Untitled Texas Attorney General Opinion ( 1981 )

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,- ‘.. ’
The Attorney General of Texas
October 5. 1981
MARK WHITE
Attorney General
Mr. E, D. Walker, Chancellor Opinion No. ml-373
The University of Texas System
601 Colorado Street Re: Agreement between the
Austin, Texas 78701 University of Texas Law
School Foundation and the
University of Texas
School of Law
Dear Mr. Walker:
You inquire about the relationship between the University of
Texas and the University of Texas Law School Foundation. The
University of Texas Law School Foundation is a nonprofit corporation
vith the purpose of supporting the educational undertaking of the
School of Lav of the Universi.ty of Texas. It solicits donations and
expends funds to benefit the law school, acting as conduit and
coordinator of gifts made by other parties. You state that the
foundation and school of law wish to formalize their relationship
through a Memorandumof Understanding which you have submitted to us.
The memorandum states the foundation’s intent to continue to make
donations to the university. describes the purposes to be, served by
these donations, and states certain conditions under vhich the
university will accept them.
You ask whether the university’s compliance vlth its
representations under the Memorandumof Understanding would constitute
290Mai”Flu.. suit* uo
a gift or grant of public money to a corporation in violation of
S,” A”lonii. TX.75205 article III, section 51 of the constitution. which provides in
512J7294191 pertinent part:
The Legislature shall have no power to make
any grant or authorize the making of any grant of
public moneys to any individual, association of
individuals, municipal or other corporations
whatsoever.
The Memorandumof Understanding raises this constitutional question
because, in .addition to providing for donations flowing from the
foundation to the law school, it also states that the law school will
provide, for example, office space, utilities, and some staff
assistance to the foundation.
E. D. Walker - Page 2 ow373)
.
We must first, hovever, determine vhether the university has
statutory authority to accept the terms of the five sections of the
memorandum. Section 6S.31 of the Education Code states aome relevant
powers of the University of Texas Regents.
(a) The board is authorized and directed to
govern. operate, support , and maintain each of the
component institutions that are nov or may
hereafter be included in a part of The University
of Texas System.
. . . .
(c) The board has authority to promulgate and
enforce such other rules and regulations for the
operation, control, and management of the
university system and the component institutions
thereof as the board may deem either necessary or
desirable....
(e) The board Is specifically authorized.
upon terms and conditions acceptable to it, to
accept and administer gifts, grants, or donations
of any kind, from any source. for use by the
system or any of the component institutions of the
system.
Section 65.31(e) of the Education Code gives the regents considerable
discretion to accept donations “of any kind” with conditions attached
by the donor. We believe this broad language authorioes~ the regents
to accept gifts of money, other intangibles, real and personal
property, and services. See Letter Opinion R-1009 (To Honorable Frank
Smith. Jan. 27, 1948). ?he conditions attached to the grant must be
acceptable to the regents.
The board has considerable latitude in exercising powers
delegated to it by the legislature, subject to review for abuse of
discretion. Foley v. Benedict, SS S.W.2d 805 (Tex. 1932); Letter
Advisory No. 6 (1973). However, the board is charged vith the
governing of the university system, see Education Code Section 65.11,
and the exercise of its specific powersmust be In furtherance of this
duty. A “university system” is the assoclatlon of agencies of higher
education under a single governing board. Educ. Code 561.00319. The
broad powers granted the regents by section 65.31(a), (c), and (e).
&. to support and maintain, to promulgate rules and regulations,
and to accept gifts. are to be exercised on behalf of the component
institutions of the system. The University of Texas at Austin is an
“institution of higher education within The University of Texas
System.” Educ. Code $67.02. Thus the board of regents must exercise
its powers of governance for the purpose of higher education as
carried out by the component Institutions. Grants accepted for the
university at Austin must reasonably relate to its purposes as an
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E. D. Walker - Page 3 (Ml-373)
educational institution. See Attorney General Opinions M-391 (1969);
W-334 (1958); WW-S (1957).’
