Opinion No. 2012-060 August 23, 2012 The Honorable John Catlett State Representative 11732 West Highway 28 Rover, Arkansas 72860-8013 Dear Representative Catlett: I am writing in response to your request for my opinion on the following questions:

1. May a school district sell, donate or lease abandoned buildings and property to non-profit organizations, private enterprise, government entities or others?

2. If a school district has a building or property, on which it has an indebtedness, but which is no longer being utilized by the school, may the school sell, donate or lease that property or building?

You have noted the following background information:

Due to the recent school consolidations throughout the state, many buildings have been abandoned and the cost of maintaining or razing the buildings falls upon the school district.

RESPONSE I cannot provide a general answer to your first question. Various conditions may apply to the disposition of unused school district property, consisting primarily of restrictions upon the nature of the recipient and the uses to which the property may be put. I will address these conditions in the text of my discussion. With respect to your second question, the fact that unused school property is encumbered by

The Honorable John Catlett State Representative Opinion No. 2012-060 Page 2 debt will not affect the permissibility under current law of the contemplated transactions. The effect of the indebtedness in any given transaction will be controlled in each case by applicable principles of standard contract and property law. Only a finder of fact can determine the legal implications of an encumbrance on property in any particular case. Question 1: May a school district sell, donate or lease abandoned buildings and property to non-profit organizations, private enterprise, government entities or others? I cannot answer this question with a simple “yes” or “no.” The ensuing discussion will set forth the circumstances under which a school district may dispose of unused real property in any of the manners recited. Circumscribing any inquiry regarding the conveyance of school district realty are the constitutional directives that “the State shall ever maintain a general, suitable and efficient system of free public schools”1 and that no tax levied to support a school district “shall be appropriated for any other purpose nor to any other district than that for which it is levied.”2 Also bearing on any such inquiry is the related statutory directive that a school board “[do] all . . . things necessary and lawful for the conduct of efficient free public schools in the district.”3 As this office has repeatedly noted, school districts boards have broad discretion in operating their districts in fulfillment of these ends. As one of my predecessors has noted:

The Arkansas courts have long interpreted this statute [A.C.A. § 6-13-620, which defines a school district board’s powers] as allowing school boards wide latitude in governing their districts. See, e.g., Safferstone v. Tucker, 235 Ark. 70, 72, 357 S.W.2d 3, 4 (1962); Isgrig v. Srygley, 210 Ark. 580, 197 S.W.2d 39 (1946). See also Springdale Board of Education v. Bowman, 294 Ark. 66, 69, 740 S.W.2d 909, 910 (1987); Leola School District v. McMahan, 289 Ark. 496, 498, 712 S.W.2d 903, 905 (1986). The courts have further held that they will not substitute their judgment for that of a school

1 Ark. Const. art. 14, § 1. 2 Ark. Const. art. 14, § 3. 3 A.C.A. § 6-13-620(a)(12).

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board with regard to policy matters, unless the school board, in enacting the policy in question, abused its discretion or acted arbitrarily, capriciously, or contrary to law. Id. The court in Leola, supra, explained “arbitrary and capricious” action by a school board as being action that is not supportable “on any rational basis.” Leola, 289 Ark. at 498, 712 S.W.2d at 905. It should be noted that the party challenging the school board’s policy has the burden of proving the board’s abuse of discretion by clear and convincing evidence. Springdale, 294 Ark. at 69, 740 S.W.2d at 910.4

In Safferstone, the Arkansas Supreme Court offered the following summary of the discretion that resides in a school district board of directors:

The law involved appears to be well settled. In this State a broad discretion is vested in the board of directors of each school district in the matter of directing the operation of the schools and a chancery court has no power to interfere with such boards in the exercise of that discretion unless there is a clear abuse of it and the burden is upon those charging such an abuse to prove it by clear and convincing evidence. White v. Jenkins, 213 Ark. 119, 209 S.W.2d 457; Merritt v. Dermott Special School Dist., 188 Ark. 243, 65 S.W.2d 33; Connelly v. Earl Frazier Sp. School Dist., 167 Ark. 49, 266 S.W. 929; Pugsley v. Sellmeyer, 158 Ark. 247, 250 S.W. 538; State v. School Dist. No. 16, 154 Ark. 176, 242 S.W. 545.5

Among the statutory powers afforded school districts is that of “[b]uying, selling, renting, and leasing real property . . . on behalf of the school district.”6 Specifically with respect to the sale of properties in the wake of a consolidation of the sort that has reportedly prompted your questions, the Arkansas Code provides in pertinent part:

(a) A school district in the State of Arkansas that is consolidated with one (1) or more school districts may:

4 Ark. Op. Att’y Gen. No. 2000-270. 5 Safferstone, supra, 235 Ark. at 72. 6 A.C.A. § 6-13-620(6)(E) (Supp. 2011).

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(1) Sell buildings or lands owned by the school district that are no longer used by the school district; or (2) Preserve buildings or lands owned by the school district that are no longer used by the school district. (b) If the school district sells or otherwise disposes of a building or land to a person or entity under this section, then: (1) The school district shall have the right of first refusal to purchase or otherwise reacquire the real property if the person or entity decides to sell the real property; and (2) The sale price of the real property when repurchased or otherwise reacquired by the school district shall not: (A) Exceed the price that the person or entity paid the school district for the property; and (B) Include compensation for any improvements to the property.7

This statute does not qualify to whom the property may be sold and thus authorizes a sale of the property to any of the entities contemplated in your question. A school district is further authorized to sell or to lease its real property, apparently to any entity, pursuant to the above quoted A.C.A. § 6-13-620(6)(E), which expressly authorizes such transactions “on behalf of the school district.”8 The qualifying phrase “on behalf of” must be read in light of the statutory mandate, which accords with constitutional priorities, that any board action promote “the conduct of efficient free public schools in the district."9

7 A.C.A. § 6-13-111 (Repl. 2007). 8 Compare A.C.A. § 14-16-105(d)(1) and -105(e)(1) (Supp. 2011) (mandating that county real and personal property may be sold for a price not less than 3/4 of its appraised value); A.C.A. § 14-54-301 (Repl. 1998) and -302 (Supp. 2011) (authorizing municipalities to sell their real estate, presumably for both monetary and nonmonetary consideration).

