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Texas Ban on Board Business Conflicts Stirs Controversy

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After nearly a quarter of a century of service on the Deer Park, Tex., school board, Joe Cathey is in the unexpected position this fall of possibly jeopardizing his district's ability to do business.

Mr. Cathey is caught up in a new state conflict-of-interest law that prohibits school boards from contracting with businesses in which a board member or the member's spouse has a "significant interest.''

Mr. Cathey, a retiree, receives a pension from and owns stock in Southwestern Bell, which provides telephone service to the schools in Deer Park, a Houston suburb.

Along with a few others, Mr. Cathey will be in state court next week seeking an injunction against the law passed last spring, which opponents claim could affect as many as a third of the state's 6,600 school board members.

"In some instances, [the law] would paralyze entire school boards,'' warned Randall Buck Wood, the plaintiffs' lawyer.

Although Mr. Cathey's example may be an extreme one, it clearly illustrates some of the difficult issues that have arisen out of the legislature's attempt to insure that school board members not be able to take advantage of their position.

"If they choose to participate on school boards, they shouldn't expect to be given preferential treatment,'' said Rep. Ciro D. Rodriguez, the sponsor of the measure.

An Old Question

The new Texas law and an ethics measure adopted last year in New Jersey represent the latest action on the legislative front in dealing with the sensitive issue of establishing a code of conduct for board members.

Athough the states approach the issue differently, neither is in the vanguard of state efforts to crack down on alleged abuses.

Ethics and conflict-of-interest laws for board members go back to the early 1970's, according to Kathy Christie, an information specialist at the Education Commission of the States.

In 1972, Georgia and Maine became the first states to pass legislation prohibiting teachers from holding school board posts. In 1978, Kentucky, Ohio, and South Carolina outlawed school board members from holding state offices.

In 1977, better than half a dozen states passed anti-nepotism laws barring school board members from hiring relatives or blocking relatives of school employees from becoming board members.

Since then, legislative moves to set ethical standards and restrictions on board members have continued. Many states have adopted disclosure laws, under which board members are required to disclose any personal benefits derived from district business and, in some instances, to abstain from voting.

One of the most controversial efforts has been in Kentucky, where the 1990 school-reform law barred board members from doing business with the district or having relatives on the payroll. The ethics provisions were the most politically touchy issue during legislative work on the bill, and state actions to enforce them have generated extensive debate and led to the removal of several board members.

Disclose and Abstain

Until late spring, Texas also had a "disclose and abstain'' law.

Just before adjournment, however, Representative Rodriguez managed to tack a comprehensive conflict-of-interest amendment onto a bill banning current school board members from negotiating with their districts for jobs.

Mr. Rodriguez, a school board member for 12 years, said he introduced the amendment because he knew of a number of instances statewide in which board members did business with their districts.

For example, the lawmaker said, the owner of a sporting-goods company sells athletic equipment to the district where he serves on the board. In another instance, a banker serves on a board that has its assets invested in the board member's bank.

"This is an issue that has to be dealt with,'' Mr. Rodriguez said.

But opponents of the law contend it will make the system unworkable.

"The biggest problem we have had with this is [board members] could never be sure if they were breaking the law,'' said Frank Battle, the legislative counsel for the Texas Association of School Boards.

Mr. Battle argued that the law actually conflicts with other state statutes, such as one that requires districts to publish notices in local newspapers. In small towns, though, it is not uncommon for prominent community members both to own local newspapers and to serve on school boards.

'A Kind of Catch-22'

"This creates a kind of Catch-22,'' Mr. Battle said. "The board can't enter into a contract with the newspaper, but the board is required to enter into a contract with the newspaper.''

Opponents also contend that the term "significant interest'' is troublesome. "What is significant?'' Mr. Battle asked. "There is no case law establishing what is significant.''

Initially, school board officials feared that the term would be equated with "substantial,'' which Texas law defines as 10 percent or more of an individual's income. But an opinion issued by Attorney General Dan Morales ruled against a specific standard, instead leaving considerable discretion over the definition to the local boards themselves.

Mr. Rodriguez insists that the bill was not intended to block employees of utility companies or major corporations from serving on school boards, unless they were rewarded for voting in a way that benefited their employers. Rather, he said, it was intended to abolish self-enrichment.

The attorney general agreed. "We believe it is evident that [the measure] was designed, however imperfectly, to permit a school district to contract with, for example, Southwestern Bell, even though one of its trustees is an employee of that company,'' Mr. Morales wrote. "It is manifest that the intent of this legislation was to proscribe self-dealing.''

Unlike most other states with disclosure requirements, New Jersey also created a school-ethics commission with the specific task of insuring that school board members and administrators comply with the law.

'A More Honest System'

During its first year of operation, the commission forced the resignation of a dozen school officials.

"We had tried to get a more stringent law, but we couldn't get it through committee,'' said Paul J. Contillo, the chairman of the panel.

A Democratic senator defeated for re-election in 1991, Mr. Contillo was the sponsor of the legislation.

The former lawmaker said he had hoped to abolish nepotism, block teachers from serving on school boards, and bar teachers' spouses from sitting on collective-bargaining negotiating teams.

He cited one school board member with a wife, daughter, and son all working for the district, yet the law could not touch them.

"The biggest expenditure of dollars in the municipalities and at the state level seems to be the education budget,'' Mr. Contillo said. "It's getting higher and higher, but there is no evidence that the children are getting a better education out of it.''

"From my perspective,'' he continued, "at least I thought the children would get a better education if we got a cleaner and more honest system of hiring and contracting.''

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