The Memorandum of Understanding contains a number of statements
as to the foundation’s goal of serving the educational purposes of the
law school and the kind of assistance it has rendered in the past and
proposes to render in the future. These statements are found in
sections one through three:
1. The Foundation has engaged in development
activities for The University of Texas School of
Law (The Law School), has assisted in maintaining
alumni reletions on behalf of The Law School, has
participated~ ins the Continuing Legal Education
(CLE) program of The Law School, has provided
various and substantial support for the
development of The Law School, its faculty and
staff, and has furnished important administrative
and other services to The Law School and The
University. The continuation of these activities
is essential to the maintenance of a law school of
the first class. The University and The
Foundation deem it appropriate to, and do hereby,
memorialize the nature of the relationship between
The Foundation and The University and The Law
School, ratify and approve these past activities
by The Foundation, and agree mutually for the
future regarding the respective roles, rights, and
obligations of The University and The Foundation
in this relationship.
2. The Foundation is a nonprofit educational
corporation chartered in 1952 for the purposes of
supporting the educational undertaking of The Law
School by furthering legal education, legal
research, financial assistance to deserving
students, and the progress of law, and of
soliciting donations for particular objectives to
accomplish such purpose, and of cooperating with
the ~advancement of the general welfare of The
University as a whole. The Statement of
Development Policy by the Board of Trustees of The
Foundation includes the activities of securing,
holding in trust.~ and administering funds for the
benefit of The School of Law of The University of
Texas at Austin.
3. The Foundation agrees that, during the
term of this Memorandum of Understanding, The
Foundation: (1) will continue to invest and
administer the funds presently on hand for the
benefit of The Law School; (2) will continue to
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E. D. Walker - Page 4 (km-373)
conduct a development program for the benefit of
The Lav School and The University to insure
procurement and retention of outstanding law
faculty members, to enrich the educational
environment of The Law School, and by other
reasonable means to enhance the prestige of, and
to advance, The Law School, and will utilize its
expertise, resources, and personnel for such
purposes; (3) will use reasonable efforts to
finance and conduct, or work with law school
alumni groups interested in financing and
conducting, programs and publications designed to
maintain good alumni relations on behalf of The
Law School; (4) will use on behalf of Ihe Law
School, or will lease, loan, or give to The Law
School from time to time, to the extent~that it is
feasible to do so, equipment needed by The Law
School or helpful to its operations; (5) will
continue to render other assistance to The Law
School of the general nature of the assistance
that it has rendered in the past, and to render
other assistance to The Law School in the future
as may mutually appear desirable; and (6) will
continue to recognize The School of Lav of The
University of Texas at Austin as the sole
beneficiary of its development policy and its
educational support.
These provisions restate and elaborate on the foundation’s
purpose, as expressed in its charter, which is to support legal
education by soliciting and expending donations for that purpose.
They express numerous specific purposes directed at serving the law
school’s educational enterprise: the provision of administrative
services, financial aid for students, and funds and services directed
at faculty recruitment. In addition, it has participated in the law
school Continuing Legal Education program and has worked with alumni
groups. With the possible exception of the latter endeavor, these
activities are closely related to the educational function of the
university. See Attorney General Opinions M-391 (1969)(provision of
financial aido students); WW-334 (19SB)(Texas Tech television
channel may accept conxnercial programs provided directors find
reasonable relationship to statutory purposes of college); WW-S
(19S7)(Texas Tech may engage in educational television broadcasting);
V-1476 (1952)(salary of university comptroller may be supplemented
with donated funds); O-4167 (1941)(University may spend funds for
purpose of soliciting gifts from potential donors). ct. Attorney
General Opinion M-223 (1968)(hospital district may spend public funds
to pay travel costs of employees who recruit prospective employers).
The legislature has in fact recognized that universities may cooperate
with alumni associations. See V.T.C.S. art. 1396-2.23A(E)(8). It
has, hovever. prohibited the= of appropriated funds for the support
and maintenance of alumni organizations Of activities. General
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g. D. Walker - Page S (MW-373)
Appropristlons Act, Acts 1979. 66th Leg., ch. 843. art. IV, 117. at
2859. Thus, if the regents of the university believe that the support
of alumni organizations will benefit the educstional purposes of the
school, they will have to locate a permissible funding source’ The
foundation can provide precisely that.
