Summer 2008

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Message from the General Counsel

It has been a long, hot summer in Texas.  Now in early September, it sure seems like fall is around the corner, but as usual I suspect we have more summer to endure.  Thus, in this issue of The Foreseeable Future, we bring you commentary on a quartet of issues that never seem to go away:  FERPA, Procurement Ethics, Indigent Healthcare and Debt Reporting.  Whether we like it or not, these issues are always on our plates.  We have written about them before and I am sure we will again, but hopefully each time we will provide some valuable insight.

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New Attorneys at OGC

Please join me in welcoming a new attorney to OGC:

  • Neera Chatterjee, General Law Section, Public Information Coordinator

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FERPA and Student Directory Information

by Barbara Holthaus (General Law)

The Family Educational Rights and Privacy Act (FERPA) of 1974. (20 U.S.C. 1232g) is a federal law intended to protect the privacy of educational records, and to establish the right of students to inspect and review their own non-privileged educational records. FERPA requires that a University may not have a policy or practice of permitting the release of a student’s “education records” without the written consent of the student unless within a specific exception recognized within the FERPA regulations. For example, there is an exception that permits “a University official with a legitimate educational interest in a student’s education record” to access those records without obtaining the student’s consent or even notifying the student. 34 CFR § 99.31(a)(1).

FERPA regulations define education records very broadly to include virtually all records maintained by an educational institution, in any format, that are “directly related” to one or more of its past or present students. (See NACUANOTES, August 6, 2007, Vol. 5, No. 4.) A record is “directly related” to a student if it is “personally identifiable” to the student. It includes records that are publicly available elsewhere even if the student has publicly disclosed the same information elsewhere such as the student’s e-mail, street address or phone number. As discussed below, even verifying that an individual is enrolled in the University as a student can be a FERPA violation in some circumstances.

Directory Information

One important FERPA exception permits a University to designate certain information from a student’s education record which would not generally be considered harmful or an invasion of privacy if disclosed. 34 CFR § 99.37.  This information is collectively referred to as “Directory Information.”  Subject to “opting out” (see below) a university may, but is not required to, release “Directory Information” without seeking written permission of the student. 34 CFR § 99.31(a)(11).

The Office of General Counsel’s Model FERPA policy states that UT System institutions will designate the following minimum information as directory information: “student's name; local and permanent address; email address; telephone number; date and place of birth; field of study; dates of attendance; enrollment status; student classification; degrees, certificates and awards (including scholarships) received; photographs; participation in officially recognized activities and sports; weight and height of members of athletic teams; and the most recent previous educational agency or institution attended.”

Proposed amendments to the FERPA regulations at Sec. 99.31(a)(1)(ii) would amend the definition of Directory Information to state that a student’s “student identification number” may not be designated as directory information but “a student’s “user ID” or other unique identifier that can be used alone by a student to access the students’ records or authenticate the students’ identity with in an electronic system may be included as Directory Information but only if the electronic identifier cannot be used to gain access to education records except if used in conjunction with a separate authentication method such as a personal identification number (PIN), password, or other factor known or possessed only by the student.”  In other words, a student identifier cannot be disclosed as directory information if it can be used by itself to authenticate identity or to gain access to education records. UT System and other commenters have concerns that the use of the terms “student identification number” and “student user ID” are so similar that the use of these terms may cause confusion and have requested that this provision be clarified in the finally adopted regulations.

“Opting Out” of the Directory Information Exception

Unlike other FERPA exceptions, the university must give students a choice as to whether their Directory Information may be shared without their consent. Section 99.37(a)(1) requires the University to notify each student annually as to the information it has designated as student Directory Information. Section  99.37(a)(2) requires the University to provide the student with opportunity to opt out of any release of his or her directory information under the exception. The OGC Model FERPA policy provides a form notice that includes the opt out notice  and provides that the notice “be provided by the University of Texas educational institution in a manner reasonably likely to inform students of their rights and the procedures for exercising their rights.” (See Model Notification of Rights under FERPA for Postsecondary Institutions.) The OGC Catalog checklist indicates that UT institutions should include the FERPA notice in the institution’s student catalogs.

