, section 6b of the
Texas Constitution. You also inform us that none of the school
districts indicated to the commissioners court that the funds would be
used for reducing bonded iidebtedness, and all but one of the school
districts indicated that 11: did not intend to use the money for
permanent improvements. That one school district (Friona Independent
School District), through its representatives, indicated to the
commissioners court that in order to comply with the Education Code,
it would at some point in time make permanent improvements. The
school district did not sllxuit any plans to the court nor was any
indication given to the court as to when the improvements might be
made or the specific nature of the improvements.

     You inform us that the county has invested the school fund in
certificates of deposit which matured in March 1985. In that regard,
the Friona Independent Scho,olDistrict has requested its portion of
the fund and has indicated that it would create a sinking fund in
which its share of the permanent school funds would be placed until it
proceeds with its future plans for permanent improvements.

     You first ask:

             May the commissioners court distribute the
          principal and interest after retaining a suffi-
          cient amount of. the principal to pay ad valorem
          taxes to a scho,LL district upon the district's
          statement that it intends to make permanent
          improvements without first ascertaining whether or
          not the permanen: improvements will be made, and
          how much of the district's portion of the per-
          manent school fund will be used in construction of
          the permanant improvements.

 It is important to note that under article VII, section 6 of the Texas
 Constitution counties are trustees of school lands for the benefit of
 the schools. Tex. Const. art. VII, 96. As the governing board of the
 county, the commissioners court acts as trustee in distributing the
 school fund under article VII, section 6b of the constitution. See
 Attorney General Opinions H-878 (1976); H-391, H-239 (1974); M-1104
 (1972). As trustees, the:.r powers must be strictly construed, and
 they may neither divest themselves of the powers conferred nor assume
 powers not conferred. Set! Potter County v. C. C. Slaughter Cattle
-CO., 254 S.W. 775 (Tax. i%iim'nApp.. Sec. B, 1923, opinion adopted).
     Section 6b lodges discretion of how and when to distribute the
county school fund in the wmmissioners court. Tex. Const. art. VII,
§6b.   Neither the time of the distribution nor the manner of
distribution is specified :Ln the constitutional provision. On the
contrary, the purposes for which the fund may be distributed are




                               p. 1624
Honorable Charles F. Aycock - Page 3   (JM-355)




clearly expressed. Id. Thus, the answer to your first question
depends on what stan=d      is applied to a tmstee exercising his
discretion to distribute test funds to the beneficiaries.

     In exercising discretionary powers, the tmstee must act within
the "bounds of a reasonatle judgment." See First National Bank of
Beaumont V. Howard, 229 S.W.2d 781, 783 (Tz   1950). We believe that
under this standard, a trustee is required to manifest the care,
skill, prudence, and diligence of an ordinary prudent wan engaged in
similar business affairs. Cf. Attorney General Opinion M-1104 (1972)
(prudent wan standard is applicable to investments). Inplicit within
this standard is a duty tc investigate and ascertain facts to make an
informed judgment. Therefore, in response to your first question we
conclude that it is within the cowmissioners court's duty as trustee
to ascertain whether permanent improvements will be made and how much
of the school district's portion of the permanent school fund will be
used in the construction of permanent improvements before funds are
distributed to school dist~c:tcts.

     You next ask whether ,sschool district may receive its portion of
the fund and create a sinking fund or reinvest the funds in a
certificate of deposit until it proceeds with its plans for permanent
improvements. We believe that this situation is possible only if
there is a justifiable expectation on the part of the county
commissioners that the fund.will be used within a reasonable time to
satisfy the constitutional purposes. See Attorney General Opinion
H-878 (1976). To distribute permanent   school     funds to a school
district for the purpose of allowing the school district to invest the
funds or establish a sinktug fund with no impending expectation that
the funds will be used for the constitutional purposes within a
reasonable time would be cnrtrary to the intent and purpose of article
VII. section 6b. See Pal:tersonv. City of Dallas, 355 S.W.2d 838
(Tex. Civ. App. -ml=-1962,        writ ref'd n.r.e.) (interpretation
should not thwart legislative intent); appeal dismissed per curiam, 83
S.Ct. 873 (1963).

     Article VII, section 6b outlines standards for members of the
commissioners court for t'he investment of the school funds. The
constitution wakes no provision governing investments by a school
district. General tmst principles provide that a tmstee cannot
delegate the authority that has been conferred upon him. See West v.
Dapgood, 174 S.W.2d 963 (Tex. 1943) (trustee nay onlydelegate
mechanical or ministerial BIXS).

