When a Texas college refunds old bonds under the constitution, does 'prior law' mean just the repealed 1982 provision or any older statute?

Texas AG Opinion JM-1001: What Does "Prior Law" Mean for College Bond Refunding?

Plain-English summary

Texas funds capital projects at many of its colleges and universities through a constitutional appropriation in article VII, section 17. Schools that share in that money can also issue bonds and refund old ones using those funds. The catch is a phrase. The constitution lets a school issue bonds to refund bonds "issued under this section or prior law," and the University of Houston System wanted to know exactly what "prior law" covered. The current article VII, section 17 was added in 1984, replacing an earlier version of the same section that had been repealed in 1982. So did "prior law" mean just that repealed 1982 predecessor, or did it sweep in any older statute a school might have used to issue bonds?

The Attorney General read it narrowly: "prior law" means only the former article VII, section 17, the version repealed in 1982. The reasoning worked through the text and history. Section 17 uses the phrase "prior law" twice, and the Attorney General took it to mean the same thing both times. He also connected it to a sister provision, article VIII, section 1-e, which was amended in 1982 in the same package that repealed the old section 17. Two earlier Attorney General opinions had already decided that "prior law" in article VIII, section 1-e meant the former article VII, section 17. When the legislature drafted the 1984 resolution that created the current section 17, those opinions were on the books, and the drafters reused the same phrase. The sensible conclusion is that they meant it to carry the same meaning it already had in the closely related provision.

There was also a practical reason to read it narrowly. If "prior law" meant any old statute, a school could take bonds it had issued for almost anything and refund them with the constitutionally-allocated money. That would collide with subsection (f) of section 17, which flatly forbids using those funds for student housing, intercollegiate athletics, or auxiliary enterprises. A school cannot do indirectly, by refunding, what it is directly forbidden to do. So a university cannot issue revenue bonds today for an auxiliary-enterprise building under separate statutory authority and then refund them with section 17 money, and it cannot refund older auxiliary-enterprise bonds that way either. Tying "prior law" to the former article VII, section 17, which itself had been amended in 1965 to bar auxiliary-enterprise spending, keeps the whole scheme consistent.

The Attorney General grounded the analysis in ordinary rules of interpretation: when a word in the constitution is unclear, you look to how it is used in other sections of the same document, and courts are not stuck with the literal words if the whole law shows a phrase was meant in a narrower sense. Those rules, developed mostly for reading statutes, apply to constitutional provisions too. The upshot for schools is a clear boundary: constitutional section 17 money can refund bonds issued under the old constitutional section 17, and nothing more.

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Article VII, section 17 of the Texas Constitution (the capital-funding provision for eligible institutions of higher education, sometimes called the Higher Education Fund) has been amended since 1989, including changes to the appropriation amount and the list of eligible institutions, and the Education Code bond provisions cited here have been amended and renumbered. The core interpretive conclusion, that "prior law" in the 1984 provision refers to the former article VII, section 17, is tied to the 1982 repeal and 1984 re-adoption described here. Anyone dealing with a higher-education bond refunding today should consult the current constitutional text, the current Education Code, and bond counsel rather than the provisions as they stood in 1989.

Who this opinion affected (as of 1989)

Institutions of higher education eligible under article VII, section 17: The opinion told them that their constitutionally-allocated funds could refund bonds issued under the former article VII, section 17, but not bonds issued under other, older statutory authority.

University and college finance officers and bond counsel: The opinion drew a clear line around what "prior law" bonds could be refunded with section 17 money, keeping auxiliary-enterprise bonds outside that line.

The Texas Legislature: The opinion confirmed that the phrase it reused in the 1984 amendment carried the narrow meaning earlier opinions had given it.

Common questions

What does "prior law" mean in the Texas higher-education bond-refunding provision?
In this opinion the Attorney General concluded it refers only to the former article VII, section 17 of the Texas Constitution, which was repealed in 1982, not to any older statute.

