Opinion Number

Dear Commissioner Cosper:

You have requested an opinion of this office with respect to funds accumulated pursuant to the Eminent Scholar's Trust Fund. More specifically, you ask the following two questions:

(1) Does the $600,000 from private contributions remain private after the state match of $400,000 is accepted by the institution?

(2) If an institution chooses to transfer the state match of $400,000 to the Foundation for deposit with the $600,000 private contribution, can these two sums be invested separately, i.e., the state match invested according to applicable state laws and regulations, while the $600,000 may be invested in accordance to only the Foundation's investment regulations?

La. R.S. 17:3384, the statute which established the Louisiana Endowment Fund for Eminent Scholars, provides the answers to your questions. The pertinent sections of the statute read as follows:

B.(2) Each university shall establish its own Eminent Scholars Fund for each challenge grant as a depository for private contributions and state matching funds as provided herein. The state matching funds shall be transferred to a university upon notification that the university has received and deposited the matching funds in their own Eminent Scholars Fund. A university shall be deemed to have met the requirements of this Subsection if the private contributions have been made to and deposited with a nonprofit organization of a type described in Sections 501(c)(3), 170, 2055(a) and 2522(a) of the Internal Revenue Code, which organization has been recognized by the management board of a college or university within the state. Private contributions and state matching funds may be pooled with other permanent funds for purposes of achieving management efficiency, diversification, and maximum earnings potential. . .The state matching funds shall be transferred to a university at the time that such funds are specifically appropriated by the legislature for this purpose.

(4) A nonprofit organization meeting the criteria set forth in Paragraph (2) of this Subsection may enter into a contract with a public institution of higher education to act as a depository for Eminent Scholars Funds derived from state matching funds as provided therein. In the event that the organization acts as depository for such funds, said funds shall be invested in accordance with applicable state laws and regulations. (Emphasis added.)

While La. R.S. 17:3384(B)(4) stipulates that funds "shall be invested in accordance with applicable state laws," the funds addressed within this provision are only those "derived from state matching funds." Since this is the only provision within La. R.S. 17:3384 requiring that funds be invested according to applicable state laws and regulations, the investment of private contributions is not regulated by state laws and regulations. Note also the La. R.S. 17:3384(B)(2) specifically encourages that investments be made "for purposes of achieving management efficiency, diversification, and maximum earnings potential."

In consideration of the above, it is the opinion of this office that:

(1) The $600,000 derived from private contributions remain classified as private after the state match of $400,000 is accepted by the institution, and

(2) If an institution chooses to transfer the state match of $400,000 to the Foundation for deposit with the $600,000 private contribution, the state match must be invested in accordance with the applicable state laws and regulations, and the $600,000 may be invested in accordance with the Foundation's investment regulations, as set forth in La. R.S. 17:3384.

If a depositary intends to separately invest the state and private portions, compliance with La. R.S. 17:3384 would require that care be taken so that the two classifications of funds remain distinguishable. I trust that this opinion sufficiently addresses your inquiry. Please contact me if I can be of further assistance.

Yours very truly,

RICHARD P. IEYOUB Attorney General

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