Can a Texas public university contract with a company a regent has a financial stake in?

Plain-English summary

A Texas state senator asked the AG to untangle an apparent contradiction between two statutes about public-university contracting. One, Education Code section 51.923(d), had for years said an institution of higher education is not prohibited from contracting with a business in which a board member has an interest, as long as the interest is not substantial or, if it is, the member discloses it and refrains from voting. The other, Government Code section 2261.252, was added in 2015 by Senate Bill 20 and barred a state agency from contracting to purchase goods or services from a private vendor in which certain officials, including a member of the agency's governing body, or a close family member, hold a financial interest. The new prohibition expressly applied to institutions of higher education acquiring goods or services under their general "best value" purchasing authority.

The AG worked through the usual interpretive steps. Courts try to harmonize statutes that seem to conflict, and the Code Construction Act supplies tie-breaking rules when they cannot be harmonized: the later-enacted statute prevails over an irreconcilable earlier one, but a more specific provision usually prevails over a general one, unless the general provision is the later enactment and the Legislature manifestly intended it to prevail. Because the Education Code authorized some contracts the Government Code would forbid, the AG found the two irreconcilably conflict where they overlap.

The AG concluded the Government Code prohibition wins for the contracts it covers. Even assuming the Education Code provision was the more specific statute, the AG explained that a later general statute controls when the Legislature shows a manifest intent that it apply. Here, in the newer section 2261.252, the Legislature specifically extended the prohibition to an institution of higher education and expressly included members of a governing body, which the AG read as the manifest intent for the new statute to prevail. So for contracts to purchase the specified goods or services, a public university could not contract with a private vendor in which a governing-body member or a covered family member had a prohibited financial interest. The AG added that contracts and transactions not subject to the section 2261.252(b) prohibition could still be authorized under Education Code section 51.923.

Currency note

This opinion was issued in 2016. 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. The Texas Attorney General's official listing flags this opinion as superseded by statute, citing a later addition of subsection (f) to Government Code section 2261.252, so the conflict the AG resolved here was addressed by the Legislature after this opinion issued. Confirm the current text of section 2261.252 and Education Code section 51.923 before relying on the rule described here.

What the opinion meant for those who asked

The state senator and the Legislature (as the opinion described it): The opinion told the requester that the two statutes irreconcilably conflict where they overlap, and that the newer Government Code prohibition, expressly extended to institutions of higher education, controls for the contracts it covers.

Public universities, university systems, and their boards (as the opinion described it): The opinion described the new prohibition as barring the covered universities from buying the specified goods or services from a vendor in which a governing-body member or a close relative had a prohibited financial interest, while leaving Education Code section 51.923 available to authorize contracts the new prohibition did not reach.

Vendors doing business with public universities (as the opinion described it): The opinion explained that a private vendor in which a regent or a close family member of a regent or covered official held a prohibited financial interest could not be a party to the covered purchase contracts after Senate Bill 20.

Common questions

Could a Texas public university contract with a company a regent had a stake in?
For the contracts covered by Government Code section 2261.252(b), no, under this opinion. The AG read Senate Bill 20 to bar a university from buying the specified goods or services from a private vendor in which a governing-body member or a close family member had a prohibited financial interest.

Didn't the Education Code allow those contracts with disclosure and abstention?
Education Code section 51.923(d) had allowed such contracts when the interest was not substantial or was disclosed with the member abstaining. The AG concluded the newer Government Code prohibition prevails where the two conflict.

Why did the newer, more general law win over the specific Education Code provision?
The AG explained that a later-enacted general statute controls over a specific one when the Legislature shows a manifest intent that it apply, and here the Legislature expressly extended the new prohibition to institutions of higher education and their governing-body members.

Did the Education Code provision stop mattering entirely?
No. The opinion said contracts and transactions not subject to the section 2261.252(b) prohibition could still be authorized under Education Code section 51.923.

Is this opinion still the law?
The Attorney General's official listing flags it as superseded by statute, pointing to a later subsection (f) of Government Code section 2261.252. Anyone relying on this should check the current statutes.

Background and statutory framework

In 2015, Senate Bill 20 added subchapter F to chapter 2261 of the Government Code, titled "Ethics, Reporting, and Approval Requirements for Certain Contracts" (Tex. Gov't Code §§ 2261.251-.257). Section 2261.252(b) bars a state agency from contracting to purchase goods or services from a private vendor with whom certain agency employees or officials have a financial interest, including a member of the agency's governing body, the named senior officials, and a family member related to such a person within the second degree by affinity or consanguinity; subsection (c) defines a financial interest as a direct or indirect ownership interest of at least one percent or a reasonably foreseeable financial benefit (Tex. Gov't Code § 2261.252(b)-(c)). The subchapter does not define "state agency," but the Legislature expressly applied it to an institution of higher education acquiring goods or services under certain Education Code authority (Tex. Gov't Code § 2261.251(a); Tex. Educ. Code §§ 51.9335, 73.115; see id. § 61.003; Tex. Gov't Code § 2151.002).

