HonorableJ. W.

Commissionerof 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 calculatingthe 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 productsmanufacturedon federally-owned

military reservationsin Harrison County.

Your office has requested an opinion on the following question:

'In determiningthe economic index and in calculatingthe 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

manufacturedat Longhorn Ordnance Works?"
The facts contained in your statementare the following:
"Locatedwithin the Karnack Independent School District in Harrison County Is a government-owned and controlledinstallation known as 'Longhorn

OrdnanceWorks.' It reportedly comprises (8,50~ acres) 13.32 squaremiles of area in the Karnack districtwhich has 114 square miles of territory. For purposes of Section 5 of Article 2922-16, the Longhorn OrdnanceWorks installationis recognizedby this Agency as a Federal-owned

military reservationwithin 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 assignmenttherefor as prescribed and provided Sn the law.
"This reservation (LonghornOrdnanceWorks) and its facilitiesare 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 facilitiessre owned by the Government.
'The Governmenthas contracted with a corporation (ThlokolChemical Corporation)for the manufactureand sale of certain rocket fuels. All,paymentsare made to Thlokol by the United States Army; all its products are sold exclusively to the Qovernment. All expendituresof every kind includingpayrolls and manufacturemade by Thlokol are reimbursedto Thiokol by the Government,subject to approval and acquiescenceof the ffovernment. Located upon the reservationare reservationemployees of the Government, under the direction of its CommandingOfficer.

'In determination

of the economic index for Harrison County, there has been included~the factor, 'valueadded by manufacture',for Harrison County pursuant to subdivisionc.(Artlcle2922-16, Section 3). The total value added by manufacture for Harrison County encompassesthe value of products manufacturedat the reservationby Thiokol which are rocket fuels, their value being collectively reportedunder the broad category,transportation equipment, in Departmentof Commerce Reports. The economic index calculatedby this Agency for Harrison County does not includenor add a value for 'payrolls' at Thlokol; this because the reservationor Thlokol is not recognized

as a retail, wholesale or service establishment referred to in subdivisionc for payroll factor purposes.
"A school district in Harrison County.

. . vigorouslycomplainsand contends that value of manufacture of productsmanufacturedat Thlokol legally should not have come Into the

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

calculationsof the economic Index for Harrison County, that such value should have been ascertained from proper Governmentreportingagencies and deducted from the total 'valueadded 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 assignmentsagainst the local school districts of Harrison County and particularlythe Marshall district; that the law itself contemplates that value of manufactureof tax exempt reservationsor 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, prescribesas follows:

'In determiningthe taxpaying ability of each school district, the State Commissioner of Education, subject to the approval of the State Board of Education, shall calculatean economic index of the financialability ofeach county to support th F d tl School Program. The economic inzex"xy E c&ty shall be calculatedto approximatethe =$%%%ich the total taxpaying ability in the 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. .Theeconomic index for each county shall be ,based upon and determinedby the following weighted factors:

a. Assessed valuation of the county, weighted by.

. .(20);
b. Scholasticpopulation of the county, weighted by.

. .(8);

c. Income for the county measured by: Value added by manufacture,value of minerals produced, value of agriculturalproducts,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 operationas follows:

"Divide the State and county assessed valuationof 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'spercentage 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 schoolprogram. "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-namedclassificatiol;f. bears to the total area of the district.

. . . Section 3 of Article 2922-16 of Vernon's Civil Statutesprovides that the Texas EducationAgency shall calculate an economic index of the financialability 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 populationand (3) Income. In(%.s instancewe are concernedwith the third, i.e., Income, specifically, income for the county measured by value added by manufacturingwithin that county.

Although there is a specific exclusion of federallyowned military reservationareas in the county, this office can find no extilusions in the statutes or cases which would support a contentionthat income created ,bythe manufacturingof transportation equipment (rocket fuel) on a federal reservationby an independentcontractor 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)

independentcontractor, 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 manufacturingconcerns in arriving at the economic index of a county.
SUMMARY

In determiningthe economic index and In calculatingthe amount of funds to be charged to each county, the Texas EducationAgency should include the income for the county using the "value added by manufacturing" of an independent contractoron 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

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