Honorable J. W. 

Commissioner of 

Texas Education 

Austin, Texas 

Dear Mr. Edgar: 

March 30, 1964 

Edgar Opinion No. C- 232 

Education 

Agency Re: Whether the Texas Education 

Agency should, in determining 

the economic Index and in 

calculating the amount of 

local funds to be charged 

to each scho,ol district in 

Harrison County, remove from 

the total ‘value added by 

manufacture" the value of 

products manufactured on 

federally-owned military 

reservations in Harrison 

County. 

Your office has requested an opinion on the following 

question: 

'In determining the economic index and 

in calculating the amount of local funds to 

be charged to each school district In Harrison 

County, legally may and should the Texas Education Agency remove from the total ‘value added 

by manufacture' for Harrison County the value 

of p~roducts manufactured at Longhorn Ordnance 

Works?" 

The facts contained in your statement are the following: 

"Located within the Karnack Independent 

School District in Harrison County Is a government-owned and controlled installation known as 

'Longhorn Ordnance Works.' It reportedly comprises (8,50~ acres) 13.32 square miles of area 

in the Karnack district which has 114 square 

miles of territory. For purposes of Section 5 

of Article 2922-16, the Longhorn Ordnance Works 

installation is recognized by this Agency as a 

Federal-owned military reservation within the 

-1124- 
Hon. J. W. Edgar, page 2 (C-232) 

confines of the Karnack district; the school 

district enjoys an adjusted reduction in its 

local fund assignment therefor as prescribed 

and provided Sn the law. 

"This reservation (Longhorn Ordnance Works) 

and its facilities are not assessed for taxes; 

it does not comprise any portion of the assessed 

valuation in or for Harrison County. The reservation is under the direct control of the United 

States Army, Ordnance Corps; all its lands and 

facilities sre owned by the Government. 

'The Government has contracted with a 

corporation (Thlokol Chemical Corporation) for 

the manufacture and sale of certain rocket fuels. 

All,payments are made to Thlokol by the United 

States Army; all its products are sold exclusively 

to the Qovernment. All expenditures of every kind 

including payrolls and manufacture made by Thlokol 

are reimbursed to Thiokol by the Government, subject to approval and acquiescence of the ffovernment. 

Located upon the reservation are reservation employees of the Government, under the direction of 

its Commanding Officer. 

'In determination of the economic index for 

Harrison County, there has been included~the 

factor, 'value added by manufacture', for Harrison 

County pursuant to subdivision c.(Artlcle 2922-16, 

Section 3). The total value added by manufacture 

for Harrison County encompasses the value of products manufactured at the reservation by Thiokol 

which are rocket fuels, their value being collectively reported under the broad category, transportation equipment, in Department of Commerce 

Reports. The economic index calculated by this 

Agency for Harrison County does not include nor 

add a value for 'payrolls' at Thlokol; this because the reservation or Thlokol is not recognized 

as a retail, wholesale or service establishment 

referred to in subdivision c for payroll factor 

purposes. 

"A school district in Harrison County. . . 

vigorously complains and contends that value 

of manufacture of products manufactured at 

Thlokol legally should not have come Into the 

-1125- 
Hon. J. W. Edgar, page 3 (C- 232) 

calculations of the economic Index for Harrison 

County, that such value should have been ascertained from proper Government reporting agencies 

and deducted from the total 'value added by manufacture,' determined for Harrison County In arriving at that county's economic index. Further, 

that not to deduct such 'value' results in an 

Improper and unfair charging of higher local 

fund assignments against the local school districts of Harrison County and particularly the 

Marshall district; that the law itself contemplates that value of manufacture of tax exempt 

reservations or corporations, such as Thlokol, 

should not be used In arrlvlng at the economic 

index.' 

Section 3 of Article 2922-16, In so far as pertinent 

to the presentation herein, prescribes as follows: 

'In determining the taxpaying ability of 

each school district, the State Commissioner 

of Education, subject to the approval of the 

State Board of Education, shall calculate an 

economic index of the financial ability ofeach county to support th F d tl School 

Program. The economic inzex"xy E c&ty shall 

be calculated to approximate the 

the total taxpaying ability in the =$%%%ich 

is in a given county, and shall constitute 

for the purpose of thisAct a measure of one 

county's ability to support schools in relation 

to the ability of other counties of the State. 

.The economic index for each county shall be 

,based upon and determined by the following 

weighted factors: 

a. Assessed valuation of the county, 

weighted by. . .(20); 

b. Scholastic population of the county, 

weighted by. . .(8); 

c. Income for the county measured by: 

Value added by manufacture, value 

of minerals produced, value of agricultural products, payrolls for retail 

establishments, payrolls for wholesale 

establishments, payrolls for service 

establishments, weighted collectively 

by. . .(72). 

-1126- 
- . 

Hon. J. W. Edgar, page 4 (C-232) 

!I ‘I 

. . . 

Se&Ion 5 of Article 2922-16 recites the formula 

for determination (annually) of the amount of local funds 

to be charged to each school district in support of its local 

school operation as follows: 

"Divide the State and county assessed 

valuation of all property in the count 

ject to school district taxation I53%e%&t 

preceding school year Into the State and county 

assessed valuation of the district for the next 

preceding school year, findlng the district's 

percentage of the county valuation. Multiply 

the district's percentage of the county valuation by the amount of funds assigned to all of 

the districts in the county. The product shall 

be the amount of local funds that the district 

shall be assigned to raise toward the financing 

of its foundation school program. 

"Provided, however, that in any district 

containing. . ., Federal-owned military reservations. .' .the amount assigned to such school 

district shall be reduced In proportion that 

the area included in the above-named classificatiol;f. bears to the total area of the district. 

. . . 

Section 3 of Article 2922-16 of Vernon's Civil 

Statutes provides that the Texas Education Agency shall calculate an economic index of the financial ability of each 

county to support the Foundation School Program. It further 

provides three guides to measure the wealth of a county: 

land value, (2) scholastic population and (3) Income. In(%.s 

instance we are concerned with the third, i.e., Income, specifically, income for the county measured by value added by manufacturing within that county. 

Although there is a specific exclusion of federallyowned military reservation areas in the county, this office can 

find no extilusions in the statutes or cases which would support 

a contention that income created ,by the manufacturing of transportation equipment (rocket fuel) on a federal reservation by 

an independent contractor should not be included In determining 

the economic index of a county. 

Furthermore, we cannot conceive of any reason why, 

from an economic standpoint, the income from a manufacturing 

-1127- 
Hon. J. W. Edgar, page 5 (C- 232) 

independent contractor, who sells all of his manufactured 

products to the Federal Government , is not the same and should 

not stand on the same footing as other manufacturing concerns 

in arriving at the economic index of a county. 

SUMMARY 

In determining the economic index and In 

calculating the amount of funds to be charged 

to each county, the Texas Education Agency 

should include the income for the county using 

the "value added by manufacturing" of an independent contractor on a federally-owned military 

reservation. 

Yours very truly, 

WAQQONER CARH 

Attorney General 

BMjr:sj:mkh 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

Pat Bailey 

Paul Phy 

Paul Robertson 

Gordon Appleman 

BY'B&r!!%?~ 

Assistant ' * 

APPROVED FOR THE ATTORNEY GENERAL 

BY: H. Grady Chandler 

-1128-