Can a college refund any of its old bonds with these constitutional funds?
No. It can refund bonds issued under the former article VII, section 17, but not bonds issued under other authority, especially bonds for auxiliary enterprises, which subsection (f) forbids these funds from supporting.

Why did the Attorney General read the phrase so narrowly?
Because the same phrase in the closely related article VIII, section 1-e had already been construed to mean the former article VII, section 17, and the 1984 drafters reused it with those opinions available; a broad reading would also let schools evade subsection (f)'s spending ban by refunding.

Can a school refund auxiliary-enterprise bonds with section 17 money?
No. The opinion concluded a school cannot refund auxiliary-enterprise bonds, whether newly issued under other statutes or previously issued, with funds allocated under the current article VII, section 17.

Background and statutory framework

Article VII, section 17 of the Texas Constitution appropriates money for eligible agencies and institutions of higher education for acquiring land, constructing and equipping permanent improvements, major repair or rehabilitation, and acquiring capital equipment and library materials (subsection (a)). Subsection (e) authorizes a participating governing board to issue bonds and notes for the purposes of refunding bonds or notes issued under "this section or prior law," acquiring land, constructing and equipping improvements, and major repair and rehabilitation, and to pledge up to 50 percent of its allocation to secure them. Subsection (f) bars the appropriated funds from being used to construct, equip, repair, or rehabilitate improvements used for student housing, intercollegiate athletics, or auxiliary enterprises. Subsection (i) provides that the section does not impair any obligation created by bonds and notes issued "in accordance with prior law," which must be paid in full according to their terms.

Section 17 uses "prior law" in both subsection (e) and subsection (i), and the Attorney General concluded it was used in the same sense both times, and in the sense the phrase carries in article VIII, section 1-e of the Texas Constitution. In construing a constitutional word or phrase, resort may be had to other sections of the instrument for the sense in which it is used (State v. Gillette's Estate, 10 S.W.2d 984 (Tex. Comm'n App. 1928, judgmt adopted)). The current article VII, section 17 was added on November 6, 1984, while a previous version had been repealed in 1982. When former article VII, section 17 was repealed in 1982, the electorate amended article VIII, section 1-e (barring state ad valorem taxes and directing that previously collected receipts be distributed among institutions eligible under "prior law" and expended for purposes provided under "prior law"). Shortly after, Attorney General Opinion MW-594 (1982) construed "under prior law" in the new article VIII, section 1-e to mean the repealed article VII, section 17, a conclusion reaffirmed in Attorney General Opinion JM-77 (1983). Because the 1984 resolution (H.J.R. 19, adopted in final form May 25, 1983) was drafted with those opinions available and reused the phrase, the drafters and the electorate intended "prior law" in the new article VII, section 17 to have the same meaning as in article VIII, section 1-e.

Although "prior law" in a different context might be read more broadly, courts are not limited to literal language where the whole law shows a phrase was used in a more limited sense (Moody v. San Saba County Water Control & Improvement Dist. No. 1, 293 S.W. 845 (Tex. Civ. App. - Austin 1927, writ ref'd); State ex rel. Grimes County Taxpayers Ass'n v. Texas Municipal Power Agency, 565 S.W.2d 258 (Tex. Civ. App. - Houston [1st Dist.] 1978, writ dism'd)); rules for construing constitutional provisions are analogous to those for statutory construction (Booth v. Strippleman, 61 Tex. 378 (1884)). Giving "prior law" its widest scope would place no restriction on the type of former bond issue an institution could refund with constitutionally-allocated funds, a result incompatible with subsection (f)'s prohibition on using such funds for auxiliary enterprises. A school could not issue revenue bonds for an auxiliary-enterprise building under existing statutory authority (see, e.g., Educ. Code §§ 55.13, 61.003(14)) and then refund them with section 17 funds, nor refund previously issued auxiliary-enterprise bonds that way (see Educ. Code § 55.41). Former article VII, section 17 was amended in 1965 to forbid using its proceeds for auxiliary enterprises, and article VIII, section 1-e, when amended in 1982, restricted distributions to uses permitted by "prior law," that is, former article VII, section 17 (Attorney General Opinions H-1248 (1978); JM-77 (1983)). The Attorney General concluded that institutions of higher education must look to former article VII, section 17 to determine what bonds or notes issued under "prior law" may be refunded with funds allocated by the current article VII, section 17.

