THICA~TORNEX 

OF 

AU==% 

. 

GENERAL 

TnuAm 78711 

July 2, 1974 

The Honorable J. W. Edgar, Commissioner 

Texas Education Agency 

201 East Eleventh Street 

Austin, Texas 78701 

The Honorable Bevington Reed, 

Commissioner, Coordinating Board 

Texas College and University System 

P. 0. Box 12788, Capitol Station 

Austin, Texas 78711 

Opinion No. H-339 

Re: Application to 

Independent School Districts 

and Regional Junior Colleges 

of statute authorizing issuance 

of Certificate of Indebtedness 

Gentlemen: 

Each of you has requested our opinion about the effect of Article 

2784g-2. V. T. C. S., currently Sec. 20.51 of the Texas Education Code, 

dealing with “Certificates of Indebtedness” issued by school districts. 

Dr. Edgar asks: 

In authorizing a school district board to issue 

certificates of indebtedness (in amount(s) not to 

exceed $250,000) without the requirement of a local 

election to approve such indebtedness, does [Sec. 

20. 511 contravene Article VII, Section 3 of the 

Constitution of Texas. 

His second question, relating to a specific school district is: 

Since [Sec. 20.511 was not enacted prior to the 

time when the district electorate voted an authorized 

maximum maintenance tax rate (in July 1968). may a 

school district board legally appropriate and/or 

p. 1579 
. 

‘. ’ 

. . 

The Honorable J. W. Edgar 

The Honorable Betington Reed page 2 

irrevocably pledge local maintenance taxes as 

payment for certificates of indebtedness issued 

pursuant to [Sec. 20.511 as amended? 

Dr. Reed inquires for the Wilbarger County Junior College District 

about the legality of the issuance of such certificates by the District for the 

purpose of constructing physical. education facilities on the campus of Vernon 

Regional Junior College which the District operates. 

Pertinent provisions of 5 20.51 of the Education Code, incorporating 

the 1973 amendment to Article 2784g-2 61 (a), are: 

(a) Any school district, including a junior college 

district, may issue interest bearing Certificates of 

Indebtedness for the purpose of (1) providing funds for 

the erection and equipment of school buildings within 

the boundaries of the district, (2) refinancing outstanding 

certificates as herein provided, or (3) purchasing sites 

for the future construction of public school facilities. 

The term certificates, as used in thin Act [Section] shall 

include all obligations authorized to be issued hereunder 

and the term ohall include interest thereon, unless 

clearly indicated by the context that another meaning is 

intended. 

(b) The governing body of the district shall make 

provision for the payment of the certificates issued 

. . . by. . . the appropriation and pledge of local 

school funds derived and to be derived from maintenance taxes levied and assessed or to be levied 

and assessed under authority of Sections 20.02 and 

130.122 of this code . . . or other similar law . . . 

which limits the amount of tax which may be levied 

for maintenance purposes, as distinguished from 

bond requirements. The appropriation and pledge 

may be in the nature of a continuing irrevocable 

p. 1580 
The Honorable J. W. Edgar 

The Honorable Bevington Reed page 3 

pledge to apply the firrt money6 collected or to 

be collected annually from the tax levy to the payment of the obligation6 or by the irrevocable 

prerent levy and appropriation of the amount of the 

maintenance tax as ir required to meet the annual debt 

service requirement6 of the obligations, in which 

event the governing body 6hall covenant to annually 

set aside the amount in the annual tax levy, showing 

the same is a portion of the maintenance tax. The 

governing body shall annually budget the amount 

required to pay the debt service requirements, principal and interest, of the obligations which may be 

scheduled to become due in any fircal year. Nothing 

herein shall be conetrued a6 permitting the levy of 

a maintenance tax in exce6a of the amount approved 

by the resident qualified property taxpaying voter6 

of the district. 

(f) Certificates authorized to be irsued hereunder 

shall be payable at 6uch times, be in such form and 

denomination or denomination6 . . . and contain such 

other provision6 ar the governing body of the district 

may determine, but in no event rhall any certificate 

mature over a period in exce6s of 25 year6 from the 

date thereof, or bear interest at a rate in exce66 of 

seven percent per annum. 

(k) Certificate6 is6ued under the provi6ions of thi6. 

section shall be an indebtednerr of the school diltrict 

i6suing them, but the holder thereof shall not have the. 

right to demand payment thereof out of any fund or 

fund6 other than thoee pledged to it6 payment. . . . 

***** 

p. 1581 
The Honorable J. W. Edgar 

The Honorable Bevington Reed psge 4 

(n) The provi6ionr of this section shall be 

cumulative of existing law6 relating to the financing 

of the cost of erecting and equipping rchool building6 

by 6chool districts , it being the legislative intent 

that thi6 section shall be complete authority for the 

issuance, sale, and delivery of certificates by school 

districtcr. 

***** 

These provisions have not yet been conrtrued by the appellate courts, 

but we believe they will be held constitutional. 

