                                               KEN PAXTON
                                          ATTORNEY GENERAL OF TEXAS




                                                  July 6, 2016



 The Honorable Micheal E. Jimerson                           Opinion No. KP-0101
 Rusk County and District Attorney
 115 North Main Street, Suite 302                           Re: Whether the Rusk County school district
 Henderson, Texas 75652                                     tax violates article VIII, section 1-e of the
                                                            Texas Constitution (RQ-0090-KP)

 Dear Mr. Jimerson:

          You ask whether it is problematic under article VIII, section 1-e that tax proceeds are being
 used to support an independent school district that serves students in a neighboring county. 1 You
 tell us that the Rusk County School Board ("school board"), like the county education districts
 considered in the Carrollton-Farmers Branch Independent School District v. Edgewood
 Independent School District opinion, performs no educational duties. See Request Letter at 1; see
 also Carrollton-Farmers Branch Indep. Sch. Dist. v. Edgewood Indep. Sch. Dist., 826 S.W.2d 489,
 498 (Tex. 1992) (Edgewood Ill). You suggest that because "there are school districts that cross
 county lines, resulting in the tax being used to subsidize another county's rates[,] there is no
 distinction to a Rusk County citizen between this system and the system [p]ronounced
 [u]nconstitutional by the Texas Supreme Court." Request Letter at 1. You inform us the tax was
 approved by the voters at an election in 1940. See id You also inform us that the school board's
 distribution of the tax proceeds to the school districts in Rusk County is determined by studen~
 attendance at each school. See id You state that some of the school districts "overlap with other
 counties and serve students from both counties," and that the funds are not limited to only the
 county from which they were collected. See id 1-2. You liken the school board to a county
 education district that the Texas Supreme Court held unconstitutional in 1992 in its Edgewood III
 opinion. See id at 1.

         In Edgewood III, the Texas Supreme Court considered a challenge to the State's school
 financing system under several provisions of the Texas Constitution. See Edgewood III, 826
 S.W.2d at 493. One provision, article VIII, section 1-e, provides that "[n]o State ad valorem taxes
_shall be levied upon any property within this State." TEX. CONST. art. VIII, § 1-e. At issue in
 Edgewood III was ad valorem taxation by county education districts. See Edgewood III, 826
 S.W.2d at 498. The Legislature created county education districts in response to the Texas
 Supreme Court's holding the prior system of school financing unconstitutional. See id; see also

            'See Letter from Honorable Micheal E. Jimerson, Rusk Cty. & Dist. Att'y, to Honorable Ken Paxton, Tex.
  Att'y Gen. at 1 (Jan. 7, 2016), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request
  Letter").
The Honorable Micheal E. Jimerson - Page 2              (KP-0101)



Edgewood Indep. Sch. Dist. v. Kirby, 804 S.W.2d 491 (Tex. 1991) ("Edgewood IF'). These county
education districts had no educational duties. Edgewood III, 826 S.W.2d at 498 ("They employ no
teachers, provide no classrooms, and educate no children."). Instead, they were created to
"ameliorate disparities among school districts due to local property wealth." Id. Their function
was to levy an ad valorem tax to supplement the local funding required under the school financing
system. See id. Not only did the Legislature require that the county education district levy an
ad valorem tax, it also effectively established the tax rate. See id. at 498, 500. Similarly, the
Legislature directed the distribution of the tax proceeds. See id. at 498-99. These facts led the
Court to state that "[i]f the State mandates that a tax be levied, sets the rate, and prescribes the
distribution of the proceeds, the tax is a state tax." Id. at 500. Thus, the Court said of article VIII,
section 1-e that "[aJn ad valorem tax is a state tax when it is imposed directly by the State or when
the State so completely controls the levy, assessment, and disbursement of revenue, either directly
or indirectly, that the authority employed is without meaningful discretion." Id. at 501-02 (stating
that county education districts "are mere puppets; the State is pulling all the strings"); see also id.
at 503-07 (concluding the tax, imposed without an election, also violated Texas Constitution
article VII, section 3, which requires an ad valorem tax imposed by a school district to be approved
by the electorate).

