**** FOR PRINT ****Abbott: School board can't use funds for contingent fee lawyers

Jessica M. Karmasek Mar. 14, 2011, 11:33am


AUSTIN (Legal Newsline) - The Texas Attorney General's Office, in an opinion requested by the state Board of Education, says state law doesn't allow the board to hire private attorneys to file a lawsuit on its behalf.

Gail Lowe, chairwoman of the state school board, wrote to Attorney General Greg Abbott's office in September asking, among other things, if the board may contract for attorney fees payable from amounts due to the Permanent School Fund without an appropriation to pay those fees.

The Texas Constitution dedicates certain lands to the PSF, which is managed by two entities, the School Land Board and the state school board.

The School Land Board is entrusted with lands dedicated to the PSF pursuant Article VII, Section 4 of the Texas Constitution. As proceeds from the sale of lands are transferred to the state school board, they are invested pursuant to Article VII, Section 5 as "investment assets."

The school board makes a biennial determination of a percentage of the PSF's investment assets to transfer to the Available School Fund for the support of public education. Expenses of managing the PSF are paid "by appropriation" from the PSF itself.

Lowe, in her letter to Abbott's office, said her questions involve the ability of the school board to manage the investment assets of the PSF "by contracting to monitor, investigate, and if necessary to pursue claims for recovery of amounts due to the PSF that may arise in the context of improper conduct by third parties concerning and adversely affecting the value of certain assets held by the PSF."

The school board chairwoman also asks whether the board may agree to a contingent fee contract without completing the process set out in Chapter 2254 of the Government Code.

"In light of the very broad authority over the PSF delegated to the board under Article VII, Section 5 of the Texas Constitution, I believe that the board should be able to engage litigation counsel as it deems necessary to protect the PSF," Lowe wrote.

The Attorney General's Office, in response Monday, told Lowe that Article VII, Section 5 of the state constitution does not authorize the state school board to utilize funds from the PSF to pay attorney fees without an appropriation for that purpose by the state Legislature.

"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)," Abbott wrote. "To the contrary, a court would likely conclude that such use of PSF funds would contradict Article VII, Section 5."

As to the contingency fee issue, Abbott's office said the board must comply with the Government Code.

"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 entity for legal services providing for a contingency fee," Abbott wrote. "A 'state governmental entity' subject to the subchapter is 'the state or a board, commission, department, office, or other agency in the executive branch of state government created under the constitution or a statute of the state.'

"As the board is a board created under the constitution, we conclude that, to the extent that it may enter into a contingency fee contract for legal services, it must comply with Chapter 2254, Subchapter C of the Government Code."

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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