Untitled Texas Attorney General Opinion ( 2003 )

OFFICE gthe ATTORNEY GENERAL
GREG ABBOTT
January 29,2003
Mr. Felipe Alanis Opinion No. GA-00 16
Commissioner of Education
Members of the State Board of Education Re: Whether appropriation of additional funds to
1701 North Congress Avenue the Texas Education Agency for payment of
Austin, Texas 78701-1494 internal costs and fees for external management of
the assets of the permanent school fund is
contingent on the fund producing $150 million in
excess of the Comptroller of Public Accounts’
estimate in the Biennial Revenue Estimate
(RQ-0582-JC)
Dear Commissioner Alanis and Board Members:
On behalf of the State Board of Education, former Chairwoman Grace Shore requested an
opinion from this office regarding the relationship between riders 3 8 and 90 of the 2002-03 biennial
appropriation to the Texas Education Agency. Specifically, she asked whether the appropriation of
additional funds in rider 38 for fees for external management of the assets of the permanent school
fund is contingent, pursuant to rider 90, on the fund producing $150 million in excess of the amount
estimated by the Comptroller of Public Accounts in the Biennial Revenue Estimate.’
To provide a context for her question, we briefly review the constitutional and statutory
provisions with respect to the permanent school fund, the available school fund, the State Board of
Education, and the Texas Education Agency.
Article VII, section 2 of the Texas Constitution creates the “perpetual school fund” consisting
of “[a]11 funds, lands and other property heretofore set apart and appropriated for the support of
public schools . . . and all stuns of money that may come to the State from the sale of any portion of
the same.” TEX. CONST. art. VII, 0 2. Article VII, section 5 describes and governs the “permanent
school fund” and the available school fund. See id. art. VII, 5 5. The permanent school fund is
described as a “perpetual endowment for the public schools of this state” consisting generally of
bonds, dedicated lands, and investment and sale proceeds of those bonds and lands. See id. art. VII,
5 5(a); TEX. EDUC. CODE ANN. 5 43.001(a) (Vernon 1996). The available school fund, which
‘See Letter from the Honorable Grace Shore, Chair, State Board of Education, to the Honorable John Corny-n,
Texas Attorney General (July 26,2002) (on file with Opinion Committee) [hereinafter Request Letter].
An Equal Employment Opportunity Employer Printed on Recycled Paper
Commissioner Alanis and Board Members - Page 2 (GA-0016)
generally consists of the income derived from the securities and land in the permanent school fund
as well as taxes and appropriations made by the legislature for public school purposes, may be used
annually for the support of the public free schools. See TEX. CONST. art. VII, 5 5(a); TEX. EDUC.
CODE ANN. 9 43 -001 (a) (Vernon 1996). Except as provided by article VII, section 5, the legislature
may not appropriate any part of the permanent school fund or the available school fund for any other
purpose. See TEX. CONST. art. VII, 5 5(a). Section 5(c) of article VII permits the legislature to
appropriate part of the available school fund for administration of the permanent school fund. See
id. art. VII, 0 5(c).
The State Board of Education (the “Board”) manages the assets of the permanent school
fund. The Board is a state agency that the constitution requires the legislature to create with “such
duties as may be prescribed by law.” Id. art. VII, 9 8. The Board is authorized to “invest the
permanent school fund within the limits of the authority granted by Section 5, Article VII, Texas
Constitution, and Chapter 43” of the Education Code. TEX. EDUC. CODE ANN. ij 7.102(c)(3 1)
(Vernon Supp. 2003); see also TEX. CONST. art. VII, 5 5(d) (in managing assets of permanent school
fund, Board to acquire and sell investments that person of ordinary prudence would acquire or
retain); TEX. EDUC. CODE ANN. 8 43.003 (Vernon 1996) (types of securities in which Board may
invest permanent school fund). In managing the permanent school fund, the Board is required to
“develop written investment objectives concerning the investment of the . . . mnd[,]” which “may
address desired rates of return, risks involved, investment time frames, and any other relevant
considerations.” TEX. EDUC. CODEANN. 5 43.004(a) (Vernon 1996). And the Board is authorized
to contract with private investment managers to assist the Board in investing the fund. See id. 8
43.005(a).
