Court Opinion

ID: 4132930
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:32:00.966849+00
Date Added: 2024-06-11T14:06:58.517721
License: Public Domain

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                      THEA~TORNEYGENERAL
                                OF TEXAS
                            AUSTI(N. TEXAS 7B7ll

                                            November     12,   1974

        The Honorable Marlin Brockette                           Opinion No.       H-   448
        Commissioner   of Education
        Texas Education Agency                                   Re: The obligation of
        210 East 11th Street                                     the Commissioner    of
        Austin, Texas 78701                                      Education to equalize
                                                                 assessment   ratios
                                                                 before using them in
                                                                 the county economic
        Dear   Dr.   Brockette:                                  index formula.

           You have asked         our opinion on two questions        which are:

                      1. In calculating   the economic index, should
                 this office require each county’s tax assessor       to
                 report,   along with the assessed     valuations of the
                 county, the percentage      of market value used in
                 determining    the assessed    values reported?

                      2. If you have answered the above question
                 in the affirmative,  should this office use such
                 information   in computing the county economic
                 index to achieve equality and ‘uniformity of
                 property values of each county ascompared      with
                 every other county?

            Similar questions were among several issues presented in Fort
        Worth Independent School District,     et al v. Edgar, et al.,       Civil Action
        4-1405 (N. D. Tex.,    Fort Worth  Division).     That   case  was  filed   in 1970,
        and a three judge court was appointed.        Plaintiffs in that case were the
        Fort Worth,   Dallas,   and HoustonIndependent        School .Districts    along
        with taxpayers-and    students from each district.       Allocation    of funds
        under the minimum foundatiotiprogram          (hereafter MFP) was attacked
        on several grounds including the use of property assessments              at less
        than full market value in determining
                                       ._.        the   county  economic    index,    which
        is the issue raised inyour two questions.

                                                 p.    2062
The Honorable    Marlin   Brockette,   page 2      (H-448)

     This office represented    the defendants in the suit and asserted    several
defenses.    These defenses included a challenge to the standing of the
plaintiffs to litigate the issues presented in the case.    During the course
of the litigation the United States Supreme Court issued its opinion in
San Antonio Independent School District v. Rodriguez,        411 U.S.   1 (1973).
Rodriguez had the effect of deciding substantial portions of the Fort
Worth lawsuit in a manner adverse to the plaintiffs’ claim.        In the latter
part of 1973 the Fort Worth litigation was voluntarily     dismissed.     Sub-
sequently,   your predecessor,     who was a defendant in the lawsuit,     sub-
mitted these two inquiries to this office for an opinion to be issued in
our quasi-judicial    role under Article 4399, V. T. C. S.

     The present questions were not before the Supreme Court in Rodriguez.
The contentions in that case centered on the inter-district       disparities  in
per-pupil  expenditures     caused by the variations in different school
districts’ ad valorem tax bases.       Although the Court recognized     that
assessment     practices   in Texas are not uniform,    there is no indication
that it considered    the effect of the use of non-equalized  assessments
in determination    of the county economic index.     Rodriguez,    supra, at
p. 46, n. 100.

     Your two questions are substantially   narrower than those raised by
Rodriguez or by Fort Worth Independent School District.       They relate
solely to the figures employed in calculating   one factor which is used in
determining   the county economic index.

    It is unnecessary     to set out the details of the highly complex MFP
in this opinion.   It will suffice to say that the economic index for each
county is determined      from a formula spelled out in Sec. 16.74,         Texas
Education Code.      Its application is a major factor in the determination
of each district’s   local fund assignment,     which is the amount a district
is required to contribute as its share of the MFP.          Although the local
fund assignment    ultimately    computed for a given district may be affected
by various statutory credits and adjustments         not germane to this request,
the amount of state aid received generally        corresponds    to the economic
index calculated for the county in which the district lies.          If the economic
index is high, the local fund assignment       will be high, and the amount
of state aid received under the MFP will be low.          On the other hand, if
the economic index is low, the local fund assignment          will be low, and
the amount of state aid received will be high.

                                       p.   2063
. .   .

