Can a Texas county give money to the Boys and Girls Club or another nonprofit?

Plain-English summary

A county auditor asked the AG whether Bandera County could give financial assistance to the local Boys and Girls Clubs without running afoul of article III, section 52 of the Texas Constitution, which generally bars a county from granting public money to an individual, association, or corporation. The auditor also asked whether the county had statutory authority to provide the funding.

The AG explained that the constitutional provision exists to prevent gratuitous grants of public funds, but that spending public money for a legitimate public purpose, to obtain a clear public benefit in return, is not an unconstitutional grant. An expenditure that directly accomplishes a legitimate public purpose stays constitutional even if it incidentally benefits a private interest. The Texas Supreme Court's three-part test governs a transfer of public funds to a private entity: the county must ensure the transfer accomplishes a public purpose rather than benefiting private parties, retain public control over the funds to ensure the purpose is met and protect the public's investment, and ensure the county receives a return benefit.

On statutory authority, the AG pointed to Family Code section 264.006, which empowers a commissioners court to provide for services to and support of children in need of protection and care. A prior opinion had concluded that section 264.006 authorized a county to fund Big Brothers and Sisters to the extent that organization served children from single-parent families in the county. The Boys and Girls Clubs of Bandera County described services including after-school homework help and supervision for grade-school children. The AG noted that, under particular facts, after-school care for children from low-income families could be a statutorily authorized service for children in need of protection and care. Because the AG cannot find facts, it could not determine whether the organization actually provides those services, but it concluded that, to the extent the clubs do, section 264.006 could authorize Bandera County to fund them in furtherance of a county public purpose, as long as the constitutional requirements are met.

The AG also walked through the control and return-benefit prongs. A contract spelling out what the receiving entity must do in exchange for the funds may supply sufficient public control. The return benefit need not be monetary; it can be the accomplishment of the county's public purpose. And the AG emphasized that whether a particular expenditure satisfies the three-part test is for the commissioners court to decide in the first instance, subject to judicial review 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. Family Code section 264.006 and the case law applying article III, section 52(a) may have developed since 2016, so confirm the current law before relying on these specifics.

What the opinion meant for those who asked

The county auditor and Bandera County (as the opinion described it): The opinion told the county that it could fund the Boys and Girls Clubs without an unconstitutional gift of public funds if it satisfied the three-part test, and that Family Code section 264.006 could supply statutory authority to the extent the clubs serve children in need of protection and care. It placed the public-purpose determination with the commissioners court, subject to court review.

County commissioners courts generally (as the opinion described it): The opinion described the commissioners court as the body that decides, in the first instance, whether a particular expenditure meets the public-purpose, control, and return-benefit requirements, and noted that a court can supervise a commissioners court that abuses its discretion.

Nonprofits seeking county funding (as the opinion described it): The opinion described how a nonprofit can be funded when its work accomplishes a county public purpose, and noted that a contract outlining what the nonprofit must do in exchange for the funds can provide the control the constitution requires.

Common questions

Can a Texas county give money to the Boys and Girls Club?
Yes, under this opinion, if the funding meets the three-part test: it serves a public purpose, the county keeps control to ensure the purpose is met, and the county gets a return benefit. The AG did not decide the specific Bandera County arrangement.

Isn't giving public money to a nonprofit an illegal gift?
Not if it is for a legitimate public purpose with a clear public benefit in return. The AG explained that an incidental benefit to a private party does not make such an expenditure unconstitutional.

What statute lets a county fund a children's nonprofit?
The AG pointed to Family Code section 264.006, which authorizes a commissioners court to provide for services to and support of children in need of protection and care, and to contract with organizations that provide those services.

Does the return benefit to the county have to be money?
No. The opinion said the return benefit need not be monetary and could instead be the accomplishment of the county's public purpose.

Who decides whether a particular grant is allowed?
The commissioners court decides in the first instance whether the expenditure satisfies the three-part test, subject to judicial review for abuse of discretion.

