Can a Texas state board member receive a grant from a program their own agency administers?

Plain-English summary

Texas has had a common-law rule for about a hundred years: if a public official has a financial interest, direct or indirect, in a contract made by the governmental body he or she serves, that contract is void as against public policy. It does not matter that the official is honest, and it does not matter that the official recuses from the vote. The contract is still void.

In 2015 and 2017 the Legislature overhauled state contracting and added Government Code section 2261.252, which requires state-agency officials to disclose conflicts of interest and bars certain conflicted agency contracts. A 2017 amendment added subsection (e), which says the section "applies only to a contract for the purchase of goods or services solicited through a purchase order if the amount of the purchase order exceeds $25,000." The Texas State Soil and Water Conservation Board runs a program that funds landowners who carry out conservation measures, and "contract" in this chapter is defined broadly enough to include that kind of grant. One of the Board's own governing members stood to receive $15,000 in grant assistance through the program. The Board asked: because subsection (e) limits section 2261.252 to purchase orders over $25,000, did the Legislature intend to free up smaller transactions like this $15,000 grant from the conflict-of-interest rules entirely?

The AG said no. Courts do not lightly read a statute to abolish the common law. They will treat a statute as abrogating the common law only when the statute says so or when the statute and the common law are clearly repugnant to each other. Section 2261.252 says nothing about the common law. And the AG pointed to a telling contrast: when the Legislature wanted to preempt common-law conflict-of-interest rules for local officials, it did so in plain words in Local Government Code section 171.007(a). The absence of any similar language in section 2261.252 signaled that the Legislature did not intend to displace the common law for smaller state-agency transactions. State ethics policy in Government Code section 572.001(a), which bars state officers from holding financial interests in substantial conflict with their duties, reinforced the result. So below the $25,000 threshold, the common-law doctrine still controls, and it would bar the board member from receiving the $15,000 grant.

Currency note

This opinion was issued in 2019. 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.

What the opinion meant for those who asked

The State Soil and Water Conservation Board and similar state boards: At the time of the opinion, the AG read the 2017 amendment as leaving the common-law conflict-of-interest doctrine fully in force for purchase orders of $25,000 or less. The opinion meant the Board could not award a grant to one of its own governing members through a program it administered, even though the amount was under the statute's $25,000 line.

Board and agency members who are also program beneficiaries: The opinion explained that the doctrine voids such a contract even if the interested member recuses, so recusal alone would not cure the conflict.

Landowners and program applicants generally: The opinion did not disturb the program for ordinary applicants. It addressed only the narrow situation where the applicant also sits on the board that sets criteria, decides appeals, and funds the grants.

Common questions

Does the $25,000 threshold in section 2261.252 mean smaller agency deals have no conflict-of-interest rules?
No. The AG concluded that for purchase orders of $25,000 or less, the long-standing common-law conflict-of-interest doctrine still applies. The statutory threshold limits the statute, not the common law.

Can a board member just recuse and then take the grant?
The opinion said the common-law rule voids the contract even when the interested official recuses, so recusal does not fix the problem.

Why does a "grant" count as a conflicted "contract" here?
Chapter 2261 defines "contract" to include a nonacademic grant under which the recipient must perform a specific act or service, and the conservation grants required the landowner to perform conservation measures.

How do we know the Legislature did not mean to wipe out the common law?
The AG noted that the statute never mentions the common law, and that the Legislature used express preemption language for local officials in Local Government Code section 171.007(a). The contrast showed it knew how to preempt when it wanted to.

Background and statutory framework

Texas common law has long barred a governmental body from entering a contract in which one of its officers has a direct or indirect pecuniary interest, a rule traced to Meyers v. Walker (1925) and Knippa v. Stewart Iron Works (1902). The AG's office has applied that doctrine across many opinions, holding such contracts void even with recusal (JC-0484) and noting the doctrine does not reach a relative's interests at common law (JM-424).

In 2015, Senate Bill 20 reformed state contracting and added Government Code section 2261.252, which requires disclosure of conflicts and prohibits certain conflicted agency contracts, partly codifying and partly modifying the common law (for example, subsection (b)(3) imputes relatives' interests to the governing board). In 2017, Senate Bill 533 added subsections (a-1) and (e); subsection (e) confines section 2261.252 to purchase orders exceeding $25,000.