The Honorable John Catlett State Representative Opinion No. 2012-060 Page 5 In my opinion, the propriety of any such sale would be conditioned upon the consideration received being adequate10 and the proceeds being used for school district purposes. With regard to these issues, my immediate predecessor has aptly observed:

[S]chool districts are authorized by statute to sell, rent or exchange their property if doing so is reasonably related to the goal of providing a “general, suitable and efficient system of free public schools.” Ark. Const. art 14, § 1; A.C.A § 6-13-620(3) (Supp. 2003). I will further note that the Arkansas Supreme Court has held that in certain circumstances “public advantage” can constitute adequate consideration for a sale. See City of Blytheville v. Parks, 221 Ark. 734, 255 S.W.2d 962 (1953). Given the fact that a school district’s sole priority under the constitutional mandates discussed above is the advancement of its student’s educational interests, I believe the “public advantage” that might constitute an element of consideration supporting a sale of district property must be directly related to advancing free, fair and efficient public education.11

At issue in my predecessor’s opinion was the question, inter alia, of what might constitute adequate consideration for the sale of unused school district property to a city. In addressing this question, my predecessor offered the following:

I am neither authorized nor equipped to make the factual determination whether a sale below fair market value would be

9 A.C.A. § 6-13-620(a)(12). 10 Although it does not bear directly on your question as posed, you have attached to your request a copy of House Bill 1892, which was introduced in the 2011 Regular Session of the Arkansas General Assembly and withdrawn on March 29, 2011. This bill proposed, inter alia, to amend A.C.A. § 6-13-111 to permit the sale of unused school district buildings only at “near fair market value” – i.e., at 90% or more of recently appraised value – subject to the district’s conditional right of first refusal to repurchase the building or real property should the purchaser elect to sell it. This condition on the sale of such properties is not expressly stated in the current statute. You have not asked, and I will not address, whether selling school district property at below fair market value pursuant to this withdrawn amendment would withstand constitutional scrutiny. 11 Op. Att’y Gen. No. 2004-056. See also Op. Att’y Gen. No. 2005-300 (generally discussing the question of what consideration might be deemed adequate in connection with such a sale).

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supported by consideration in the form of educational public advantage in this instance. However, should the Bearden School District, in the exercise of its broad discretion, elect to sell the unused property to the City of Thornton, any finder of fact weighing the adequacy of the consideration might well be influenced in its determination by evidence that maintaining the unused property would have acted as a drain on the school district's resources. Beyond this speculation, I can only opine that the school district is barred from simply donating the property to the city.12

In another opinion addressing this issue, my predecessor concluded that the Code “leav[es] it to the discretion of the school district board whom the purchaser will be and what consideration the school district will receive,” with that discretion bounded only by the above recited principles set forth in Safferstone, supra.13 In yet another opinion, he opined that “a court reviewing the adequacy of consideration would likely take into account both that retaining the property would in itself constitute a financial drain to the district and, possibly, that the buyer of the property would commit to using it for educational purposes.”14 I have further opined, however, that “freeing up educational money” that might otherwise have been spent to maintain and insure a condemned school district building would probably not in itself “qualify as nonmonetary consideration” sufficient to support a contractual conveyance of the property.15 With respect to the lease of school district properties, I fully concur with the following analysis offered by one of my predecessors:

12 Op. Att’y Gen. No. 2004-056. Accord Op. Att’y Gen. No. 2003-349 (opining that a school district board, in the reasonable exercise of its discretion in pursuing authorized educational goals, may, in exchange for adequate consideration, sell an abandoned building that it would otherwise have to demolish or to restore at significant cost); compare Op. Att’y Gen. No. 2001-102 (opining that a reviewing court might well question a conveyance of school district property below fair market value to a city when the city intended to lease or sell the property to establish a private school). The question of when a donation of school district property might be warranted is discussed below in my text. 13 Op. Att’y Gen. No. 2005-300. 14 Op. Att’y Gen. No. 2003-349. 15 Op. Att’y Gen. No. 2008-128.

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Although a school district is statutorily authorized to lease its properties, A.C.A. § 6-13-620(3), it is constrained in this authority by the overarching constitutional mandate to undertake only activities “necessary and lawful for the conduct of efficient free public schools in the district.” A.C.A. § 6-13-620(13); see Ark. Const. art. XIV, § 1 (directing that “the State shall ever maintain a general, suitable and efficient system of free public schools”). As I noted in the attached Ark. Op. Att’y Gen. No. 2001-102, which generally addresses the standard of discretion of school districts to lease property, a school district “is empowered by statute to sell, rent or exchange . . . property, presumably for whatever use the recipient intends, if doing so is reasonably related to the goal of providing efficient free public schools.”16

With respect to the donation of school district property, which you also mention specifically in your question, the Code provides in pertinent part:

* * * (b)(1) If the board of directors for a school district determines that any real estate owned or controlled by the school district is not required for the present or anticipated future needs of the school district and that the donation thereof would serve a beneficial educational service for the pupils of the school district, then the school district is also empowered and authorized to donate property or any part thereof to a publicly supported institution of higher education, a technical institute, a community college, a not-for-profit organization, or any entity thereof for any of the following limited purposes: (A) Having the real property improved, upgraded, rehabilitated, or enlarged by the donee; (B) Providing a publicly supported institution of higher education or a technical institute or community college with the donated property

16 Op. Att’y Gen. No. 2001-174; accord Op. Att’y Gen. No. 2000-270.

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in which to hold classes for students who are from the school district or to educate pupils from within the donating school district even if students from outside the school district might also benefit; or (C) Providing community programs, social enrichment programs, or after-school programs for students who are from the school district or educating pupils from within the donating school district even if other persons in the community or students from outside the school district might also benefit. (2) Furthermore, school districts may donate the fee simple title and absolute interest, without any reservations or restrictions, in and to all real property or any part of the property to the publicly supported institution of higher learning or community college if this property was previously conveyed or otherwise transferred by the institution or college to the school district without cost.