          The Honorable      Marlin   Brockette,   page 3      (H-448)

               The economic     index for each county is based on three weighted
          factors.    Income for the county is measured        by value added by manu-
          facture,   value of minerals    and agricultural    products,   and the total
          of payrolls   for retail,  wholesale and service establishments.         This
          factor is weighted by 72.      The scholastic    population of the county is
          weighted by a and the aeses+&d p@&rty         \aluaticn of the ccunty is wigtied   by 20.

              You indicate    that:

                       It is common knowledge that many county tax
                  assessor-collectors     in this state customarily    assess
                  property subject to ad valorem taxes at less than
                  100% market value, and that there is a wide variation
                  from county to county in the assessment        ratios used
                  (see Governor’s      Committee   Report on School Finan-
                  cing--1967).     Some school districts    conterd that the
                  disparity in the assessments      by the county tax assessor-
                  collector    vary from 3% to 100% of fair market value.

              The practical  effect    of assessment  at a low percentage     of market
          value is a low economic      index and a resultant high amount     of state aid
          under the MFP.

              Your first   inquiry concerns your ability to obtain information  from
          tax assessors    on the assessment  ratio employed in their counties.

              Section 16.79(a)   of the Education Code imposes the duty on the State
          Board of Education and the Commissioner      “to take such action,   require
          such reports,    and make such rules and regulations   consistent  with the
          terms of this chapter as may be necessary     to carry out its provisions.   ”
          (Emphasis     added)

               Three Attorney General C-pinions have been addressed         to similar
          points.   Attorney General Opinion V-1195       (1951) construed Article
          2922-16.   Sec. 3, V. T. C. S. [now Sec.    16. 74, Education Code] and held
          that in adjusting a county’s economic index to reflect a sudden and marked
          decline in economic activity,     the Commissioner     was free to consider
          information    from sources other than those listed in the statute if the
          information    was not reflected in the statutorily designated     source.   The
          Opinion stated that, “unless the Commissioner         can look to other reliable
          sources of information,     it might not be possible to compute an index
          accurately   indicating the taxpaying ability of each county. ”

                                                   p.   2064
The Honorable    Marlin   Brockette,   page 4      (H-448)

        Attorney General Opinion WW-452         (1958) said that the various
sources of information     then being used by the Commissioner       to obtain
the necessary    data for the computation of the index were not exclusive.
The only statutory requirement was that the information         be taken
” ‘from the most recently available     official publications  and reports
of agencies   of the State of Texas or the Federal Government.       ’ I’

        Attorney General Opinion M-262    (1968) discussed adjustments   made
by the State Board of Education to reflect changes in economic activity.
That opinion indicated that:

                     In computing the economic index . . . the Board is
                 confined to data taken from the most recently avail-
                 able official publications    and reports of Federal and
                 State agencies.      Although being thusly confined, it
                 is the opinion of this office that the Board may con-
                 sider 2      official State or Federal publications    or
                 reports; and if the Board deems it proper or neces-
                 sary in considering      the question of an adjustment,
                 it has the authority to arrange for and make avail-
                 able to itself other and further such official reports
                 and publications as it may deem necessary         in order
                 to properly and wisely make its decisions.         This
                 same principle is true with regard to the compila-
                 tion of economic indices in the future.      (Emphasis
                 in original)

         It appears well settled that the commissioner      has the authority
to require any official report he may deem necessary         for the proper per-
formance    of his statutory functions. If he is permitted or required to
utilize  values which have been’corrected     to offset fractional assessment    prac-
tices,  it seems’ clear to us that he can require tax assessors       to report the
percentage  of market value that has been used in arriving        at the assessed
property values reported.

         Your second inquiry is whether the Commissioner       should utilize such
information   in computing the county economic index to reflect equal and
uniform property assessment      ratios among the state’s 254 counties.      In
answering   this question it is important to recognize  that if differing per-
 centages   of valuation are employed from county to county in determining
assessed   property valuation to be reported to the Commissioner,        the

                                       p.   2065
The Honorable     Marlin   Brockette,   page 5      (H-448)

inevitable result is to distort calculation of the county economic
index in favor of those counties using lower assessment     percentages
unless these assessed   values are adjusted to reflect an equal
standard of assessment.

