March 22, 1977
The Honorable Tom C. Massey Opinion No. H-961
Chairman
Special House Committee on Re: Use of occupation
Alternatives to Public School tax revenues for areas of
Financing school finance other than
P. 0. Box 2910 the available school fund.
Austin, Texas 18767
Dear Chairman Massey:
You have requested our opinion on the following ques-
tion:
Since occuption taxes are authorized but
not levied by the Texas Constitution, may
these funds be used to support areas of
public school finance other than the
Available School Fund?
Answering your question requires an interpretation of article
7, section 3 and article 7, section 5 of the Texas Constitution,
which provide:
Sec. 5. The principal of all bonds and
other funds, and the principal arising from
the sale of the lands hereinbefore set apart
to said school fund, shall be the permanent
school fund, and all the interest derivable
therefrom --
and the taxes herein authorized
and levied shall --
be the available school
fund....
Sec. 3. One-fourth of the revenue derived
from the State occupation taxes and poll tax
--
of one dollar on every inhabitant of the State
. . . shall --
be set apart annually for the
benefit --
of the public free schools;ndn
addition thereto, there shall be levied and
collected an annual ad valorem State tax of
such an amount not to exceed thirty-five cents
P. 4005
. -
The Honorable Tom C. Massey - page 2 (H-961)
on the one hundred ($100.00) dollars valuation,
as with the available school fund arising from
all other sources, will be sufficient to maintain
and support the public schools of this State for
a period of not less than six months in each
year . . . provided, however, that should the
limit of taxation herein named be insufficient
the deficit may be met by appropriation from the
general funds of the State . . . . (Emphasis added).
We believe your question turns on whether "the taxes herein
authorized and levied" in section 5 includes "one-fourth of
the revenue derived from the State occupation taxes" in
section 3, article 7 of the Texas Constitution.
Initially, it should be stressed that your question does
not suggest that the twenty-five percent of the revenue
derived from state occupation taxes might be diverted from
the use of public schools. The only issue is whether the
method of distribution to the schools is through the available
school fund, rather than through some other method the
Legislature might choose. The available school ffindis
required to be distributed on the basis of scholastic
population without regard to any equalizing factors such
as recognition of the local tax base.
An examination of the historical background of sections
5 and 3 of article 7 may be of value in determining whether
occupation taxes are included in the "taxes herein authorized
and levied." The quoted portion of section 5 has remained
the same since its adoption in 1876. Section 5 established
the permanent school fund and the available school fund: the
available fund was composed of two parts which included
the interest derivable from the permanent fund and the
"taxes herein authorized and levied." Section 3, however,
was originally adopted to read as follows:
Sec. 3. There shall be set apart
annually not
--- more than one-fourth --
of the
general revenue ---
of the State, and a poll
tax of one dollar . . . for the benefit
of the public free schools. (Emph,asis
--
added).
p. 4006
The Honorable Tom C. Massey - page 3 (H-961)
The twofold purpose behind the original section 3 was first,
to levy a one dollar poll tax for the benefit of the public
schools and second, to limit the amount of general revenues
that could be allocated for the support of the public school
system. Arguably, the one dollar poll tax levied in section
3 must be a part of the available school fund; however, the
"taxes herein authorized and levied" phrase of section 5
could not have referred to the present "one fourth of the . . .
occupation taxes" language in section 3 because that language
was not added until 1883. Thus, as originally drafted, the
two sections of article 7 are independent of one another:
section 5 established the available school fund, and section 3
limited the amount of State revenue that could be spent on
public education in addition to that already provided in the
available fund. Furthermore, the only tax specifically
authorized and levied for the available school fund at the
time of the adoption of section 5 was the one dollar poll
tax. This interpretation of the Constitution finds some
support in Webb County v. Board of School Trustees of Laredo,
65 S.W. 878 (Tex. 190l)Twhereinthe Texas Supreme ?&rt
stated that
the annual income derived from the permanent
fund, together with the tax provided for in
r--
section 3, shall constitis the avallable school
fund of the state, bv which is meant the fund
which may be appropriated annually to the
maintenance of the schools.
Id. at 880. (Emphasis added). "The tax" referred to by the
court was the one dollar poll tax.
The present language of section 3 was added by amendment
in 1883. The. impact of the changes were threefold: first,
the limitation on State spending for the public school
system was removed and the Legislature was authorized to
appropriate amounts necessary to fund the public school
system; second, one-fourth of the revenue from State occupation
taxes was dedicated to the support of the public free schools:
and third, the Legislature was authorized and directed to
levy an ad valorem tax to support the public school system
and to provide free textbooks. The amendment only required
that if an occupation tax were levied by the Legislature,
one-fourth of the proceeds must be set aside for the benefit
of the public school system. Therefore, it does not follow
that any occupation tax must be allocated to the available
p. 4007
The Honorable Tom C. Massey - page 4 (H-961)
school fund and subsequently alloted to the schools on the
basis of scholastic population.
In our opinion, we answer your question in the
affirmative. Although article 7, section 3 requires that
one-fourth the revenue from State occupation taxes be set
aside for the benefit of the public free schools, there is
no constitutional requirement that these taxes be allocated
to the available school fund or distributed on a per scholastic
basis. The only revenues required to be allocated to the
available fund are, at present, the income from the permanent
fund, tax revenue constitutionally dedicated to the fund such
as a portion of motor fuel taxes under article 8, section la,
and specific taxes authorized and levied by the Constitution
for the benefit of the fund. This conclusion is not altered
by the fact that the Legislature 9 allocate other revenue
sources to the fund.
SUMMARY
Occupation taxes may be used to support areas
of public school finance other than the
Available School Fund as long as such
funds are used "for the benefit of the
public free schools" as required by article
7, section 3 of the Texas Constitution.
,,ggiy?i&
(1 /Attorney General of Texas
APPROVED:
Opinion Committee
P. 4008