* * * (d)(1) If the school district donates real property to an entity under this section, then the school district shall have the right of first refusal to reacquire the real property if the entity decides to sell or otherwise dispose of the real property. (2) The school district shall not be required to compensate the entity for any improvements to real property reacquired under this subsection.17

This statute is noteworthy in various respects. First, it mandates in the highlighted phrase as a precondition of any donation of school district property that the donation in itself provide an educational benefit to the district’s students.18

17 A.C.A. § 6-21-108 (Repl. 2007) (emphasis added). 18 The withdrawn bill referenced in note 10, supra, proposed to amend A.C.A. § 6-21-108 to permit a district to donate its unused real property if doing so “would serve a beneficial educational service for the citizens of the school district.” An earlier version of this proposed amendment would have required that the educational benefit redound to the benefit of the school district’s “pupils,” as distinct from its “citizens.” Given that the upshot of the constitutional mandate is to assure each of the state’s children an

The Honorable John Catlett State Representative Opinion No. 2012-060 Page 9 Second, it restricts the donation to one of the recited recipients. Third, with one possible exception that I will discuss immediately below, it requires that the donation to the recited recipients directly benefit district students in one or more of the recited manners. And finally, it affords a donating school district a right of first refusal to reacquire the property under the recited conditions should the donee decide to dispose of it by sale or otherwise. As noted in my previous paragraph, subsection (b)(1)(A) of the statute appears to authorize donating district property to one of the recited donees for a purpose that might not necessarily benefit the donating district’s students. Although the donated property itself would doubtless benefit from being “improved, upgraded, rehabilitated, or enlarged by the donee,” there is no assurance that this benefit would extend to the district’s pupils. Although this provision, if read in isolation, might invite constitutional attack in a particular instance as involving an impermissible diversion of school district assets,19 I believe this provision must be read in conjunction with the highlighted passage in the introductory paragraph of subsection (b)(1). In accordance with constitutional mandates, subsection (b)(1) requires that any donation realize “a beneficial educational service for the pupils of the school district.”20

adequate and substantially equal education, Fort Smith School District v. Beebe, 2009 Ark. 333, 11-12, 322 S.W.3d 1, *7-8, Lake View Sch. Dist. No. 25 v. Huckabee, 362 Ark. 520, 210 S.W.3d 28 (2005), I question whether the diversion of school district assets to benefit the district’s “citizens,” as distinct from its “pupils,” would withstand constitutional challenge. 19 See Op. Att’y Gen. No. 2004-213 (opining that a donation of school district real property to a city or municipality would run afoul of Ark. Const. arts. 14, § 3 and 16, § 11, the latter of which provides that “no moneys arising from a tax levied for one purpose shall be used for any other purpose”). Accord Ops. Att’y Gen. Nos. 2004-056 and 2001-102. 20 This reading accords with the maxim of statutory interpretation providing that legislative enactments alleged to be in conflict must be reconciled, read together in a harmonious manner, and each given effect, if possible. Gritts v. State, 315 Ark. 1, 864 S.W.2d 859 (1993); City of Fort Smith v. Tate, 311 Ark. 405, 844 S.W.2d 356 (1993). I am guided by the principle that statutes are presumed constitutional, with the burden of proving otherwise placed on the challenger. Ford v. Keith, 338 Ark. 487, 996 S.W.2d 20 (1999); ACW, Inc. v. Weiss, 329 Ark. 302, 947 S.W.2d 770 (1997). If it is possible to construe a statute as constitutional, a court must do so. Jones v. State, 333 Ark. 208, 969 S.W.2d 618 (1998). Moreover, in construing a statute, a court will presume that the General Assembly, in enacting it, possessed the full knowledge of the constitutional scope of its powers. McLeod v. Santa Fe Trail Transp. Co., 205 Ark. 225, 168 S.W.2d 413 (1943).

The Honorable John Catlett State Representative Opinion No. 2012-060 Page 10 Determining how a school district’s students would benefit from a donation of school district properties to realize one of the ends recited in subsection (b)(1)(A) will in each instance involve undertaking a factual inquiry of a sort that this office is not authorized to conduct.21 In my opinion, to the extent that the maintenance of unused property might constitute a drain on a school district’s resources, a reviewing court might view any disposition of property by donation under this subsection as in itself affording the district a benefit that would pass constitutional muster.22 However, extrapolating from my previous opinion that “freeing up educational money” would not in itself constitute consideration sufficient to support a contractual conveyance of condemned school district property,23 I question whether an outright gift for noneducational uses of property that is draining a district’s resources would be deemed to accord the district’s students a “beneficial educational service” of the sort required under the statute. Nevertheless, I consider this a close call. I have found no binding authority directly on point. Finally, I must note the possible relevance of A.C.A. § 14-169-803 (Repl. 1998), which provides:

Any school district owning lands and buildings within the boundaries of any existing urban renewal project or neighborhood development program, or within the boundaries of any such project or program that may be constituted in the future, is authorized to donate and dedicate to the governing board of any such urban renewal program or neighborhood development project as may be created any surplus lands or buildings owned by it if the lands or buildings are found by the board of the school district to be surplus to its present needs or the lands and buildings are unsuitable for further use by the school.

On its face, this statute authorizes a school district to donate property to an urban renewal project or a neighborhood development program, so long as the donated property lies within the project or program boundaries and the district deems the 21 See Op. Att’y Gen. No. 2008-128 (discussing the factual nature of such an inquiry). 22 This consideration strongly resembles the non-monetary consideration in a sales context discussed in Opinion No. 2004-056 and note 10, supra. 23 Op. Att’y Gen. No. 2008-128.