Citations

Statutory authority:

• Tex. Const. art. VII, § 17 (higher-education capital funding; subsections (a), (e), (f), (i)); art. VIII, § 1-e (no state ad valorem taxes; distributions under "prior law")
• Education Code § 55.13 (revenue bonds); § 55.41 (refunding constitutional bonds and notes); § 61.003(14) (definition of "auxiliary enterprise")

Cases:

• State v. Gillette's Estate, 10 S.W.2d 984 (Tex. Comm'n App. 1928, judgmt adopted)
• Moody v. San Saba County Water Control & Improvement Dist. No. 1, 293 S.W. 845 (Tex. Civ. App. - Austin 1927, writ ref'd)
• State ex rel. Grimes County Taxpayers Ass'n v. Texas Municipal Power Agency, 565 S.W.2d 258 (Tex. Civ. App. - Houston [1st Dist.] 1978, writ dism'd)
• Booth v. Strippleman, 61 Tex. 378 (1884)

Related opinions:

• Attorney General Opinions JM-533 (1986), H-1129 (1978), MW-594 (1982), JM-77 (1983), H-1248 (1978), V-848 (1949)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1001
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1001.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

THE ATTORNEY GENERAL OF TEXAS

January 2, 1989

Dr. Wilbur L. Meier, Jr.
Chancellor
University of Houston System
4600 Gulf Freeway
Suite 425
Houston, Texas 77023

Opinion No. JM-1001

Re: Constitutional authority of an institution of higher education to refund bonds issued under "prior law" (RQ-1406)

Dear Dr. Meier:

On behalf of the University of Houston System, you have requested an opinion of this office interpreting a portion of article VII, section 17, of the Texas Constitution. Article VII, section 17, deals with appropriations and funding for agencies and institutions of higher education. Your letter reads in part:

Subsection (e) of article VII, section 17 provides in part that the governing board of any of the institutions of higher education identified in subsection (b) 'may issue bonds and notes for the purposes of refunding bonds or notes issued under this section or prior law . . . .' (Emphasis provided). We request your opinion as to the meaning of the emphasized language. Specifically, does the phrase 'prior law' refer only to the predecessor of article VII, section 17, which was repealed on November 2, 1982, or does it refer to any statute existing prior to the adoption of the present article VII, section 17?

To better orient the discussion that follows, pertinent provisions of article VII, section 17, are set out here:

Sec. 17 (a) In the fiscal year beginning September 1, 1985, and each fiscal year thereafter, there is hereby appropriated out of the first money coming into the state treasury not otherwise appropriated by the constitution $100 million to be used by eligible agencies and institutions of higher education for the purpose of acquiring land either with or without permanent improvements, constructing and equipping buildings or other permanent improvements, major repair or rehabilitation of buildings or other permanent improvements, and acquisition of capital equipment, library books and library materials.

(e) Each governing board authorized to participate in the distribution of money under this section is authorized to expend all money distributed to it for any of the purposes enumerated in Subsection (a). In addition, unless a single bonding agency is designated as hereinafter provided, such governing board may issue bonds and notes for the purposes of refunding bonds or notes issued under this section or prior law, acquiring land either with or without permanent improvements, constructing and equipping buildings or other permanent improvements, and for major repair and rehabilitation of buildings or other permanent improvements, and may pledge up to 50 percent of the money allocated to such governing board pursuant to this section to secure the payment of the principal and interest of such bonds or notes. . . . In lieu of the authority granted to each governing board herein, the legislature by general law may designate a single agency to issue bonds and notes authorized under this section . . . .

