Can an Arkansas school district spend its funds to improve city-owned property (like a baseball field) in exchange for use of that property?

Plain-English summary

Senator Michael Lamoureux sent the AG a proposed "Non-Exclusive Ballfield Improvement and Use Agreement" between the City of Russellville and the Russellville School District. Under the agreement, the district would spend its own funds to improve city-owned baseball and softball facilities in exchange for using those fields for school athletic competitions for a term of years. The senator wanted to know whether the district could constitutionally spend money on property it did not own.

AG Dustin McDaniel declined to give a categorical yes or no. He explained that the propriety of any school-district expenditure turns on whether the school board, exercising its considerable discretion, could rationally conclude the expense was "necessary" to advance the educational interests of district pupils. The Arkansas Supreme Court in Gray v. Mitchell, 373 Ark. 560 (2008), defined "necessary" (and even "absolutely necessary") to mean only "convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools."

Applied to the Russellville ballfield deal, the AG noted that a court might give weight to the district's stated rationale: the fields adjoin the high school, the district avoids buying and developing its own facilities, and proximity cuts travel time. On the other hand, a court might also probe whether the agreement effectively transferred to the district expenses another government should have borne. Either way, only a court could decide. The opinion answered a related concern about Op. No. 2004-118 (school spending on access roads) by clarifying that the earlier "necessary" language in that opinion is consistent with the deferential Gray v. Mitchell standard.

Currency note

This opinion was issued in 2014. 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.

Common questions

Q: Does Arkansas law allow a school district to spend money on property the district does not own?
A: The opinion did not categorically say yes. It said the "absolutely necessary" standard does not foreclose an expenditure that incidentally benefits parties other than the district, as long as the board can rationally conclude the expense is "convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools." The fact pattern matters.

Q: What test would a court apply if someone challenged the ballfield agreement?
A: A court would defer substantially to the school board's judgment. It would strike the expenditure only if it concluded the board acted arbitrarily or capriciously, meaning without "any rational basis." The challenger carries the burden by clear and convincing evidence (Springdale Board of Education v. Bowman, 294 Ark. 66 (1987)).

Q: Did the AG say the Russellville agreement was constitutional?
A: He explicitly did not. He said only a reviewing court could weigh the factual circumstances. He listed factors a court might consider: the proximity of the school to the fields, the savings to the district from not having to acquire and develop its own facilities, and the consideration flowing back to the district under the contract.

Q: What factors would weigh against the agreement?
A: A court might attach significance to any circumstance suggesting the district was effectively absorbing expenses that should have been borne by the city or another governmental entity, or that the consideration flowing to the district was inadequate compared to its outlay.

Q: What is the difference between "necessary" and "absolutely necessary" in the case law?
A: Functionally nothing. The Arkansas Supreme Court in Gray v. Mitchell explained that "absolutely necessary" does not mean "without which there could be no public schools." It means convenient, useful, appropriate, suitable, proper, or conducive to operating the schools. The adverb "absolutely" carries no extra restriction.

Q: Does the Arkansas Code allow a school district to share its facilities with the public?
A: Yes. A.C.A. § 14-54-1307, subject to State Board of Education monitoring, allows a district to devote its facilities to "recreation purposes" benefiting non-students, as long as that use is "secondary" and the facilities are used "primarily" for the regular curriculum.

Background and statutory framework

The opinion sits inside a long line of decisions on what Arkansas school districts can spend money on. The relevant constitutional provisions are Article 14, §§ 1, 2, and 3, plus Amendment 74. Read together they require that school resources be dedicated to maintaining and operating public schools and prohibit diverting taxes levied for schools to other purposes.

The Arkansas Supreme Court has interpreted those provisions through three centerpiece cases. Little River County Bd. of Educ. v. Ashdown Special Sch. Dist., 156 Ark. 549 (1923), said the constitution prohibits applying the common school fund to any expense not "immediately and directly connected with the establishment and maintenance of a common school system." Bd. of Educ. of Lonoke County v. Lonoke County, 181 Ark. 1046 (1930), used the phrase "absolutely necessary." Gray v. Mitchell, 373 Ark. 560 (2008), defused that phrase, holding that the term "absolutely necessary" only means "convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools." Gray also confirmed that school boards have broad discretion to decide what spending qualifies, and that any use of school funds that "results in benefits to school funds or property or aids in the stated purposes" is constitutional.