Background and statutory framework

Article III, section 52(a) of the Texas Constitution provides that the Legislature shall have no power to authorize a county or other political subdivision to lend its credit or grant public money or anything of value to an individual, association, or corporation, except as otherwise provided; its purpose is to prevent the gratuitous grant of public funds (Tex. Const. art. III, § 52(a); Byrd v. City of Dallas, 6 S.W.2d 738, 740 (Tex. 1928)). Spending public funds for a legitimate public purpose to obtain a clear public benefit is not an unconstitutional grant, and an expenditure that directly accomplishes a legitimate public purpose remains constitutional even if it incidentally benefits a private interest (Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 740 (Tex. 1995)).

The Texas Supreme Court's three-part test requires the transferring entity to ensure the transfer accomplishes a public purpose rather than benefiting private parties, retain public control over the funds to ensure the public purpose is accomplished and protect the public's investment, and ensure the political subdivision 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)). A contractual agreement setting requirements the receiving entity must comply with in exchange for the funds may supply sufficient control (Key v. Comm'rs Ct. of Marion Cty., 727 S.W.2d 667, 669 (Tex. App.-Texarkana 1987, no writ)). The return benefit need not be monetary. Whether a particular expenditure satisfies the test is for the commissioners court to decide in the first instance, subject to judicial review for abuse of discretion (Comm'rs Ct. of Titus Cty. v. Agan, 940 S.W.2d 77, 80 (Tex. 1997)).

Family Code section 264.006 expressly empowers a county commissioners court to provide for services to and support of children in need of protection and care (Tex. Fam. Code § 264.006). A prior opinion concluded that section 264.006 authorized a county to fund a nonprofit that served children from single-parent families to the extent of those services. The AG concluded that, to the extent the Boys and Girls Clubs of Bandera County provide services and support to children in the county who need protection and care, section 264.006 could authorize the county to fund them in furtherance of a statutory public purpose, so long as the constitutional requirements are met. Whether the clubs actually provide qualifying services is a fact question outside the opinion process.

Citations

Constitutional and statutory provisions:

• Tex. Const. art. III, § 52(a) (gift of public funds)
• Tex. Fam. Code § 264.006 (county services to and support of children)

Cases:

• Byrd v. City of Dallas, 6 S.W.2d 738 (Tex. 1928)
• Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717 (Tex. 1995)
• Tex. Mun. League Intergov'tl Risk Pool v. Tex. Workers' Comp. Comm'n, 74 S.W.3d 377 (Tex. 2002)
• Key v. Comm'rs Ct. of Marion Cty., 727 S.W.2d 667 (Tex. App.-Texarkana 1987, no writ)
• Comm'rs Ct. of Titus Cty. v. Agan, 940 S.W.2d 77 (Tex. 1997)

Texas Attorney General opinions:

• Tex. Att'y Gen. Op. Nos. GA-0078 (2003), JC-0439 (2001), GA-0106 (2003), GA-0076 (2003), GA-0843 (2011)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0091
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2016/kp0091.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 23, 2016

Ms. Christina Moreno Opinion No. KP-0091
Bandera County Auditor
Post Office Box 563 Re: Whether article III, section 52 of the
Bandera, Texas 78003 Texas Constitution prohibits a county from
providing financial assistance to a nonprofit
organization (RQ-0079-KP)

Dear Ms. Moreno:

    You ask whether a county may "enter into an agreement with Boys and Girls Club without violating Article III, Section 52 of the Texas Constitution." [1] You explain that the Boys and Girls Clubs of Bandera County have "requested financial assistance," and you question whether the county has statutory authority to provide such funding. Request Letter at 2.

    Article III, subsection 52(a) of the Texas Constitution provides:

            Except as otherwise provided by this section, the Legislature shall have no power to authorize any county, city, town or other political corporation or subdivision of the State 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). The purpose of this provision is "to prevent the gratuitous grant of [public] funds to any individual, corporation, or purpose whatsoever." Byrd v. City of Dallas, 6 S.W.2d 738, 740 (Tex. 1928). Spending public funds for a legitimate public purpose to obtain a clear public benefit, however, is not an unconstitutional grant of public funds. See Edgewood Indep. Sch. Dist. v. Meno, 917 S.W.2d 717, 740 (Tex. 1995). Furthermore, an expenditure to directly accomplish a legitimate public purpose is constitutional even though it incidentally benefits a private interest. See Tex. Att'y Gen. Op. No. GA-0078 (2003) at 5 (concluding that the incidental benefit to private attorneys would not render the provision of online legal research services at a county law library unconstitutional).