     One of the basic rules of statutory construction     is that a statute
should be construed in a manner that will sustain its constitutionality
unless the plain import of its provisions    renders such an interpretation
impossible.    State V- Shoppers World,    Inc.,  380 S. W. 2d 107 (Tex.
1964); Newsom     v. State, 372 S. W. 2d 681 (Tex. Crim.     1963); McKinnev
v. Blankenship,    282 S. W. 2d 691 (Tex. 1955).   A recent federal case,
Levy v. Parker,     346 F.Supp.   897 (E. D. La. 1972) (3 judge court)
aff’d.  mem.,   411 U.S. 978 (1973). involved questions which are very
similar to those presented in your inquiry and has established         the
constitutional  limits within which we must construe your statutory
duties in computing the county economic index.        It should be noted
that the affirmance    of Levy by the United States Supreme Court came
 subsequent to that court’s Rodriguez    decision and that the case was
not presented   to the three judge court in the plaintiff’s   brief in the
 Fort Worth case.

    The question in Lx     involved a state revenue sharing scheme
designed to reimburse    parishes for the cost of a homestead   tax
exemption provided in the state constitution.    Reimbursement    by
the state was proportionate   to the parishes’ tax or millage rates.

     In Louisiana, as elsewhere,      property tax revenue is a function of
the assessed     value of property and the rate of tax.       Thus, a parish
faced with local requirements       for a certain amount of tax revenue
benefited most from the homestead         reimbursement      provisions    by
minimizing     assessments    and maximizing     its millage   rates.     The Texas
MFP formula works in essentially         the same manner since the lower
the assessed     value the higher the amount of state aid under the MFP.
In Louisiana    constItut;onaI and statutory limitations      effectively   pre-
cluded some parishes       from raising their tax rates and thus qualifying
for higher rebates.       Likewise,   county tax rates in Texas are limited,
e. g.,  Article   VIII, Section 9, Texas Constitution.        When a county
 reaches the maximum tax rate it must assess          property at a higher

                                        p.   2066
The Honorable    Marlin       Brockette,      page 6     (H-448)

percentage   of true value if it is to generate more revenue.          A county
which is relatively  poor in value of taxable property will be required
to reach its maximum tax rate sooner than a relatively            rich county
and will then be required to increase its assessment           rate if it is to
raise more tax money.      Thus, the poorer a county is the less able it
is to manipulate its assessment      ratio  to generate larger amounts of
state aid for its school districts.     Conversely,     the richer the county,
the more able it is to adjust its assessment        ratio.

        In discussing        the Louisiana    plan the federal     court    observed:

                 . . . The millage-times-assessment-any-basis-
                 you-choose   formula for distributing state funds is,
                 in a word, arbitrary.     It establishes a rule for
                 distributing  state funds that is no rule at all.

                 .   .   .

                     No reason has been advanced,      nor any govern-
                 mental policy argued, that would support the
                 reimbursement    of each Louisiana parish on the
                 basis now in effect.   It has not been suggested
                 that the amounts now being paid to any parish
                 are based on its real loss of revenue resulting
                 from the homestead    exemption,   or on state policy
                 based on any rational geographical     or demographic
                 classification, or on any other basis thstmight
                 constitute coherent governmental     policy.
                 Levy v. Parker,   supra, at 903-904.

         The court       accordingly   held the Louisiana      rebate      system   unconstitutional.

        Given the Ls    precedent,   we believe the use of unequalized assessment
values in determination  of the county economic index for purposes of the MFP
presents constitutional problems.    See, Weissinger   v. Boswell,  330 F.
Supp.615 (M.D.   Ala. 1971); Yudof, The Property Tax in Texas Under State
and Federal Law, 51 Texas Law Review 885 (1973).

                                             p.   2067
                                                        ..     .-   _. ., .,. .,.. _,_. ~..

The Honorable     Marlin   Brockette,    page 7      (H-448)

         In construing the statute we are required to be guided by the intent
of the Legislature    while at the same time giving the statute an inter-
pretation most calculated to sustain its constitutionality.

