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 funds be used to support areas of 

public school finance other than the 

Available School Fund? 

Answering your question requires an interpretation of article 

7, section 3 and article 7, section 5 of the Texas Constitution, 

which provide: 

Sec. 5. The principal of all bonds and 

other funds, and the principal arising from 

the sale of the lands hereinbefore set apart 

to said school fund, shall be the permanent 

school fund, and all the interest derivable 

therefrom and the taxes herein authorized -- 

and levied shall be 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 set apart annually for the 

benefit of the public free schools;ndn -- 

addition thereto, there shall be levied and 

collected an annual ad valorem 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, 

as with the available school fund arising from 

all other sources, will be sufficient to maintain 

and support the public schools of this State for 

a period of not less than six months in each 

year . . . provided, however, that should the 

limit of taxation herein named be insufficient 

the deficit may be met by appropriation from the 

general funds of the State . . . . (Emphasis added). 

We believe your question turns on whether "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 7 of 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 of public schools. The only issue is whether 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 ffind is 

required to be distributed on the basis of scholastic 

population without regard to any equalizing factors such 

as recognition of the local tax base. 

An examination of the historical background of sections 

5 and 3 of article 7 may be of value in determining whether 

occupation taxes are included in the "taxes herein authorized 

and levied." The quoted portion of section 5 has remained 

the same since its adoption in 1876. Section 5 established 

the permanent school fund and the available school fund: the 

available fund was composed of two parts which included 

the interest derivable from the permanent fund and the 

"taxes herein 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 a poll --- 

tax of one dollar . . . for the benefit 

of the public free schools. -- (Emph,asis 

added). 

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

The twofold purpose behind the original section 3 was 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 the public school 

system. Arguably, the one dollar poll tax levied in section 

3 must be a part of the available school fund; however, the 

"taxes herein authorized and levied" phrase of section 5 

could not have referred to the present "one fourth of the . . . 

occupation taxes" language in section 3 because that language 

was not added until 1883. Thus, as originally drafted, the 

two sections of article 7 are independent of one another: 

section 5 established the available school fund, and section 3 

limited the amount of State revenue that could be spent on 

public education in addition 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 5 was the one dollar poll 

tax. This interpretation of the Constitution finds some 

support in Webb 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 the permanent 

fund, together with the tax provided for in r-- 

section 3, shall constiti s the avallable school 

fund of the state, bv which is meant the fund 

which may be appropriated annually to the 

maintenance of the schools. 

Id. at 880. (Emphasis added). "The tax" 

court was the one dollar poll tax. 

referred to by the 

The present language of section 3 was added by amendment 

in 1883. The. impact of the changes were threefold: first, 

the limitation on State spending for the public school 

system was removed and the Legislature was authorized to 

appropriate amounts necessary to fund the public school 

system; second, one-fourth of the revenue from State occupation 

taxes was dedicated to the support of the public free schools: 

and third, the Legislature was authorized and directed to 

levy an ad valorem tax to support the public school system 

and to provide free textbooks. The amendment only required 

that if an occupation tax were levied by the Legislature, 

one-fourth of the proceeds must be set aside for the benefit 

of the public school system. Therefore, it does not follow 

that any occupation tax must be allocated to the available 

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

school fund and subsequently alloted to the schools on the 

basis of scholastic population. 

In our opinion, we answer your question in the 

affirmative. Although article 7, section 3 requires that 

one-fourth the revenue from State occupation taxes be set 

aside for the benefit of the public free schools, there is 

no constitutional requirement that these taxes be allocated 

to the available school fund or distributed on a per scholastic 

basis. The only revenues required to be allocated to the 

available fund are, at present, the income from the permanent 

fund, tax revenue constitutionally dedicated to the fund such 

as a portion of motor fuel taxes under article 8, section la, 

and specific taxes authorized and levied by the Constitution 

for the benefit of the fund. This conclusion is not altered 

by the fact that the Legislature 9 allocate other revenue 

sources to the fund. 

SUMMARY 

Occupation taxes may be used to support areas 

of public school finance other than the 

Available School Fund as long as such 

funds are used "for the benefit of the 

public free schools" as required by article 

7, section 3 of the Texas Constitution. 

,,ggiy?i& 

(1 /Attorney General of Texas 

APPROVED: 

Opinion Committee 

P. 4008