   The Texas Supreme Court has articulated a three-part test to determine whether a transfer of funds from a public entity to a private entity satisfies the limitations of article III, subsection 52(a). See 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.

    Related to the first prong, which requires that the monetary transfer serve a public purpose, you ask whether a specific statute "would allow Bandera County to fund Boys and Girls Club of Bandera County." Request Letter at 2. A prior opinion of this office addressed a county's provision of funding to specific nonprofit corporations that provided various services to residents of the county. See Tex. Att'y Gen. Op. No. JC-0439 (2001). That opinion addressed, among other things, whether a county could provide $3,000 to Big Brothers and Sisters in exchange for the services that it provided to children from single-parent families in the county. Id. at 4. The opinion noted that section 264.006 of the Family Code expressly empowers a county commissioners court to "provide for services to and support of children in need of protection and care." TEX. FAM. CODE § 264.006; see Tex. Att'y Gen. Op. No. JC-0439 (2001) at 5. This office concluded that "section 264.006 authorizes the County to transfer funds to ... Big Brothers and Sisters" to the extent that the organization provides services to and support for children who need protection and care. Tex. Att'y Gen. Op. No. JC-0439 (2001) at 5.

    Attached to your request, you provide a document from the Boys and Girls Clubs of Bandera County that describes some of the services they provide, including, among others, after-school programs for grade-school children to obtain homework assistance and supervision. [2] Under particular facts, the provision of after-school care for children from low-income families could be a statutorily-authorized service for children in need of protection and care. Fact finding is beyond the scope of an attorney general opinion, and we therefore are unable to determine whether, in fact, an organization is providing the services authorized by a particular statute. See Tex. Att'y Gen. Op. No. GA-0106 (2003) at 7 ("This office cannot find facts or resolve fact questions in an attorney general opinion."). However, to the extent that the Boys and Girls Clubs of Bandera County provide services and support to children in the county in need of protection and care, section 264.006 of the Family Code could serve as authority for Bandera County to provide financial assistance to the organizations in furtherance of a statutory public purpose of the county, so long as the additional constitutional requirements are met.

    In addition to serving a public purpose, a county transferring public funds to a private entity must retain public control over the funds to ensure that the public purpose is accomplished and to protect the public's investment. See Tex. Mun. League Intergov'tl Risk Pool, 74 S.W.3d at 384. Depending on the specific transfer of funds at issue, a contractual agreement outlining requirements that the receiving entity must comply with in exchange for the funds may provide sufficient control over the funds. See Key v. Comm'rs Ct. of Marion Cty., 727 S.W.2d 667, 669 (Tex. App.-Texarkana 1987, no writ) (noting that the transfer at issue did not involve a contractual agreement for services to retain formal control). A county transferring public funds to a private entity must also ensure that the county receives a return benefit. See Tex. Mun. League Intergov'tl Risk Pool, 74 S.W.3d at 384. The return benefit received by the county need not be monetary, but could instead be the accomplishment of a county's public purpose. See Tex. Att'y Gen. Op. No. GA-0076 (2003) at 7. The determination of whether a particular expenditure satisfies the three-part test is for the commissioners court to make in the first instance, subject to judicial review for an abuse of discretion. Tex. Att'y Gen. Op. No. 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).

                                  SUMMARY

          A county entering into an agreement with Boys and Girls Clubs to provide the organizations funding will not violate article III, subsection 52(a) of the Texas Constitution as long as the county (1) ensures that the transfer is to accomplish a public purpose of the county, not to benefit private parties; (2) retains public control over the funds to ensure that the public purpose is accomplished and to protect the public's investment; and (3) ensures that the county receives a return benefit.

          To the extent that the Boys and Girls Clubs of Bandera County provide services and support to children in need of protection and care, section 264.006 of the Family Code authorizes Bandera County to provide financial assistance to the organizations in furtherance of a statutory public purpose of the county, so long as the other constitutional requirements are met.

                                         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