Untitled Texas Attorney General Opinion ( 1947 )

AjWJ. 28, 1947 Hon. A. P. Spacek, Chairman 9omittee on School Districts House of Representatives Austin, Texas oplnioa Ho. V-168 Dear Sir: Your request for au opinion by this dapart- ment upon the above subject matter is, 8s fbllews: “As Chairman of the Committee on Sohaol Districts, I am submitting to you House Bill #66O by Repress,ntative C,. B. Noore f’or your considerat ion of the follow lng quest Ions : (1) If this bill is coastltutloaal as wrltten, (2) If this bill becomes a law, would the State Board of Ed- ucatlonhave authority to ex- change bonds not ,matured for the new refunding ~bonds islfiued by the s,atne lncorporat ion. The title to Nouae Bill No. 660, 50th Legis- lature Is “An Act Amending Article 2789 of the, Revised Civil Statutes af t’he!, State of Texas, as amended by Chapter, 32, Acts:,uf the Regular Session of the 43rd leg- islature, and as ‘further amended by Chapter 331, Acts bf the Regular 8aebion $f the 411th bgislature; and declaring au amergmoy. Thla titU s,tates one subject--the amending of Article 2789 of the Re,vrise.di Civil Statutes as, the aama has be&n ac+en.&ed+ atid, the references contained Bon. A. P. Spacek, Page 2, V-168 therein are accurate, and in nowise misleading. It is suf f ielent e The amendment contained in the body of the Bill Is an exact reproduction on Article 2789, as the same now exists, save oaly the Bill omits the final words,,of limitation contained in the present law, to- wit : in case the rate of Interest on the new bond8 19 noi less than tha rate of interest on the bondr for which they are exchanged, ” While the title states an appropriate subject for any amendment of Artiole 2789 that would be consti- tutionally valid, there is injected into the body of House Bill 660 a provision that would render the Act un- const It ut lonal. We refer to the broad power conferred by the body of the Bill ia deleting the final words of limitation as to rate of interest as now contained in Art lc le 2789. In the present form of Bouse Bill 660, there- fore, the Bill is invalid, and If enacted into law would be void insofar as it authorlees or applies to any re- funding at a less rate of interest than that carried in the bonds exchanged. To permit the State Treasurer, upon the order of the ,State Board of Education, to ex- change bonds, not matured, held by him for the Perman- ent School Fund, for the new refunding bonds of the issuing corporation, carrying a lesser rate of inter- est, would be to violate Section 4 of Article VII of the Constitution, which declares: “The lands herein set apart to the Pub- lic Free School Fund, shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof O The Com- troller shall invest the proceeds of such sales, and of those heretofore made, as may be directed by the Board of Education herein provided for, in the bonda of the United States, the State of Texas, or counties in said State, or in such other securities, and under such restrictions as may be pre- scribed by law; and the State,,shall be res- ponsible for all investments. This same question arose in connection with House Bill Eo, 164 of the 48th Legislature, which sought to amend Art lcle 2789, in part, as follows : Ron. R . P. Spacek, Page 3, V-l@ New bonds, bear&g the aama 11 . . . or a less rate of interest, ixay when or- dered by the gosernZng board thereof be issued, either as term bonds ofi as serial bonds 0 * . the wate Treasurer sh613j when requested by the govrm&inl; be&Ma bf said districta, amhaag@ baa%a net mtuced held by him for the Femacient School Fund for the new refunding bonds ismed by the same incorporation under the provibions of this subdivision, provided the interest rate shall dot be lowered or the term ex- tended withdiut the f,PasJnt of the $tate Board of Bdueat ion. This Be rtment, in SPinion No. O-5213, held that House Bill 1r 4 of tkw 48th ~$lslature, was cen- stitutionslly inval,i&, sayiw: “The abave+quoted se~ction of Article VII of the CodstitutZon vwts iki the :Comp- troller, under the aireotion of the Board of Baucation the power -- jurisdibtion -- to invest the proceeds of the sales of he,r public free school landa in the bonds there- in stated, or in such other ser;urities under such restrictions as oay be Prescribed by LawD This vesiture of jurlsdiatloa is ex- clusive, and the power end discretion there- in conferred may not be exeroiaed in any other way, “The provision that such investments in the securities therein mentioned, ‘under such restrictions as may be prescribed by law’ nec- essarily means restrictions prescribed by law in aid or furtherance of the exercise of the jurisdiction and powers confarred, and not in denial or destruction thereof. Thus, the leg- islature might prescribe under this clause the relative or at&&xl* uMulbQ,a ef t,ha Btifferrat clarses of pertnWgib36 iWostMsnt*, t&3 matur- ities ena rcstes af iixtiswb~ sf such dwwiti13s, and the like, but it Would hare ~10 pcYtt%rto substitute its ~lsoseti`` ror t&at of the fkdup- troller, under the direction of the Board of E&cat iaa o Hon. R. P. Spacek, Page 4, V-168 “the concluding words of the section above quoted are very significant. ‘The State shall ba responalble for all Invest - msnts’ can only maan that when the Board of Education, acting through the Comptrol- ler, has invested In securities authorized therein, in other words, has exercised its jurisdiction there conferred, the State shall make good any and all losses to the Public Free School Fund to the extent of a guarantor of the aecurlties. This lia- bility of the State generally Is a constl- t ut ional one, and the Legislature is power- less to absolve it therefrom. The sanctity of our Public Free Sohool Fund is such that the people through the Constitution have in this emphatic manner seen Sit to protect it so far as is humanly or governmentally pos- s ible s “When the Board of Education and the Comptroller have acted in the exercise of the power conferred upon them, and have made investments in certain seourltLes, within the scope of that power, they have exercised their jurisdiction, and the benefits of such Investments Instantly become indelibly fixed in the Public Free School Fund of the State, to the protection of which i,he State’s finan- cial resources are pledged. It follows, from what we have said, that if House Bill No. 660 should become a law, as written, the State Board of Education would have no authority to ex- change bonds unmatured for new refunding bonds issued by the same issuer, but at a lesser, rate of interest. Rouse Bill No. 660, 50th Legislature, as it is written, if the same were enacted into law, would be in violation of Section 4 of Article VII of the Constitution of Tex- as insofar as It may authorize the exchange of bonds owned by the State Board of Educa- Hon. R. P. Spacek, Page 5, V-168 tloo for refundlrq boada issued by the sams lmuer, but at a. lesser rate of ia- terest . Yours vel’7 truly, ATTORNEYOXVERJU oFma Ocle Speer - . Assistant OS :wb :mr j