If voters reject a hospital district's proposed property tax increase, does the district's taxing law conflict with the Tax Code, and does the county have to take over indigent care?

Plain-English summary

Hood County Hospital District provides indigent care and can levy a property tax. Back on December 31, 1996, it leased some facilities to another entity for an up-front payment, then stopped collecting property taxes and lived off the lease money. That money is nearly gone. In 2024 the district set a tax rate above zero and held the voter-approval election the Tax Code requires, but voters rejected it, leaving the rate at zero and the district roughly a year from running out of money. The county attorney asked the Attorney General two questions.

First: which law controls, the district's power to tax under its enabling law, or the Tax Code rule requiring voter approval to raise rates? The AG found there is no conflict between them, so neither "controls" over the other. The district's enabling law (Special District Local Laws Code sections 1042.251 and 1042.252) commands the board to set a rate within a range, up to 75 cents per $100 valuation. The Tax Code's section 26.07 is a separate truth-in-taxation provision that lets voters reject a proposed increase above the previously approved rate; if they do, the rate stays at the voter-approval rate (here, zero). One tells the board what range it may tax within; the other lets voters cap an increase. They operate together. The AG noted that if a zero rate is outside the board's permitted range, the district's problem would stem from the board's own ultra vires act, not from any statutory conflict.

Second: if the district's rate stays at zero, does its indigent-care duty automatically fall on Hood County under Health and Safety Code section 61.022? No. That section makes a county provide health care assistance to eligible residents, but only to a person who does not reside in the service area of a hospital district. The district's boundaries are coextensive with the county, so every county resident lives in the district, and the duty stays with the district. The AG declined to predict every downstream consequence, noting a district might draw on other revenue (sales tax, patient payments) or, in distress, face bankruptcy or dissolution.

What this means for you

If you sit on a hospital district board

The opinion confirms two things about your taxing authority. Your enabling law directs you to set a rate within a permitted range (up to 75 cents per $100), and the Tax Code separately lets voters reject an increase above the prior approved rate. Those are not in conflict. If voters reject your proposed increase, the rate reverts to the voter-approval rate. The AG pointedly did not decide whether a zero rate is a valid rate within your statutory range, and flagged that if zero is outside that range, the situation may reflect an ultra vires act by the board. The opinion also notes districts may have other revenue options, such as a sales and use tax election under Health and Safety Code section 285.061 or patient charges under section 1042.111(d)-(g).

If you are a county official or county attorney

Do not assume the county inherits the district's indigent-care obligations if the district's tax rate stays at zero. Because the district covers the whole county, section 61.022's county duty does not apply to district residents. The AG would not forecast every possible ripple effect, but it was clear that the indigent-care responsibility remains with the district.

If you are a taxpayer in the district

Your vote on a proposed rate increase is the control the Tax Code gives you. Rejecting the increase keeps the rate at the voter-approval rate. The opinion explains the mechanics: it does not tell the district how to close its budget gap, and it acknowledges the district could pursue other revenue or, in a worst case, bankruptcy or dissolution.

Common questions

Q: Does the Tax Code override a hospital district's power to set its own tax rate?
A: No. The AG found no conflict. The district's enabling law sets the range it may tax within; the Tax Code lets voters reject an increase above the prior approved rate. Neither controls over the other.

Q: What happens when voters reject the district's proposed rate increase?
A: Under section 26.07(e), the rate for the current tax year becomes the voter-approval tax rate. Where the previously approved rate was zero, that means the rate stays at zero.

Q: If the district's rate is zero, does the county have to provide indigent care for district residents?
A: No. Section 61.022's county duty applies only to people who do not reside in a hospital district's service area. The district here covers the entire county, so the duty stays with the district.

Q: Did the AG decide whether a zero tax rate is legal for the district?
A: No. The AG expressly did not decide whether a zero rate falls within the board's permitted range, noting no court or prior AG opinion had addressed it, and that the answer did not change the no-conflict conclusion.

Q: What other options does a cash-strapped hospital district have?
A: The opinion mentions revenue sources besides property tax, such as a sales and use tax (Health and Safety Code § 285.061) or patient payments (Special District Local Laws Code § 1042.111(d)-(g)), and notes that a district in distress might face bankruptcy or dissolution.

Background and statutory framework

Hospital districts are authorized by article IX, section 9 of the Texas Constitution, which requires a district to "assume full responsibility for providing medical and hospital care for its needy inhabitants." Hood County Hospital District's enabling law is Chapter 1042 of the Special District Local Laws Code. A board of directors manages the district (§§ 1042.001, .103), which must provide care for needy inhabitants (§ 1042.101). To fund its work, "[t]he board shall impose a tax on all property in the district" (§ 1042.251(a)) "at a rate not to exceed [seventy-five] cents on each $100 valuation" (§ 1042.252).