The Honorable John Catlett State Representative Opinion No. 2012-060 Page 11 property surplus or unsuitable for school use.24 As this office has previously noted,25 in accordance with the above discussed principles, this statute might be subject to constitutional challenge if applied to support a conveyance of school district property that fails to realize an educational benefit for the school district’s students. Question 2: If a school district has a building or property, on which it has an indebtedness, but which is no longer being utilized by the school, may the school sell, donate or lease that property or building? I have set forth in my response to your previous question the circumstances under which a school district may dispose of or lease its unused real property. In my opinion, the conditions discussed in my response will apply irrespective of whether that property is subject to an indebtedness.26 The effect of an indebtedness upon any particular real estate transaction permitted under the above discussed principles will be purely a matter of contract law, to be assessed by counsel in each instance based upon all of the attendant circumstances. Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve. Sincerely, DUSTIN McDANIEL Attorney General DM/JHD:cyh

24 See Op. Att’y Gen. No. 2001-102 (generally discussing this statute). 25 See, e.g., Op. Att’y Gen. No. 2004-213. 26 See Op. Att’y Gen. No. 2008-091 (opining that, “under either the constitution or statutes,” the existence of a district’s bonded indebtedness would not foreclose a sale of school property when the indebtedness would remain the district’s obligation).

Opinion No. 2013-116 January 28, 2014 The Honorable Stephanie Flowers State Senator 104 Main Street, Suite C Pine Bluff, Arkansas 71601 Dear Senator Flowers: I am writing in response to your request for my opinion on the following questions:

1. Can a school district donate real property according to state and federal guidelines and laws?

2. If it is determined that any portion of outstanding bond money is owed that is traced to that property, can the district donate the property?

3. If the answer to question two is “no,” and it is possible to donate

under question one, what would the district be required to do in order to donate the property?

You report that these questions relate to the proposed donation of a former middle school campus “to either the 501c3 group Keep Redfield Middle School or possibly to the City of Redfield.” Based upon this report, I assume that the school district has determined that this property is “surplus” inasmuch as it is not currently serving the educational interests of the district’s pupils.

RESPONSE In my opinion, the answer to your first question is “yes,” subject to certain significant constitutional and statutory restrictions. In summary, I question that a

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 2 school district could simply give away surplus property without first determining that no more advantageous use of the property exists, even if that “use” is simply to realize financial benefits in the form of sales revenues. Assuming the property is reasonably deemed surplus and, possibly, unmarketable, a donation of the property pursuant to A.C.A. § 6-21-108, as recently amended, might withstand scrutiny as constitutional. Recent legislation purports to grant relatively broad, although not unrestricted, donative authority to school districts, including the power to donate realty to nonprofit corporations and cities. This legislation might be read as authorizing donations that exclusively serve interests other than those of the district’s pupils. Notwithstanding this fact, in my opinion, a reviewing court might well review any donation of district property to ensure that the gift, in accordance with constitutional mandates, indeed serves the educational interests of the district’s students. In conducting any such review, a court would nevertheless accord substantial deference to the district board’s discretion in determining what will benefit the district. With respect to your second and third questions, only a finder of fact acquainted with all the attendant circumstances, including the terms of pertinent bond instruments, could determine whether a school district is precluded from donating property due to the existence of a bonded indebtedness that might be “traced to” the property. In my opinion, these questions implicate only contract law, which in no way qualifies the principles of constitutional law addressed in my response to your first question. Neither the Arkansas Constitution nor the Arkansas Code forecloses the donation of property that secures a bonded indebtedness. Question 1: Can a school district donate real property according to state and federal guidelines and laws? In my opinion, although the answer to this question as phrased is “yes,” both the Arkansas Constitution and the Arkansas Code restrict the circumstances under which a school district may donate its property. The permissibility of a school district’s donating property is not addressed directly by federal law. 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”1 and that taxes levied for maintenance and operation of the schools

1 Ark. Const. art. 14, § 1.

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 3 will be used exclusively for that purpose.2 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.”3 This office has opined on various occasions that a school district would in all likelihood be deemed barred, whether by statute or by constitutional directive, from simply donating property under circumstances not designed to benefit the students of the school district.4 The statutory provisions in effect today, however, are not the same as those in effect on the previous occasions this office has opined on this issue. I will accordingly review below the current pertinent statutes, discussing in the process their application in light of controlling constitutional principles. School-district donations as addressed by Act 318 of 2013 In Act 318 of 2013,5 the General Assembly expressly authorized school districts to donate real property under specified circumstances. Section 3 of Act 318, dealing generally with the power of school districts to donate real property, amended the Arkansas Code in the following ways, which I have noted to expedite the ensuing discussion:

6-21-108. School districts authorized to own and convey real property — Donation of property for educational purposes only and beneficial educational services only.

2 Ark. Const. art. 14, § 3. 3 A.C.A. § 6-13-620(a)(12) (Supp. 2011). 4 See, e.g., Op. Att’y Gen. 2012-060 (attached) (discussing in detail the constitutional and statutory restrictions on the donation of school district property); cf. Op. Att’y Gen. 2008-128 (opining that, under the then applicable statute, “freeing up educational money” that might otherwise have been spent to maintain and insure a surplus school district building that had been condemned would not warrant donating the property and would probably not in itself “qualify as nonmonetary consideration” sufficient to support a conveyance of the property under a contract theory). Although the opinions just referenced focus on statutory restrictions that have since been eased, see textual discussion infra, in several instances this office has suggested categorically that donations of district property might be barred on constitutional grounds. Ops. Att’y Gen. No. 2004-056 and 2001-102. As reflected in my textual discussion, however, I question that the constitution imposes a blanket proscription on the donation of school-district realty. Rather, in my opinion, a gift of such property in any instance will be subject to certain strict constitutional restrictions. 5 Acts 2013, No. 138, amending A.C.A. §§ 6-13-111 (Repl. 2007) and 6-21-108 (Supp. 2013).

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(a) In addition to the authority of school districts under § 6-13-620 to have the care and custody of the schoolhouse, grounds, and other property belonging to the school district, the, a school district board of directors for any Arkansas school district shall be authorized and empowered to may acquire and hold real estate, tenements, hereditaments, and other real property as is necessary and proper for the purposes of the education of pupils students of the school district and the administration of the schools of the school district.