Section four of the memorandum states in part the terms and
conditions on which the university is willing to accept donations from
the foundation:
4. The University agrees that, during the
term of this Hemorandum of Understanding, The
University: (1) will provide reasonable space in
or near The Law School building, as approved by
The University President and The Lav School Dean,
to The Foundation for the purpose of carrying out
its obligations hereunder and for its general
operations on behalf of The Law School*
provide the utilities and telephon: “,‘e%
reasonably needed by The Foundation in carrying
out its activities under this Memorandum of
Understanding; and (3) will permit reasonable use
of University equipment and personnel as needed to
coordinate the activities of The Foundation with
the educational operations of The Law School, and
hereby expressly recognizes that the Dean,
Associate Deans, and members of The Law School
faculty may reasonably assist from time to time in
development programs as may be needed or helpful
in coordinating those Foundation activities with
the operations of The Law School.
In our opinion, the university has statutory authority to provide
the foundation with the items enumerated in section 4 as “terms and
conditions’ attached to donations. See Educ. Code 165.31(e).
University property is state property, see Walsh v. University of
Texas’ 169 S.W.2d 993 (Tex. Civ. App. - El-so 1942, writ ref’d), but
the regents have power to determine the use of campus buildings.
Splawn v. Woodard, 287 S.W. 677 (Tex. Civ. App. - Austin 1926. no
writ). Compare V.T.C.S. art. 601b. 54.01 (Purchasing and General
Services Commission’s control of public building does not extend to
higher education buildings).
Counties have been oermitted to provide a nrivate entity with
space in a public building where convenient or necessary to carry out
a county purpose. See Sullivan v. Andrevs County, 517 S.W.2d 410
(Tex. Civ. App. - KPaso 1974, writ ref’d n.r.e.)(county leased
clinic to physicians); Dodson v. Marshall, 118 S.W.2d 621 (Tex. Civ.
APP. - Waco 1938, writ dism’d)(space in courthouse leased. to
individual for concession stand); Attorney General Opinions MU-200
(1980)(county provided rent free space in courthouse to employees
credit union); H-912 (1976)( contract ,with physician to practice in
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E. 0. Walker - Page 6 (nw373)
county medical clinic). Countfes have only those powers expressly or
impliedly granted by the constitution and statutes. Canales v.
Laughlin, 214 S.W.2d 451 (Tex. 1948); Anderson V. Wood’
1084 (Tex. 1941). The regents of the University of Texas have far
broader powers to operate and manage component institutions within the
system pursuant to regulations they deem necessary and desirable.
Educ. Code 565.31(c). In our opinion, the board of regents has
statutory authority over the provision of apace to private entitles at
least as great as, and in all probability greater thsn. that of the
commlasioners court. The provision of utilities may be regarded as
incidental to the provision of space in the lav school,in view of the
difficulty of the foundation making separate provision for them.
Section 65.31(e) of the Education Code permits the university to
“accept and administer” grants. This language implicitly acknowledges
that the university vi11 have to devote some of its resources to
administering grants it accepts, in particular the services of
personnel. The regents have statutory authority to decide whether or
not to accept a grant which involves particular administrative coats
for the university.
There is little or no precedent for a governmental body providing
telephone services and the use of equipment to a private entity which
uses space provided by the governmental body. See Attorney General
Opinion MW-200 (1980) (county may provide media free space in
courthouse, but may not provide free telephone service). tlovever, we
believe the regents may regard the provision of this assistance as
incidental to the provision of office space in the law school to the
foundation. The foundation exists to serve the educational purposes
of the law school by making various types of donations. The joint
purposes of the law school and foundation may possibly be accomplished
in a more cost effective way if the board of regents provides the
foundation with a telephone and some equipment, rather than requiring
it to use foundation resources to pay Its telephone bills and buy its
own copy machine. We conclude that the board of regents has authority
under section 65.31 of the Education Code which permits the law school
to provide to the foundation in reasonable amount the resources
enumerated in section four of the memorandum.
