Mr. Michael Morath 

Commissioner of Education 

Texas Education Agency 

1701 North Congress Avenue 

Austin, Texas 78701-1494 

Dear Mr. Morath: 

KEN PAXTON 

ATTORNEY GENERAL OF TEXAS 

April 24, 2017 

Opinion No. KP-0144 

Re: Whether the computation of state 

funding for school districts rece1vmg 

additional state aid for tax reduction must 

include local option homestead exemptions 

that were determined to be authorized in 

Attorney General Opinion KP-0072 (2016) 

(RQ-0137-KP) 

You ask about your exercise of the duties of the Commissioner of Education as they relate 

to computing state funding for school districts. 1 You tell us your questions arise, in part, because 

of the recent issuance of Attorney General Opinion KP-0072. See Request Letter at 2. 

Opinion KP-0072 examined the effect of 2015 legislation in which the Legislature 

increased the state homestead exemption from $15,000 to $25,000. Tex. Att'y Gen. Op. No. 

KP-0072 (2016) at 1-6. In that l~gislation, the Legislature also added Tax Code subsection 

11.13(n-1) providing that the "governing body of a school district, municipality, or county that 

adopted a [local option homestead exemption, or "LOHE"] under Subsection (n) for the 2014 tax 

year may not reduce the amount of or repeal the exemption." TEX. TAX CODE § l 1.13(n-l ); see 

also id. § 11.13(n) (authorizing the governing body of a taxing unit to provide an additional 

homestead exemption). Opinion KP-0072 concluded that Tax Code subsection 11.13(n-1) 

"prohibits a school district ... from repealing or reducing the local option homestead exemption 

from the amount that was adopted for the 2014 tax year," recognizing that the Legislature froze 

local homestead exemptions at their 2014 level. Tex. Att'y Gen. Op. No. KP-0072 (2016) at 5 

(concluding that subsection 11.13(n-1) is not constitutionally retroactive).2 Your questions arise 

1

See Letter from Mr. Michael Morath, Comm'r of Educ., Tex. Educ. Agency, to Honorable Ken Paxton, Tex. 

Att'y Gen. at 1 (Oct. 26, 2016), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request 

Letter"). 

2Since the issuance of Opinion KP-0072, several school districts repealing or reducing their LOHE in 2015 

contrary to section I I. l 3(n-l) have been sued for tax refunds in various Texas courts by local taxpayers. See, e.g., 

Plaintiff's Orig. Pet. and Application for Temp. Injunction, Martin v. White Deer Indep. Sch. Dist., No. 11807 (1 OOth 

Jud. Dist. Ct., Carson CtY., Tex. filed Sept. 15, 2015) (on file with the Op. Comm.). 
Mr. Michael Morath - Page 2 (KP-0144) 

because the subsection 1 l.13(n-1) prohibition against a LOBE reduction or repeal impacts your 

calculation of the additional state aid for tax reduction ("ASATR"). See TEX. EDUC. CODE 

§ 42.2516. The ASATR calculation involves the determination of a district's local revenue, which 

increases when a district repeals its LOBE. See id. § 42.2516(b )-(f-1 )(1 )-(2). 

Currently, section 42.2516 of the Education Code provides for payment of the ASATR.3 

See generally id. § 42.2516. Within the greater context of determining the amount of state and 

local revenue to which a school district may be entitled under the complex school financing 

formula, the ASATR requires the education commissioner to make adjustments to "a school 

district's local revenue derived from maintenance and operations tax collections." Id. 

§ 42.2516(f-1). Relevant here, subsection 42.2516(f-1) provides that 

[t]he commissioner shall, in accordance with rules adopted by the 

commissioner, adjust the amount of a school district's local revenue 

derived from maintenance and operations tax collections, as 

calculated for purposes of determining the amount of state revenue 

to which the district is entitled under this section, if the district, for 

the 2010 tax year or a subsequent tax year: 

(1) adopts an exemption under Section 1 l.13(n), Tax Code, 

that was not in effect for the 2009 tax year, or eliminates an 

exemption under Section 1 l.13(n), Tax Code, that was in 

effect for the 2009 tax year; 

(2) adopts an exemption under Section l l.13(n), Tax Code, 

at a ... lesser percentage than the percentage in effect for the 

district for the 2009 tax year; .... 

