Untitled Texas Attorney General Opinion ( 1992 )

@ffice of toe Rttornep @enera
Mate of ‘Qexas
DAN MORALES July 24, 1992
ATTORNEY
GENERAL
Mr. Lionel R. Meno Opinion No. DM-143
Commissioner of Education
Texas Education Agency Re: Whether the Proprietary School
1701 North Congress Avenue Tuition Protection Fund as created by
Austin, Texas 78701-1494 Texas Education Code section 32.91
manifests sufficient characteristics of a
trust to require interest from the fund to
be credited to the Tuition Protection
Fund rather than the General Revenue
Fund (RQ-309)
Dear Commissioner Meno:
You have asked our opinion about the proper disposition of interest
generated by the Proprietary School Tuition Protection Fund (the “fund”). As a
threshold matter, your question requires us to determine whether the fund is a trust
fund within the state’s general revenue fund. We conclude that the fund is not a
trust fund, and thus that interest on the fund should be credited to the general
revenue fund.
Section 32.91(a) of the Education Code creates the fund, which is “a special
fund in the state treasury.” Under section 32.91(a), the fund is financed with a fee
the State Board of Education (the “board”) collects from each proprietary school>
‘The Texas Proprietary School Act, Education Code chapter 32, defines ‘proprietary school”
as fouowsz
any business enterprise operated for a profit, or on a nonprofit basis, which
maintains a place of business within the State of Texas, or solicits busiacss
within the State of Texas, and which is not specifically exempted by [§ 324
and; [sic]
(A) which offers or maintains a course or courses of instruction or study.
Or
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Mr. Lionel R. Meno - Page 2 (W-143)
See Ekhtc. Code Q32.91(b) (describing how board shall calculate amount of fee); id
Q32.71 (providing for certificate and registration fees); see u&o 19 T.A.C. 0 69.128
(describing how board shall calculate amount of fee). The board assessed fees in an
amount to bring the balance of the fund to S250,OCKI by January 1.1992. Educ, Code
5 32.91(b). After January 1.1992, the board must collect fees during any year in
which the fund balance falls below $200,000. Id Q32.91(c). Significantly, section
32.91(d) states that “[t]he state treasurer shall invest the fund in the same manner as
other state funds.”
Monies from the fund are to be used for various expenditures that accrue
upon the closing of a proprietary school. When a proprietary school closes, the
Central Education Agency (the “agency”)is to attempt to arrange for students of the
closed school to attend another proprietary school. Id Q32.92(a); see id 0 32.21
(defining general powers and duties of the Ce.ntral Education Agency). The fund
assists the agency in placing students of the closed school in two ways. First, the
agency must use the fund to refund tuition and fees to those students whom the
agency cannot place in other proprietary scbook, or who refuse available,
reasonable places in other proprietary schools. Id 0 3292(c), (d); see id P 32.39(b)
(stating mandated refund policy for unused portion of tuition and fees); id
3 32.39(d) (stating required refund policy for students who refuse places in other
proprietary schools); 19 TAC 0 69.127(b)(5) (stating required cancellation and
refund policy). Second, the agency must use the fund to reimburse proprietary
schools that accept students from a closed proprietary school pursuant to section
32.92 for all expenses directly related to completing the training of students who
attend the school because of the closure. Educ. Code 0 32.92(b).
You advise that “[c]urrently, the interest earned by the fund is credited to the
General Revenue Fund in accordance with Section 3.042(a) of Article 4393-1,
V.T.CS., as a normal statutory account.” On behalf of the Texas Education Agency,
(footnotewn6nucd)
(B) stwhichplaaofbuJincsssuchscourscorco~ofipctrtlctionor
studyis availablethroughclassroominstmctiouor by wrread or
both,toapcrsonospersoasforthep~oTtrainineorpreppringthc
personfor a G&lof endeavor in a business, trade, techi& or Mutrial
oceupali~ 04 for avocational or personal improvemen& except as
hereinafter excluded.
E&z. Code 03211(l); see G/SO19 TA.C 069.122. See gvlurrll 19 TA.C ch. 69, sub&. E
(establishing minimum standards for operation of proprietary schools).
p. 744
Mr. Lionel R. Meno - Page 3 (m-143)
you contend that the interest on the fund should be credited to the fund, not to the
general revenue fund. Initially, we note that the legislature has repealed V.T.CS.
article 4393-1, section 3.042 (see Acts 1987,7Oth Leg., ch. 147.0 6(a); Acts 1989,71st
Leg., ch. 4, Q2.07(b)), codifying the text as section 404.071 of the Government Code.
Section 404.071(a) states as follows:
(a) Interest received from investments of money in funds
and accounts in the charge of the treasurer shall be allocated on
a monthly basis as follows:
(1) the pro rata portion of the interest received due to
each constitutional fund shall be credited to that fund; and
(2) the remainder of the interest received, except the
portion required by other statutes to be cre4lite.d on a pro
rata basis to protested payments, shall be credited to the
general revenue fund.