Article 7, Sec. 3, of the Constitution of Texas reads in part as 

follows: 

. . . and the Legislature may authorize an additional 

ad valorem tax to be levied and collected within all 

school districts heretofore formed or hereafter formed, 

for the further maintenance of public free schools, and 

for the erection and equipment of school buildings 

therein; provided that a majority of the qualified property 

taxpaying voter6 of the district voting at an election to be 

held for that purpose, &all vote such tax not to exceed 

in any one year one ($1.00) dollar on the one hundred 

dollars valuation of the property subject to taxation in 

such district, but the limitation upon the amount of 

school district tax herein authorized shall not apply to 

incorporated cities or towns constituting separate and 

independent 6chool di6tricts. nor to independent or 

common school district6 created by general or special 

law. (Emphasis added) 

Although the portion of Article 7, Sec. 3, here considered appears to 

refer to a single tax to be voted for maintenance and school building purposes, 

the Lgiilrtum, historically, has treated taxes for such respective purpose6 

p. 1582 
, 

The Honorable J. W. Edgar 

The Honorable Bevington Reed, page 5 

as separate, distinct taxes, each requiring separate voter approval. 

(See, Seer. 20.02, 20.04, 130.122, V. T. C.S., Education Code). 

In Madeley v. Trustee6 of Conroe I. S. D., 130 S. W. 2d 929 (Tex. 

Civ. App. , Beaumont, 1939, err. dt6%n., judgment car. ), the Court 

conridered two statutory forerunner6 of the above noted Education Code 

provisions. All the public free 6ChOOl6 in the dirtrict were adequately 

maintained and a large surplur had accumulated in the maintenance tax 

fund which the Trustee6 proposed to 6pend for building improvementr. 

What shall the Trustees do with thir ru,~lur? It 

cannot be expended in the support and maintenance 

of the public free 6ch0016, for it is not needed for that 

purpose; it cannot be diverted from public free school 

purposes, for under the Conrtitution it was collected 

for that purpore. It cannot be returned to the tax 

payers. 

It6 allocation to the maintenance fund was by 

legislative edict for the purpore of rupporting and 

maintaining the public free rchool. When that 

purpose ha6 been effectuated, the fund io no longer 

6ubject to the control of the statutes, for the purpore 

of the statute6 has been fully effectuated, If and 

when the statutes cease to control the fund, then 

it becomes a conrrtitutional fund and not a rtatutory 

fund, and may be ured by the trurteer for the constitutional nurpose6; one of the constitutional purposes 

is ‘the erection and equipment of rchool buildingr’ 

within the dirtrict. (Emphasir added) 

In Allen v. Channelview Ind.Sch. Dist., 347 S. W. 2d 27 (Tex. Civ.App., 

Xaco, i961, writ ref’d. ) the plaintiff attacked the constitutionality of 

Article 2786e, V. T. C. S., now Sec. 20.43(a) of the Education Code, 

which authorized school districts to issue time warrants against maintenance tax proceeds for certain purposes, including the repair, purchase, renovation and equipment of 6ChOOl properties. The rtatute, in 

effect, pledged “delinquent taxerr (except bond taxes) penalties and 

interest to the payment of outstanding warrants.” But the Court denied 

that Article 7, Sec. 3 of the Constitution forbade deficit financing. 

p. 1583 
. 

The Honorable J. W. Edgar 

The Honorable Bevington Reed, page 6 

The plaintiff argued that the previour maintenance tnx elections had 

authorized levy and collection of taxes for maintenance only for a current 

year, and that no new elections had been held to authorize the collection 

of taxes to pay such time warrants. But Ue Court noted that only 

“available” maintenance trx money, collected purmant to an election, 

properly held, was used. [Prelrumably, surplus tax money rimilar 

to the hind discuseed in the Madeley case: note Sec. 3 of Acts 1953, 

53rd Leg., R. S., p. 1038, ch. 427, and see Attorney General Opinion 

C-197 (1963)]. 

In discussing thi6 claim, the Court said: 

They contend the statute unconstitutionally 

authorizes issuance of warrant6 payable from taxes 

without an election at which the tax is voted. If by 

this is meant a special election at the time the 

warrants are irsued, Section 3 does not require it, 

and there is no contention maintenance taxes ‘available’ 

were not properly voted. (Emphasis added) 

The Madeley case would seem to teach that where the statute authorize6 

the collection of the tax for current year maintenance purpo6e6 only, the 

money cannot be ueed for anything else until all maintenance requirements 

for the year have been met. The Allen case teaches that maintenance tax 

funds “available” can be pledged to pay time warrants, if the practice is 

legislatively sanctioned. 

In our view, surplus maintenance tax receipts, remaining unexpended 

after maintenance purpose6 have been fulfilled, may be pledged as payment 

for Certificates of Indebtedners under the above-quoted portions of Sec. 20.51, 

whether the election authorizing the levy of the maintenance tax funds Used 

for iia accomplishment occurred before or after the effective date of 

Sec. 20. 51. 

SUMMARY 

Surplus maintenance tax receipts, remaining 

unexpended after maintenance purposes have been 

fulfilled, may be pledgriar payment for Certificate6 

. . 

p. 1584 
:* 

. 

The Honorable J. W. Edgar 

The Honorable Bevington Reed, page 7 

of Indebtedne66 under the above-quoted portion6 

of Sec. 20.51, whether the election authorizing 

the levy of the maintenance t6x fund6 ured for it6 

accomplirhment occurred before or after the 

effective date of Sec. 20.51. 

Very truly yours, 

DAVID M. KENDALL, Chairman 

Opinion Committee 

p. 1585