On whether subsection (e) abrogated the common law for smaller purchase orders, the AG applied the rule that "abrogation by implication is disfavored" (Texas Mutual Insurance Co. v. Ruttiger) and that a statute displaces the common law only on a "clear repugnance" (Wasson Interests, Ltd. v. City of Jacksonville) or a clear legislative intent (Energy Service Co. of Bowie v. Superior Snubbing Services; Abutahoun v. Dow Chemical Co.), with intent drawn first from the text (Colorado County v. Staff). Because section 2261.252 says nothing about the common law, and because the Legislature expressly preempted common-law conflict rules for local officials in Local Government Code section 171.007(a) (citing PPG Industries v. JMB/Houston Centers Partners and FM Properties Operating Co. v. City of Austin on the significance of statutory silence), the AG found no repugnance and concluded the common-law doctrine survives below $25,000. State ethics policy under Government Code section 572.001(a) supported that reading. The conservation program itself is governed by Agriculture Code sections 201.301-.311 and 31 Texas Administrative Code section 523.6, and "contract" is defined to include performance-based grants under Government Code section 2261.002(1).

Citations

Statutory, regulatory, and session-law provisions:

• Tex. Gov't Code § 2261.252; § 2261.252(a)-(b); § 2261.252(a-1); § 2261.252(b)(1), (3); § 2261.252(e); § 2261.002(1)
• Tex. Gov't Code § 572.001(a); § 572.051(a), (c); § 572.058
• Tex. Agric. Code §§ 201.301-.311; § 201.307; § 201.310
• Tex. Loc. Gov't Code § 171.007(a)
• 31 Tex. Admin. Code § 523.6(g)(10)
• Act of May 31, 2015, 84th Leg., R.S., ch. 326, 2015 Tex. Gen. Laws 1477, 1477-89 (Senate Bill 20)
• Act of May 28, 2017, 85th Leg., R.S., ch. 556, § 9, 2017 Tex. Gen. Laws 1532, 1535 (Senate Bill 533)

Cases:

• Meyers v. Walker, 276 S.W. 305, 307 (Tex. App.-Eastland 1925, no writ)
• Knippa v. Stewart Iron Works, 66 S.W. 322, 324 (Tex. App.-San Antonio 1902, no writ)
• Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 461 (Tex. 2012)
• Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 437 (Tex. 2016)
• Energy Serv. Co. of Bowie, Inc. v. Superior Snubbing Servs., Inc., 236 S.W.3d 190, 194 (Tex. 2007)
• Colo. Cty. v. Staff, 510 S.W.3d 435, 444 (Tex. 2017)
• PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd., 146 S.W.3d 79, 84 (Tex. 2004)
• FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 885 (Tex. 2000)
• Abutahoun v. Dow Chem. Co., 463 S.W.3d 42, 51 (Tex. 2015)

Attorney General opinions:

• Tex. Att'y Gen. Op. No. JM-310 (1985)
• Tex. Att'y Gen. Op. No. JC-0484 (2002)
• Tex. Att'y Gen. Op. No. GA-0351 (2005)
• Tex. Att'y Gen. Op. No. JM-671 (1987)
• Tex. Att'y Gen. Op. No. JM-424 (1986)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0259
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2019/kp0259.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

June 25, 2019

Mr. Barry Mahler Opinion No. KP-0259
Chairman
Texas State Soil and Water Conservation Board Re: Whether subsection 2261.252(e) of the
1497 Country View Lane Government Code allows a member of the
Temple, Texas 76504-8806 State Soil and Water Conservation Board to
receive funding through an agency program for
land improvement measures (RQ-0264-KP)

Dear Mr. Mahler:

    Your predecessor asked whether Government Code subsection 2261.252(e) abrogates the common-law conflict-of-interest doctrine for state agency purchase orders of $25,000 or less.1 See TEX. GOV'T CODE § 2261.252(e) (providing that section 2261.252, which addresses conflicts of interest for state agency contracts, applies only to purchase orders exceeding $25,000). Specifically, he asked whether subsection 2261.252(e) alters the common law to allow the Texas State Soil and Water Conservation Board ("State Board") to issue a purchase order granting a member of its governing board $15,000 in financial assistance through a conservation program administered by the agency ("Program"). Request Letter at 1-3; see TEX. AGRIC. CODE §§ 201.301-.311.

    For at least the past century, Texas common law has prohibited a governmental body from entering into a contract if an officer of the governmental body had a direct or indirect interest in that contract:

            If a public official directly or indirectly has a pecuniary interest in a contract, no matter how honest he may be, and although he may not be influenced by the interest, such a contract so made is violative of the spirit and letter of our law, and is against public policy.