The Tax Code's section 26.07 is a truth-in-taxation provision. If a special taxing unit, which includes a hospital district (§ 26.012(19)(C)), adopts a rate exceeding its voter-approval tax rate, the voters decide at an election whether to approve it (§ 26.07(b)). If they do not, the rate for the current year is the voter-approval tax rate (§ 26.07(e), calculated under § 26.04(c)). Raising a previously approved rate from zero therefore takes a voter-approval election, and rejection leaves the rate at the prior figure, here zero.

On the conflict question, the AG applied ordinary construction principles (Combs v. Roark Amusement & Vending), noting that two statutes "irreconcilably conflict" only when just one can apply to a situation (Love v. State), and that courts read statutes to avoid conflict where possible (Board of Adjustment of City of San Antonio v. Wende). The enabling law and section 26.07 differ in purpose and application, the former sets the permissible range, the latter lets voters cap an increase, so they coexist. Drawing on Gilbert v. El Paso County Hospital District, the AG observed that section 26.07 lets voters refuse to raise taxes as far as the board proposes but does not bar the board from imposing a rate within the permissible range. The AG declined to decide whether a zero rate is within that range, citing the rule that a hospital district exercises only powers delegated by the Legislature (Jackson County Hospital District).

On the second question, section 61.022(a) of the Health and Safety Code makes a county provide health care assistance to eligible residents, but section 61.021 limits that to people who do not reside in a hospital district's service area, and section 61.002(2) defines "eligible county resident" accordingly. Because the district's boundaries are coextensive with Hood County (§ 1042.003), the county duty does not attach. The AG declined to predict all downstream effects, pointing to alternative revenue (e.g., § 285.061 sales tax; § 1042.111(d)-(g) patient charges) and the possibility of bankruptcy or dissolution (In re Hardeman County Hospital District).

Citations and references

Statutes:
- Tex. Spec. Dist. Code ch. 1042 — Hood County Hospital District, including the tax mandate (§ 1042.251) and rate cap (§ 1042.252)
- Tex. Tax Code § 26.07 — voter election to limit a tax-rate increase
- Tex. Health & Safety Code ch. 61 — indigent health care, including the county duty (§ 61.022) and its district-resident limit (§ 61.021)

Key cases:
- Gilbert v. El Paso Cnty. Hosp. Dist., 38 S.W.3d 85 (Tex. 2001) — truth-in-taxation statute does not limit a district's power to levy taxes
- Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632 (Tex. 2013) — statutory construction focuses on enacted text

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0515
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2026/kp-0515.pdf

Original opinion text

February 5, 2026

The Honorable Matthew A. Mills
Hood County Attorney
1200 West Pearl Street
Granbury, Texas 76048

Opinion No. KP-0515
Re: Interpretation and application of certain provisions in Tax Code chapter 26 and Special District Local Laws Code chapter 1042 to a hospital district (RQ-0593-KP)

Dear Mr. Mills:

You ask about Hood County Hospital District's statutory authority in relation to a Tax Code requirement. You tell us that, under the Special District Local Laws Code, the District is charged with providing indigent care and is authorized to impose an ad valorem tax. Request Letter at 1. You say that "[o]n December 31, 1996, the" District entered into a lease that transferred control of certain District facilities to another entity "in exchange for an up-front payment to the District." Id. "After that time, the District did not impose ad valorem taxes, and it used the lease money to provide indigent care." Id. But "the [lease] money is nearly out" so, in 2024, the District set an ad valorem tax rate above zero and called an election to obtain voter approval on the new rate. Id. at 1–2. You explain the District called the election because of a requirement in the Tax Code. Id. at 2. "However, the measure was defeated, leaving the District" with an ad valorem tax rate of zero and "limited options before running out of money in about a year." Id.

Against that backdrop, you suggest "tension" exists between the Special District Laws Code and the Tax Code as to the imposition of ad valorem taxes. Id. at 1. You first ask which statute controls—the District's authority to impose a tax under the Special District Laws Code or the Tax Code's requirement to "secure voter approval before raising ad valorem taxes above a certain rate." Id. at 2. If "the Tax Code controls," you next ask whether the "responsibilities of the District" fall on Hood County. Id.

The District's board of directors shall impose a tax on property in the District at a rate not to exceed seventy-five cents on each $100 valuation.

