Constitutionality of Tuition Deregulation

- the following memo on the Constitutionality of Tuition Deregulation(pdf) was received from an anonymous UT Austin Law student by UT Watch in April 2004



MEMORANDUM


TO: XXX

From: XXX

Date: Wednesday, April 28, 2004

Re: Constitutionality of Tuition Deregulation




Statement of Fact

The 78th Legislature passed, and the Governor of Texas signed into law House Bill 3015 (H.B. 3015). The legislation divested the Texas Legislature of its authority to set maximum tuition rates and empowered the individual university governing bodies to set tuition rates. These governing bodies are composed of gubernatorial appointees and are completely insulated from public accountability. Furthermore, the state's primary auditing agency (Comptroller for Public Accounts) does not audit the university system, giving university officials the ability to waste taxpayer and tuition dollars in massive amounts unchecked.

In conjunction with H.B. 3015, the Legislature reduced funding for higher education as part of an overall effort to balance the state's budget disproportionately on the backs of students. Several state universities have already announced plans to increase tuition by significant amounts, especially the University of Texas at Austin. Some interested organization should explore possible legal remedies to prevent these increases from becoming effective and perhaps even restoring the people's influence over the tuition-setting process.


Question Presented

Has the Texas Legislature violated the non-delegation doctrine articulated in Article II § 1 of the Texas Constitution by enacting H.B. 3015?


Brief Answer

Maybe. It will depend on whether or not H.B. 3015 gives the universities standards in setting tuition that are reasonably clear and hence acceptable as standard of measurement.


Discussion

Article II, § 1 reads as follows:

The powers of the Government of the State of Texas shall be divided into three distinct departments, each of which shall be confided to a separate body of magistracy, to wit: Those which are Legislative to one; those which are Executive to another, and those which are Judicial to another; and no person, or collection of persons, being of one of these departments, shall exercise any power properly attached to either of the others, except in the instances herein expressly permitted.

In applying this provision, the Texas Supreme Court has held that the, "power to pass laws rests with the Legislature, and that power cannot be delegated to some commission or ether tribunal." See Brown v. Humble Oil and Refining Co., 126 Tex. 296, 83 S.W.2d 935 (Tex. 1935). However, courts give great deference to the Legislature in applying this requirement construing this constitutional provision narrowly to uphold delegations. See Texas Boll Weevil Eradication Foundation, inc. v. Lewellen, 952 S.W.2d 454 (Tex. 1997). As Texas Boll Weevil illustrates, the courts apply different standards for delegations to public and private entities, and it is the seminal case on delegations to private entities.

When the court considers a delegation of legislative authority to a government agency, it follows a string of cases following a similar analysis to Housing Authority of the City of Dallas v. Higginbotham. In that case, the Texas Supreme Court held that the legislature must adopt standards which guide the agency in setting policy. See Housing Authority of City of Dallas v. Higginbotham, 135 Tex. 158, 143 S.W.2d 79 (Tex. 1940).

A clear statement and application of the test came out of a case involving court reporter fees, which held that the constitution requires the delegation of power to include sufficient and adequate standards to guide the discretion conferred. See In re Johnson, 554 S.W.2d 775 (Tex. Civ. App. - Corpus Christi 1977).

In Johnson, the Corpus Christi Court of Civil Appeals gave the non-delegation doctrine a fairly liberal construction and struck down a statute which gave a trial court the authority to set court reporter fees. The statute granted trial courts authority to determine the, "reasonable amount subject to the approval of the judge of the court if objection is made thereto, taking into consideration the difficulty and technicality of the material to be transcribed and the time within which the transcript is requested to be prepared." The court made it clear that the Legislature need not set definite maximum and minimum limits but found this delegation to be too subjective and arbitrary and struck it down.

In another case, the Texas Supreme Court held a delegation of authority to the Lower Colorado River Authority to be constitutional. The provision permitted the Authority to set water rates, but it contained extensive guidelines as to how high the rates should be. Specifically, it stated that they must be high enough to cover particular expenses as well as what to do with any surplus. See Lower Colorado River Authority v. McGraw, 125 Tex. 268, 83 S.W.2d 629 (Tex. 1935).

