Can a Texas county pay a nonprofit to display American flags on holidays?

Plain-English summary

Brandy Lee, the Upshur County auditor, asked the AG a practical question about public spending. A nonprofit ran an ongoing fundraiser: it recruited area businesses to contribute money, and in return placed American flags in front of those businesses on holidays, with the proceeds going to scholarships for local students. The county had taken part in the past and was billed $20 to $27 per flag each holiday. The auditor wanted to know whether contributing to the Rotary Club's flag project was a legal use of public funds.

The AG framed the issue under article III, section 52(a) of the Texas Constitution, which bars political subdivisions from granting public money to a private association or corporation. The catch is that this provision does not forbid every expenditure that happens to benefit a private party. Texas courts have long held that an expenditure made for the direct accomplishment of a legitimate public purpose is fine even if it incidentally benefits a private interest. The Texas Supreme Court turned that idea into a three-part test: the public body must (1) make the transfer to accomplish a public purpose rather than to benefit private parties, (2) keep public control over the funds so the purpose is carried out and the investment protected, and (3) make sure it gets a return benefit.

Applying that test, the AG first noted that counties have only the powers the constitution or statutes give them, then pointed out that both federal and state law provide for displaying the United States flag, especially on holidays and at public institutions. So spending county funds to display the flag in those circumstances serves a public purpose of the county. The county can satisfy the second and third prongs by using an agreement or contract that obligates the recipient to perform a public-benefiting function and that secures a return benefit. The AG stressed that whether a specific expenditure clears the three-part test is a decision for the county to make first, subject to a court reviewing it for abuse of discretion.

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 Government Code flag-display provisions and the case law applying article III, section 52(a) may have developed since this opinion issued, so confirm the current law before relying on the specifics here.

What the opinion meant for those who asked

The Upshur County auditor (as the opinion described it): The opinion answered that a county has express authority to spend funds to display the United States flag on county property, and that participating in the flag project would not violate article III, section 52(a) if the commissioners court determines in good faith that the expenditure serves a public purpose, imposes sufficient controls, and secures a return benefit. The opinion did not bless or condemn the particular $20-to-$27-per-flag arrangement; it set out the test the county itself had to apply.

The county commissioners court (as the opinion described it): The opinion placed the judgment with the commissioners court, explaining that the determination of whether a particular expenditure satisfies the three-part test is for the political subdivision to make in the first instance, subject to judicial review for abuse of discretion. It pointed the court to using a contract or agreement to retain control over the funds and to ensure a return benefit.

The nonprofit running the flag project (as the opinion described it): The opinion described the kind of arrangement that would let a county participate lawfully, one structured so the county can document a public purpose, retain control, and receive a return benefit, rather than a bare donation. It did not pass on whether this specific project's terms met that standard.

Common questions

Can a Texas county legally spend money on an American flag display?
Yes, as the opinion read the law. The AG concluded a county has express authority to spend county funds to display the United States flag on county property, because federal and state law provide for displaying the flag, especially on holidays and at public institutions, so the spending serves a county public purpose.

Doesn't the constitution ban giving public money to a private group?
Article III, section 52(a) does bar gifts of public money to private associations or corporations, but the opinion explained that an expenditure made to directly accomplish a legitimate public purpose is allowed even if it incidentally benefits a private party. The key is meeting the Texas Supreme Court's three-part test.

What are the three things a county has to show?
Under the opinion, the county must determine that (1) the predominant purpose of the expenditure is an authorized public purpose of the county, (2) there are sufficient controls to ensure the public purpose is accomplished and the public investment protected, and (3) the county receives a return benefit. A contract or agreement is the usual way to lock in the second and third.

Who decides whether a specific flag-project payment is legal?
The opinion put that decision on the county commissioners court in the first instance. A court can later review the decision, but only for abuse of discretion, not by substituting its own judgment.

Background and statutory framework

Article III, section 52(a) of the Texas Constitution bars the Legislature from authorizing a county to grant public money or a thing of value to any individual, association, or corporation (Tex. Const. art. III, § 52(a)). Texas courts have explained that this does not invalidate an expenditure that incidentally benefits a private interest if it is made for the direct accomplishment of a legitimate public purpose (Brazos River Auth. v. Carr, 405 S.W.2d 689, 693-94 (Tex. 1966)). The Texas Supreme Court articulated a three-part test: the entity making a transfer must ensure the transfer accomplishes a public purpose rather than benefiting private parties, retain public control over the funds, and ensure it receives a return benefit (Tex. Mun. League Intergov'tl. Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002)).

Counties may exercise only the powers specifically conferred on them by statute or the constitution (Guynes v. Galveston Cty., 861 S.W.2d 861, 863 (Tex. 1993)). Federal and state law provide for the display of the United States flag on all days, especially specified state and federal holidays, and on or near the main administration building of every public institution (4 U.S.C. § 6(d), (e); Tex. Gov't Code §§ 3100.051(1), .052(b)(2)). A county may retain public control over funds by entering an agreement or contract that obligates the recipient to perform a function benefiting the public and that secures a return benefit (Tex. Att'y Gen. Op. No. GA-0078 (2003) at 4-5). The determination of whether a particular expenditure satisfies the test is for the political subdivision in the first instance, subject to judicial review for abuse of discretion (Tex. Att'y Gen. Op. Nos. KP-0007 (2015) at 2, GA-0843 (2011) at 2; Comm'rs Ct. of Titus Cty. v. Agan, 940 S.W.2d 77, 80 (Tex. 1997)).

