Untitled Texas Attorney General Opinion ( 1946 )

State Board of Education Opinion No. O-7362 ,hstin, Texas Re: Investment of State FreB:&chool Fpp~_mat)xrnt. Attention: Fund in U. S. bonds. Hon. Ted R. Alexander Bond Investment Adviser Dear Sir: We have received your letter of September 11, 1946, which is quoted, in part, as followsr “Under Article 2669, Revised Civil Statutes of 1925, as amended by Chapter 278, Acts of the Regular Session of the Forty-first Legislature, the State Board of Education is authorized and empowered to invest the Permanent Free School Fund of the State Iin bonds of the United States, ***I. .Articles 2670 through 2675, inclusive also relate to the investment of the Permanen-i School Fund by the State Board of Education. “Offerings of other eligible end desirable securities have declined to such an extent that there is now a cash balance in the Permanent School Fund of over $11,000,000.00 which the Board is desirous of investing in short-term bonds of the United States. In order to purchase United States Government Bonds at this time, however the Board must go into the ‘open market’ and pure h ase from agencies other than the United States Gover- ment . This brings up the following question upon which I have been authorized and directed to re- quest your opinion. 1’1. Is the State Board of Education author- imed and empowered to purchase United States gov- eknment bonds for the Permanent School Fund from agencies other than the United States Government?‘* Section 4 of ,Article,,7, Constitution of Texas, @er which authority the statutes providing for investment of the Permanent Free School Fund were’ enacted, reads in part, as fol- lows: -c. State Board of Education, page 2 (0-7362) u . . . The Comotroller shall invest the proceeds of such sales and oft those heretofore made’as may be directed by the Board of Educa- tiot herein provided for in the bonds of tha Uni, ed w the State of Texas, or counties in said State: or in such other securities and under such restrict1 ns as may be orescribed by m . . .I* (Emphasii, added) Article 2669 of Vernon’s Annotated Civil Statutes reads as follows: “The State Board of Education is authorized and empowered to invest the permanent public free school funds of the State in bonds of the United States, the State of Texas, or any county thereof, and the ltiependent or common school districts, road precincts, drainage, irrigation and levee districts in this State,, and the bonds of incor- porated cities and towns, and obligations and pledges of the University of Texas.” It is seen that the authority for the investment of the fund in bonds of the United States is kuthorized both by the Constitution and by the law enacted in pursuance thereof. It is, therefore necessary that we examine the statutes to de- termine whether i here are “restrict ion.9’ which would prohibit the purchase of such bonds from other than the United States Government it self. ,JLrticle 2670, provides for the examination by the Attorney General of bonds of certain named subdivisionscof:,the State. Article 2671 outlines the conditions under which such bonds may be purahased. Article 2672 provides that where such issuing agencies have received the proceeds derived from the sale of the bonds, they shall thereafter be esto ped from deny- ing the validity of such obligations. Article 2F3 73 grants an option to purchase ‘such bonds to the aboard of Education. It is our understanding that a part of Article 2673 gives rise to the question under aonsideration. That part reads as follows: ,,‘,* If said Board shall refuse to purchase bonds, ol?l;gations or pledges from such county, city, precinct or district or the University of Texas or the parties to whom the same were issued, then in no event shall said Board purchase them from any subse- quent owner or holder of the same.” ,- . State Board of Education, page 3 (0-7362) The query now resolves itself as to whether Article 2673 requires that bonds of the Unit,ed States be purchased di- rectly from the issuing agency (i.e., the Federal Government). Article 2675 provides as follows: ItThe provisions of the six preceding arti- cles (Articles 2669-2674, inclusive) shall ex- tend to any bonds or securities other than thQ bonds of the State or of the United States, in which the public school funds are or may be in- vested, as is or may be authorized or prescribed by law, and also to any bonds or securities pur- chased with any of the permanent funds set apart for the support, maintenance and improvement of any asylum or other institution of this State.” (Parenthetical tiser&on~. and emphasis added) This statute, therefore, expressly excludes bonds of the United States from the provisions of Articles 2669 to 2674, inclusive. Hence, the prohibition. quoted above from Article 2673 is not applicable In any sense to such bonds. The logic of excepting United States government bonds from these restrictions is evident. In the first place, the State of Texas could have no power or authority relating to the issuance of Federal bonds. In the second place if the obliga- tions of the United States did not remain invio 3 ate, could it be said that any other obligations would be effective? The Board of Education had constitutional and statu- tory authority to invest the Permanent Free School Fund in bonds of the United States and the Legislature has placed no restric- tion upon such InvesCment. The school fund has now built up a balance of several millions of dollars. At this time the Only way in which United States government bonds may be purchased IS through non-governmental agencies. Should this fund remai;h;dle and make no earning because of this fact? We think not. Constitution and the laws of Texas do not require that these bonds be purchased from the Government; yet, the Board of Educa- tion is empowered to purchase such bonds. We think that this grant of power necessarily carries with it the authority to make it effective. You are,therefore, advised that it Is the opinion of this department that the State Board of Education in the exercise of its discretion is authorized and empowered to purchase United State Board of Education, page 4 (0-7362) States government bonds from agencies other than the United States Government. Very truly yours ATTORNEYGENERAL OFTEXAS By /s/ George W. Sparks George W. Sparks, Assistant mmovm sm 17, 1946 /s/ Carlos Ashley FIRST ASSISTANTATTORNEY GENERAL APPROVED:OPINIONCOMMITTEE BY: GK, CHAIRMAN BWS:bw:wb