(b)(1) If the board of directors for a school district determines that any real estate property owned or controlled by the school district is not required for the present or anticipated future needs of the school district and that the donation thereof of the real property would serve a beneficial educational service for the pupils citizens of the school district, then the school district is also empowered and authorized to may donate real property or any part thereof to a publicly supported institution of higher education, a technical institute, a community college, a not-for-profit organization, a county, a city, or any entity thereof for any of the following limited purposes: (A) Having the real property preserved, improved, upgraded, rehabilitated, or enlarged by the donee; (B) Providing a publicly supported institution of higher education or, a technical institute, or a community college with the donated property in which to hold classes for students who are from the school district or to educate pupils from within the donating school district even if students from outside the school district might also benefit; or (C) Providing community programs and beneficial educational services, social enrichment programs, or after-school programs for students who are from the school district or educating pupils from within the donating school district even if other persons in the community or students from outside the school district might also benefit.

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(2) Furthermore, A school districts district may donate the fee simple title and absolute interest in real property, without any reservations or restrictions, in and to all the real property, or any part of the property to the a publicly supported institution of higher learning, a technical institute, or a community college, a not-for-profit organization, a county, or a city if this property was previously conveyed or otherwise transferred by the institution or college to the school district without cost.

I have reproduced this legislation showing the changes made in order to illustrate the extent to which the amendment purports to broaden the authority of school districts to donate property. Act 318’s amendment of subsection (b)(1) clearly broadens the following: (1) the range of authorized donees of district property; (2) the range of individuals targeted to benefit from a donation; and (3) the range of purposes to which donated property might be put. Pursuant to this amendment, a district may now donate its surplus real property to counties and cities, among other previously designated donees such as “a not-for-profit organization.” The amendment of this subsection further authorizes donations that merely “serve a beneficial education service” for the district’s “citizens,” as distinct from the “pupils” designated prior to the amendment.6 A broadening of authorized “beneficial educational services” is further reflected in the amended subsection’s catalog of “limited purposes” to which donated property might be put. Subsection (b)(1)(B), for instance, while it continues to authorize the donation of property “to hold classes,” no longer requires that donated classroom property be used to educate “students who are from the school district or to educate pupils from within the donating school district.” The amendment similarly strikes from subsection (b)(1)(C) what had been a restriction mandating that district students directly benefit from “community programs . . . , social enrichment programs, or after-school programs” offered using donated facilities. The clear implication is that, in the wake of Act 6 In Op. Att’y Gen. No. 2012-060, at n.18, I questioned as follows what was then only a proposed substitution of the term “citizens” for “pupils” in A.C.A. § 6-21-108(b)(1):

Given that the upshot of the constitutional mandate [Ark. Const. art. 14, § 1] is to assure each of the state’s children an adequate and substantially equal education, Fort Smith School District v. Beebe, 2009 Ark. 333, 11-12, 322 S.W.3d 1, *7-8, Lake View Sch. Dist. No. 25 v. Huckabee, 362 Ark. 520, 210 S.W.3d 28 (2005), I question whether the diversion of school district assets to benefit the district’s “citizens,” as distinct from its “pupils,” would withstand constitutional challenge.

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 6 318’s enactment, a school district might under the authority of this subsection convey surplus property to any authorized donee for uses that realize direct educational benefits to individuals other than the district’s students. Based upon this amendment, for instance, it seems that nothing would preclude a district from donating property intended to benefit only adults through vocational training or “social enrichment programs” of indeterminate description.7 Act 318’s amendment of subsection (b)(2) appears to broaden the donative powers of a school district even further, providing that the district may donate property apparently regardless of whether the property is deemed surplus and “without any reservations or restrictions” (emphasis added). Like subsection (b)(1), subsection (b)(2) further broadens the range of authorized donees to include any “publicly supported institution of higher learning, a technical institute, a community college, a not-for-profit organization, a county, or a city.” Finally, the amendment of this subsection dispenses with the former restriction against a district’s donating real property to a public “institution of higher learning or a community college” unless the donee itself previously donated the property to the district. It is unclear to what extent, if any, this subsection is qualified by the entire section’s caption, which designates the legislature’s intent as being to authorize “[d]onation of property for educational purposes and beneficial educational services only” (emphasis added). Application Your constituents’ underlying concern is apparently whether, pursuant to this statutory broadening, a district might donate a former middle school campus either to a nonprofit corporation or to the municipality in which the realty is located. It

7 Each of the changes described in my text is mirrored in Act 318’s addition to A.C.A. § 6-21-108 of subsection (b)(3), which requires any consolidated school district to offer to the same group of potential recipients, by donation or “low-cost long-term lease,” any undisposed-of real property that within two years of consolidation is “not used by the school district for educational purposes.” The restrictions referenced in my text on the uses of such property likewise apply. Pursuant to both subsections (b)(1)(A) and (b)(3)(A), among the restricted uses of donated property is “[h]aving the real property preserved, improved, upgraded, rehabilitated, or enlarged by the donee.” In Ops. Att’y Gen. 2012-060 and 2008-128, I opined that the similar provisions of A.C.A. § 6-21-108(b)(1)(A) in its pre-amendment form would pass constitutional muster only if full effect were given to the statutory requirement that the donation directly provide “a beneficial educational service for the pupils of the school district” (emphasis added).