 If a student opts out, the University must honor the student’s request and may not release any directory information unless the student either signs a written consent or another FERPA exception applies. Since an education record would include a record that the student is enrolled, no one at the University may even acknowledge that an “opt out” student is enrolled there in the absence of a consent form or an exception,  

An “opted out” student’s name, e-mail address, phone number or other directory information cannot be included in the University’s student directories including any on-line directories or even an address book feature for the University’s e-mail system if the directory or address can be accessed by members of the public or other students or staff.  Therefore, in addition to maintaining a system that allows a University to flag student records and ensure that record custodians need to check to see if a file is flagged for non-release of directory information when responding to directory information requests, universities must ensure that their IT departments or vendors to whom student e-mail services have been outsourced can and do exclude students who have opted out when creating on-line directories, e-mail address books and directories or other databases that contain student directory information.

As noted above, another FERPA exception does  permit University faculty and staff to access a student’s specific education records without the student’s consent if the faculty or staff is designated as, or meets the University’s definition of, “a University official with a legitimate educational interest in that particular student record”.  However, a University must also have procedures and/or policies to ensure that staff and faculty who do NOT have a legitimate interest in the record may not access such a record absent consent or another applicable FERPA exception.

For example, the registrar and her staff may all have a legitimate interest in all students names and e-mail addresses but unless a student is enrolled in a faculty member’s class or the faculty member is the students advisor, the faculty member probably has no legitimate interest in a student’s name and e-mail address if the student has requested that his directory information not be released. A University groundskeeper probably has no legitimate interest in any students name and e-mail address and should never be able to find such information about a student from a University’s records.  On the other, the fact that the student has opted out of directory information would have no impact on the right of that staff or faculty member to access that student’s records under another FERPA exception- a student cannot block the ability of faculty or staff that does have a legitimate interest in a record to access that record.

Proposed amendments to the FERPA regulations at  Sec. 99.31(a)(1)(ii) clarify that schools must use “reasonable methods” to ensure that faculty and other school officials obtain access to only those education records in which they have a legitimate educational interest. There is some  indication that the DOE would prefer that such methods involve physical or technological barriers to bar access rather than the adoption of administrative policies that prohibit such access.  In comments  submitted to DOE on to the proposed amendments, UT System and other commenters have requested confirmation that the FPCO will recognizes that schools must  retain the ability to ensure that access properly limited through administrative policies as well as since it could be impossible and/or cost prohibitive to implement a data system to automatically mandate compliance.  The final amended regulations along with the DOE’s responses to the comments submitted about the proposed amendments are expected be issued sometime in mid-December of 2008.

The Bottom Line:  As with most FERPA issues, the issues surrounding the Directory Information exception are complex. Staff and faculty at UT System institutions should be familiar with these requirements. A good place to start is the OGC Model FERPA Policy.

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Competitive Procurement Ethics

by Dana Hollingsworth (Business Law) and Karen Lundquist (General Law)

All public servants (including UT employees) should know that they may be subject to criminal, civil, and administrative penalties for ethics violations related to the competitive procurement of goods and services.

For example, with limited exceptions, the Texas Penal Code provides criminal penalties for a public servant who accepts a gift or anything of value from a person who is interested in or likely to become interested in a contract or other transaction involving the exercise of the public servant’s discretion. (See Section 36.08, Texas Penal Code.) Although there are exceptions to that rule, such as the exception for non-cash items worth less than $50, it is advisable not to accept any gifts from a potential vendor during the procurement process. Of course, it is always illegal for a public servant to accept a gift in exchange for an official act, including a recommendation or other exercise of official discretion. This action would constitute the offense of bribery under Section 36.02, Texas Penal Code. Criminal penalties also apply to public servants who disclose or use information obtained in the procurement process that (1) the public servant has access to by means of his office or employment; and (2) has not been made public, for a nongovernmental purpose with intent to obtain a benefit or with intent to harm or defraud another. (See Section 39.06, Texas Penal Code.)