        The tax you describe is a local county equalization tax governed by former chapter 18 of
the Texas Education Code, not a statewide tax. 2 See generally Request Letter at 1-2 (including
former chapter 18 of the Education Code as an attachment to the Request Letter). Chapter 18
authorizes the creation and levy of a "countywide equalization tax for the maintenance of the
public schools." TEX. EDUC. CODE, tit. 2, app. § 18.01; see also id., tit. 2, app. § 18.02(a)
(validating "[a]ll actions heretofore taken in establishing in any county a countywide equalization
fund"). Chapter 18 was repealed in 1995, but a school district or county system operating
thereunder on May 1, 1995, "may continue to operate under the applicable chapter as that chapter
existed on that date." TEX. EDUC. CODE§ 11.301; see also id., tit. 2, app. §§ 18.01-.30. In chapter
18, the Legislature established a maximum rate for a countywide equalization tax. See id., tit. 2,
app. § 18.12(a). The Legislature also provided for the distribution of the proceeds of the
equalization tax. See id., tit. 2, app. § 18.14(a)-(c) (requiring that funds shall be distributed to the
school districts of the county "on the basis of the average daily attendance" and providing that a
"county-line district shall be eligible to receive its per capita apportionment based upon the number
of scholastic pupils residing in the county of the equalization district").

        The use of tax proceeds for the support of a school district that overlaps into another county
was not the constitutional infirmity of county education districts in Edgewood III. See generally
Edgewood III, 826 S.W.2d at 500-14 (discussing constitutional challenges). Moreover, under
Edgewood III, the performance of educational duties versus taxing functions is not the standard by
which to find a violation of article VIII, section 1-e. See id. Rather, the standard for article VIII,
section 1-e is whether the State so controls the levy, assessment, and disbursement of revenue that
the tax is essentially directed by the State such that the taxing entity has no meaningful discretion


         2SeeAct of June 2, 1969, 61st Leg., R.S., ch. 889, §§ 18.01-.30, 1969 Tex. Gen. Laws 2735, 2848-56,
repealed by Act of May 27, 1995, 74th Leg., R.S., ch. 260, § 58, 1995 Tex. Gen. Laws 2207, 2498, reprinted in TEX.
EDUC. CODE, tit. 2, app. (Title 2-Appendix-Former Chapters with Continued Application).
The Honorable Micheal E. Jimerson - Page 3         (KP-0101)



with respect to the tax. See id at 502. Certainly, under former chapter 18, the Legislature
established the formula for the use of the tax proceeds for the school districts of the county and
thus could be seen as directing the disbursement of the funds. See TEX. EDUC. CODE, tit. 2, app.
§ 18.14. Yet, the imposition of a county equalization tax is discretionary. See id., tit. 2, app.
§ 18.03(b) (providing that countywide school district "may ... exercise in and for the ... county
... the tax power conferred" by the Texas Constitution (emphasis added)). And though former
chapter 18 sets a maximum tax rate, it does not affirmatively establish the actual rate to be imposed.
Instead, it gives discretion to the managing trustees of the countywide school district to determine
the tax rate. See id, tit. 2, app. § 18.25(a). It is not apparent that the Legislature controls a county
equalization tax to the same extent it controlled the county education district tax in Edgewood III.
Some may validly question the wisdom of imposing a county equalization tax in addition to those
imposed by a school district. However, to the extent chapter 18 provides the school board with
meaningful discretion to levy, set the rate, and provide for the disbursement of the equalization
tax, a court is likely to determine that the county equalization tax does not violate article VIII,
section 1-e of the Texas Constitution.
The Honorable Micheal E. Jimerson - Page 4      (KP-0101)



                                     SUMMARY

                       In Carrollton-Farmers Branch Independent School District
              v. Edgewood Independent School District, the Texas Supreme Court
              determined that an ad valorem tax imposed by county education
              districts was unconstitutional under article VIII, section 1-e of the
              Texas Constitution because the levy, assessment, and disbursement
              of revenue was so directed by the State that the tax amounted to a
              state ad valorem tax. A county equalization tax under former chapter
              18 of the Education Code appears to provide a county school board
              operating thereunder meaningful discretion with regard to the tax
              such that a court could determine that the tax is not similarly
              constitutionally infirm under article VIII, section 1-e.

                                            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