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 7 is unclear to what purpose either of these proposed recipients would put the donated property. Subsection (b)(1), which deals with donation of surplus properties, conditions donations both with respect to recipients and authorized uses of the property. It is questionable, in my estimation, that all of those potential uses might be deemed to benefit the district’s students, as Article 14, § 3 of the constitution requires. As previously noted, for instance, the catalog of permitted uses would not foreclose, say, a recipient city from using the property for purposes other than K-12 public education. A finder of fact might consequently conduct an intensive inquiry into how a recipient intended to use the donation contemplated in your question. Subsection (b)(1) further does not appear to require a district contemplating a donation to conduct any preliminary inquiry into whether the property might not alternatively be sold and thereby benefit the district at least to the extent of generating income. The Code generally authorizes the “[b]uying, selling, renting, and leasing” of realty by a school district,8 presumably subject to a school board’s broad discretion to pursue the educational interests of its students.9 The Code further authorizes a consolidated district to sell surplus realty at fair market value, apparently to any buyer for any purpose.10 Significantly, there appears to be no case law even challenging selling such property to any buyer for any purpose, so long as the proceeds are properly used to advance the education of district pupils. In terms of constitutional propriety, it is difficult to distinguish between selling

8 A.C.A. § 6-13-620(6)(E) (Supp. 2011). 9 The range of this discretion is defined in Gray v. Mitchell, 373 Ark. 560, 568-69, 285 S.W.3d 222 (2008), in which the court, citing various precedents, declared that any district’s exercise of its “broad discretion” to use school funds or resources would qualify as “necessary,” and hence capable of withstanding an Article 14 challenge, if the expenditure were established as “convenient, useful, appropriate, suitable proper or conducive to the proper maintenance of the schools.” 10 A.C.A. § 6-13-111(a)(1) (Repl. 2007), as amended by Acts 2013, No. 318. In Act 318, the legislature added subsection (c) to A.C.A. § 6-13-111, setting forth the procedures to be followed “[i]f a school district is unable to secure a purchaser or lessor for an unused building or real property at or near fair market value.” The statute as amended provides that a school district may indeed sell a property without restrictions for less than fair market value, but only if specified measures to sell the property for its true worth have failed, and only then if the reduced-value sale has been approved by a court focused on serving “the best interest of the school district.” The principle to be drawn from this statute, whose amendment regarding such sales appears driven by constitutional concerns, appears to be that realizing even diminished income from disposing of surplus property is indeed permissible, so long as the reduced-price sale would best serve, as established upon careful judicial review, the always paramount “interest of the school district.” See also Op. Att’y Gen. 2012-060 (generally discussing the statutes dealing with the sale of district properties).

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 8 surplus property to anyone for any reason in order to realize revenues for education – a practice that is statutorily sanctioned and that does not appear to have triggered any constitutional challenge – and donating at least unmarketable surplus property in order to avoid an ongoing drain of school-district revenues. At least with respect to unmarketable surplus property, then, subsection (b)(1)’s authorization of donations to a limited range of donees might well pass constitutional muster. Specifically with respect to the circumstances giving rise to your request, I suspect but do not know that the former Redfield Middle School is indeed surplus property. Even assuming that this property is “surplus,” however, the underlying constitutional question remains whether saving a district the expense of maintaining such property would in itself warrant giving it away without further inquiry regarding such alternatives as selling it to realize income for the district or donating it subject to the condition that the district directly benefit from the donation. I question, in other words, that a district could simply give surplus property away without conditions without first determining that no more advantageous alternative exists. In my opinion, this constitutional condition might well apply even if the donee were one of the authorized recipients listed in A.C.A. § 6-21-108(b). Notwithstanding what might appear to be a categorical authorization to make donations to nonprofit corporations and cities under subsection (b)(1), a reviewing court, even displaying due deference to district board authority, might consequently feel compelled to consider the factual circumstances in order to determine whether a donation indeed benefits the district’s students. Although subsection (b)(1) arguably authorizes donating property for a use that benefits the district in no way whatsoever, I question that a court would approve any such disposition as complying with constitutional imperatives. Subsection (b)(2), moreover, only compounds the difficulties just noted by apparently permitting the donation of any property, whether surplus or not, to be used for any purpose the donee might be generally authorized to pursue.11 The

11 By way of comparison, the Code before the enactment of Act 318 authorized the donation of school district property for clearly non-educational purposes only with respect to surplus property located within the boundaries of a donee urban renewal project or neighborhood development program. A.C.A. § 14-169-803 (Repl. 1998). This office has read this statute as at that time intended to foreclose other non-educational donations district realty. See Ark. Op. Att’y Gen. 2001-102 (invoking Gazaway v. Greene County Equalization Bd., 314 Ark. 569, 575, 864 S.W.2d 233 (1993) (“The phrase expressio unius est

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 9 potential constitutional issues just discussed would consequently exist as well with respect to any donation of property made pursuant to this subsection. With respect to donations in general, what is problematic in the statute as amended is that, except in its caption, it fails to require as the sine qua non of any donation that it provide the district’s students an educational benefit. On the contrary, each of the subsections discussed above authorizes gifts to such entities as counties, cities and nonprofit corporations without any triggering need to dispose of the property, even though it is deemed surplus, and without requiring that the gift benefit district pupils by advancing an adequate K-12 education. It follows from the foregoing that I consider the statute as amended potentially unconstitutional in certain applications, possibly including the donation contemplated in your request.12 Again, in order to pass constitutional muster, in my opinion, any donation of school-district property must have the practical effect of providing educational benefits to the district’s public-school pupils. Avoiding established future costs by donating surplus property, at least when sale thereof is infeasible, would presumably pass this constitutional test inasmuch as the savings would benefit the district’s pupils. Act 318, however, does not authorize donations solely to avoid financial distress that might threaten the public education of district pupils; rather, it further sanctions such donations as a means of pursuing other ends. To this extent, its application in particular instances might invite constitutional objection. In my opinion, in determining whether the donation of the former Redfield Middle School is permissible, district counsel will need to determine whether this constitutional objection applies.

exclusio alterius is a fundamental principle of statutory construction that the express designation of one thing may properly be construed to mean the exclusion of another.”)). This office has repeatedly called into question the constitutional propriety of the unrestricted donation of school-district authorized under A.C.A. § 14-169-803, which remains on the books. See, e.g., Ops. Att’y Gen. 2008-091, 2004-213, 2004-056 and 2001-102. Although the Code further purported to authorize conveyances to, inter alia, a nonprofit organization for the purposes of improving, upgrading, rehabilitating or enlarging the property, A.C.A. § 6-21-108(b)(1)(A), this office has interpreted this authorization as bounded by the constitutional requirement that these uses directly benefit the school district’s students. See note 7, supra. 12 In entertaining this possibility, I am not ignoring the fact that any legislation is presumptively constitutional. Paschal v. State, 2012 Ark. 127, 8 (“Statutes are presumed constitutional, and the burden of proving otherwise is on the challenger of the statute.”).

