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DAN MORALES
 ATTORNEY
       cwEML                            February 28,199l


 Honorable Robert A Eckels                       Opinion No.     DM-8
 chairman
 committee on county Affairs                     Re: Duty of Teacher Retirement System
 Texas House of Representatives                  to compute the adjusted statewide average
 P. 0. Box 2910                                  maintenance and operations tax rate pur-
 Austin Texas 78768-2910                         suant to section 825.405(h) of the Govern-
                                                 ment Code      (RQ-2162)


 Dear Representative Eckels:

         Your predecessor as chairman of the House Committee on County Affaii asked
 about. the adjustment of the statewide average school maintenance and operations tax rate
 required by section 825405(h) of the Government Code. That section requires that the
 statewide average maintenance. and operations tax rate for school districts be adjusted by
 125 percent for the purpose of determining a local school district’s, liabiity for the state
 contribution to the teachers’ retirement fund. The specific question raised was whether the
 Teachers Retirement System (hereinafter TRS) is authorized to compute the adjustment of
 the statewide average tax rate to the fourth decimal place for the.purpose of determining
 that liability instead of to the second decimal place.

       The retirement system is supported by contiiiutions from the state in addition to
 payments by its members. Gov’t Code 89 825.402, 825.403, 825.404; see also -Attorney
 General Opinion JM-429 (1986). Subsection (a) of section 825.405 requires that the
 employing district pay the state contribution on a portion of the salary of certain members.
 Subsection (h) provides an exception to that general requirement, as follows:

                This section does not apply to state contributions for members
        employed by a school district in a school year if the district’s tax rate for
        maintenance and operation revenues for the tax year that ended in the
        preceding school year equals or exceeds 125 percent of the statewide
        average tax rate for school district maintenance ‘and operation revenues
        for that tax year. For a tax year, the statewide average tax rate for school
        district maintenance and operation revenues is the tax rate that, if applied
        to the statewide total appraised value of taxable property for every school
        district in the state according to the appraisal roll certified for each district



                                               p. 41
Honorable Robert A. Eckels - Page 2      t DM-8 )



       for the tax year as provided by Section 26.01 Tax Code, would produce an
       amount equal to the statewide total amount of maintenance and operation
       taxes imposed in the tax year for every school district in the state.

Gov’t Code 0 825.405(h).

        In other words, school districts whose maintenance and operations tar rates equal or
exceed 125 percent of the statewide average are excepted from the subsection (a)
requirement that the employer pay part of the state contribution. The section has the dual
purpose of equalizing financial pressures on local school districts and putting “a cap on the
state’s obligation to contribute on behalf of certain members.” Attorney General Opinion
JM-429 (1986) at 1.

        In order to qualify for. the exception set out in subsection (h), a schooi district’s
maintenance and operations tax rate for the preceding school year must be equal. to or
greater than 125 percent of the statewide average. Thus, the TRS must calculate the
adjustment of the statewide average to as many dechnal places as necessary to accurately
compare a local district’s tax rate with the adjusted statewide average in order to determine
whether the school district qualities for the exception. Of course, the TRS may use its
discretion to limit the number of decimal places in the adjusted statewide average, as long
as the comparison of the adjusted average with each local district’s rate does not
improperly deny or grant the exception in violation of subsection (h).t

       The request letter offeqa as an example a situation in which a school district% tax
rati is $1.05 per $100 of taxable property value. Certainly, if the adjustment of the
statewide average were correctly calculated to be $1.05, that school district, with a tax rate
u      to the adjusted average, would not be required to pay the state contribution.
However, assuming that the correct calculation of the adjusted statewide average is 1.093
for the school year, the school district’s tax rate would be less than 125 percent of the




                                             p.   42
Honorable Robert A. Rckels - Page 3      (DM-8)




statewide average, and the local district would not qualify for the exception and would be
liable for the state contribution. That example illustrates the necessity of csnying the
calculation out far enough to meani&u@ and acatmtely compare the tax rate of a local
district witb the adjusted statewide average in order to determine whether the local district
pays the state contriiution.

                                     SUMMARY


                Section &25.405(h) of the Government Code requires the
          computation of the statewide average maintenance and operations
          tax rate for school districts and the adjustment of that average by 125
          percent.    The Teachers Retirement System must calculate the
          adjustment of the statewide average to as many decimal places as
          neeaary to accurately compare that adjusted average with each
          school district’s maintenance and operations tax rate.




                                                  DAN      MORALES
                                                  Attorney General of Texas

MflLL PRYOR
Fi Assistant Attorney General

MARYKBILER
Executive Assistant Attorney General

JUDGEZOLLIE     STEAKLm    0
Special Assistant Attorney General

RENEAx-ncKs
Special Assistant Attorney General

SUSAN GARRISON
ActingChabmaq Opiion Committee

Prepared by Celeste A. Baker
Assistant Attorney General


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