The legislature has, for the past two bienniums, appropriated to the Texas Education Agency
(the “TEA”) available school funds to manage the state school finance system and increase the value
and return from the permanent school fund. See General Appropriations Act, 77th Leg., R.S., S.B.
1, art. III (m-6); General Appropriations Act, 76th Leg., R.S., H.B. 1, art. III. The Commissioner
of Education (the “Commissioner”) and agency staff comprise the TEA. See TEX. EDUC. CODEANN.
8 7.002 (Vernon 1996). The Commissioner serves as the executive officer of the TEA and the
executive secretary of the Board, see id. 8 7.055 (b)(2) (V emon Supp. 2003), and carries out the
duties imposed by the Board and the legislature, see id. 4 7.055(b)(3). Among other legislatively
imposed duties, the Commissioner must implement and administer the state’s school finance system,
i.e., the Foundation School Program. See id. 59 7,055(b)(35), 42.004 (Vernon 1996). The
Foundation School Program, generally speaking, consists of school district funding components or
“tiers” to provide for a basic educational program; for substantially equal access to funds to provide
an enriched educational program above the basic level; and for educational facilities. See id. 9
42.002(b) (Vernon Supp. 2003). The cost of the Foundation School Program is financed with local
school district taxes, state appropriations, and available school fund distributions. See id. tj 42.25 1.
The current appropriation to the TEA appropriates a sum of money in each year of the
biennium for the management of the Foundation School Program and the permanent school fund,
including amounts that may be expended for external management expenses:
Commissioner Alanis and Board Members - Page 3 (GA-0016)
C.1.2. Strategy: SCHOOL FINANCESYSTEM OPERATIONS
Efficiently manage the Foundation School Program and increase the
principal value of the Permanent School Fund and the annual rate of
deposit to the Available School Fund.
. . . .
Efficiencies:
. . . .
Percent Market Value Expended on External Management Expenses
See General Appropriations Act, 77th Leg., R.S., S.B. 1, art. III (III-6).
Rider 38 to the TEA’ s appropriation appropriates additional amounts to Strategy C. 1.2 for
the 2002-03 biennium for payment of internal costs and external management fees of the permanent
school fund if income from the fund exceeds the Comptroller of Public Account’s (the
“Comptroller”) estimate for the biennium:
Permanent School Fund: External Management Fees. Contingent
on the State Board of Education adopting asset allocation and
investment policies for the Permanent School Fund that produce
income to the Available School Fundfir support of appropriations
above for Strategies A.2.1, FSP - Equalized Operations and C.1.2,
School Finance System Operations, in excess of the amounts
estimated in the Biennial Revenue Estimate prepared by the
Comptroller of Public Accounts for the 2002-03 biennium,*
additional income projected by the Board for the Available School
Fund from Permanent School Fund investments is appropriated to
Strategy C. 1.2, School Finance System Operations, for expenditure
for internal costs and fees for external management of Permanent
School Fund assets.
The additional amounts appropriated for external management costs
may not exceed .5 percent of market value of funds placed with
external managers and may not be transferred to any other strategy
within Goal C, Texas Education Agency Operations, or to Goal D,
Indirect Administration. The amounts appropriated shall be made
available for expenditure on a quarterly basis. Appropriations for
2SeeTEX. EDUC. CODE ANN. 9 43.014 (Vernon Supp. 2003) (d irecting the Comptroller each year to estimate
amount of available school fund receivable and report to Board and, before legislative session, directing Comptroller
to report to legislature estimate of available school fund to be received for following two years and that is subject to
appropriation for public schools).
Commissioner Alanis and Board Members - Page 4 (GA-0016)
external management costs may only be expended if the Board
awards contracts for external management services on an open,
formal request for proposal process which gives consideration to both
performance and price.
See id. art. III (III-14) (emphasis and footnote added).
Finally, rider 90 to the TEA’s appropriation requires the Board to provide to the Comptroller
a “memorandum of commitment” indicating that the Board’s changed permanent school fund
investment strategy will produce an additional $150 million in excess of the Comptroller’s income
estimate for the 2002-03 biennium:
Available School Fund. The State Board of Education shall provide
to the Comptroller ofPublic Accounts a memorandum of commitment
indicating that changes in the Permanent School Fund investment
strategy will result in an additional $150,000,000 in the 2002-03
biennium over the Comptroller’s official estimate of Permanent
School Fund interest, dividend, and other revenue earnings as
reported in the 2002-03 Biennial Revenue Estimate or, if applicable,
in the latest succeeding official revenue estimate issued by the
Comptroller prior to the date of the agreement.