The standards of conduct for state employees are also relevant in guiding ethical behavior in state procurements. Among other things, those standards provide that a state employee should not accept gifts that might reasonably be expected to influence the employee in performing official duties, should not accept other employment or compensation that could reasonably be expected to impair the employee’s independence of judgment, and should not make personal investments that could reasonably be expected to create a substantial conflict between the employee’s private interest and the public interest. (See Section 572.051, Texas Government Code.) All UT institutions have adopted policies that further reinforce these standards of conduct. A violation of one of the standards could result in disciplinary action, including termination of employment.

Maintaining Level Playing Field for Participating Vendors and Service Providers

Competitive procurement (including requests for proposal, invitations for offer, and invitations for bid) requires that all participating vendors and service providers be placed upon the same plane of equality and that they each compete upon the same terms and conditions. The competitive procurement process should stimulate competition, prevent favoritism and secure the best goods and services at the lowest practicable price, for the best interests and benefit of Texas taxpayers and property owners. There can be no competitive procurement in a legal sense where the terms of letting the contract prevent or restrict competition, favor a vendor or service provider, or increase the cost of the goods or services. (See Sterrett v. Bell, 240 S.W.2d 516, 520 (Tex. Civ. App.–Dallas 1951, no writ); Texas Highway Commission v. Texas Association of Steel Importers, 372 S.W.2d 525, 527 (Tex. 1963); and Texas Attorney General Opinions JM-940 (1988) and JM-282 (1984).)

Avoiding Conflicts of Interest

To ensure that competitive procurement processes are equitable for all participating vendors and service providers, the employees, representatives, and agents of UT institutions should not participate in or assume any responsibility for procurement decisions if their participation would constitute a conflict of interest.

A conflict of interest could result if the UT employee, representative or agent is currently employed by or receiving any compensation from a vendor or service provider participating in a procurement process. A conflict of interest could also result if the UT employee, representative or agent has been or will be the recipient of any past, present or future economic opportunity, gift, loan, gratuity, special discount, trip, favor, or service, in return for favorable consideration related to (1) any response to a procurement solicitation or (2) any vendor or service provider participating in the procurement process.

Preventing Inappropriate Disclosures of Information and Actions

In addition, UT employees, representatives, and agents may not (1) disclose any information, or (2) take any action, that could be construed to give a direct or indirect advantage or disadvantage to any vendor or service provider participating in the procurement process.The disclosure of information about the contents, status, or ranking of any proposal, offer or bid, to a participating vendor or service provider or to other third parties could give a direct or indirect advantage or disadvantage to a participating vendor or service provider. Prohibited disclosures include, but are not limited to (1) the disclosure of all or any part of any proposal, offer or bid or other information pertaining to the contents, status, or ranking of any proposal, offer or bid, (2) the verbal communication of any information about or contained in any proposal, offer or bid, or (3) verbal communication of other information pertaining to the contents, status, or ranking of any proposal, offer or bid.

With very few exceptions, UT institutions should use commercially reasonable efforts to avoid disclosure of the contents of all responses to procurement solicitations prior to selection of the successful vendor or service provider. Provided, however, when using the invitation for bid procurement process, pricing is generally disclosed at the bid opening. Contents of all responses to a procurement solicitation should be disclosed only in accordance with the Texas Public Information Act. (See Chapter 552, Texas Government Code.) If you have any questions regarding your duties and obligations related to the procurement process, please contact your institution’s primary procurement officer or Dana Hollingsworth in the UT System Office of General Counsel by email or at 512.499.4475..

The Bottom Line:  When participating in the competitive procurement process all UT employees should help maintain a level playing field for participating vendors and service providers by avoiding conflicts of interest and preventing inappropriate actions and disclosures of information.