(f) The funds appropriated by this section may not be used for the purpose of constructing, equipping, repairing, or rehabilitating buildings or other permanent improvements that are to be used for student housing, intercollegiate athletics, or auxiliary enterprises.

. . . .

(i) This section is self-enacting upon the issuance of the governor's proclamation declaring the adoption of the amendment, and the state comptroller of public accounts and the state treasurer shall do all things necessary to effectuate this section. This section does not impair any obligation created by the issuance of any bonds and notes in accordance with prior law, and all outstanding bonds and notes shall be paid in full, both principal and interest, in accordance with their terms. If the provisions of this section conflict with any other provisions of this constitution, then the provisions of this section shall prevail, notwithstanding all such conflicting provisions. (Emphasis added.)

Section 17 uses the "prior law" phrase twice, once in subsection (e) and again in subsection (i). We think it was used in the same sense both times, and in the sense in which the term is used by article VIII, section 1-e of the Texas Constitution. In construing the meaning of a word or phrase in the constitution, resort may be had to other sections of the instrument for the sense in which it is used. State v. Gillette's Estate, 10 S.W.2d 984 (Tex. Comm'n App. 1928, judgmt adopted); Attorney General Opinion JM-533 (1986).

As it is now written, section 17 of article VII was added to the Texas Constitution November 6, 1984, but, as you note, a previous version of article VII, section 17, was repealed in 1982. The repealed provision also had as its object the distribution of funds to colleges and universities for certain purposes, but under a different formula. See Attorney General Opinion H-1129 (1978).

At the same time that former article VII, section 17, was repealed in 1982 (thus eliminating its formula for the distribution of ad valorem tax money to institutions of higher education), the electorate amended article VIII, section 1-e, of the constitution to read:

Sec. 1-e 1. No State ad valorem taxes shall be levied upon any property within this State.

2. All receipts from previously authorized State ad valorem taxes that are collected on or after the effective date of the 1982 amendment to this section shall be deposited to the credit of the general fund of the county collecting the taxes and may be expended for county purposes. Receipts from taxes collected before that date shall be distributed by the legislature among institutions eligible to receive distributions under prior law. Those receipts and receipts distributed under prior law may be expended for the purposes provided under prior law or for repair and renovation of existing permanent improvements. (Emphasis added.)

Within two months after the repeal of the old article VII, section 17, provision and the adoption of the new article VIII, section 1-e, language, this office construed the phrase "under prior law," as used in the new article VIII section to refer to the repealed article VII, section 17, provision. See Attorney General Opinion MW-594 (1982). That conclusion was reiterated in Attorney General Opinion JM-77 (1983), which found fault with the MW-594 opinion in other respects -- but not in its conclusion that the phrase "under prior law," in article VIII, section 1-e, meant former article VII, section 17:

The new constitutional amendment [article VIII, section 1-e] states with respect to receipts distributed under prior law, that is, article VII, section 17, that they 'may be expended for . . . .' (Emphasis added.)

Attorney General Opinion JM-77 (1983), at 2.

The new version of article VII, section 17, added to the constitution in 1984, was proposed by Texas House Joint Resolution 19 -- a resolution adopted by the legislature in its final form on May 25, 1983. See H.J.R. 19, Acts 1983, 68th Leg., at 6701. Thus, the drafters of the resolutions had available to them Attorney General Opinion MW-594 (1982), which interpreted the phrase "under prior law" as it related to the constitutionally-directed distribution of funds to institutions of higher education pursuant to article VIII, section 1-e. It is our opinion that in re-using the phrase, "prior law," the drafters (and the electorate) intended it to have the same meaning in the new article VII, section 17, provision as it has in the existing, related provision, article VIII, section 1-e.