Id. § 42.2516(f-1)(1)-(2); see also TEX. Gov'T CODE § 311.016(2) ('"Shall' imposes a duty."). 

The commissioner's rules must require the commissioner to determine, along with chapter 41, the 

effect of "a school district's action described by Subsection (f-1)(1), (2), (3), or (4) on the total 

state revenue to which the district would be entitled or the cost to the district of purchasing 

sufficient attendance credits to reduce the district's wealth per student to the equalized wealth 

level." TEX. EDUC. CODE § 42.2516(f-2)(1). The commissioner's rules must also "require an 

increase or reduction in the amount of state revenue to which a school district is entitled ... that 

is substantially equivalent to any change in the total state revenue or the cost of purchasing 

attendance credits." Id. § 42.2516(f-2)(2). Your ultimate question is how to reconcile subsection 

42.2516(f-1) of the Education Code and subsection l l.13(n-1) of the Tax Code as you make the 

ASATR calculation for those districts that repealed their LOBE in 2015. 

3The ASATR is expected to be eliminated in 2017. See TEX. EDUC. CODE§ 42.2516(c-1). Several bills in 

the 2017 Legislative Session provide for an extension to the ASA TR. See, e.g., Tex. H.B. 308, 85th Leg., R.S. (2017), 

Tex. H.B. 527, 85th Leg., R.S. (2017). 
Mr. Michael Morath - Page 3 (KP-0144) 

In considering the interaction between Education Code subsection 42.2516(f-1) and Tax 

Code subsection 11.13(n-1 ), we follow the rules of statutory construction utilized by the courts. 

The primary objective in such a task is to give effect to the Legislature's intent as ascertained from 

the plain meaning of the words used in the statute. See City of Houston v. Bates, 406 S.W.3d 539, 

543--44 (Tex. 2013). Courts "analyze [the] language in context, considering the specific sections 

at issue as well as the statute as a whole." CHCA Women's Hosp. L.P. v. Lid.Ji, 403 S.W.3d 228, 

232 (Tex. 2013). To give effect to every word and phrase, a court will not interpret a statute "in a 

manner that renders any part of the statute meaningless or superfluous." Crosstex Energy Servs. 

L.P. v. Pro Plus, Inc., 430.S.W.3d 384, 390 (Tex. 2014). 

The plain language of Education Co.de subsections 42.2516(f-1)(1) and (2) triggers the 

commissioner's duty to make an adjustment only "if the district ... eliminates an exemption under 

Section 1 l.13(n)" or adopts an exemption at a lesser percentage. TEX. EDUC. CODE 

§ 42.2516(f-1)(1)-(2) (emphasis added); see also Hohenberg Bros. Co. v. Gibbons & Co., 537 

S.W.2d 1, 3 (Tex. 1976) (recognizing that the word "if' connotes a condition). Yet the language 

of Tax Code subsection 1 l.13(n-1) expressly prohibits a repeal or reduction of a LOHE in 2015. 

As any reduction or repeal of a LOHE in 2015 is prohibited by statute, a district's repeal or 

reduction of its LOHE cannot serve as the condition that triggers the application of Education Code 

subsection 42.2516(f-1 ). To construe otherwise would needlessly negate the meaning of Tax Code 

subsection 1 l.13(n-l) within the school finance scheme. See Crosstex Energy Servs., 430 S.W.3d 

at 390. 

