How precisely must Texas compute the school tax rate that decides who pays the state's teacher-retirement contribution?

Texas AG Opinion DM-0008: How Precisely the Teacher Retirement System Computes the Adjusted School Tax Rate

Plain-English summary

Texas helps fund the teachers' retirement system partly through state contributions, and in some cases requires the local school district to pay part of that contribution. Government Code section 825.405(h) created an exception: a district did not have to pay if its maintenance and operations tax rate equaled or exceeded 125 percent of the statewide average maintenance and operations tax rate. The chair of the House Committee on County Affairs asked whether the Teacher Retirement System (TRS) could compute that adjusted statewide average to the fourth decimal place, instead of stopping at the second.

The Attorney General concluded the TRS could compute the adjusted average to as many decimal places as necessary to make an accurate comparison. Because the exception turned on whether a district's rate equaled or exceeded 125 percent of the average, the TRS had to carry the math far enough to tell, on each side of the line, whether a district qualified. The opinion gave an example: if a district's rate was $1.05 and the correctly adjusted statewide average came out to 1.093, the district fell below the threshold and owed the contribution, whereas a too-coarse rounding could have produced the wrong answer. The TRS retained discretion to limit the number of decimal places, but only so long as the rounding did not improperly grant or deny the exception to any district.

Currency note

This opinion was issued in 1991. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Texas school finance and the teacher-retirement contribution statutes have been amended many times since 1991. Verify current law before relying on any specific rule mentioned here.

Common questions

Did the Teacher Retirement System have to stop at two decimal places?
No. The opinion concluded the TRS had to compute the adjusted statewide average to as many decimal places as needed to compare it accurately with each district's tax rate, which could mean four or more.

Why did the precision matter?
Because the exception in section 825.405(h) was a bright line at 125 percent of the statewide average. A rounding that was too coarse could push a district to the wrong side of the line and wrongly excuse or impose the state contribution.

Could the system round at all?
Yes. The opinion said the TRS could use discretion to limit the decimals, but only so long as the comparison did not improperly grant or deny the exception to any school district.

Background and statutory framework

The retirement system is supported by state contributions in addition to member payments (Gov't Code §§ 825.402, 825.403, 825.404). Section 825.405(a) generally required an employing district to pay the state contribution on part of certain members' salaries, but subsection (h) excepted a district whose maintenance and operations tax rate for the relevant tax year equaled or exceeded 125 percent of the statewide average maintenance and operations tax rate. The statute defined the statewide average rate by reference to the statewide total appraised value of taxable property under the appraisal rolls certified for each district (Tax Code § 26.01) and the statewide total of maintenance and operation taxes imposed. The opinion described the provision's dual purpose, equalizing financial pressures on districts and capping the state's contribution obligation, citing Attorney General Opinion JM-429 (1986), and concluded the TRS must calculate the adjusted average precisely enough to make an accurate district-by-district comparison.

Citations

Statutory provisions:

• TEX. GOV'T CODE ANN. §§ 825.402, 825.403, 825.404, 825.405
• TEX. TAX CODE ANN. § 26.01

Prior Attorney General opinions cited: JM-429 (1986).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0008
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1991/dm0008.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
Attorney General

February 28, 1991

Honorable Robert A. Eckels
Chairman
Committee on County Affairs
Texas House of Representatives
P. O. Box 2910
Austin, Texas 78768-2910

Opinion No. DM-8

Re: Duty of Teacher Retirement System to compute the adjusted statewide average maintenance and operations tax rate pursuant to section 825.405(h) of the Government Code (RQ-2162)

Dear Representative Eckels:

Your predecessor as chairman of the House Committee on County Affairs asked about the adjustment of the statewide average school maintenance and operations tax rate required by section 825.405(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 liability 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 contributions from the state in addition to payments by its members. Gov't Code §§ 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 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 § 825.405(h).

In other words, school districts whose maintenance and operations tax 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 school 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 decimal 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 qualifies 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).

The request letter offers as an example a situation in which a school district's tax rate 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 equal 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 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 carrying the calculation out far enough to meaningfully and accurately compare the tax rate of a local district with the adjusted statewide average in order to determine whether the local district pays the state contribution.

SUMMARY

Section 825.405(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 necessary to accurately compare that adjusted average with each school district's maintenance and operations tax rate.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

SUSAN GARRISON
Acting Chairman, Opinion Committee

Prepared by Celeste A. Baker
Assistant Attorney General