The phrase, "prior law," if used in a different context, might be readily given a much broader significance, but in arriving at the intent of lawmakers, courts are not limited to the literal language of a provision if it appears from the entire law that a word or phrase was used in a more limited sense. See Moody v. San Saba County Water Control and Improvement District No. 1, 293 S.W. 845 (Tex. Civ. App. - Austin 1927, writ ref'd); see also State ex rel. Grimes County Taxpayers Ass'n v. Texas Municipal Power Agency, 565 S.W.2d 258 (Tex. Civ. App. - Houston [1st Dist.] 1978, writ dism'd).1

Subsection (a) of the current article VII, section 17, is careful to limit the use of the distributed funds to four purposes: (1) "acquiring land either with or without permanent improvements," (2) "constructing and equipping buildings or other permanent improvements," (3) "major repair or rehabilitation of buildings or other permanent improvements," and (4) "acquisition of capital equipment, library books and library materials."

Subsection (e) thereof also limits to four purposes the use of bonds and notes secured by a pledge of money allocated by subsection (a): (1) "refunding bonds or notes issued under this section or prior law," (2) "acquiring land either with or without permanent improvements," (3) "constructing and equipping buildings or other permanent improvements," and (4) "major repair and rehabilitation of buildings or other permanent improvements."

The four purposes for which subsection (e) allows bonds to be used are independent of each other. If the phrase, "prior law," as used in subsection (e), were given its widest scope, there would be no restriction upon the type or purpose of former bond issues that an institution of higher education could refund with new bonds secured by constitutionally-allocated funds. That result would be incompatible with the spirit of subsection (f) of section 17, article VII, which forbids the use of such funds for "constructing, equipping, repairing, or rehabilitating buildings or other permanent improvements that are to be used for student housing, intercollegiate athletics, or auxiliary enterprises."

Subsection (f) does not expressly prevent the use of constitutionally-allocated funds to secure the refunding of bonds or notes issued for the purpose of erecting buildings dedicated to auxiliary enterprises. It is not to be supposed, however, that an institution of higher education could today issue revenue bonds for the construction of an auxiliary enterprise building pursuant to still-existing statutory authority therefor, see e.g. Educ. Code §§ 55.13, 61.003(14), and subsequently refund those bonds with bonds secured by funds allocated pursuant to the current provisions of section 17 of article VII. Neither is it to be supposed, in our opinion, that bonds previously issued for auxiliary enterprise purposes might be refunded in that manner. See Educ. Code § 55.41 (refunding constitutional bonds and notes).

Attorney General Opinion H-1248 (1978) observed that (former) article VII, section 17, was amended in 1965 to forbid the use of proceeds under that section for auxiliary enterprises. See S.J.R. 24, Acts 1965, 59th Leg., at 2197. When article VIII, section 1-e, was amended in 1982, it restricted the use of distributions made to institutions of higher education to those uses permitted by "prior law" i.e., former article VII, section 17. H.J.R. 1, Acts 1982, 67th Leg., 2d C.S., § 1, at 52. That restriction prevented the use of distributed funds for purposes authorized by pre-existing statutes if not also authorized by the former constitutional provision. See Attorney General Opinion JM-77 (1983).

We think it remains the intent and policy of the Constitution of Texas that institutions of higher education look to former article VII, section 17, to discover "prior law" and to determine what bonds or notes issued under "prior law" may be refunded by bonds secured with money allocated to such institutions by article VII, section 17, of the Constitution of Texas. See generally Attorney General Opinion V-848 (1949).

[Footnote 1: The Moody and Grimes County Taxpayers Ass'n cases involved construction of statutes, not the constitution, but rules for the construction of constitutional provisions are analogous to those for statutory construction. Booth v. Strippleman, 61 Tex. 378 (1884).]

SUMMARY

The phrase, "prior law," as used in subsection (e) of section 17 of article VII of the Texas Constitution, as adopted in 1984, refers to the former provision of the constitution, also designated article VII, section 17, that was repealed in 1982.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Bruce Youngblood
Assistant Attorney General