     However, this office briefly discussed a limited circumstance in
which a school district sought permission to deposit its portion of
the county school fund in .an interest bearing account. See Attorney
General Opinion H-878 (1975'). In that opinion, it was argued that




                            p. 1625
Honorable Charles F. Aycock '-Page 4     (JM-355)




           logically, the dj.stributionof funds could not be
           immediately applLed towards reduction of bonded
           indebtedness or construction of permanent improve-
           ments and that investing the funds in the interim
           period would insure that no earnings would be lost
           to the school chjldren of the county.

Id. The opinion concluded that an investment by a school district was
Frmissible    as long as the resulting income (interest) and the
principal are not expended except as directed by [article VII, sec.
6bl." Attorney General 0p:tnionH-878. The opinion clearly suggested
that the investment would te temporary and that a determination by the
county commissioners had been made to distribute the funds for the
constitutional purpose. IIf!believe that only under these limited
circumstances may the schocN1district be allowed to invest its portion
of the fund once distributcld,
                             by the county.

       Finally you ask:

              If the commisr;i.oners
                                   court elects to distribute
           the corpus and ,Lnterest of the permanent school
           fund to those districts satisfying the require-
           ments of article VII, is it incumbent upon each
           school district to determine the number of persons
           residing in the !school district eligible by age
           for free education whether the persons *re
           enrolled in private or public schools and then
           present that data to the commissioners court so
           that the commiss'tonerscourt can make the distri-
           bution on a per wholastic basis.

Article VII, section.6b of the Texas Constitution provides that when
more than one school distl:ictis located in the county, the commis-
sioners court is requirei.  to distribute the funds to the various
school districts on wa pel' scholastic basis." Tex. Coast. Art. VII,
56b. In Attorney General Opinion H-47 (1973). this office defined the
phrase "on a per scholastic basis" as "on the basis of the number of
persons residing in the school district eligible by age for free
education." The computation of students on a per scholastic basis has
no relation to the avera$;e:daily attendance. See Attorney General
Opinion H-47 (1973); ---
                     hut s(?eEduc. Code 016.006. -

     Prior to 1975. the l@!gislaturehad provided for the taking of a
scholastic census whereby the number of students of scholastic age
residing in a particular rrchooldistrict could be determined, but in
1975 the provision was repealed. See Educ. Code 514.02, repealed by
Acts 1975, 64th Leg., ch. (4, §l. at,   eff. Feb. 13, 1975. We have
not found nor have you ini'ormedus of any official method by which a
tabulation may be made whereby the county funds may he distributed in




                               p. 1626
Ronorable Charles F. Aycod. - Page 5    (JM-355)




compliance with the constitutional requirement. See Love v. City of
Dallas, 40 S.W.2d 20 (Tex. 1931); see also Attorney General Opinion
H-47 (1973). Since sectlone:6 and 6b of the constitution are directed
to the county commissione:rscourt, we believe that it is incumbent
upon the county commissioners as trustees of the fund to formulate a
method to determine the scholastic population within a school
district. Again, we advise that these commissioners are required to
manifest the care, skill, p:cudence,and diligence of ordinary prudent
persons engaged in similar t#usinessaffairs.

                             SUMMARY

             Before distributing the funds to school
          districts, the ctmrmissionerscourt, as trustees of
          the county school fund, is under a duty to
          investigate whe,clleror not certain permanent
          improvements will be made by a school district.
          In ascertaining this information, the commis-
          sioners court 111 required to manifest the care,
          skill, prudence, and diligence of an ordinary
          prudent man engat:edin similar business affairs.

             Before funds are distributed to any school
          district in the county, the commissioners court
          must satisfy itself that the funds will he used
          within a reasonzble time for either of the con-
          stitutional purposes.

             It is incumbe~ntupon the county commissioners
          as trustees of the fund to formulate a method to
          determine the scholastic population within a
          school district.




                                       4
                                         Ve



                                         JIM     MATTOX
                                         Attorney General of Texas

TOM GREEN
First Assistant Attorney General

DAVID R. RICHARDS
Executive Assistant Attorney General

ROBERT GRAY
Special Assistant Attorney General




                                   p. 1627
                                                   ,

Honorable Charles F. Aycock - Page 6    (33-355)




RICK GILPIN
Chairman, Opinion Committee

Prepared by Tony Guillory
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Rick Gilpin, Chairman
Colin Carl
Susan Garrison
Tony Guillory
Jim Moellinger
Jennifer Riggs
Nancy Sutton
Sarah Woelk




                              p. 1628