Citations

Constitutional and statutory provisions:

• Tex. Const. art. III, § 52(a) (limits on grants of public money)
• 4 U.S.C. § 6(d), (e) (display of the United States flag)
• Tex. Gov't Code §§ 3100.051(1), .052(b)(2) (display of the state flag)

Cases:

• Brazos River Auth. v. Carr, 405 S.W.2d 689 (Tex. 1966)
• Tex. Mun. League Intergov'tl. Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377 (Tex. 2002)
• Guynes v. Galveston Cty., 861 S.W.2d 861 (Tex. 1993)
• Comm'rs Ct. of Titus Cty. v. Agan, 940 S.W.2d 77 (Tex. 1997)

Texas Attorney General opinions:

• Tex. Att'y Gen. Op. No. GA-0078 (2003)
• Tex. Att'y Gen. Op. No. GA-0843 (2011)
• Tex. Att'y Gen. Op. No. KP-0007 (2015)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0104
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2016/kp0104.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

July 13, 2016

Ms. Brandy Lee Opinion No. KP-0104
Upshur County Auditor
Post Office Box 730 Re: Whether a county may participate in a
Gilmer, Texas 75644 nonprofit organization's flag project
(RQ-0093-KP)

Dear Ms. Lee:

    You explain that a nonprofit organization "conducts an ongoing fundraiser by recruiting area businesses to contribute funds, and in return, American flags are placed in front of their businesses on holidays." [1] You tell us that the project raises funds for "scholarships for area students." Request Letter at 1. You further explain that Upshur County has participated in this project in the past and that the county "is billed $20-$27 per flag each holiday." Id. You question "whether it is a legal use of public funds to contribute to the Rotary Club's Flag Project." Id.

    Whether a county may contribute to a nonprofit organization in exchange for the display of flags implicates article III, section 52(a) of the Texas Constitution. Article III, section 52(a) precludes political subdivisions from using public funds for private purposes, providing:

            Except as otherwise provided by this section, the Legislature shall
            have no power to authorize any county ... to lend its credit or to
            grant public money or thing of value in aid of, or to any individual,
            association or corporation whatsoever ....

TEX. CONST. art. III, § 52(a). Texas courts have explained that this provision does not invalidate an expenditure which incidentally benefits a private interest if it is made for the direct accomplishment of a legitimate public purpose. See Brazos River Auth. v. Carr, 405 S.W.2d 689, 693-94 (Tex. 1966). The Texas Supreme Court has articulated a three-part test to determine whether a monetary transfer satisfies the limitations of article III, section 52(a). Tex. Mun. League Intergov'tl. Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377, 384 (Tex. 2002). The entity making the transfer must (1) ensure that the transfer is to "accomplish a public purpose, not to benefit private parties; (2) retain public control over the funds to ensure that the public purpose is accomplished and to protect the public's investment; and (3) ensure that the political subdivision receives a return benefit." Id.

    With regard to the first prong of this test, counties in Texas are limited to exercising those powers that are specifically conferred on them by statute or the constitution. Guynes v. Galveston Cty., 861 S.W.2d 861, 863 (Tex. 1993). Federal and state laws provide for the display of the United States flag "on all days, especially" specific state and federal holidays and also provide for the display "on or near the main administration building of every public institution." 4 U.S.C. § 6(d), (e); TEX. GOV'T CODE §§ 3100.051(1), .052(b)(2) (authorizing the state flag to be displayed on "each state or national holiday" and "in the same circumstances that the flag of the United States may be displayed"). Thus, the use of county funds to display a United States flag in these circumstances serves a public purpose of a county. With regard to the second prong of the test, a county may retain public control over the funds by entering into an agreement or contract that imposes upon a recipient of public funds an obligation to perform a function benefitting the public. See Tex. Att'y Gen. Op. No. GA-0078 (2003) at 4-5. And with regard to the third prong, any such agreement or contract could ensure that the county receives a return benefit. Id.

    The determination of whether a particular expenditure satisfies the three-part test is for the political subdivision to make in the first instance, subject to judicial review for an abuse of discretion. Tex. Att'y Gen. Op. Nos. KP-0007 (2015) at 2, GA-0843 (2011) at 2; see also Comm'rs Ct. of Titus Cty. v. Agan, 940 S.W.2d 77, 80 (Tex. 1997) (recognizing a district court's supervisory control over a commissioners court that abuses its discretion). Thus, to determine if the expenditure is constitutional under article III, section 52(a), the county must consider whether (1) the predominant purpose of the expenditure is to accomplish an authorized public purpose of the county; (2) there are sufficient controls to ensure the public purpose is accomplished and the public investment is protected; and (3) the county receives a return benefit. See Tex. Mun. League, 74 S.W.3d at 384.

                                  SUMMARY

                  A county has express authority to expend county funds for
          the display of the United States flag on county property.

                  In expending public funds on an organization's flag project,
          a county commissioners court will avoid violating article III, section
          52(a) of the Texas Constitution if it determines in good faith that the
          expenditure serves a public purpose, it places sufficient controls on
          the transaction to ensure that the public purpose is carried out, and
          it ensures that it receives a return benefit.

                                         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