Education Code section 51.923(d) provides that an institution of higher education is not prohibited from contracting with a business entity in which a governing-board member has an interest, if the interest is not substantial or, if substantial, the member discloses it in a meeting under Chapter 551 of the Government Code and refrains from voting, with any such contract requiring approval by an affirmative majority of the members voting; subsection (e) defines a "substantial interest" (Tex. Educ. Code § 51.923(d)-(e)).

When statutes appear contradictory, courts try to harmonize them and give full effect to both, disfavoring repeals by implication (Texas Indus. Energy Consumers v. CenterPoint Energy Hous. Elec., LLC, 324 S.W.3d 95, 107 (Tex. 2010); Acker v. Texas Water Comm'n, 790 S.W.2d 299, 301 (Tex. 1990)). When statutes irreconcilably conflict, the Code Construction Act provides that the latest enactment prevails as the last expression of legislative intent, except that a specific provision prevails over a general one as an exception, unless the general provision is the later enactment and the manifest intent is that it prevail (Tex. Gov't Code §§ 311.025(a), 311.026(b); Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 901 (Tex. 2000); City of Dallas v. Mitchell, 870 S.W.2d 21, 23 (Tex. 1994)). Because section 51.923(d) would authorize some contracts section 2261.252(b) would prohibit, the statutes irreconcilably conflict where they overlap (NXCESS Motor Cars, Inc. v. JP Morgan Chase Bank, N.A., 317 S.W.3d 462, 469 (Tex. App.-Houston [1st Dist.] 2010, pet. denied)). The AG concluded that, in the later-enacted section 2261.252, the Legislature's specific inclusion of institutions of higher education and governing-body members manifested intent that the prohibition prevail for the covered purchase contracts.

Citations

Statutory provisions:

• Tex. Gov't Code §§ 2261.251-.257 (Senate Bill 20 contracting ethics subchapter)
• Tex. Gov't Code § 2261.251(a) (application to institutions of higher education)
• Tex. Gov't Code § 2261.252(b)-(c) (prohibited contracts and financial interest)
• Tex. Gov't Code § 2151.002 (definition of "state agency")
• Tex. Gov't Code §§ 311.025(a), 311.026(b) (Code Construction Act tie-breakers)
• Tex. Educ. Code § 51.923(d)-(e) (board-member interest authorization and "substantial interest")
• Tex. Educ. Code §§ 51.9335, 73.115 (best-value purchasing authority)
• Tex. Educ. Code § 61.003 (definition of institution of higher education)

Cases:

• Texas Indus. Energy Consumers v. CenterPoint Energy Hous. Elec., LLC, 324 S.W.3d 95 (Tex. 2010)
• Acker v. Texas Water Comm'n, 790 S.W.2d 299 (Tex. 1990)
• Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887 (Tex. 2000)
• NXCESS Motor Cars, Inc. v. JP Morgan Chase Bank, N.A., 317 S.W.3d 462 (Tex. App.-Houston [1st Dist.] 2010, pet. denied)
• City of Dallas v. Mitchell, 870 S.W.2d 21 (Tex. 1994)

Texas Attorney General opinions:

• Tex. Att'y Gen. Op. No. GA-0650 (2008)

Bills:

• Senate Bill 20, Act of May 31, 2015, 84th Leg., R.S., ch. 326, 2015 Tex. Gen. Laws 1477

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0093
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2016/kp0093.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

May 27, 2016

The Honorable Jane Nelson Opinion No. KP-0093
Chair, Committee on Finance
Texas State Senate Re: Whether an institution of higher
Post Office Box 12068 education may enter into a contract with a
Austin, Texas 78711 business entity in which an institution's board
member has an interest (RQ-0081-KP)

Dear Senator Nelson:

