               THEATTORNEYGENERAL
                        OF TEXAS
                            AUSTIN.       TNXAS      78711




                                January     31,   1975


The Honorable    Senfronia  Thompson                     Opinion   No.   H-   512
State of Texas House of Representatives
Committee    on State Scholarship                        Re: Administration    of scholar-
   Programs                                              ship fund created   by article
Austin,   Taxas   78767                                  54.051m,   Education   Code.

Dear   Representative     Thompson:

        You have asked seven questions   concerning   the administration    of
the scholarship  fund authorized under article  54.051(m),  Education    Code,
which provides  that:

                       (m) Twenty-five       cents out of each hourly charge
                  in Subsection     (b) and $1. 50 out of each hourly charge
                  in Subsection     (c) of this section shall be placed in a
                  scholarship     fund at each institution    to be administered
                  by that institution     to award scholarships     to needy
                   students.    Standards     for determining   need shall be
                  formulated     by each institution.      No more than 10
                  percent    of said scholarship      funds may be allocated
                  to out-of-etate     students.

         You ask:

                      I., Mny individual  schools require  a student to meet
                  any standard other than demonstrating      sufficient financial
                  need in order to qualify for a ,acholarship    under section
                  54.0 51 (m) 7

                        2. If the answer to question         #l is in the affirmative,
                  may individual       schools  enact any academic          or “character”
                  guidelinea    to determine     eligibility    for such scholarships
                  above and beyond requiring           a student to be acceptable        for
                  admission,      in the case of new students,          or to maintain     suf-
                  ficient   scholastic    and disciplinary      records    to keep them in
                  good standing and not classified           in any generally     applied
                  probationary      status?



                                          p. 2306
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    The Honorable   Senfronia    Thompson        page   2     (H-512)




                         3. If the answer to question     #2 is in the affirmative,
                    may schools      enact guidelines  that award such scholar-
                    ships on a competitive      basis in which a student with
                    greater   financial   need is less likely to receive    a scholar-
                    ship than another     student with lesser   financial   need, but
                    who might rank higher in a competition         on the basis of
                    academic     or other criteria?

                          4. In awarding     scholarships     under 54.051(m),   may
                    schools    treat students differently      on the basis of classi-
                    fication   (i. e. freshman-sophomore         or graduate-   under-
                    graduate)     by reserving    all or a percentage    of funds for
                    use by one class of students         only?

                         5. If the answer to question    #4 is affirmative,    may
                    the percentage    of funds set aside for a class of students
                    be determined    without regard to whether      that percentage
                    is in proportion   to the percentage   of all students’ financial
                    need represented     by that class of students?

                        6.If  a school fails to reserve     the proper amount of
                    funds for scholarships     from tuition revenue     pursuant to
                    54.051(m)   during a semester     or fiscal year,    must the
                    school compensate      for this by designating    extra funds
                    for scholarships    from tuition revenues      in subsequent
                    semesters    or years?

                         7. The University         of Texas Board of Regents has
                    adopted rules stating “There           shall be established,      in
                    accordance     with Article       2654c, Section l(a)12,      such a
                    scholarship     fund at each component         institution   where
                    and when such a fund is deemed appropriate                 by the chief
                    administrative      officer”.      May the governing       boards of
                    state institutions      of higher education      grant the authority
                    to administrative       officials   to determine     not to set up
                    the fund required       by law?




                                        p. 2307
    The Honorable        Senfronia    Thompson       page   3    (H-512)




               While the language    of section  54.051(m)   clearly   states that the
    scholarship     fund created   by that section is for “needy”      students,   the
    institutions    are charged with formulating      standards    for determining
    need.     See Attorney    General   Opinion M-1129 (1972).

                We understand       that the amount of available       monies in the fund is
    limited     and, in all likelihood,       will never be suffient to award every student
    all the scholarship        aid for which he or she may show financial             need.
    Accordingly,      it would seem reasonable           that an institution    may use additiona
    standards      or criteria     other than comparative       financial    need in determining
    the distribution      of the echolarship       monies   so-long as the standards        or
    criteria     are reasonable       and are designed     to effectuate    the intent of the
    statute to provide       scholarships      for needy students.        We therefore    answer
    your    first question     affirmatively.

             Questions      2,3,4    and 5 concern    examples     of such additional      criteria.

              We note initially  that a determination    of whether   each additional
    criterion   is a reasonable   one under the guidelines     set out above,    is dependent
    on the facts of the particular      situation.  For example,    an additional   standard
    may be reasonable      on its face,    but be unreasonable    as administered.      Thus,
    we can only advise you on whether in ,our opinion the general          classes    of
    criteria   you mention could be reasonable.

             In our opinion,  the additional   standards   of academic   standing and
    “character”    could be reasonable    standards   a school may use in determining
.
    which needy students receive      scholarships.      We therefore  answer your
    second question affirmatively.