The most recent, major case involving the non-delegation doctrine is Edgewood Independent School Dist. v. Meno. In Edgewood ISD, the Supreme Court showed more willingness to uphold delegations and has slightly reworded the test. The court has held that separation of powers requires that standards of delegation be reasonably clear and hence acceptable as standard of measurement. In Edgewood ISD the court upheld a delegation of authority to the Commissioner of Education to modify funding elements to the Foundation School Program to match those funding elements with appropriations. Holding that this was merely a "ministerial calculation," it does not require more extensive standards. With minimal discussion, the court also upheld the commissioner's annexation, detachment, and consolidation authorities, citing "specific, objective criteria." See Edgewood Independent School Dist. v. Meno, 917 S.W.2d 717 (Tex - 1995).

Edgewood ISD was applied by the Austin Court of Appeals (which would be controlling legal authority over a hypothetical case against UT Austin) this year in a discouraging case involving the Public Utilities Commission. In that case, the Austin Court upheld a statute that empowered the P.U.C. to enforce the right of a property owner to require a utility to pay "reasonable" and "nondiscriminatory" compensation when a utility gains access to property. The case also interjected comments suggesting that the public interest in the delegation is relevant in deciding how stringently the court should apply the non-delegation doctrine. Unfortunately, the case also limited Johnson to delegations to the judicial branch of government, See Texas Building Owners and Managers Association Inc. v. Public Utilities Commission of Texas, 110 S.W.3d 524 (Tex. App. - Austin 2003).


Conclusion

It is difficult to predict with certainty what a court would do with a possible suit to throw out H.B. 3015 under the non-delegation doctrine. It appears that the Austin Court of Appeals is somewhat hostile to the non-delegation doctrine perhaps because virtually all regulatory agencies are located within its jurisdiction making it somewhat beholden to them. Either way, the case is worth examining further because H.B. 3015 grants broader authority than any of the examples referenced above or in the cases I examined.

The relevant portion of the legislation reads as follows:

In addition to amounts that a governing board of an institution of higher education is authorized to charge as tuition under the other provisions of this chapter, the governing board, under the terms the governing board considers appropriate, may charge any student an amount designated as tuition that the governing board considers necessary for the effective operation of the institution.

The bold text is the relevant standard that would be under scrutiny by a court.

H.B. 3015 should fail under Edgewood I.S.D., because the delegation standard is not "reasonably clear" and certainly provides no acceptable standard of measurement. Unlike the standards imposed on the Education Commissioner, the universities are not performing a ministerial calculation (not tied to appropriations), and they are not subject to any objective or specific criteria. The H.B. 3015 standard is entirely subjective and is essentially nothing more than the arbitrary whims of university trustees. Furthermore, unlike the standard under review in Lower Colorado River Authority, H.B. 3015 does not tie tuition rates to any expenses.

Texas Building Owners and Managers Association is our biggest hurdle. It upheld a standard that, like H.B. 3015, is extremely broad. However, it is somewhat more objective in including the term "nondiscriminatory." The big issue could be the policy issues at play, which could determine how liberally or how strictly the court will apply the non-delegation doctrine. Frankly, I think the court could go either way on that matter. Students will obviously argue that the accessibility of higher education favors a liberal construction, while the university would argue that balancing the budget and promoting the interests of the university favor a strict construction. They would further argue that large amounts of the increased tuition will go into need-based scholarship programs.

The university will certainly argue that the bill's statement of legislative intent effectively imposes a standard. The statement of intent indicates that as a condition of enacting tuition deregulation:

each institution shall make satisfactory progress towards the goals provided in its master plan for higher education and in "Closing the Gaps," the state's master plan for higher education; and (2) each institution shall meet acceptable performance criteria, including measures such as graduation rates, retention rates, enrollment growth, educational quality, efforts to enhance minority participation, opportunities for financial aid, and affordability.

I am not entirely sure whether or not a court would view this as a standard. None of the cases I reviewed involved such a statement. If I represented the university, I would argue that it does constitute a form of standard. However, that is unpersuasive in my view because it does not actually impose any limitations on the university's authority. It is essentially a guide for the legislature's oversight committee which is supposed to monitor the implementation of tuition deregulation. However, it does not actually impose any standard and it would be totally useless if a plaintiff wanted to allege that the university was not meeting the goals mentioned in the statement of legislative intent.