Statutory authority for school-district contracting and facility decisions comes from A.C.A. § 6-13-620(a)(6)(D) (entering contracts for goods and services necessary to operate the district), (a)(7)(A) (ensuring necessary and sufficient facilities are built or obtained, furnished, and maintained), and (a)(11) (doing other necessary and lawful things to conduct efficient public schools). The Code envisions that the district's facility-related contracting authority extends beyond the four walls of the district's own buildings.

The opinion that prompted Senator Lamoureux's request was Op. No. 2004-118, which addressed school spending on access roads that benefited the school but lay on land the district did not own. That opinion read "necessary" with apparent caution. The 2013-124 opinion clarified that the earlier opinion is consistent with the deferential Gray standard once the case law is read together.

On the practical question of consideration, the AG noted the agreement contemplated district payments in exchange for use of city-owned fields adjacent to the high school. A court evaluating the agreement would test the "sufficiency of the consideration flowing to the district." Where the consideration is plausibly substantial (avoiding the cost of land acquisition and development), the agreement is more likely to survive. Where it is not (such as a one-sided arrangement loaded onto the school district), constitutional doubt grows.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS
THE ATTORNEY GENERAL
DUSTIN McDANIEL
Opinion No. 2013-124
January 29, 2014

The Honorable Michael Lamoureux
State Senator
103 West Parkway, Suite 1B
Russellville, Arkansas 72801

Dear Senator Lamoureux:

I am writing in response to your request for my opinion on a matter relating to a proposed agreement, captioned Non-Exclusive Ballfield Improvement and Use Agreement (the "Agreement"), between the City of Russellville (the "City") and the Russellville School District (the "District"). Pursuant to the Agreement, the City would provide the District the use of certain City-owned baseball/softball facilities in consideration of the District's improving the City-owned properties. Although you have attached the Agreement to your request, I need not elaborately review its terms, noting only that it is drafted as a contract, with the recited consideration flowing from the District consisting primarily of its proposed improvements to the properties and the consideration flowing from the City consisting primarily of its allowing the District access to the facilities for a term of years to conduct athletic competitions. The Agreement declares itself as intended "to expand the scope of" an earlier contract pursuant to which the District conveyed certain property to the City in exchange for the City's constructing a driveway connecting the back of the Russellville High School to the City street system. As I understand it, at issue in your request is only the constitutional propriety of the currently proposed Agreement, which envisions the District funding improvements to the City-owned property in exchange for its access to improved athletic facilities.

With respect to this inquiry, you have offered the following observations: the District believes the Agreement provides a valuable educational benefit to the District and is for a permissible educational purpose because the Russellville High School adjoins the baseball fields and has a road connecting the two; the District is not required to purchase and develop additional property for its baseball/softball programs; and the proximity of the school to the fields allows for more participation and less travel time and expense.

Against this backdrop, you have posed the following question: May the District use its funds to construct improvements to City-owned property under the terms of the proposed Agreement?

RESPONSE

Not being a finder of fact, I am unable categorically to answer this question, which can only be addressed after careful consideration of all the attendant circumstances. I will opine, however, that a school district is not barred as a matter of law from incurring an expense that might incidentally effect an improvement to municipal property. Under the controlling constitutional standard as interpreted by the Arkansas Supreme Court, the pertinent inquiry in reviewing any expenditure of school district funds is whether the school board, in exercising its considerable discretion, lacked any rational basis to conclude that the expense was "necessary" to advance the educational interests of school-district pupils. Somewhat counterintuitively, the court has defined the term "necessary" and, indeed, the alternative coinage "absolutely necessary," which it sometimes uses in its pronouncements on this subject, as meaning only "convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools." The court has further pronounced that an expenditure will pass constitutional muster if it is "immediately and directly connected with the establishment and maintenance of a common school system." Only a reviewing court, based upon its consideration of all the pertinent facts, could determine whether a particular expenditure would comply with this standard.