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Texas Attorney General Opinion GA-0652 and Indigent Health Care Contracts: "Provider Beware"

by Chuck Johnstone (Health Law)

If any medical component provides indigent health care pursuant to a county contract, a recent AG opinion is noteworthy.

Reminiscent of the Popeye comic strip character Wimpy who promised to pay tomorrow for a hamburger today, Cameron County had for years promised to pay over budgeted indigent health care costs out of next year’s tax revenues.

The County auditor described the practice as follows: "[A]fter funds set aside for indigent health care were exhausted, indigent health care for eligible county residents provided for the remainder of the fiscal year would be paid out of the general tax revenue from the subsequent fiscal year.”

The question for the AG was whether such a procedure unconstitutionally created a "debt" within the meaning of the Texas Constitution article XI, section 7. That would render the county’s promise to pay from the following year’s revenue void.

The AG wasted little time in noting that the county did not contemplate paying for its indigent health care contracts entirely from its current tax revenues for the fiscal year. Accordingly, such a arrangement created a "debt" and was unconstitutional. Tex. Att'y Gen.Op. No. GA-0652 (2008)

Further, assurances given by the various county officials that the agreement would be subsequently ratified by the commissioner's court were to no avail. The AG cited the often quoted contractual rule that void contracts cannot later be remedied via ratification.

As a practical matter, GA-0652 allowed Cameron County to avoid paying yearly health care services for any amount that exceeded that year's budgeted indigent health care amount. The AG was careful to note that the facts related to GA-0652 were important because historically the indigent health care contracts never were reasonably contemplated to be paid from current fiscal year revenues.

The Bottom Line: Any UT System institution with a county indigent health care contract must vigilantly ensure that the county pays its medical bills. A delay in payment could mean that the county has depleted its available funds rendering it unable to pay subsequent charges. As GA-0652 illustrates, a county’s IOU from next year’s funds won’t always do the trick 

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Annual Debt Reporting to the Attorney General's Office

by Traci Cotton (Claims and Bankruptcy)

Each state agency is required to report to the Attorney General's office, on an annual basis, the amount of delinquent obligations it is owed as of August 31 of any given year. This reporting requirement is codified in Chapter 2107, Section 2107.005, of the Government Code. Specific elements to be included in the report can be found in Title 1, Part 3, Rule 59.3, Texas Administrative Code (TAC). The report is due by November 30 of each year.

The definition of a "delinquent obligation" is set forth in TAC Rules 59.2 and 59.3. An obligation is broadly defined as any of the following: a debt, judgment, claim, account, fee, fine, tax, penalty, interest, loan, charge or grant. To qualify as delinquent, the payment for the obligation must be past due by law or by customary business practice, and all conditions necessary before requiring said payment must have occurred or must have been performed.

No particular form of report is required, but certain information about the obligations must be included in the report. For example, the total amount of the delinquent obligations must be reported, and should be broken into collectible and uncollectible categories. Information regarding obligations which are included in bankruptcy proceedings; and the amount of obligations secured by judgments should also be included.

The Office of General Counsel (OGC) submits a consolidated report on behalf of all UT System institutions, and coordinates the gathering of information to be included. Your institutional contacts will soon receive detailed instructions and forms for use in complying with this reporting requirement.

The figures included in the Attorney General's statewide report have been used to support recommendations for the expanded use of third party collection agencies and for the broadening of agency authority to contract with law firms. Purchasers of state debt will undoubtedly rely on these figures to request legislation authorizing agencies to sell their debt. As such, it is important that the information UT System reports is as accurate as possible.

The Bottom Line:  Upon receipt of the request for information from OGC, UT System institutions should promptly submit their responses by the stated deadline. Doing so will ensure UT System compliance with this reporting requirement.

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Office of General Counsel
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Austin, TX 78701
Tel: 512.499.4462
Fax: 512.499.4523
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