        We believe the language of the statute is consistent            with a construc-
tion which will avoid constitutional pitfalls. For example,            in actually levying
the maintenance      taxes from which local fund assignments            are paid, all
school districts    except common school districts          are free under Sec. 20.03
Texas Education Code, to assess          property “on any basis authorized
or permitted by any applicable law, I’ including Title 28, V. T. C. S.,
applicable   to cities and towns, which permits fractional            assessment.
It may have been to avoid varying fmctiztial assessments             bearing no relation
to local taxpaying ability that the Legislature         selected for inclusion in the
MFP’s    economic index formula valuations by the county --a taxing jursidic-
tion theoretically     required to assess    at 100% of market value and forbidden
from adopting “a lower or different standard of value’(Articles               7149, 7174,
V. T. C. S.), although in actual practice lesser values were used.                See e. g.,
Lively v. Missouri,.      Kansas and Texas Railway Co.,           120 S. W. 852 (Tex.
1909); Robertson v. Connecticut        General Life Insurance Co.,          140 S. W. 2d 936
 (Tex. Civ. App. --Waco        1940, no writ).    Also,    use of the largest tax
assessing    unit, the county, rather than the multitude of school districts
in the state is more consistent       with a program based on equalized and
standardized    effort.    County assessments      if performed      according to the
common standards thus prescribed,            would afford a far more accurate
means of comparing local fiscal capacities           than would the assessments
actually made by districts       pursuant to Sec. 20.03.         Moreover,     such
county assessments        would better serve the basic intent of the MFP financing
provisions,    which is to determine local contributions           to the program on
the basis of relative taxpaying ability.        Further support for the view that
there was anintent to prescribe        a common valuation standard appears in
the valuation reporting provision        of Sec. 16,77(a),     the formula for
determining    district local fund assignments        in Sec. 16.76(a) and the
maintenance     tax credit provisions     of Sec. 16. 76(e), all of which are tied
 to the county valuation standard.

         Additional aid to construction  i8 found in the basic purpose of the
MFP itself,    which is to assure an equal minimum educational opportunity
for each school-aged    child by providing state aid in compensation   for
variations  in local taxpaying ability.   The program is to be financed in

                                         p.   2068
The Honorable     Marlin   Brockette,   page 8      (H-448)

part by   an “equalized,   local school district effort” (Sec. 16.71) assigned
to each   district “according   to its taxpaying ability” (Sec. 16.73).   The
manner     of adjustment presented in your second question would plainly
further   this purpose.

         Therefore,   we answer both of your questions in the affirmative.
The Commissioner      should require counties to rep~o’rt the percentage of
true value at which they assess    property.    He should then utilize the
information   received from the counties in computing the Minimum
Foundation Program county economic index.          Your questions are phrased
narrowly,   and it has not been necessary    to consider the legality or
propriety of county tax assessors    assessing   property at a fraction of its
full value or their determination   of what constitutes  taxable property.

         Our function essentially    is to predict the resolution of a question
which would be reached were it presented to a court.          Our courts possess
broad powers of equity and often utilize their equitable discretion to grant
stays,  to allow phased implementation       of an order or to permit other
means of ameliorating     the effect of its decisions.    At least one provision
of the Education Code is designed to lessen the effect of any sudden shifts
in the factors constituting     the county economic index.      Section 16.74(c)
of the Education Code provides that the index is to be computed from a
three-year    average of data.    Although a court’s order conceivably could
require full market value assessment        figures to be used in figures for all
three years used in computing the index for the coming school year,
we believe that utilization of the corrected      figures for the current year
and following years would be within the equitable discretion of a court.
Under such an arrangement        some effect of the corrected data would be
felt immediately    but the full effect would not be realized until the third
year.

                                    SUMMARY

                      The Commissioner     of Education should require
                  each county’s tax assessor   to report the percentage
                  of market value used in determining    the assessed

                                        p.   2069
The Honorable   Marlin   Brockette,   page 9 (H-448)

       value of property in that county.  The Commissioner
       should use this information  in computing the county
       economic index to achieve uniformity    of property
       values of each county as compared with every other
       county.

                                         Very   truly yours,

                                         Attorney   General    of Texas

DAVID M. KENDALL,         Chairman
Opinicn Committee

                                      ps 2070