Section five of the agreement states as follows:
5. It is expressly mutually agreed that:
(1) staff personnel working for or serving The
Foundation may be paid as University employees,
but the salaries and The University’s portion of
retirement benefits for such personnel will be
reimbursed to The University by The Foundation,
and other usual benefits for such personnel will
be provided by The University: however, all such
personnel are subject to all of the rules.
regulations’ and personnel policies of The
University; (2) funds raised by the development
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E. 0. Walker - Page 7 ww-373)
activities of The Foundation may be subject to a
reasonable management or operations charge or fee
by The Foundation, but all such charges or fees in
regard to endoved funds shall come from income and
not from corpus; all funds, whether endowed,
restricted, or unrestricted, raised by the
development activities of The Foundation shall be
held, invested. managed, and disbursed by The
Foundation for the aole benefit of The Law School,
subject to any restrictions placed thereon by
particular donors.
We understand section five, subsection (1) to provide that
foundation employees are permitted to be on the university payroll and
to be eligible for retirement and other benefits provided by the
university to its own employees. The statutes and appropriations act
forbid this arrangement. The appropriations act provides funds for
departmental operating expense and staff benefits. Acts 1979, 66th
Leg., ch. 043, art. IV, at 2787. See V.T.C.S. art. 68138. In our
opinion, these funds are appropriatedfor university employees, and
may not be specifically allocated for salaries or fringe benefits for
the employees of a private corporation which is under contract with
the university. See Acts 1979, 66 Leg., ch. 843. art. V. II(p), at
2895. Nothing in-e university’s budget request to the sixty-sixth
legislature indicates that any of the lav school’s departmental
operating expense was to be allocated to foundation employees. State
of Texas Request for Legislative Appropriations, Fiscal Years Ending
August 31, 1980 and 1981, the University of Texas of Austin, at 74,
~87.
Where authorized by law. state agencies may employ an independent
contractor, but he does not occupy an office or position under the
state nor is he an agent of the state. Attoiney General Opinion V-345
(1947). See also Attorney General Opi.lion H-1304 (1978). In
addition, the appropriations act may authorize an expenditure for a
consultant. Attorney General Opinion S-13 (1953). Hovever. vhere the
appropriations act indicates that work is to be done by employees
under the direct control of the agency, it may not expend its
appropriation to contract for the performance of those services by an
independent contractor. Attorney General Opinion S-80 (1953). In our
opinion, employees of the Texas Law School Foundation are not entitled
to be paid by the university. Nor are they entitled to receive
vacation and sick leave benefits which the appropriations act provides
state employees. Acts 1979. 66th Leg., ch. 843. art. V,
$7(a),(b),(c). at 2901.
Employees of the Law School Foundation may not become members In
the Teacher.Retirement System. Section 3.03(b) of the Education Code
provides as follows:
Every employee in any public school or other
branch or unit of the public school system of this
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E. D. Walker - Page 8 (W-373)
State is a member of the retirement system ao a
condition of his employment.
“Employee” is defined in part as “any person elnployed to .render
service on a full-time, regular salary basis . . . by the board of
regents of any college or university.” Educ. Code #3.02(s)(3). In
Attorney General Opinion O-3399 (1941), it YPS determined that public
school teachers who were employed and paid by the federal government
and vhose services were controlled by a federal agency could not
participate in the teacher retirement system. These persons were not
teachers as that term is defined in the retirement statute because
they were not employed by any state educational agency but were
employed directly and exclusively by the federal government. See also
Attorney General Opinion O-3409 (1941). Since employees of the Law
School Foundation are not university employees, they are’ not eligible
for retirement benefits under the teacher’s retirement system.
Nor are employees of the foundation entitled to participate in
the group insurance plan which the university provides its employees.
Article 3.50-3 of the Insurance Code, the Texas State College and
University Employees Uniform Insurance Benefits Act, provides group
coverage for all employees of Texas state colleges and universities.
“Employee” is defined as any person employed by a governing board of a
state university, senior or community/junior college, or any other
agency of higher education. Ins. Code art. 3.50-3. 13(a)(4)(A).
Employees of the Texas Law School Foundation do not fit this
definition and consequently are not eligible for insurance benefits
‘under article 3.50-3 of the Insurance Code. See also V.T.C.S. art.
5221b-6(b) (2) (unemployment compeqsation for state employees); art.