DISCUSSION

Circumscribing any inquiry regarding a disposition of school district assets is the constitutional mandate that school district resources invariably be devoted to benefiting K-12 district students. In this regard, the Arkansas Constitution directs that "the State shall ever maintain a general, suitable and efficient system of free public schools," that "[no] money or property belonging to the public school fund, or to this State for the benefit of schools or universities, shall ever be used for any other than for the respective purposes to which it belongs," and that taxes levied for maintenance and operation of the schools will be used exclusively for that purpose. Also bearing on any such inquiry are the various statutory directives discussed below, including the mandate restricting a school board's actions to ones "necessary and lawful for the conduct of efficient free public schools in the district."

You have specifically expressed concern about this office's tentative application of these provisions in Op. Att'y Gen. No. 2004-118, in which my immediate predecessor addressed "whether a school district can use its funds to build and/or repair roads which are not on school property, but would provide access to a school in the district." My predecessor opined that "it would be necessary to analyze all the facts surrounding the location, use and necessity of the repairs or construction and the particular funding utilized in order to definitively determine the answer." He further opined that "the answer to your question is generally 'no,' absent facts indicating that the repair or building of the road is so connected to operation of the school that it could be considered necessary for school purposes."

In Gray v. Mitchell, the court directly clarified the scope of the term "necessary" in terms of the constitutional restrictions upon school district expenditures. The court interpreted prior formulations as follows: "It is clear, nonetheless, that, by using the term 'absolutely necessary,' this court did not intend to limit school boards to those expenditures without which there could be no public schools.... Given the list of expenditures that the court noted would be permissible, there can be no doubt that the court intended 'absolutely necessary' to mean that which is convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools. Moreover, this court has said that 'any use of school funds raised from taxation that results in benefits to school funds or property or aids in the stated purposes for which these funds may be expended would not be an unconstitutional diversion.'"

As a guide to the practical application of this standard, the court observed that "exactly which expenditures should be made to benefit a school district is a matter for the School Board to determine." This conclusion is fully consistent with a position repeatedly taken by this office, namely, that school districts have broad discretion in pursuing their constitutional duty to "maintain a general, suitable and efficient system of free public schools."

With respect to the expenditure at issue in your request, I can only echo my predecessor's observation that any determination under the above standard will be "fact-specific," meaning that only a court could provide you an unqualified answer. Purely by way of guidance regarding the test district counsel might apply in assessing the propriety of the proposed expenditure, I will merely note that, in my opinion, the "absolutely necessary" standard set forth above does not categorically foreclose an expenditure that incidentally benefits parties other than the district itself. In my opinion, the expenditures contemplated in the Agreement would be deemed impermissible only if they could not rationally be described as "convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools."

In reviewing the Agreement under this standard, a court might well attach significance to what you have highlighted in your bullet-point list of "permissible educational purposes," namely, that the district would save the costs of facility purchases and development by simply improving and ensuring unfettered access to property conveniently adjacent to the school. A court might conversely attach significance, however, to any circumstance suggesting that the Agreement would trigger district expenditures that in the ordinary course would or should normally have been incurred by another governmental entity in the reasonable exercise of its responsibilities. A reviewing court, in short, would test the sufficiency of the consideration flowing to the district as a result of the Agreement, seeking again to determine whether the district's decision to enter into this contractual arrangement might be deemed "arbitrary" or "capricious" under the standard discussed above.

As should be apparent from the foregoing, any inquiry of this sort would entail a weighing of factual circumstances of the sort that I, not being a finder of fact, am neither authorized nor situated to conduct. I can do no more than set forth the factors I believe a court might consider in conducting its deferential review of a school board's determinations. I am unaware of any applicable case law in which a court has conducted such a review involving circumstances that directly parallel those you have described.

Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve.

DUSTIN McDANIEL
Attorney General
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