The context of the two statutes considered within the whole of the school financing system 

bolsters this conclusion. Though located in different codes, they are both necessary to the 

calculation of a district's local revenue for school finance purposes and should be considered 

together. Cf Ochsner v. Ochsner, 2016 WL 3537255, at **3-5 (Tex. 2016) (considering child 

support arrearage question within statutory context of several Family Code chapters to "look to 

the statutory scheme as a whole in order to establish the meaning of the arrearage provision, not 

to snippets taken in isolation"); Valdez v. Hollenbeck, 465 S.W.3d 217, 226-29 (Tex. 2015) 

(considering statute of limitations question in probate matter within "the comprehensive statutory 

scheme governing the probate process"). The delivery of the ASATR is a result of the Texas 

Supreme Court's 2005 determination that the school property tax was unconstitutional and the 

Legislature's response of reducing property tax rates across the State. Neeley v. West Orange-Cove 

Consol. Indep. Sch. Dist., 176 S.W.3d 746, 797-99 (Tex. 2005). The Legislature established a 

compressed maintenance and operations tax4 rate, which decreased each school district's rate by a 

specific percent. See Morath v. Tex. Taxpayer & Student Fairness Coal., 490 S.W.3d 826, 836-37 

(Tex. 2016) (describing legislative changes to the maintenance and operations tax rate). But the 

Legislature maintained a district's level of funding with a "hold harmless" provision-the 

ASATR-to provide additional state revenue to a district so that it would receive the same amount 

of money (per weighted student) that it had received in the target school year. See HOUSE WAYS 

& MEANS COMM., BILL ANALYSIS, Tex. Comm. Substitute H.B. 1, 79th Leg., 3d c.s. (2006) at 1 

4School districts may collect two discrete annual ad valorem taxes: one to pay debt service on bonds issued 

for school buildings and other related purposes, and one for the further maintenance of public schools in the district. 

See TEX. EDUC. CODE§§ 45.00l(a)(2), .002. 
Mr. Michael Morath - Page 4 (KP-0144) 

("This additional state aid for tax reduction from the results of property tax rate compression 

ensures that each district receives at least the amount ofrevenue per student that the district would 

have received during the 2006-2007 school year if property tax rates had not been compressed[.]"); 

see also Morath, 490 S.W.3d at 838 (describing the alternative "target revenue" system as "based 

on certain hold harmless rules and [applicable] if the target revenue amount exceeds the amount 

the district receives" under the "on formula" funding system, and noting that the "State makes up 

the difference with [ ASATR ]"). Similarly, in Tax Code subsection l l.13(n-1 ), the Legislature 

adopted another "hold harmless" provision designed to preserve the $10,000 increased property 

tax exemption provided by the State without offset by a local taxing entity. See SENATE RESEARCH 

CENTER, BILL ANALYSIS, Tex. S.B. 1, 84th Leg., R.S. (2015) at 1 ("Any local taxing units that 

currently offer the optional homestead exemption must maintain the current exemptions offered 

for IO years."). Taken together, it is evident that the Legislature intended to make school districts 

whole as to the compressed maintenance and operations tax rate at specific funding levels but also 

to grant and protect tax relief to the taxpayers in each district. To construe Education Code 

subsection 42.2516(f-1) to require the commissioner to make an adjustment based upon a district's 

prohibited LOHE reduction or repeal would negate the Legislature's intended benefit to a district's 

taxpayers and would instead confer an undeserved benefit on a district that violated Tax Code 

subsection 1 l.13(n-1) beyond the hold harmless funding level that the Legislature intended to 

preserve for the district. 

Accordingly, you should not use or recognize a school district's LOHE repeal or reduction 

made in violation of Tax Code subsection l 1. l 3(n-1) for the ASA TR calculation under Education 

Code subsection 42.2516(f-l). 
Mr. Michael Morath - Page 5 (KP-0144) 

SUMMARY 

The computation of state funding for school districts 

receiving additional state aid for tax reduction must not include local 

option homestead exemption repeals or reductions that Tax Code 

subsection 1 l.13(n-1) prohibits. 

JEFFREY C. MATEER 

First Assistant Attorney General 

BRANTLEY STARR 

Deputy First Assistant Attorney General 

VIRGINIA K. HOELSCHER 

Chair, Opinion Committee 

CHARLOTTE M. HARPER 

Very truly yours, 

KEN PAXTON 

Attorney General of Texas 

Assistant Attorney General, Opinion Committee