The opinion
AjWJ. 28, 1947
Hon. A. P. Spacek, Chairman
9omittee on School Districts
House of Representatives
Austin, Texas oplnioa Ho. V-168
Dear Sir:
Your request for au opinion by this dapart-
ment upon the above subject matter is, 8s fbllews:
“As Chairman of the Committee on Sohaol
Districts, I am submitting to you House Bill
#66O by Repress,ntative C,. B. Noore f’or your
considerat ion of the follow lng quest Ions :
(1) If this bill is coastltutloaal
as wrltten,
(2) If this bill becomes a law,
would the State Board of Ed-
ucatlonhave authority to ex-
change bonds not ,matured for
the new refunding ~bonds islfiued
by the s,atne lncorporat ion.
The title to Nouae Bill No. 660, 50th Legis-
lature Is “An Act Amending Article 2789 of the, Revised
Civil Statutes af t’he!, State of Texas, as amended by
Chapter, 32, Acts:,uf the Regular Session of the 43rd leg-
islature, and as ‘further amended by Chapter 331, Acts
bf the Regular 8aebion $f the 411th bgislature; and
declaring au amergmoy.
Thla titU s,tates one subject--the amending
of Article 2789 of the Re,vrise.di Civil Statutes as, the
aama has be&n ac+en.&ed+ atid, the references contained
Bon. A. P. Spacek, Page 2, V-168
therein are accurate, and in nowise misleading. It is
suf f ielent e
The amendment contained in the body of the
Bill Is an exact reproduction on Article 2789, as the
same now exists, save oaly the Bill omits the final
words,,of limitation contained in the present law, to-
wit : in case the rate of Interest on the new
bond8 19 noi less than tha rate of interest on the
bondr for which they are exchanged, ”
While the title states an appropriate subject
for any amendment of Artiole 2789 that would be consti-
tutionally valid, there is injected into the body of
House Bill 660 a provision that would render the Act un-
const It ut lonal. We refer to the broad power conferred
by the body of the Bill ia deleting the final words of
limitation as to rate of interest as now contained in
Art lc le 2789.
In the present form of Bouse Bill 660, there-
fore, the Bill is invalid, and If enacted into law would
be void insofar as it authorlees or applies to any re-
funding at a less rate of interest than that carried in
the bonds exchanged. To permit the State Treasurer,
upon the order of the ,State Board of Education, to ex-
change bonds, not matured, held by him for the Perman-
ent School Fund, for the new refunding bonds of the
issuing corporation, carrying a lesser rate of inter-
est, would be to violate Section 4 of Article VII of
the Constitution, which declares:
“The lands herein set apart to the Pub-
lic Free School Fund, shall be sold under
such regulations, at such times, and on such
terms as may be prescribed by law; and the
Legislature shall not have power to grant
any relief to purchasers thereof O The Com-
troller shall invest the proceeds of such
sales, and of those heretofore made, as may
be directed by the Board of Education herein
provided for, in the bonda of the United
States, the State of Texas, or counties in
said State, or in such other securities,
and under such restrictions as may be pre-
scribed by law; and the State,,shall be res-
ponsible for all investments.
This same question arose in connection with
House Bill Eo, 164 of the 48th Legislature, which sought
to amend Art lcle 2789, in part, as follows :
Ron. R . P. Spacek, Page 3, V-l@
New bonds, bear&g the aama
11
. . .
or a less rate of interest, ixay when or-
dered by the gosernZng board thereof be
issued, either as term bonds ofi as serial
bonds 0 * . the wate Treasurer sh613j
when requested by the govrm&inl; be&Ma bf
said districta, amhaag@ baa%a net mtuced
held by him for the Femacient School Fund
for the new refunding bonds ismed by the
same incorporation under the provibions
of this subdivision, provided the interest
rate shall dot be lowered or the term ex-
tended withdiut the f,PasJnt of the $tate
Board of Bdueat ion.
This Be rtment, in SPinion No. O-5213, held
that House Bill 1r 4 of tkw 48th ~$lslature, was cen-
stitutionslly inval,i&, sayiw:
“The abave+quoted se~ction of Article
VII of the CodstitutZon vwts iki the :Comp-
troller, under the aireotion of the Board
of Baucation the power -- jurisdibtion --
to invest the proceeds of the sales of he,r
public free school landa in the bonds there-
in stated, or in such other ser;urities under
such restrictions as oay be Prescribed by
LawD This vesiture of jurlsdiatloa is ex-
clusive, and the power end discretion there-
in conferred may not be exeroiaed in any
other way,
“The provision that such investments in
the securities therein mentioned, ‘under such
restrictions as may be prescribed by law’ nec-
essarily means restrictions prescribed by law
in aid or furtherance of the exercise of the
jurisdiction and powers confarred, and not in
denial or destruction thereof. Thus, the leg-
islature might prescribe under this clause the
relative or at&&xl* uMulbQ,a ef t,ha Btifferrat
clarses of pertnWgib36 iWostMsnt*, t&3 matur-
ities ena rcstes af iixtiswb~ sf such dwwiti13s,
and the like, but it Would hare ~10 pcYtt%rto
substitute its ~lsoseti~~ ror t&at of the fkdup-
troller, under the direction of the Board of
E&cat iaa o
Hon. R. P. Spacek, Page 4, V-168
“the concluding words of the section
above quoted are very significant. ‘The
State shall ba responalble for all Invest -
msnts’ can only maan that when the Board
of Education, acting through the Comptrol-
ler, has invested In securities authorized
therein, in other words, has exercised its
jurisdiction there conferred, the State
shall make good any and all losses to the
Public Free School Fund to the extent of
a guarantor of the aecurlties. This lia-
bility of the State generally Is a constl-
t ut ional one, and the Legislature is power-
less to absolve it therefrom. The sanctity
of our Public Free Sohool Fund is such that
the people through the Constitution have in
this emphatic manner seen Sit to protect it
so far as is humanly or governmentally pos-
s ible s
“When the Board of Education and the
Comptroller have acted in the exercise of
the power conferred upon them, and have made
investments in certain seourltLes, within
the scope of that power, they have exercised
their jurisdiction, and the benefits of such
Investments Instantly become indelibly fixed
in the Public Free School Fund of the State,
to the protection of which i,he State’s finan-
cial resources are pledged.
It follows, from what we have said, that if
House Bill No. 660 should become a law, as written, the
State Board of Education would have no authority to ex-
change bonds unmatured for new refunding bonds issued
by the same issuer, but at a lesser, rate of interest.
Rouse Bill No. 660, 50th Legislature,
as it is written, if the same were enacted
into law, would be in violation of Section
4 of Article VII of the Constitution of Tex-
as insofar as It may authorize the exchange
of bonds owned by the State Board of Educa-
Hon. R. P. Spacek, Page 5, V-168
tloo for refundlrq boada issued by the
sams lmuer, but at a. lesser rate of ia-
terest .
Yours vel’7 truly,
ATTORNEYOXVERJU oFma
Ocle Speer - .
Assistant
OS :wb :mr j