Judges: MARK PRYOR, Attorney General
Filed Date: 4/12/2002
Status: Precedential
Modified Date: 7/5/2016
Dr. Leslie Wyatt, President Arkansas State University P.O. Box 10 State University, AR 72467-0010
Dear Dr. Wyatt:
You have presented the following question for my opinion:
Can interest income earned on funds received from the sale of property by a university be used for operating expenses of the university?
You explain that certain property was donated to Arkansas State University. The property was sold and the proceeds from the sale were placed in an endowment. This investment has generated income that the university seeks to utilize for the university's operating expenses. You state that this use of the funds will not invade the corpus of the endowment or violate the terms of the endowment agreement.
RESPONSE
It is my opinion that the answer to your question will depend upon the terms of the endowment agreement. If the purposes of the endowment are stated broadly enough to encompass the general operations of the university, the interest generated by the endowment funds can be used for the operating expenses of the university. However, if the purposes of the endowment are not so stated, the funds cannot be used for the university's operating expenses.
As you note, the provisions of A.C.A. §
The Uniform Management of Institutional Funds Act (codified at A.C.A. §
Section 603 of the Act states:
The governing board may appropriate for expenditure for the uses and purposes for which an endowment fund is established so much of the net appreciation, realized and unrealized, in the fair value of the assets of an endowment fund over the historic dollar value of the fund as is prudent under the standard established by § 28-69-607. This section does not limit the authority of the governing board to expend funds as permitted under other law, the terms of the applicable gift instrument, or the charter of the institution.
A.C.A. § 28-69-603 (emphasis added).
This provision permits expenditures of interest income if such expenditures are made "for the uses and purposes" for which the fund was established. Accordingly, this provision will apply to permit the expenditure you seek only if the endowment agreement in question states its purpose broadly enough to include the general operations of the university. I note that I have not been provided with a copy of the endowment agreement and am not in a position to opine as to whether its stated purpose is broad enough to permit expenditures for the general operating expenses of the university.
It is my opinion that to the limited extent that the endowment agreement permits the expenditures of interest earned on endowment and institutional funds, it supersedes the prohibition stated in A.C.A. §
That statute states:
(a) All moneys received by a board as consideration for the transfer of property, whether in the form of payment of the principal of or interest on the purchase price for property sold, rent for property leased or in any other form, and all investment earnings thereon, are specifically declared to be bank funds.
(b) Such moneys shall not be deposited in the State Treasury but shall be deposited in accounts of the board in one (1) or more banks selected by the board.
(c)(1) Such moneys may be used for any lawful purpose specified by the board without the necessity of legislative authorization or voucher examination and approval under §§
19-4-801 —19-4-806 .(2) However, no part of the moneys shall ever be used to pay current operating expenses of the university other than in connection with the property for which such moneys were received.
(d) The board may invest and reinvest all or part of such moneys. Such investments and expenditures shall be subject to audit as provided by law.
A.C.A. §
The expenditure prohibition stated in Section 613(c)(2), above, directly conflicts with the expenditure authority granted in Section 603 of the Uniform Management of Institutional Funds Act. I base my conclusion that the expenditure authority of Section 603 of the Uniform Management of Institutional Funds Act supersedes the expenditure prohibition of Section 613(c)(2) above (in some limited instances) on two well-established rules of statutory construction. The first holds that if two acts that address the same subject are in conflict, the one that is passed later in time will govern. See Uilkie v. State,
I emphasize that any supersession of A.C.A. §
The funds that you have described clearly fall within the provisions of A.C.A. §
It is my opinion that the statute unambiguously prohibits the type of expenditure that you have proposed (in instances not governed by the Uniform Management of Institutional Funds Act). This conclusion is not "nonsensical," inasmuch as the statute applies not only to funds received from property that universities sell, but also to funds received as consideration for property that universities continue to own, such as leased or rented property. Universities clearly may have ongoing operating expenses in connection with such property. The legislature's obvious intent was to permit the use of the funds in question for operating expenses related to property that the university continues to own, but to prohibit their use for general operating expenses. To adopt the reading of the statute that you have proposed would render meaningless the statute's explicit prohibition of the use of these funds for operating expenses. The Arkansas Supreme Court has consistently rejected statutory interpretations that render the language of statutes meaningless. See, e.g., ATT v. Public Serv. Comm'n.,
To summarize, then, I have concluded that an expenditure of the interest income earned on an endowment created from the proceeds of a sale of property donated to the university can be used for the general operating expenses of the university if the purpose of the endowment as stated in the endowment agreement is worded broadly enough to encompass such general expenditures, as required by A.C.A. § 28-69-603. If, on the other hand, the purpose of the endowment is not stated broadly enough to permit expenditures for general operating expenses, the expenditures are expressly prohibited by the provisions of A.C.A. §
Assistant Attorney General Suzanne Antley prepared the foregoing opinion, which I hereby approve.
Sincerely,
MARK PRYOR Attorney General
MP:SA/cyh
Lawhon Farm Services v. Brown , 335 Ark. 276 ( 1998 )
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Ozark Gas Pipeline Corp. v. Arkansas Public Service ... , 342 Ark. 591 ( 2000 )
Yarbrough v. Witty , 336 Ark. 479 ( 1999 )
Stapleton v. M.D. Limbaugh Construction Co. , 333 Ark. 381 ( 1998 )
Henson v. Fleet Mortgage Co. , 319 Ark. 491 ( 1995 )
CITIZENS TO EST. REFORM PARTY v. Priest , 325 Ark. 257 ( 1996 )
At&T Communications of the Southwest, Inc. v. Arkansas ... , 344 Ark. 188 ( 2001 )
Raley v. Wagner , 346 Ark. 234 ( 2001 )