              Question      3 concerns     the situation   in which a student with lesser
    financial    need is awarded a scholarship            rather than a, student with greater
    financial    need because of the use of criteria            other than need.       In our opinion,
    such a method of awarding             scholarships    would be acceptable        so long as
    all recipients     of the scholarships        did in fact require    financial    aid and the
    additional    criteria     were reasonable.        Indeed,    such a result would be in-
    evitable   given our opinion that criteria           other than financial      need may be
    used in the determination           of scholarship     awards.     We therefore      answer
    question    three    affirmatively.




                                             p. 2308
The Honorable       Senfronia     Thompson        page   4   ,(ti-512,)




           Questions   four and five concern      the practice     of     a school of reserv-
ing all or a portion      of the scholarship    funds for us~e by         one class of students,
e.g.,    freshmen,     sophomore,     graduate,     without regard         to the percentage
of all students’ financial      need represented        by the class      of students.    This
practice     in effect imposes    an additional     criteria  on the       scholarehip   applicant,
that he,or ehe be.within       a specified   class.
                                                                                                ”
          It is not with&the      purview   of this office    to suggest the best method
of administering       the scholarship    funds.    There may be valid reasons         fora
school to reserve       a portion of its scholarship      funds for each class: for
example,      a school may wish to reserve         enough funds to provide      eontinui.ng
financial    aid to deserving     students as they progress       from freshman’      to
    ‘.
Senior status.       Thus, it is our opinion that nothing in article        54.051(m)
precludes      a school from administering        scholarehip    funds as described      in
questions     four and five.     Of course,   as we have stated,      any such alloca-
tions of funds among the claseee          must be baaed on reasonable        clasaifica-
tions and be designed       to effectuate   the intent of article    54.051(m).

           Your sixth.queetion       concerns    the failure   of a school to reserve           the
proper amount of funds for scholarships              from tuition revenue         pursuant to
article    54.051(m).       We construe    the “shall”    language     used by the Legisla-
ture    in article    54.051(m)   as mandatory;     thus, the schools        are required        to’
set aside the amount called for.            Yet, no penalties       for failure   to comply
with the statute       are provided.     To our knowledge        there is no authority         in
the general       law which requires      a school to compensate         for the failure      to
reserve     the proper amount of funds for scholarships                by designating      extra
funds for scholarships,from           subsequent    tuition revenues.         In addition,      the
scholarship        fund established    by section   54.051(m)     is appropriated       to the
various     schools     by Acts 1973, 63rd Leg.,        chapter 659, section 17, p. 2149,
which provides:

                        Sec. 17. INSTITUTIONAL             FUNDS REAPPROPRIATED.
                   All balancee     in the institutional    funds of the several   state
                   institutions    of higher education      named in this Article,    at
                   the close of the fiecal year ending August 31, 1973, includ-
                   ing balances     in their revolving     funds at that time, and the
                   income to aaid funds during the fiscal years beginning
                   September      1, 1973 and 1974, are hereby reappropriated          for
                   the operation,     maintenance,       and improvement    of the res-
                   pective    atate institutions.




                                            p. 2309
The Honorable      Senfrhia    Thompson        page   5      (H-512)




This is a general    appropriation    rather than a line item; consequentlythe
Legislature    has provided    no practical   check on how the money is spent.
Thus, although the schools       are required    by section    54.051(m)  to set aside
there specific   amounts for scholarships,        we find no law which provides,a
penalty or specific    remedy    for past failures. to do so.      Absent such law.,
we therefore    must answer your sixth question         negatively.’

          With reference     to your seventh question,        article     2654c, V. T. C. S.,
was repealed     by the enactment      of the Education      Code (Acts 1971, 62nd Leg.,
ch. 1024, p. 3319) and is now substantively           article ~54.051,: Education       Code.
Governing     Boards   of institutions   of higher education        may grant the authority
to administer     scholarship    funds to administrative       officia’lr,,   butt such  .’
officials  may not ignore      the mandate of article       54.051(m),      which provides
that a certain   portion    of tuition charges    shall be placed in a scholarship
fund for needy 6tUd8nt#.

                                      SUMMARY

                       An institution    may use additional         standards     other than
                  financial    need in distributing       the scholarship      fund established
                  by article    54.051(m),     Education      Code, so long as the
                  standards     are reasonable      and designed       to effectuate    the
                  intent of the statute      to provide     scholarships     for needy
                  students.      The Legielature       has not provided       a mechanism
                  to require     schools   to designate      extra funds from sub-
                  sequent tuition revenues         when the school fails to reserve
                  the proper amount of money for scholarships.                    Governing
                  Boards     of state iastitutions      of higher   education     may not
                  grant to administrative        officials    the authority     to determine
                  not to set up the scholarship          fund established       by article
                   54.051(m).

                                                          Very   truly     yours,




                                                u         Attorney       General    of Texas




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             The Honorable   Senfronis   Thompson      page   6   (H-512)




             APPROVED:




             Opinion   Committee




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