6252-19 (Tort Claims Act makes state liable for torts of persons in
paid service of state); art. 83098 (workmen’s compensation for state
employees).
Raving examined the memorandum from the perspective of the
university’s statutory authority to agree to it, w turn to your
question: whether the university would violate article III. section
51 by complying with its representations under the memorandum.
Article III, section 51 of the constitution provides in pertinent
part:
The Legislature shall have no power to make
any grant or authorize the making of any grant of
public moneys to any individual, association of
individuals, municipal or other corporations
whatsoever
This provision prevents the legislature from giving away public funds
or enacting a .statute which authorizes a state agency or political
subdivision to do so. See Texas Pharmaceutical Ass’n v; DooleF. 90
S.W. 2d 328 (Tex. Civ.App. - Austin 1936, no wit). Thus, the
legislature may not authorize the University of Texas to grant public
funds to an individual or corporation.
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E. 0. Walker - Page 9 (nw-373)
Although article III, section 51 on its face prohibits only
grants of money, it has been liberslly construed to prohibit the grant
of state property and contract rights as well as money. Rhoads
Drilling ~Co. v. Allred. 70 S.W. 26 576. 582 (Tex. 1934)(dicta);
Attorney Gener al Opinions WW-790 (1960); I&153 (1957).
We note that provisions one through three of the memorandum do
not raise the constitutional issue which concerns you. These
provisions describe the foundation’s donative purposes, and do not
refer to benefits flowing from the university to the foundation.
Section five does not raise,the article III, section 51 issue, because
various statutes prevent the university from providing foundation
employees with the described benefits.
Section four of the memorandum does, however, raise the
constitutional issue. It states that the university will provide the
foundation with office space, telephone service, utilities, assistance
from university staff and the use of university equipment. We have
determined that the regents have statutory authority to provide this
assistance to the foundation; we must next consider whether statutes
granting such authority are constitutional as applied to the situation
you present.
Article III, section 51 of the constitution requires that a grant
by the university to the foundation must serve a public purpose,
appropriate to the function of a university, and that adequate
consideration must flow to the public. Attorney General Opinions
hW-89 (1979); H-1260 (1978); H-520 (1975); H-403 (1974). In addition,
the university must, maintain some controls over the foundation’s
activities, to ensure that the public purpose is actually achieved.
Attorney General Opinions MW-89 (1979); H-1309 (1978); H-912 (1976).
If these conditions are met, the grant by the public entity is not
unconstitutional.
As made clear by sections one through three of the memorandum,
and by its charter, the foundation exists to serve the educational
function of the law school. Public education is an essential
governmental functiog. Rainey v. Malone, 141 S.W.2d 713 (Tex. Civ.
APP. - Austin 1940, no writ). The assistance provided by the
foundation to the university helps it accomplish a public purpose
entrusted to it.
The foundation’s charter requires it to devote Its resources to
benefitting the law school; therefore, the law school would still
receive donations from the foundation even if it did not provide
office space and other in klnd,assistance. -See Boyd v. Frost National
Bank, 196 S.W.2d 497 (Tex. 1946).
Nonetheless, a public purpose may be served by providing the
foundation with rent-free space In the law school. This determination
is to be made by the university in the first instance. and if
challenged, ultimately by a court. Attorney General Opinion H-403
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e. D. walxer - rage 10 (tsw-373)
. .
(1974); see also Dodson v. Harshall, z, at 624. Although we lack
sufficient information to state with certainty how the foundation’s
presence in the law school serves the public purpose of higher
education, we can at least raise some poasibilitles for consideration
by the regents.
For example, if law students and faculty members have easy access
to the foundation office, they may learn about and benefit from the
scholarship and research grants it offers. The foundation’s presence
in the law school may help achieve full and efficient use of its
resources by prospective recipients. It will also serve the
convenience of persons in the law school who can contact the
foundation vith a minimal expenditure of time. See
- Attorney General
Opinion MS-200 (1980).
Law school administrators work with the foundation to coordinate
foundation activities with those of the lav school. Their convenience
will be served if the foundation is easily available for
consultations. If the foundation also provides administrative
services, these can be utilized easiest on the law school premises.