    You ask whether "an institution of higher education may enter into a contract with a business entity in which an institution's board member has an interest." [1] You explain that during its 2015 session, the Legislature enacted Senate Bill 20 relating to various aspects of state agency contracting. [2] Among the legislative changes in Senate Bill 20 is the addition of subchapter F to chapter 2261 of the Government Code. See TEX. GOV'T CODE §§ 2261.251-.257 (subchapter F, "Ethics, Reporting, and Approval Requirements for Certain Contracts"). Subsection 2261.252(b) provides that a "state agency may not enter into a contract for the purchase of goods or services with a private vendor with whom [certain] agency employees or officials have a financial interest," specifically including "a member of the agency's governing body." Id. § 2261.252(b)(1). While subchapter F does not define "state agency," the Legislature expressly applied the subchapter "to an institution of higher education acquiring goods or services under" certain grants of authority in the Education Code. Id. § 2261.251(a); TEX. EDUC. CODE §§ 51.9335 ("best value" acquisition authority generally applicable to institutions of higher education), 73.115 ("best value" authority of the University of Texas M. D. Anderson Cancer Center). [3]

    An existing provision of the Education Code, however, subsection 51.923(d), states that an "institution of higher education is not prohibited from entering into a contract or other transaction with a business entity in which a member of the governing board of the institution of higher education has an interest" provided the interest is not substantial or the member discloses the interest and refrains from voting on the contract or transaction. TEX. EDUC. CODE § 51.923(d). [4] As you note, "[t]hese provisions appear to contradict one another." Request Letter at 1.

    When two statutes appear contradictory, courts try to harmonize them to avoid conflicts, giving full effect to both if possible. Texas Indus. Energy Consumers v. CenterPoint Energy Hous. Elec., LLC, 324 S.W.3d 95, 107 (Tex. 2010); Acker v. Texas Water Comm'n, 790 S.W.2d 299, 301 (Tex. 1990) (stating that "statutory repeals by implication are not favored"). When statutes irreconcilably conflict, the Code Construction Act provides rules to determine which should prevail. Subsection 311.025(a) of the Code Construction Act provides that if effect cannot be given to two irreconcilable statutes, the statute latest in date of enactment prevails as the last expression of legislative intent. TEX. GOV'T CODE § 311.025(a) (Code Construction Act). But a different rule applies when one provision is general and the other is specific on the same subject, in which case the specific provision "prevails as an exception to the general provision, unless the general provision is the later enactment and the manifest intent is that the general provision prevail." Id. § 311.026(b); Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 901 (Tex. 2000) (recognizing the "traditional statutory construction principle that the more specific statute controls over the more general"). [5]

    We begin by examining the scope of the two statutes to determine the extent to which they may conflict. Section 2261.252 of the Government Code is a prohibition on certain contracts of state agencies:

             (b) A state agency may not enter into a contract for the purchase of goods or services with a private vendor with whom any of the following agency employees or officials have a financial interest:
                 (1) a member of the agency's governing body;
                 (2) the governing official, executive director, general counsel, chief procurement officer, or procurement director of the agency; or
                 (3) a family member related to an employee or official described by Subdivision (1) or (2) within the second degree by affinity or consanguinity.
            (c) A state agency employee or official has a financial interest in a person if the employee or official:
                 (1) owns or controls, directly or indirectly, an ownership interest of at least one percent in the person, including the right to share in profits, proceeds, or capital gains; or
                 (2) could reasonably foresee that a contract with the person could result in a financial benefit to the employee or official.

TEX. GOV'T CODE § 2261.252(b)-(c). Subsection 51.923(d) of the Education Code is a grant of authority, allowing institutions of higher education specifically to contract with an entity in which a member of the board of trustees has an interest in certain circumstances:

            (d) An institution of higher education is not prohibited from entering into a contract or other transaction with a business entity in which a member of the governing board of the institution of higher education has an interest if the interest is not a substantial interest or, if the interest is a substantial interest, the board member discloses that interest in a meeting held in compliance with Chapter 551, Government Code, and refrains from voting on the contract or transaction requiring board approval. Any such contract or transaction requiring board approval must be approved by an affirmative majority of the board members voting on the contract or transaction.

TEX. EDUC. CODE § 51.923(d). [6]

    Because subsection 51.923(d) of the Education Code would authorize some contracts that subsection 2261.252(b) of the Government Code would prohibit, the statutes irreconcilably conflict where they overlap. See NXCESS Motor Cars, Inc. v. JP Morgan Chase Bank, N.A., 317 S.W.3d 462, 469 (Tex. App.-Houston [1st Dist.] 2010, pet. denied) (stating that statutes conflict "[i]f the same factual situation can harvest different results under different statutes" (internal quotation marks omitted)). Thus, we must analyze how to resolve the conflict using the rules in the Code Construction Act.

