March 22, 1977

The Honorable Tom C.Massey Opinion No. H-961 Chairman Special House Committee on Re: Use of occupation Alternatives to Public School tax revenues for areas of Financing school finance other than P. 0. Box 2910 the available school fund. Austin, Texas 18767
Dear Chairman Massey:
You have requested our opinion on the following question: Since occuption taxes are authorized but

not levied by the Texas Constitution, may these fundsbe used to support areas of public school finance other than the Available School Fund? Answering your question requires an interpretation of article 7, section 3and article 7, section 5of the Texas Constitution, which provide:

Sec. 5. The principal of all bonds and other funds, and theprincipal arising from the sale of the landshereinbefore setapart to said school fund, shall be thepermanent school fund, and all the interest derivable therefrom and the taxes herein authorized

-- and levied shallbe the available school fund.... --
Sec. 3. One-fourth of the revenue derived from the State occupation taxes and poll tax -- of one dollar on every inhabitant of the State

. . .shall be setapart annually for the

-- benefit of thepublic free schools;ndn

-- addition thereto, there shall be levied and collected an annual advalorem State tax of such an amount not to exceed thirty-five cents

P. 4005. -

The Honorable Tom C.Massey -page 2 (H-961)

on the one hundred ($100.00)dollars valuation, aswith the available school fund arising from all other sources, will be sufficient tomaintain and support thepublic schools of this State for aperiod ofnot less than sixmonths in each year . . .provided, however, that should the limit of taxation herein named be insufficient the deficit may bemet by appropriation from the general funds of the State
. . . . (Emphasis added).
We believe your question turns onwhether "the taxes herein authorized and levied" in section 5 includes "one-fourth of the revenue derived from the State occupation taxes" in section 3,article 7of the Texas Constitution. Initially, it should be stressed that your question does not suggest that the twenty-five percent of the revenue derived from state occupation taxes might be diverted from the use ofpublic schools. The only issue iswhether the method of distribution to the schools is through the available school fund, rather than through some other method the Legislature might choose. The available school ffindis required tobe distributed on the basis of scholastic population without regard to any equalizing factors such as recognition of the local taxbase.
An examination of the historical background of sections 5and 3of article 7may be ofvalue indetermining whether occupation taxes are included in the "taxes herein authorized and levied." The quoted portion of section 5has remained the same since itsadoption in 1876. Section 5established thepermanent school fund and the available school fund: the available fund was composed of twoparts which included the interest derivable from thepermanent fund and the "taxesherein authorized and levied." Section 3,however, was originally adopted to read as follows:

Sec. 3. There shall be set apart annually not more than one-fourth of the

--- -- general revenue of the State, and apoll --- tax of one dollar
. . .for thebenefit of thepublic free schools. -- (Emph,asis added).

p. 4006The Honorable Tom C.Massey -page 3 (H-961)

The twofold purpose behind the original section 3was first, to levy a one dollar poll tax for the benefit of the public schools and second, to limit the amount of general revenues that could be allocated for the support of thepublic school system. Arguably, the one dollar poll tax levied in section 3must be apart of the available school fund; however, the "taxesherein authorized and levied" phrase of section 5 could not have referred to thepresent "one fourth of the
. . . occupation taxes" language in section 3because that language was not added until 1883. Thus, asoriginally drafted, the two sections of article 7are independent of one another: section 5established the available school fund, and section 3 limited the amount of State revenue that could be spent on public education inaddition to that already provided in the available fund. Furthermore, the only tax specifically authorized and levied for the available school fund at the time of the adoption of section 5was the one dollar poll tax. This interpretation of the Constitution finds some support inWebb County v. Board of School Trustees of Laredo, 65 S.W. 878 (Tex.190l)Twhereinthe Texas Supreme ?&rt stated that

the annual income derived from thepermanent fund, together with the taxprovided for in

r-- s the avallable school section 3, shall constiti fund of the state, bvwhich ismeant the fund which may be appropriated annually to the maintenance of the schools. Id. at 880. (Emphasisadded). "The tax" court was the one dollar poll tax. referred toby the

The present language of section 3was added by amendment in 1883. The.impact of the changes were threefold: first, the limitation on State spending for thepublic school system was removed and the Legislature was authorized to appropriate amounts necessary to fund thepublic school system; second, one-fourth of the revenue from State occupation taxeswas dedicated to the support of thepublic free schools: and third, the Legislature was authorized and directed to levy an advalorem tax to support thepublic school system and toprovide free textbooks. The amendment only required that if anoccupation taxwere levied by the Legislature, one-fourth of theproceeds must be set aside for thebenefit of thepublic school system. Therefore, itdoes not follow that any occupation taxmust be allocated to the available

p. 4007The Honorable Tom C.Massey -page 4 (H-961)

school fund and subsequently alloted to the schools on the basis of scholastic population.
Inour opinion, we answer your question in the affirmative. Although article 7, section 3requires that one-fourth the revenue from State occupation taxes be set aside for the benefit of thepublic free schools, there is no constitutional requirement that these taxes be allocated to the available school fund or distributed on aper scholastic basis. The only revenues required tobe allocated to the available fund are, atpresent, the income from thepermanent fund, tax revenue constitutionally dedicated to the fund such as aportion of motor fuel taxes under article 8, section la, and specific taxes authorized and levied by the Constitution for thebenefit of the fund. This conclusion isnot altered by the fact that the Legislature 9 allocate other revenue sources to the fund. SUMMARY

Occupation taxes may be used to support areas ofpublic school finance other than the Available School Fund as long as such funds areused "for thebenefit of the public free schools" as required by article 7, section 3of theTexas Constitution. 

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(1/Attorney General of Texas
APPROVED:

Opinion Committee

P. 4008