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 10 Specifically with respect to the possible donation of this property to a nonprofit corporation, I should further note the possible application of Ark. Const. art. 12, § 5, which provides as follows:

No county, city, town or other municipal corporation, shall become a stockholder in any company, association, or corporation; or obtain or appropriate money for, or loan its credit to, any corporation, association, institution or individual.

Although the Arkansas Supreme Court has long ago applied this constitutional provision to a school district,13 this office has more recently opined that a school district does not fall under this constitutional provision, not being a "county, city, town or other municipal corporation."14 In the event this provision indeed applies, it would appear to call into question the propriety of a school district donating property to a nonprofit corporation. The Arkansas Supreme Court has likewise acknowledged that any diversion of public funds by a school district to a private party might be deemed to violate the due process clause of Ark. Const. art. 2, § 8.15 Question 2: If it is determined that any portion of outstanding bond money is owed that is traced to that property, can the district donate the property? This question is materially indistinguishable from one answered in the attached Opinion 2012-060, to which I continue to subscribe. As I indicated in my previous opinion, the effect of a bonded indebtedness on the donation of district property “is purely a matter of contract law.” Possible restrictions on donations, if any, would presumably be contained in the bond instruments, whose terms could only be reviewed in each instance by counsel fully acquainted with all the attendant circumstances. Neither the constitution nor the

13 Clifton v. School District No. 14 of Russellville, 192 Ark. 140, 90 S.W.2d 508 (1936). 14 Op. Att’y Gen. No. 91-411. For a discussion of this conflict, see Op. Att’y Gen. No. 2011-025. 15 Gray v. Mitchell, 373 Ark. at 570-71, quoting Chandler v. Board of Trustees of Teacher Retirement System, 236 Ark. 256, 258, 365 S.W.2d 447 (1963) (“No principle of constitutional law is more fundamental or more firmly established than the rule that the State cannot, within the limits of due process, appropriate public funds to a private purpose.”).

The Honorable Stephanie Flowers State Senator Opinion No. 2013-116 Page 11 pertinent statutes discussed above independently foreclose the donation of property that secures a bonded indebtedness.16 Question 3: If the answer to question two is "no," and it is possible to donate under question one, what would the district be required to do in order to donate the property? This question is moot in light of my response to your previous question. Only a finder of fact acquainted with all attendant circumstances, including the terms of any bond instruments, could determine whether a donation is allowed if, as you phrase it, “outstanding bond money is owed that is traced to that property.” Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve. Sincerely, DUSTIN McDANIEL Attorney General DM/JHD:cyh Enclosure

16 Cf. Op. Att’y Gen. 2008-091 (opining that, “under either the constitution or statutes,” the existence of a district’s bonded indebtedness would not foreclose a sale of school property when the indebtedness would remain the district’s obligation).

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 Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 2

The District believes the Agreement provides a valuable educational benefit to the District and is for a permissible educational purpose as:

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.

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 3 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,”1 that “[n]o 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,”2 and that taxes levied for maintenance and operation of the schools will be used exclusively for that purpose.3 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.”4 Regarding the application of Article 14, §§ 2 and 3, the Arkansas Supreme Court has declared:

The former section prohibits the use of money or property belonging to the state school fund for any other than the purpose to which it belongs. The latter prohibits the annual tax voted by the electors of the district from being used for any purpose other than the maintenance of schools, the erection and equipment of school buildings and the retirement of existing indebtedness.5

In addition, Amendment 74 to the Arkansas Constitution, establishes a uniform rate of tax for school districts to be “used solely for maintenance and operation of the schools.”6 This amendment further allows for the levy of taxes in excess of the uniform rate for “maintenance and operation of the schools and the retirement of

1 Ark. Const. art. 14, § 1. 2 Ark. Const. art. 14, § 2. 3 Ark. Const. art. 14, § 3. 4 A.C.A. § 6-13-620(a)(12) (Supp. 2011). 5 Rainwater v. Haynes, 244 Ark. 1191, 1195, 428 S.W.2d 254 (1968) (emphases added). 6 Ark. Const. amend. 74, § (b)(1) and (b)(3).

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 4 indebtedness.”7 Subsection (d) defines “maintenance and operation” as being “such expenses for the general maintenance and operation of schools as may be defined by law.” In defining the general powers of school districts, the Arkansas Code provides in pertinent part:

The board of directors of each school district in the state is charged with the following powers and required to perform the following duties in order to provide no less than a general, suitable, and efficient system of free public schools:

(6) Understand and oversee school district finances required by law to ensure alignment with the school district's academic and facility needs and goals, including without limitation:

* * *

(D) Entering into contracts for goods and services necessary to operate the school district;

* * *

(7) Ensure that:

(A) Necessary and sufficient facilities are built or obtained,

furnished, and maintained; . . . and

* * *

(11) Do all other things necessary and lawful for the conduct of efficient free public schools in the school district.8

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 7 Id. at subsection (c)(1). 8 A.C.A. § 6-13-620 (Supp. 2011) (emphases added).