    Briefs submitted to this office contend that section 51.923 of the Education Code should operate as a specific exception to section 2261.252 of the Government Code. [7] Even if we were to agree that section 51.923 of the Education Code is the more specific statute, this would not render it effective as an exception to section 2261.252 of the Government Code. This is because a general statute will prevail over a specific statute when "the general provision is the later enactment and the manifest intent is that the general provision prevail." TEX. GOV'T CODE § 311.026(b). In section 2261.252, the later-enacted statute, the Legislature specifically made the prohibition applicable to an "institution of higher education," and expressly included members of a governing body within the prohibition. Id. §§ 2261.251(a), .252(b)(1), (3). Thus, the words of specific inclusion manifest intent that the statute prevail with respect to certain contracts for the purchase of the specified goods and services by an institution of higher education. Id. § 2261.251(a). For such contracts, the prohibition in section 2261.252(b) prevails over the authorization in section 51.923 of the Education Code to the extent the statutes conflict. [8] Accordingly, section 2261.252(b) of the Government Code prohibits a contract by an institution of higher education to purchase certain goods or services from a private vendor in which a member of the institution's governing body or a certain family member has a prohibited financial interest.

[1] See Letter from Honorable Jane Nelson, Chair, Senate Comm. on Finance, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Nov. 23, 2015), https://www.texasattorneygeneral.gov/opinion/request-for-opinion-rqs ("Request Letter").

[2] Act of May 31, 2015, 84th Leg., R.S., ch. 326, 2015 Tex. Gen. Laws 1477, 1477-89 (Senate Bill 20).

[3] For purpose of subtitle D of the Government Code ("State Purchasing and General Services"), "state agency" means:
(1) a department, commission, board, office, or other agency in the executive branch of state government created by the state constitution or a state statute;
(2) the supreme court, the court of criminal appeals, a court of appeals, or the Texas Judicial Council; or
(3) a university system or an institution of higher education as defined by Section 61.003, Education Code, except a public junior college.
TEX. GOV'T CODE § 2151.002.

[4] The substance of section 51.923(d) was enacted in 1989, and the section was last amended in 2011. Act of May 22, 1989, 71st Leg., R.S., ch. 647, § 1, 1989 Tex. Gen. Laws 2140, 2140-41 (formerly codified as section 51.921, Education Code), renumbered by Act of March 25, 1991, 72d Leg., R.S., ch. 16, § 19.01(23), 1991 Tex. Gen. Laws 244, 369, and amended by Act of April 25, 1995, 74th Leg., R.S., ch. 76, § 5.95(91), 1995 Tex. Gen. Laws 458, 553; Act of May 27, 2011, 82d Leg., R.S., ch. 1049, § 2.01, 2011 Tex. Gen. Laws 2687, 2690.

[5] While subsection 311.026(b) states that a "special or local provision" prevails over a general provision, opinions of Texas courts and attorney general opinions construe "special or local" to mean "specific." Tex. Att'y Gen. Op. No. GA-0650 (2008) at 4, citing City of Dallas v. Mitchell, 870 S.W.2d 21, 23 (Tex. 1994).

[6] Subsection 51.923(e) defines what constitutes a substantial interest under the statute:
[A] member of a governing board has a substantial interest in a business entity if:
(1) the member owns 10 percent or more of the voting stock or shares of the business entity or owns either 10 percent or more or $15,000 or more of the fair market value of the business entity;
(2) funds received by the member from the business entity exceed 10 percent of the member's gross income for the previous year ....
(3) the member is an officer of the business entity or a member of the governing board of the business entity; or
(4) an individual related to the member in the first degree by consanguinity or affinity, as determined under Chapter 573, Government Code, has an interest in the business entity as described by Subdivision (1), (2), or (3).
TEX. EDUC. CODE § 51.923(e)(1)-(4).

[7] See generally Brief from John Huffaker, Vice Chancellor & Gen. Counsel, Tex. Tech. Univ. Sys. (Jan. 12, 2016); Brief from Daniel H. Sharphorn, Vice Chancellor & Gen. Counsel, the Univ. of Tex. Sys. (Dec. 22, 2015) (briefs on file with the Op. Comm.).

[8] Contracts and transactions not subject to the prohibition in section 2261.252(b) of the Government Code may still be authorized under section 51.923 of the Education Code.

                                  SUMMARY

          Section 2261.252 of the Government Code prohibits a contract by an institution of higher education to purchase certain goods or services from a private vendor in which a member of the institution's governing body or a certain family member has a prohibited financial interest.

                                         Very truly yours,

                                         KEN PAXTON
                                         Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee