Untitled Texas Attorney General Opinion ( 1974 )

. .
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