Court Opinion

ID: 4162926
Source: CourtListenerOpinion
Date Created: 2017-04-25 13:17:00.2735+00
Date Added: 2024-06-11T14:23:45.700347
License: Public Domain

KEN PAXTON
                                           ATTORNEY GENERAL OF TEXAS

                                                   April 24, 2017

Mr. Michael Morath                                             Opinion No. KP-0144
Commissioner of Education
Texas Education Agency                                         Re: Whether the computation of state
1701 North Congress Avenue                                     funding for school districts rece1vmg
Austin, Texas 78701-1494                                       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)

Dear Mr. Morath:

        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").
         2
           Since 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 1l.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 1l.13(n), Tax Code,
                           that was not in effect for the 2009 tax year, or eliminates an
                           exemption under Section 1l.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.

         3 TheASATR 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 ofHouston 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

         4
           School 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 1l.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 ASATR 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.

                                              Very truly yours,

                                              KEN PAXTON
                                              Attorney General of Texas

JEFFREY C. MATEER
First Assistant Attorney General

BRANTLEY STARR
Deputy First Assistant Attorney General

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

CHARLOTTE M. HARPER
Assistant Attorney General, Opinion Committee