Texas Attorney General Opinion: GA-0848 Page: 3 of 5
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Ms. Gail Lowe - Page 3
sell, supervise, manage, or retain" any kind of investment according to the constitutionally mandated
standard of judgment and care. Id. We believe that a court would likely conclude that the authority
to commit PSF funds to pay private attorneys without a legislative appropriation is not reasonably
necessary to accomplish the Board' s constitutional function and duties under article VII, section 5(f).
To the contrary, a court would likely conclude that such use of PSF funds would contradict article
VII, section 5.
Article VII, section 5 specifies and limits the permissible uses of PSF funds, prohibiting
the Legislature from enactingn] a law appropriating any part of the permanent school fund ... to
any... purpose" except as the section provides. Id. 5(c). The section provides for use of the PSF
to make distributions to the available school fund, to guarantee certain bonds, and to provide for the
administration of a bond guarantee program established under the section. Id. 5(a), (d)-(e). Lastly,
section 5(b) provides that the "expenses of managing permanent school fund land and investments
shall be paid by appropriation from the permanent school fund." Id. 5(b).
The very nature of the PSF requires that these constitutional limitations on use apply to assets
that properly belong to the PSF but have not yet been recovered.. The constitution establishes
the PSF as a permanent endowment made up of property set aside for that purpose, including all
investment of properties belonging to the fund. See id. 2, 4, 5(a); TEX. EDUC. CODE ANN.
43.001(a)(4), (5) (West 2006). As this office has determined, "recoverable permanent school fund
lands and other property are part of the corpus of that endowment, and must be treated as such, even
before they are actually recovered." Tex. Att'y Gen. Op. No. DM-316 (1995) at 3.
Consequently, the Board may not contract to pay attorney fees from property or funds that
properly belong to the PSF unless such use is permitted by article VII, section 5. The only use of
PSF funds allowed in article VII, section 5 that conceivably could apply to the payment of attorney
fees is found in section (5)(b), which allows the payment of management expenses from the
PSF, but only by legislative appropriation. See TEX. CONST. art. VII, 5(b); Tex. Att'y Gen. Op.
No. GA-0293 (2005) at 2 (determining that article VII, section 5(b) limits management expenses to
amounts appropriated by the Texas Legislature).3 Consequently, we conclude that the Board is not
authorized to contract for attorney fees payable from amounts due to the PSF without a legislative
appropriation for that purpose.
You also ask whether the Board may enter into a contract for legal services providing for a
contingency fee without following the process in chapter 2254 of the Government Code. Request
Letter, supra note 1, at 3. Assuming such a contract is authorized, it would be subject to chapter
2254, subchapter C of the Government Code, which applies to all contracts by a state governmental
3We do not here determine whether attorney fees may reasonably be said to constitute 'management expenses"
that have been provided for by legislative appropriation, which is a matter for the Board to determine in the first instance,
subject to judicial review. See TEX. CONST. art. VII, 5(b). See also Request Letter, supra note 1, at 3 (suggesting that
attorney fees may be an "indirect cost" rather than a management expense requiring an appropriation under article VII,
section 5(b), citing Tex. Att'y Gen. Op. No. GA-0293 (2005)).(GA-0848)
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Texas. Attorney-General's Office. Texas Attorney General Opinion: GA-0848, text, March 14, 2011; (https://texashistory.unt.edu/ark:/67531/metapth275744/m1/3/: accessed April 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.