Can the Arkansas Department of Information Systems force school districts to break vendor contracts, and will the AG opine on whether those contracts are valid?

Plain-English summary

State Senator Eddie Cheatham asked the AG about contracts between Nexus Systems, Inc. and six south Arkansas school districts (Star City, Dermott, Dumas, Hamburg, Junction City, and McGehee). He framed the dispute as whether the contracts were valid and whether the Arkansas Department of Information Systems (DIS) could force the districts to break them.

Attorney General Leslie Rutledge gave a two-part non-answer. On the first two questions, she explained that her advisory authority under Ark. Code Ann. § 25-16-706 is limited to construing Arkansas constitutional and statutory law. Reviewing the validity of a specific contract is the job of local counsel for the school districts, not the AG. On the third question, she corrected the premise: DIS does not administer the federal E-Rate program, which is what likely connects the contracts to a state-level concern. E-Rate is administered by the FCC, with the Universal Service Administrative Company actually processing applications and approving the most cost-effective contractor bid.

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.

What the AG addressed

Questions 1 and 2 (contract validity). The AG declined to answer for jurisdictional reasons. Her opinion authority under Ark. Code Ann. § 25-16-706 covers questions of Arkansas constitutional and statutory law. Construing a specific commercial contract is outside that scope. The opinion noted one statutory exception (the Interlocal Cooperation Act, Ark. Code Ann. §§ 25-20-101 to 25-20-108, which authorizes AG review of certain joint-action agreements between public agencies) but the Nexus Systems contracts did not fall in that category.

She referred the districts to their own local counsel, who could assess the relevant facts and law.

Question 3 (DIS power over the contracts). The AG rewrote the premise. The opinion explained that the federal E-Rate program is a Universal Service Fund subsidy under 47 U.S.C. § 254(h)(1)(B). The FCC administers it. The Universal Service Administrative Company (USAC), appointed by the FCC under 47 C.F.R. § 54.701(a), runs the day-to-day application and approval process. Schools and libraries that participate must follow a highly regulated procurement procedure that includes selection of the most cost-effective contractor bid.

The AG's point was that if Arkansas school districts were being told to terminate or modify Nexus Systems contracts in connection with E-Rate eligibility, the source of that pressure was the federal program rules, not any Arkansas DIS authority over the contracts. DIS does not dictate procurement decisions of school districts and does not administer E-Rate.

Why the AG's scope matters

This opinion is a useful reminder of the boundaries the Arkansas AG draws around her opinion-writing authority. The office cannot:

• Act as a factfinder to investigate disputed facts.
• Construe individual contracts not within a defined statutory review channel.
• Resolve commercial disputes between private vendors and public bodies.

Local counsel for the affected public body is the right venue for those questions. The AG opinion is reserved for questions a public official can answer simply by reading and applying Arkansas constitutional and statutory text.

Common questions

What is E-Rate?
A federal subsidy program created by the 1996 Telecommunications Act that helps qualifying schools and libraries pay for telecommunications and internet services. The FCC oversees it; USAC processes applications. Districts that want subsidies must follow specific procurement rules and select the most cost-effective bid, which is what likely produced friction with existing Nexus Systems contracts.

Can the AG ever review a contract?
Yes, in limited circumstances. The Interlocal Cooperation Act gives the AG a defined review role for certain joint-action agreements between public agencies. Outside that channel, the AG generally leaves contract questions to the parties' own attorneys.

Why did the senator ask if DIS could force districts to break their contracts?
The opinion does not give the full backstory, but it suggests there had been confusion about whether DIS was the source of the pressure. The AG's answer made clear that any termination requirement was coming from the federal E-Rate procurement rules administered by the FCC and USAC, not from a state agency.

Source

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

Original opinion text

Opinion No. 2015-146
February 17, 2016
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
The Honorable Eddie Cheatham
State Senator
2814 Ashley 239
Crossett, AR 71635-8824
Dear Senator Cheatham:
This is in response to your request for my opinion concerning certain contracts entered into by several Arkansas school districts. As background for your questions, you state:

Several school districts in south Arkansas entered into contracts with Nexus Systems, Inc. It is my understanding all the contracts contain the same wording and only the financial agreements are different for each school district.

You have provided a copy of the contract between Star City Public School District and Nexus Systems, Inc., and you have posed the following questions:

1) Is the contract between Nexus Systems, Inc. and Star City Public School District a valid contract?
2) As mentioned above, since all the contracts have the same wording, are the contracts between Nexus Systems, Inc. and the Dermott, Dumas, Hamburg, Junction City and McGehee School Districts valid?
3) Can the Arkansas Department of Information Systems force all school districts to break their existing contract with Nexus?

RESPONSE

I am not authorized to answer your first two questions, since doing so will entail a factual inquiry into the precise terms of the contracts at issue. Nor do I have the resources to conduct such an inquiry. By statute, my advisory function is limited to counseling various public servants and entities on the construction and application of Arkansas constitutional and statutory law. The construction of a contract is thus generally beyond the scope of an Attorney General opinion.

I must therefore suggest that the school districts involved consult local counsel to whom they usually look for advice in order to address the terms of the specific contracts referenced in your first two questions. Local counsel is particularly well-situated to assess the relevant facts and law and render judgments on the validity of contracts entered by school districts.

With respect to your third question, I am unable to respond to this question as worded because of my uncertainty as to its underlying premise. The question seems to suggest the Department of Information Systems (DIS) is forcing the districts to break a contract with an internet service provider. If that is the premise of the question, I must note it is mistaken.

According to my understanding, the concerns surrounding the school district contract(s) in question involve the districts' eligibility for funding under a subsidy program known as the "E-Rate" program. E-Rate is a federal program administered under the direction of the Federal Communications Commission (FCC). The program provides discounts to qualifying schools and libraries on eligible telecommunication or internet services by paying a percentage of the fee for such services. Participation in E-Rate involves a highly regulated application process that requires selection of the most cost-effective contractor's bid and approval by the Universal Service Administrative Company (USAC), the entity appointed by the FCC to administer E-Rate.

In response to your third question, therefore, DIS does not administer the federal program that may be impacting the contracts that are referenced in your questions. Nor does DIS dictate related contracts entered by school districts.

Sincerely,
LESLIE RUTLEDGE
Attorney General