See id. art. III (III-24) (emphasis added).
Former Chairwoman Shore informed us that the Board has adopted a specific investment
asset allocation policy to manage the assets of the permanent school fund and produce adequate
revenues for distribution to the public free schools through the available school fund. See Request
Letter, supra note 1, at 1. “This policy determines both the investment strategies and asset
allocations to external investment managers . . . .” Id. The Board, we understand, has entered into
contracts for the biennium with external investment managers for the investment of the assets
allocated to those managers, relying on the amounts appropriated in rider 38 for payments of such
contracts for the 2002-03 period. However, the TEA staff, which “[i]n providing administrative
services to the [Board] . . . certifies and forwards invoices to the Comptroller for payment” has stated
“that the funds appropriated in Rider 3 8 are unavailable for expenditure” as authorized by the Board
for payment of these external management services. Id. at 4. The TEA staff asserts “that the
additional income goal mentioned in Rider 90 . . . must be met before funds can be expended as
appropriated in Rider 38.” Id. at 1 .3 That goal will not be met because, as we understand it, although
3See also letters attached to Request Letter, supra note 1, from the Honorable Carole Keeton Rylander, Texas
Comptroller of Public Accounts, to the Honorable Grace Shore, Chair, State Board of Education (April 15,2002) (“[Mly
office would not issue warrants-to expend state funds under Rider 38 for additional fees for management of the
Permanent School Fund[ .I”); from the Honorable Carole Keeton Rylander, Texas Comptroller of Public Accounts, to
the Honorable Rodney G. Ellis, Chair, Senate Committee on Finance, and the Honorable Robert A. Junell, Chair, House
Committee on Appropriations (April 12,2002) (“Before Rider 38’s additional fees can be paid, the revenues need to
(continued...)
Commissioner Alanis and Board Members - Page 5 (GA-0016)
projected revenues from the permanent school fund will exceed the Comptroller’s estimate in the
2002-03 Biennial Revenue Estimate, they will not exceed the estimate by $150 million. See id. at
1,4.
Former Chairwoman Shore asked: “Does Rider 90 require that the [permanent school fund]
produce an additional $150,000,000; or does Rider 90 require that the [Board] provide a
memorandum of commitment to the Comptroller of Public Accounts?” Id. at 4. She also asked:
“Is the expenditure of funds appropriated in Rider 38 contingent on the [permanent school fund]
producing the $150,000,000 identified in Rider 90?” Id.
We conclude that rider 90, by its terms, merely requires the Board to provide a memorandum
of commitment. Rules applicable to the construction of statutes also apply to the construction of
items of appropriations and riders.4 Cf: Jessen Assocs. v. Bullock, 531 S.W.2d 593,
599-600 (Tex. 1976); Tex. Att’y Gen. Op. No. M-1207 (1972) at 3. In construing a statute, we
attempt to give effect to the legislature’s intent. SeeMitchell Energy Corp. v. Ashworth, 943 S.W.2d
436, 438 (Tex. 1997). To do that, we construe a statute according to its plain language. See
RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605,607-08 (Tex. 1985). We read words
and phrases in context and construe them according to rules of grammar and common usage. See
TEX. GOV’T CODE ANN. $j3 11 .Ol 1(a) (V emon 1998) (Code Construction Act). Rider 90 requires
the Board to “provide to the Comptroller of Public Accounts a memorandum of commitment
indicating that changes in the Permanent School Fund investment strategy will result in an additional
$150,000,000 in the 2002-03 biennium over the Comptroller’s official estimate.” See General
Appropriations Act, 77th Leg., R.S., S.B. 1, art. III (III-24) (emphasis added). This language plainly
requires the Board to provide a memorandum of commitment. It does not require the permanent
school fund to produce the additional income.