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 5 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.” (Emphasis added.) Uncoincidentally, my predecessor’s use of the term “necessary” in this passage echoes the term used in the statute recited above. Your apparent concern is that the expenditure at issue in your request would likewise involve school district expenditures for the improvement of property that does not belong to the district itself, raising the question of whether such expenditures might be deemed “necessary” as that term is used in this application. In Gray v. Mitchell,9 the court directly clarified the scope of the term “necessary” in terms of the constitutional restrictions upon school district expenditures. The court prefaced its analysis with the following summary of its prior pertinent rulings:

This court has previously interpreted article 14, § 2, and said that “[t]he Constitution . . . prohibit[s] the Legislature from applying the common school fund to any other branch of state expenditures except that immediately and directly connected with the establishment and maintenance of a common school system.” Little River County Bd. of Educ. v. Ashdown Special Sch. Dist., 156 Ark. 549, 556, 247 S.W.70, 72 (1923). Thus, a school board, like the legislature, is limited to spending school money for expenses immediately and directly connected with the establishment and maintenance of schools. This court has also said that “the proper authorities (such as the trustees of a school district) may, in their discretion, make any expenditure of the [public school] funds which is absolutely necessary for the proper maintenance of the school intrusted [sic] to

9 373 Ark. 560, 373 Ark. 560, 285 S.W.3d 222 (2008).

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 6

their charge.” Bd. of Educ. of Lonoke County v. Lonoke County, 181 Ark. 1046, 1054, 29 S.W.2d 268, 272 (1930).10

Having offered this summary, however, the court interpreted the formulation just quoted 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. Rainwater v. Haynes, 244 Ark. 1191, 1195, 428 S.W.2d 254, 257 (1968).11

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.”12 This conclusion is fully consistent with a 10 Id. at 568 (emphasis added). 11 Id. at 568-69 (emphasis added). Although it was directly addressing in these formulations the application of Article 14, § 2, the court noted that this standard is for all practical purposes coextensive with that applicable to expenditures made under the authority of Article 14, § 3:

Although this court has not previously interpreted the current version of art. 14, § 3, we hold that it requires nothing more than article 14, § 2. Under section 2, an expenditure must be “immediately and directly connected with the establishment and maintenance of a common school system.” . . . Clearly, any expenditure that meets this requirement will be one that is “for maintenance and operation of the schools.” Ark. Const. art. 14, § 3 (as amended by Ark. Const. amend. 74) . . . .

Id. at 469 (citations omitted). 12 Id.

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 7 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”13 As one of my predecessors has noted:

The Arkansas courts have long interpreted this statute [A.C.A. § 6-13-620, which defines a school district board’s powers] as allowing school boards wide latitude in governing their districts. See, e.g., Safferstone v. Tucker, 235 Ark. 70, 72, 357 S.W.2d 3, 4 (1962); Isgrig v. Srygley, 210 Ark. 580, 197 S.W.2d 39 (1946). See also Springdale Board of Education v. Bowman, 294 Ark. 66, 69, 740 S.W.2d 909, 910 (1987); Leola School District v. McMahan, 289 Ark. 496, 498, 712 S.W.2d 903, 905 (1986). The courts have further held that they will not substitute their judgment for that of a school board with regard to policy matters, unless the school board, in enacting the policy in question, abused its discretion or acted arbitrarily, capriciously, or contrary to law. Id. The court in Leola, supra, explained “arbitrary and capricious” action by a school board as being action that is not supportable “on any rational basis.” Leola, 289 Ark. at 498, 712 S.W.2d at 905. It should be noted that the party challenging the school board’s policy has the burden of proving the board’s abuse of discretion by clear and convincing evidence. Springdale, 294 Ark. at 69, 740 S.W.2d at 910.14

The opinion that has apparently prompted your concern is ultimately consistent with the foregoing. In offering his guarded opinion, my predecessor declared that he was guided by the following:

A school board will be granted some discretion in determining necessary expenditures. See Board of Education of Lonoke County v. Lonoke County, 181 Ark. 1046, 29 S.W.2d 268 (1930), citing Taylor v. Matthews, 75 S.E. 166 (1912). I have previously stated, however, that “the court has held that expenditure of school funds must be ‘confined to public schools’ and ‘absolutely necessary’ for proper maintenance of the school in the discretion of the directors. Additionally, the court in Magnolia [School District No. 14 v.

13 Ark. Const. art. 14, § 1. 14 Ark. Op. Att’y Gen. No. 2000-270, quoted in Op. Att’y Gen. No. 2012-060.

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 8

Arkansas State Board of Education, 303 Ark. 666, 799 S.W.2d 791 (1990)] has stated that the expenditure must result in benefits to school funds or property or aid in the stated purposes for which the funds may be expended.” Op. Att’y. Gen. No. 2003-349.15

This formulation, although serving as a basis for my predecessor’s tentative speculation that a fact-finder might question the expenditure there at issue, does no more than summarize the above stated requirements that school district expenditures be “absolutely necessary.” Although the court in Gray did not declare itself as departing from precedent, its pronouncements serve to mitigate what might otherwise be deemed the restrictive effect on school-district expenditures of the “absolutely necessary” standard articulated in Lonoke County.16 The court in Gray went out of its way to stress not only that the term “absolutely necessary” should not be read as limiting school boards to approving only expenditures that qualify as crucial to the public schools’ operation, it further stressed that a school board has considerable discretion in determining what expenditures indeed qualify as “convenient, useful, appropriate, suitable, proper or conducive to the proper maintenance of the schools” – i.e., in determining what expenses are “absolutely necessary” in the limited sense of that term that applies in determining their constitutional propriety. 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.17 In my opinion, the expenditures contemplated in the Agreement would be deemed impermissible only if they could not rationally be

15 Op. Att’y Gen. No. 2004-118. 16 I note in this regard that the court’s “absolutely necessary” coinage in Lonoke County, which likely prompted my predecessor’s caution regarding the proposed expenditure he addressed, incorporates a restrictive adverb totally absent in the constitutional provisions recited above. 17 In this regard, the Code contemplates that, subject to monitoring by the State Board of Education, a school district might devote its facilities to “recreation purposes” apparently benefitting non-students, so long as this use is “secondary” and the facilities are used “primarily for the purpose of conducting the regular school curriculum and related activities.” A.C.A. § 14-54-1307 (Repl. 1998).

The Honorable Michael Lamoureux State Senator Opinion No. 2013-124 Page 9 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.18 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. Sincerely, DUSTIN McDANIEL Attorney General DM/JHD:cyh

18 This consideration, for instance, may have informed my predecessor’s speculation about the propriety of the expenditure he addressed in his opinion.