Meyers v. Walker, 276 S.W. 305, 307 (Tex. App.-Eastland 1925, no writ); see Knippa v. Stewart Iron Works, 66 S.W. 322, 324 (Tex. App.-San Antonio 1902, no writ). The doctrine applies when an official with authority to make or influence the making of a contract is also a beneficiary of that contract. Tex. Att'y Gen. Op. No. JM-310 (1985) at 2. A contract that violates the common-law rule is void even if the interested official recuses himself or herself. Tex. Att'y Gen. Op. No. JC-0484 (2002) at 5, 6. Opinions from this office consistently apply this doctrine when addressing conflict-of-interest questions for public officials. See, e.g., Tex. Att'y Gen. Op. Nos. GA-0351 (2005) at 2 ("Texas courts have held that a member of a governmental body may not have a personal financial interest in a contract entered into by the governmental body. This office has relied on these authorities in addressing questions about contractual conflicts of interest." (citations omitted)), JM-671 (1987) at 2-3 ("The rule announced in Meyers v. Walker has been relied upon in numerous cases to invalidate contracts made by public officials who were pecuniarily interested therein."). Moreover, this office previously concluded that grants awarded by state agencies are subject to the common-law doctrine.2 Tex. Att'y Gen. Op. No. JC-0484 (2002) at 1, 5.

    The Legislature may, however, codify or alter common-law principles, and in 2015, it passed sweeping reforms to state contracting procedures.3 Among many reforms, the Legislature added section 2261.252 to the Government Code. Section 2261.252 generally requires state agency employees or officials to disclose potential conflicts of interest and prohibits certain agency contracts, including a contract for the purchase of goods or services with a private vendor with whom a member of the agency's governing board has a financial interest. TEX. GOV'T CODE § 2261.252(a)-(b). This prohibition against an agency entering into a contract in which a member of its governing board has a financial interest generally codifies common-law conflict-of-interest principles. But section 2261.252 also modifies those principles. For example, subsection (b)(3) expands upon the common law by imputing to the agency's governing board the pecuniary interests of relatives. Compare id. § 2261.252(b)(1), (3) (prohibiting agency from entering contract in which a family member of the agency's governing board has an interest), with Tex. Att'y Gen. Op. No. JM-424 (1986) at 4 ("The common-law doctrine [does] not extend to pecuniary interests of the officer's relatives.").

    Your predecessor specifically asked about the effect of subsection 2261.252(e) on the common law. Request Letter at 1, 3. In 2017, the Legislature amended section 2261.252 to add both subsections (a-1) and (e).4 Subsection (a-1) requires state agency employees and officials to disclose conflicts of interest during both the procurement process and the term of a contract. See TEX. GOV'T CODE § 2261.252(a-1). In contrast, common-law conflict-of-interest principles apply only at the time a state agency enters a contract. Tex. Att'y Gen. Op. No. GA-0351 (2005) at 2 ("Common-law conflict-of-interest rules have their effect at the time a contract is entered into."). Subsection (e) provides that section 2261.252 applies only to purchase orders of goods and services exceeding $25,000:

            This section applies only to a contract5 for the purchase of goods or services solicited through a purchase order if the amount of the purchase order exceeds $25,000.

TEX. GOV'T CODE § 2261.252(e).

    With the addition of subsection (e), your predecessor asked whether-for purchase orders of less than $25,000-the Legislature intended to abrogate the longstanding common-law doctrine. Request Letter at 3. "Abrogation by implication is disfavored." Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 461 (Tex. 2012). As such, courts will construe subsection 2261.252(e) as abrogating the common law "only if there exists a clear repugnance between the two." Wasson Interests, Ltd. v. City of Jacksonville, 489 S.W.3d 427, 437 (Tex. 2016) (quotation marks omitted). Thus, while "statutes can modify common law rules, ... before we construe one to do so, we must look carefully to be sure that was what the Legislature intended." Energy Serv. Co. of Bowie, Inc. v. Superior Snubbing Servs., Inc., 236 S.W.3d 190, 194 (Tex. 2007). We ascertain the Legislature's intent from the plain text of its enactments. Colo. Cty. v. Staff, 510 S.W.3d 435, 444 (Tex. 2017) ("We seek that intent 'first and foremost' in the statutory text, and where text is clear, text is determinative of intent." (footnotes and citations omitted)).