Furthermore, even assuming that rider 90 required the permanent school fund to produce
additional $150 million income in excess of the Comptroller’s estimate, neither that rider nor rider
3 8 makes the rider 38 appropriation contingent on this result.
cover all budgeted amounts, including the $150 million required by Rider 90.“); from the Honorable Rodney Ellis, Chair,
. Senate Committee on Finance, and the Honorable Robert A. Junell, Chair, House Committee on Appropriations, to the
Honorable Bill Ratliff, Texas Lieutenant Governor, the Honorable James E. “Pete” Laney, Speaker of the House, and
to the Honorable Carole Keeton Rylander, Texas Comptroller of Public Accounts (April 11,2002) (“There is no question
it was our intent that the two riders should be read together. The Biennial Revenue Estimate plus the additional $150
million in income, as called for in Rider 90, must be met prior to the agency expending state funds under Rider 38 for
external fund mangers.“) (on file with Opinion Committee).
4An “item of appropriation” sets aside or dedicates funds for a specified purpose. See Jessen Assocs. v. Bullock,
53 1 S.W.2d 593,599 (Tex. 1976). A “rider” may detail, limit, or restrict the use of funds appropriated elsewhere in the
act or may otherwise insure that money is spent for the purpose for which it is appropriated. See Tex. Att’y Gen. Op.
No. V-1254(1951)at 17; see also Strake v. Court ofAppeals, 704 S.W.2d 746,748 (Tex. 1986) (rider to appropriations
act must relate to appropriations of funds; rider dealing with different subject is general law and may not be included in
the appropriations act).
Commissioner Alanis and Board Members - Page 6 (GA-0016)
Rider 38 does not condition, by its terms, the appropriation of excess projected funds on the
permanent school fund producing $150 million over the Comptroller’s estimate. See RepublicBank
Dallas, N.A., 691 S.W.2d at 607-08 (statute to be construed according to its plain language); TEX.
GOV’T CODE ANN. fj 3 11 .Ol l(a) (V emon 1998) (Code Construction Act) (statutory language to be
read in context and construed according to rules of grammar and common usage). Rider 38
specifically appropriates additional income produced from the permanent school fund for external
management fees. This appropriation is contingent only on the Board adopting asset allocation and
investment policies for the permanent school fund that produce income to the available school fund
for support of the Foundation School Program and School Finance System Operations “in excess of
the amounts estimated in the Biennial Revenue Estimate” by the Comptroller. General
Appropriations Act, 77th Leg., R.S., S.B. 1, art. III (III- 14).
Nor does rider 90 restrict, by reference or otherwise, the rider 38 appropriation for external
management fees. Rider 90 does not condition the rider 38 appropriation on the permanent school
fund producing $150 million over the Comptroller’s estimate. See id. art. III (III-24). It makes no
reference to rider 38. See id.
Finally, where the language of a statute is clear, as we believe the language of riders 38 and
90 is, we need not look to extrinsic aids such as legislative history to determine the legislature’s
intent. See Fitzgerald v. Advanced Spine Fixation, 996 S.W.2d 864,865 (Tex. 1999); Fleming Foods
v. Rylander, 6 S.W.3d 278,282 (Tex. 1999); Boykin v. State, 818 S.W.2d 782, 785-86 (Tex. Crim.
App. 1991) (en bane); see also Cent. Counties Ctr. for Mental Health & Mental Retardation Sews.
v. Rodriguez, 45 S.W.3d 707,713 (Tex. App.-Austin 2001, pet. filed) (“Sources of legislative history
in Texas are notoriously incomplete and unreliable. . . . Because the legislature has spoken clearly,
we will look no further than the statute itself.“). Moreover, if+the language of the riders was
ambiguous, justifying the use of legislative history as an extrinsic aid, we would consider only
“actions taken and statements made during legislative consideration.” Lee v. Mitchell, 23 S.W.3d
209, 213 (Tex. App.-Dallas 2000, pet. denied) (citing Quick v. City of Austin, 7 S.W.3d 109, 123
(Tex. 1998) (considering, as legislative history, floor debates, committee hearing, and bill analyses)).