We begin with some general information about the District and its authority to impose a property tax. The Legislature created the District under its authority to "creat[e], establish[], maint[ain] and operat[e] . . . hospital districts" in article IX, section 9 of the Texas Constitution. TEX. CONST. art. IX, § 9; see TEX. SPEC. DIST. CODE § 1042.002. The District's enabling legislation is codified at Chapter 1042 of the Special District Local Laws Code. See TEX. SPEC. DIST. CODE §§ 1042.001‒.253. Pursuant to Chapter 1042, a board of directors manages and controls the District, id. §§ 1042.001, .103, which is charged with the responsibility of providing medical and hospital care for the District's needy inhabitants, id. § 1042.101. To help carry out this and its other functions, "[t]he board shall impose a tax on all property in the district subject to district taxation," id. § 1042.251(a), "at a rate not to exceed [seventy-five] cents on each $100 valuation," id. § 1042.252. Cf. Gilbert v. El Paso Cnty. Hosp. Dist., 38 S.W.3d 85, 87 (Tex. 2001) (stating that a different hospital district was authorized to assess a property tax to discharge its responsibility to furnish care for the indigent and needy and perform other functions).

The Tax Code gives voters a method to limit a tax rate increase to the extent it exceeds the voter-approval tax rate.

We next consider the Tax Code requirement at issue. You tell us the Tax Code requires "taxing entities to secure voter approval before raising ad valorem taxes above a certain rate." Request Letter at 2. We understand you to refer to section 26.07 of the Tax Code, a truth-in-taxation provision. See id.; Tex. Att'y Gen. Op. No. KP-0444 (2023) at 8. See generally TEX. TAX CODE § 26.07.

Section 26.07 provides that "[i]f the governing body of a special taxing unit . . . adopts a tax rate that exceeds the taxing unit's voter-approval tax rate, . . . the registered voters of the taxing unit at an election held for that purpose must determine whether to approve the adopted tax rate." TEX. TAX CODE § 26.07(b). A "special taxing unit" includes a hospital district. Id. § 26.012(19)(C). If the voters do not approve the proposition, the "tax rate for the current tax year is the taxing unit's voter-approval tax rate." Id. § 26.07(e); see also id. § 26.04(c) (prescribing how to calculate the "voter-approval tax rate").

This means that raising a previously approved tax rate from zero requires a voter approval election, and rejection of that proposed increase leaves the "rate for the current tax year [at] the taxing unit's voter-approval tax rate," id. § 26.07(b), (e); see also Tex. Att'y Gen. Op. No. GA-1070 (2014) at 2 (referencing what was previously called the rollback rate)—i.e., the original zero. We understand this is the situation the District faces. See Request Letter at 1.

[Footnote: Information on the District's website indicates that, in 2024, the District calculated its voter-approval tax rate to be zero.]

The District's authority to impose a tax does not conflict with the voters' ability to limit a tax-rate increase.

Your first question asks whether the Special District Local Laws Code or the Tax Code controls—suggesting the two codes are in conflict. See id. at 1–2. "When construing a statute, our chief objective is effectuating the Legislature's intent, and ordinarily, the truest manifestation of what lawmakers intended is what they enacted." Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632, 635 (Tex. 2013). "Two statutes irreconcilably conflict when only one of them can apply to a particular situation." Love v. State, 706 S.W.3d 584, 609 (Tex. App.—Austin 2024, pet. ref'd) (quoting Lomax v. State, 233 S.W.3d 302, 312 (Tex. Crim. App. 2007)). In situations where a conflict exists, one statute may prevail over another. See, e.g., TEX. GOV'T CODE §§ 311.025(a), .026(b). But we "read statutes to avoid conflict and superfluities if possible." Bd. of Adjustment of City of San Antonio v. Wende, 92 S.W.3d 424, 432 (Tex. 2002). We determine if a conflict exists by focusing first on the enacted language. See Combs, 422 S.W.3d at 635.

You correctly observe that both the District's enabling legislation and Tax Code section 26.07 concern the District's tax rate. See Request Letter at 1–2. The provisions differ, however, in purpose and application. Sections 1042.251 and 1042.252 of the Special District Local Laws Code are special laws that command the board of directors to adopt a tax rate within a permissible range—that is, "a rate not to exceed [seventy-five] cents on each $100 valuation." TEX. SPEC. DIST. CODE §§ 1042.251–.252. By comparison, section 26.07 is a general statute which affords voters the opportunity to limit tax increases through disapproval of rates above those previously approved. TEX. TAX CODE § 26.07(e); Tex. Att'y Gen. Op. No. KP-0444 (2023) at 8; see also, e.g., Vinson v. Burgess, 773 S.W.2d 263, 264 n.1 (Tex. 1989) (using the "rollback tax rate" terminology). Thus, sections 1042.251 and 1042.252 authorize the District's board of directors to impose a tax within an enumerated range of rates and section 26.07 permits voters to limit the extent of a tax-rate increase. Compare TEX. SPEC. DIST. CODE §§ 1042.251, .252, with TEX. TAX CODE § 26.07(e).