    The text of section 2261.252 itself neither expressly nor impliedly purports to supplant or alter the common law for purchase orders of $25,000 or less. See TEX. GOV'T CODE § 2261.252 (containing no reference to the common law). In contrast, in enacting similar legislation for local public officials under chapter 171 of the Local Government Code, the Legislature expressly stated its intent to abrogate common-law conflict-of-interest rules: "This chapter preempts the common law conflict of interests as applied to local public officials." TEX. LOC. GOV'T CODE § 171.007(a). Chapter 171 demonstrates that when the Legislature intends to preempt common-law conflict-of-interest rules, it knows how to do so. See PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd., 146 S.W.3d 79, 84 (Tex. 2004) (noting that "[a] statute's silence can be significant" and that an analysis begins with the presumption that the Legislature knows how to enact what it intends); FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 885 (Tex. 2000) (relying on principle of statutory construction that the Legislature knows how to enact laws effectuating its intent).

    Moreover, the public policy of the State-consistent with the common-law doctrine-opposes state officers having financial interests in substantial conflict with the proper discharge of their duties:

            It is the policy of this state that a state officer or state employee may not have a direct or indirect interest, including financial and other interests, or engage in a business transaction or professional activity, or incur any obligation of any nature that is in substantial conflict with the proper discharge of the officer's or employee's duties in the public interest.

TEX. GOV'T CODE § 572.001(a); see also id. § 572.051(a), (c) (requiring state agencies to adopt written ethics policy prohibiting state officer from accepting compensation that could reasonably be expected to impair independence of judgment in the performance of official duties). Construing subsection 2261.252(e) to permit state officers to engage in transactions with the institutions they serve contradicts this longstanding public policy. See Tex. Att'y Gen. Op. No. JM-671 (1987) at 8 (concluding disclosure and recusal requirements in Government Code section 572.058 did not change common-law rule prohibiting a state board from entering into contract in which board member has pecuniary interest, in part, because such a construction is contrary to public policy).

    Thus, for purchase orders of $25,000 or less, no repugnance exists between subsection 2261.252(e) and the common law. See Wasson Interests, Ltd., 489 S.W.3d at 437-38. Rather, section 2261.252 applies to purchase orders of more than $25,000, and for lesser amounts, a court would likely conclude that the common-law conflict-of-interest doctrine remains intact. See Abutahoun v. Dow Chem. Co., 463 S.W.3d 42, 51 (Tex. 2015) ("We have explained that statutes can modify or abrogate common law rules, but only when that was what the Legislature clearly intended."). Therefore, subsection 2261.252(e) does not abrogate common-law conflict-of-interest rules, which would prohibit a member of the State Soil and Water Conservation Board from receiving $15,000 in financial assistance through a program administered by the agency.

                                SUMMARY

                  Government Code subsection 2261.252(e) does not abrogate common-law conflict-of-interest rules, which would prohibit a member of the State Soil and Water Conservation Board from receiving $15,000 in financial assistance through a program administered by the agency.

                                        Very truly yours,

                                        KEN PAXTON
                                        Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

RYAN L. BANGERT
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

ASHLEY FRANKLIN
Assistant Attorney General, Opinion Committee

1See Letter from Jose O. Dodier, Jr., Chair, Tex. State Soil and Water Conservation Bd., to Honorable Ken Paxton, Tex. Att'y Gen. at 3 (Jan. 15, 2019), https://www2.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").
2Under the Program, landowners receive grants in exchange for performing certain conservation measures. Request Letter at 2. Although local soil and water conservation districts initially determine a landowner's eligibility for the Program, the State Board establishes the criteria for awarding a grant, determines appeals, and directly funds the grant to the landowner in exchange for the performance of specified conservation measures. TEX. AGRIC. CODE §§ 201.307, .310; 31 TEX. ADMIN. CODE § 523.6(g)(10).
3Act of May 31, 2015, 84th Leg., R.S., ch. 326, 2015 Tex. Gen. Laws 1477, 1477-89 (Senate Bill 20).
4Act of May 28, 2017, 85th Leg., R.S., ch. 556, § 9, 2017 Tex. Gen. Laws 1532, 1535 (Senate Bill 533).
5Chapter 2261 broadly defines "contract" to include a nonacademic grant "under which the recipient of the grant is required to perform a specific act or service." TEX. GOV'T CODE § 2261.002(1).