Because letters by legislators that attempt to explain the intent of a bill after it was passed “‘are not
statutory history, and can provide little guidance as to what the legislature collectively intended,“’ In
re Doe, 19 S.W.3d 346, 352 (Tex. 2000), they cannot be meaningfully considered, id. (“‘courts
construing statutory language should give little weight to post-enactment statements by legislators”‘)
(citation omitted); Gen. Chem. Corp. v. De La Lastra, 852 S.W.2d 916, 923 (Tex. 1993) (after bill
is enacted, “the intent of an individual legislator, even a statute’s principal author, is not legislative
history controlling the construction to be given a statute”); Tex. Att’y Gen. Op. No. JC-0567 (2002)
at 7 (“statements proffered by individual legislators after a statute has been enacted do not constitute
‘legislative history,“); see also In re Doe, 19 S.W.3d at 354 (a court “can only apply an interpretation
that comports with the statute’s existing plain language, structure, and legislative history. If the
Legislature, as a body, agrees [that the court misunderstood its] intent, it is the Legislature’s
prerogative to amend the statute. . . . This is precisely how the separation of powers doctrine should
work.“). If the legislature as a body had intended the rider 38 appropriation to be contingent on the
fund producing $150 million in excess of the Comptroller’s estimate, that intent could have easily
been stated in one of the two riders.
Commissioner Alanis and Board Members - Page 7 (GA-0016)
Former Chairwoman Shore next asked : “Can the TEA refuse to follow the directions of the
[Board], toward fulfilling the Board’s constitutional and legal obligations, to facilitate the expenditure
of funds appropriated therefor?” Request Letter, supra note 1, at 6. Given our conclusion that the
appropriation in rider 3 8 is not contingent on the permanent school fund producing $150 million over
the Comptroller’s estimate, we do not address this question.
While her question is very general, the discussion in her letter indicates that her concern is
limited to the TEA staffs assertion that additional appropriations from rider 3 8 are unavailable to pay
external management services contracts. See id. at 1, 4-5. The TEA’s assertion has practical
consequences because the rider 38 funds are appropriated to the TEA. See General Appropriations
Act, 77th Leg., R.S., S.B. 1, art. Ill (III-14). The Commissioner is required by statute to examine and
approve “any account to be paid out of the school funds before the comptroller may issue a warrant.”
TEX. EDUC. CODE ANN. 4 7.055(b)(7) (Vernon Supp. 2003).
The TEA’s position is premised on the legal view that the rider 38 appropriation is contingent
on the permanent school fund producing $150 million over the Comptroller’s estimate. See Request
Letter, supra note 1, at 1.5 Given that the permanent school fund is not projected to produce an excess
$150 million in income, the TEA concludes that there are no authorized appropriations with which
to pay the external management contracts. See TEA Letter, supra note 5, at l-2; see also TEX.
CONST. art. VIII, § 6 (“No money shall be withdrawn from the Treasury but in pursuance of specific
appropriations made by law.“); id. art. VII, 9 5(c) (“The legislature may appropriate part of available
school fund for administration of the permanent school fund . . . .“); Tex. Att’y Gen. Op. No. DM-3 16
(1995) at 2 (article VII, 8 5(c) requires express legislative appropriation); General Appropriations Act,
77th Leg., R-S., S.B. 1, art. IX, 8 6.04(a) (“An agency specified in this Act may not incur an
obligation in excess of the amounts appropriated to it for the respective objects or purposes named.“).
We have concluded, however, that rider 38 is not contingent on the permanent school fund producing
$150 million in excess of the Comptroller’s estimate. The TEA informs us that “[slhould [the Office
of the Attorney General] determine that additional funds are available under Rider 38, we will of
course commit those funds as directed by the Board.” TEA Letter, supra note 5, at 2.
‘See also letter from David Anderson, General Counsel, Texas Education Agency, to the Honorable John
Comyn, Texas Attorney General (Sept. 12,2002) (on file with Opinion Committee) [hereinafter TEA Letter].
Commissioner Alanis and Board Members - Page 8 (GA-0016)
SUMMARY
Appropriation of additional funds to the Texas Education
Agency in the 2002-03 biennium for payment of fees for external
management of the assets of the permanent school fund under rider
38 is not contingent, pursuant to rider 90, on the fund’s producing
$150 million in excess of the amount estimated by the Comptroller of
Public Accounts in the Biennial Revenue Estimate.
Very truly yours,
BARRY R. MCBEE
First Assistant Attorney General
NANCY S. FULLER
Deputy Attorney General - General Counsel
RICK GILPIN
Deputy Chair, Opinion Committee
Mary R. Crouter
Assistant Attorney General, Opinion Committee