Another factor to consider is whether the provision of office
space and other assistance to the foundation enhances the cost
effectiveness of operating the foundation. The regents might consider
the value of the office space, telephone, utilities, equipment, and
staff assistance the law school will provide as compared to equivalent
items purchased on the market. Rental paid for an office would
probably include a landlord’s profit. Since the foundation’s
resources are to be used to benefit the university, savings on
overhead costs should go to the law school. Providing the foundation
with an office might free some resources worth more than the office
from use for overhead so they could be devoted to law school
education.
In addition to serving a public purpose, the provision of office
space and related assistance to the foundation must be subject to
controls, contractual or otherwise. to insure that the public purpose
is met. The Memorandumof Understanding is not a contract, since the
representations made by the foundation either relate to Its past
activities or express generalized intentions as to future help. The
promises appear too vague to be enforceable as a contract, and the
foundation’s compliance with its legal duties under the charter does
not constitute~consideration. -See Teague v. Edwards, 315 S.W.2d 950
(Tex. 1958).
llovever , other controls exist to assure that the provision of
university office space and other benefits to the foundation serves
and will continue to serve a public purpose, whether it is the
convenience of the law school or increasing the value of the
foundation’s contributions to public education. The board of regents
has sufficient rule-making power to establish controls over this
transaction. -See Educ. Code 565.31. In particular, it has authority
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E. 0. Walker - Page 11 (MJ-373)
to control the use of university property. Splawn v. Woodard. w.
The memorandum recognizes this in noting that the university president
and law school dean will control the allocation of space to the
foundation subject to a test of reasonableness. Other office-related
assistance going to the foundation is provided subject to a test of
reasonableness. Memorandum, section 4. Law school administrators can
see that the office space and other items provided actually serve the
law school’s purposes.
With respect to gifts for professorships and scholarships,
section 65.36 of the Education Code provides detailed controls as to
conditions which may be attached to these donations. Moreover, the
convenient location of the foundation may enable law school
administrators to shape foundation activities to some extent toward
fulfilling the current needs of the law school. If the foundation’s
presence on university property ceases to serve a public purpose, it
may be removed at any time’ since it has no lease. The university has
control of its premises and may require the foundation to vacate the
office it uses. Cf. Morris v. Novotny’ 323 S.W.2d 301 (Tex. Civ.
APP. - Austin 195x writ ref. n.r.e.), cert. denied, 361 U.S. 889
(1959).
Additional controls over the allocation of university space to
the foundation are found outside of the university. The state auditor
is required to audit the use of public funds by the university and
report to the Legislative Audit Committee. V.T.C.S. art.
4413a-13(l),(2). Thus, university expenditures on behalf of the
foundation will be subject to examination by the auditor and
legislature.
In addition, the Open Records Act defines ‘governmental body’ to
include the portion of every corporation “which is supported in vhole
or in part by public funds....” V.T.C.S. art. 6252-17a. 52(F). Since
the foundation receives support from the university that is financed
by public funds’ its records relating to the activities supported by
public funds will be subjec,t to public scrutiny. See
- Open Records
Decision No. 228 (1979).
Despite the absence of contractual controls designed to ensure
that the presence of the foundation in the law school will serve a
public purpose, we believe the regents can exercise sufficient control
over this transaction pursuant to statutory authority. Furthermore,
additional limitations on the foundation derive from other statutes as
discussed above. Consequently, the university may comply with its
representation under section four of the memorandum.
SUMMARY
The University. of Texas may provide the Law
School Foundation with office space and other
p. 1257
C. 0. Walker - Page 12 (W-373)
assistance where a public purpose will thereby be
served, The regents have authority to decide in
the first instance whether a public purpose is
served. Sufficient statutory controls exist to
ensure that the public Purpose will be achieved.
Thus, the university may provide the foundation
with the stated benefits vithout violating article
III, section 51 of the constitution.
The university lacks authority to place
foundation ,employees on its payroll and give them
fringe benefits reserved for state employees.
HARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Susan Garrison
Assistant Attorney General
APPROVED:
OPINIONCOMHITTEE
Susan L. Garrison. Chairman
Jon Bible
Jim Noellinger
p. 1258