KBS Reference Desk: Payment Guarantee Requests Due to COVID-19

Q:        Our district is negotiating a contract for transportation services. The vendor has asked us to guarantee payment for a minimum number of 180 days of service. Under the contract, this guarantee payment would be owed to the vendor even if services are interrupted or not provided due to another COVID-19 district closure and the requisite 180 days of service are not met. Should the district agree to this contract provision?

A:        No. The district should not agree to this provision, as it would likely be considered an impermissible grant of public funds under the Constitution and laws of this state.

Permissible use of public funds by governmental entities, such as state agencies and political subdivisions is an age-old, legal concept rooted in important public policy sentiment. Article III, Section 53 of the Texas Constitution provides, in pertinent part, that the Legislature shall have no power to grant, or to authorize any county or municipal authority to grant, any extra compensation, fee or allowance to a public officer, agent, servant or contractor, after service has been rendered, or a contract has been entered into, and performed in whole or in part.

More specifically, this constitutional provision was adopted to prevent counties or municipalities (interpreted to include independent school districts) from freely giving away public moneys for services previously rendered or for which no valid legal authorization existed and for which the public would receive no return (emphasis added). Lee v. El Paso Cty., 965 S.W.2d 668, 673 (Tex. App.—El Paso 1998, pet. denied).  Stated differently, the school district must have a valid legal basis, such as receipt of an actual service, of which the public (or district) would be able to receive a return or benefit in order to grant or commit public funds to a vendor under a contract. Absent this criteria, the granting of public funds to the contractor would likely be viewed as payment of “extra compensation”—any sum given in addition to the contract price or salary, such not merely for being greater or less than the contract, but properly because it is outside the contract (Dallas Cty. V. Lively, 167 S.W. 219, 220 (Tex. 1914)—which is prohibited under Article III, Section 53 of the Texas Constitution.

For specific questions or additional information regarding payment of guaranteed amounts under contracts in light of COVID-19, please consult with your local school law attorney.

Related Posts

Recent Articles

KBS Reference Desk: On Call Employees over 4th of July Holiday
July 1, 2022
KBS Reference Desk: Employment of Students
June 24, 2022
KBS Reference Desk: TOMA Social Gatherings Conventions
June 17, 2022
KBS Reference Desk: Volunteers Under Guardian Plan
June 10, 2022
KBS Reference Desk: DOI and Certification
June 3, 2022
KBS Reference Desk: FML Leave Over the Summer
May 27, 2022
KBS Reference Desk: Decrease in Compensation
May 20, 2022
KBS Reference Desk: Participation in Graduation Ceremonies
May 13, 2022
KBS Reference Desk: Temporary Custodians of Record – TPIA
May 6, 2022
KBS Reference Desk: Driving Students to Polls
April 29, 2022
KBS Reference Desk: Authority to Create New Position
April 22, 2022
KBS Reference Desk: Booster Club Raffle
April 15, 2022
KBS Reference Desk: Returning a Teacher to Probationary Status
April 8, 2022
KBS Reference Desk: Termination of Probationary Contract While On Leave
April 1, 2022
KBS Reference Desk: Long COVID and Special Education Referrals
March 25, 2022
KBS Reference Desk: Pay During Weather Closure
March 18, 2022
KBS Reference Desk: Nepotism
March 11, 2022
KBS Reference Desk: New SBOE Rules on Contract Abandonment
March 4, 2022
KBS Reference Desk: Web Accessibility
February 25, 2022
KBS Reference Desk: Political Advocacy Prohibitions
February 18, 2022
KBS Reference Desk: Pay During Weather Closure
February 11, 2022
KBS Reference Desk: House Bill 2581 Procurement Updates
February 4, 2022
KBS Reference Desk: CDL Waivers for Bus Drivers
January 28, 2022
KBS Reference Desk: Interstate Travel Liability and Travel Forms Best Practices
January 21, 2022
KBS Reference Desk: Updated Stay at Home Periods
January 14, 2022