Section 404.071(a) distinguishes between two types of funds: those that are
constitutionally dedicated (see Gov’t Code 0 404.071(a)(1)),2 and those that are
ThisoollJtihltoMlprovisionhasbewcwstmed to require &at interest on cons&tioaaUy dedicated
fundsbespcntoalyfortbcpurposcsforwhifht6efuadawcrccrcatcd;a~ofsuchiatenstto
other purposes would violate the constitution. Luwscm v. Baker, 220 S.W. 26Q,272 (Tu Civ. App.-
Aualin 1920, wit rePd); Attorney General Opinion JM-549 (1986) at 1. ConsqucatJy, iatcre& camed
ona~~tutionathurdmustbecnditedtothathm4~tbecomstihltiolldircdsothuwise.
Attorney General Opinion JM-549 at 1. On the other hand, the interest on state funds dcdbtcd by
statute legally may be severed and placed in the general revenue fund. Id; see GUyIns. cb. v. James,
185 s.w.2d -971 (Tex 1945); &aws Riw Gnuewation & Recklmation Dist. v. hfcamv, 91 s.w.2d
665,674 (Tex. 1936). Section 404071(a) of the Gowmment Code effects such a severance of interest
on statutory funds as a general rule. See Attorney General Opinion JM-549 at 2 (disc&&g V.T.C.S.
article 2543d, immediate predecessor to V.T.C.S. article 4393-1, f 3.042(a), now codifii as Gowm-
ment Code 5 404.071(a)).
p. 745
Mr. Lionel R Meno - Page 4 (m-143)
statutory funds (see id 0 404.071(a)(2)). See Attorney General opinions JM-S49 at
2, JM-539 at 3-4 (1986). The funds about which you are concerned are statutory
funds. Ordinarily, therefore, section 404.071(a) would require the interest on such
funds to be credited to the general revenue fund. See Attorney General Opiions
JM-549 at 2, JM-539 at 4. However, numerous prior opinions have stated that
section 404.071(a)‘s predecessors -which are substantially the same as section
404.071(a) -did not apply to the disposition of interest earned by the deposit of
trust funds. See, eg., id; JM306 at 2, JM300 at 2 (1985); MW-338 (1981) at 2;
MW-82 (1979) at 1; H-1040 (1977) at 1-2. With regard to trust funds, the interest
becomes part of the principal and, consequently, part of the fund that generated the
interest. Attorney General Opinions JM-549 at 2; JM-539 at 4; JM-306 at 2.
To be characterized as trust funds, “the funds in question should reflect,
among other thins (1) that they are administered by a trustee or trusw (2) that
the funds neither are granted to the state in its sovereign capacity nor cokcted for
the general operation of state government, and (3) that they are to be spent and
invested for specific, limited purposes and for the benefit of a specific group of
individuals.” Attorney General Gpinions JM-549 at 3; JM-539 at 4; JM-300 at 2; see
also Attorney General opinion JM-632 (1987) at 2 (&scus&g disposition of interest
on county trust funds). In previous opinions concluding that a trustee or trustees
administered the funds in question, thereby satisfy@ the first prong of the trust
fund test, this office has relied on express statutory provisions requirkg
administration by a trustee, trustees, or any public officer “in trust.” See, eg.,
Attorney General opinions JM-539 at 4; JM306 at l-2; Jhf-300 at 2; MW-82 at 2;
H-1040 at 2. Compme Attorney General opinions JM-632 at 2; JM-549 at 5. Hem,
however, we find no provision in the statute expressly providing that the state
treasurer shah hold these particular funds in trust or act as a trustee. Indeed,
section 32.91(d) of the Education Code specifies that “[t]he state treasurer shah
invest the fund in the same manner as other state funds.” Thus, with regard to the
ftmd, the state treasurer is charged with no duty beyond his or her duty as to other
state funds. Accordingly, we conclude that the fund is not a trust fund and that
therefore, it is subject to section 404.071(a) of the Government Code. Interest
accruing on the fund must be credited to the general revenue fund.
p. 746
Mr. Lionel R. Meno - Page 5 (m-143)
SUMMARY
The Proprietary School Tuition Protection Fund, created
pursuant to section 32.91 of the Education Code, is not a trust
fund. Consequently, interest that accrues on the fund must be
credited to the general revenue fund pursuant to section
404.071(a) of the Government Code.
DAN MORALES
Attorney General of Texas
WILL PRYOR
First Assistant Anomey General
MARYKELLER
Deputy Assistant Attorney General
RENEAHICKS
Special Assistant Attorney General
MADELEINE B. JOHNSON
Chair, Opinion Committee
Prepared by Kymberly K. Oltrogge
Assistant Attorney General
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