Even were we to assume that a zero percent tax rate is within the prescribed statutory range of rates which the board may impose, Tax Code section 26.07 simply authorizes voters to refuse to raise property taxes "as far as the taxing unit's governing body proposes." Gilbert, 38 S.W.3d at 91. Section 26.07 does not itself prohibit the board from imposing a rate within the permissible range of tax rates. Cf. id. at 88 (concluding another truth-in-taxation statute did not limit a governmental unit's power to levy taxes). The District's enabling legislation can, in that case, apply alongside those in the Tax Code without conflict. If a zero percent tax rate is not within the prescribed statutory range of rates that the board may impose, of course, the dilemma you describe arises from an ultra vires act of the board. See Request Letter at 1. Indeed, a hospital district "may exercise only those powers expressly delegated to it by the Legislature, or which exist by clear and unquestioned implication." Jackson Cnty. Hosp. Dist. v. Jackson Cnty. Citizens for Continued Hosp. Care, 669 S.W.2d 147, 154 (Tex. App.—Corpus Christi 1984, no writ). This belies the need to conclude whether a zero percent tax rate is valid when, either way, the dilemma you describe does not follow from statutory conflict. Put simply, there is no conflict between sections 1042.251 and 1042.252 of the Special District Local Laws Code and section 26.07 of the Tax Code—meaning neither "controls" over the other. See Request Letter at 2.

[Footnote: We find no judicial opinion addressing whether the board of directors of a hospital district may set its ad valorem tax rate at zero. Nor has the issue been addressed in an Attorney General opinion. See, e.g., Tex. Att'y Gen. Op. No. GA-0798 (2010) at 1 n.2.]

A county's obligation to provide health care services and assistance pursuant to Health and Safety Code section 61.022 does not apply to a person who resides in the service area of a hospital district.

You also ask whether the District's responsibilities "automatically fall upon" the County, under section 61.022 of the Health and Safety Code, if the District continues to have an ad valorem tax rate of zero. Id. That section requires a county to "provide health care assistance . . . to each of its eligible county residents." TEX. HEALTH & SAFETY CODE § 61.022(a). But this obligation applies only "to a person who does not reside in the service area of a public hospital or hospital district." Id. § 61.021; see also id. § 61.002(2) (defining "eligible county resident"). Here, of course, "[t]he boundaries of the [D]istrict are coextensive with the boundaries of Hood County." TEX. SPEC. DIST. CODE § 1042.003. Thus section 61.022 does not require the County to provide health care services and assistance to eligible residents when all County residents necessarily reside in the District. See Tex. Att'y Gen. Op. No. JM-0722 (1987) at 2–3. Said differently, the District is responsible for these "needy inhabitants." TEX. SPEC. DIST. CODE § 1042.101; see also TEX. CONST. art. IX, § 9 (requiring a district to "assume full responsibility for providing medical and hospital care for its needy inhabitants"); TEX. HEALTH & SAFETY CODE §§ 61.051–.068 (emphasizing the District's responsibility).

We cannot predict other possible repercussions for a county if a hospital district's ad valorem tax rate is set at zero. In some instances, a hospital district might receive revenue from sources other than property tax, such as sales and use tax or patient payments. See, e.g., TEX. HEALTH & SAFETY CODE § 285.061 (authorizing certain hospital districts to hold an election to adopt a sales and use tax); TEX. SPEC. DIST. CODE § 1042.111(d)–(g) (addressing the District's authority to hold a patient liable for payment of treatment); Gilbert, 38 S.W.3d at 87 ("In addition to property taxes, the District receives money from paying patients, its cafeteria, and Medicaid."). A hospital district facing financial distress might, in other instances, have to declare bankruptcy or seek dissolution. See, e.g., In re Hardeman Cnty. Hosp. Dist., 540 B.R. 229, 231–33 (Bankr. N.D. Tex. 2015); Tex. Att'y Gen. Op. No. JC-0268 (2000) at 3. In sum, the long-term consequences for the County depend on the District's future actions.

S U M M A R Y

Hood County Hospital District's authority to impose a property tax under Special District Local Laws Code Chapter 1042 does not conflict with the voters' ability to limit a tax-rate increase under Tax Code section 26.07.

A county's obligation to provide health care services and assistance pursuant to Health and Safety Code section 61.022 does not apply to a person who resides in the service area of a hospital district.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT WEBSTER, First Assistant Attorney General
LESLEY FRENCH, Chief of Staff
D. FORREST BRUMBAUGH, Deputy Attorney General for Legal Counsel
JOSHUA C. FIVESON, Chair, Opinion Committee
CHRISTY DRAKE-ADAMS, Assistant Attorney General, Opinion Committee