March 30, 1964
Honorable J. W. Edgar Opinion No. C- 232
Commissionerof Education
Texas Education Agency Re: Whether the Texas Education
Austin, Texas Agency should, in determining
the economic Index and in
calculatingthe amount of
local funds to be charged
to each scho,oldistrict in
Harrison County, remove from
the total ‘value added by
manufacture"the value of
products manufactured on
federally-ownedmilitary
reservations in Harrison
Dear Mr. Edgar: County.
Your office has requested an opinion on the following
question:
'In determiningthe economic index and
in calculating the amount of local funds to
be charged to each school district In Harrison
County, legally may and should the Texas Educa-
tion Agency remove from the total ‘value added
by manufacture' for Harrison County the value
of p~roductsmanufacturedat Longhorn Ordnance
Works?"
The facts contained in your statementare the following:
"Located within the Karnack Independent
School District in Harrison County Is a govern-
ment-owned and controlled installationknown as
'LonghornOrdnance Works.' It reportedly com-
prises (8,50~ acres) 13.32 square miles of area
in the Karnack district which has 114 square
miles of territory. For purposes of Section 5
of Article 2922-16, the Longhorn Ordnance Works
installationis recognizedby this Agency as a
Federal-ownedmilitary reservationwithin the
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Hon. J. W. Edgar, page 2 (C-232)
confines of the Karnack district; the school
district enjoys an adjusted reduction in its
local fund assignment therefor as prescribed
and provided Sn the law.
"This reservation (LonghornOrdnance Works)
and its facilities are not assessed for taxes;
it does not comprise any portion of the assessed
valuation in or for Harrison County. The reserva-
tion is under the direct control of the United
States Army, Ordnance Corps; all its lands and
facilities sre owned by the Government.
'The Governmenthas contractedwith a
corporation (Thlokol Chemical Corporation)for
the manufacture and sale of certain rocket fuels.
All,paymentsare made to Thlokol by the United
States Army; all its products are sold exclusively
to the Qovernment. All expendituresof every kind
including payrolls and manufacturemade by Thlokol
are reimbursed to Thiokol by the Government, sub-
ject to approval and acquiescenceof the ffovernment.
Located upon the reservationare reservation em-
ployees of the Government,under the direction of
its CommandingOfficer.
'In determinationof the economic index for
Harrison County, there has been included~the
factor, 'value added by manufacture',for Harrison
County pursuant to subdivisionc.(Artlcle2922-16,
Section 3). The total value added by manufacture
for Harrison County encompassesthe value of pro-
ducts manufacturedat the reservationby Thiokol
which are rocket fuels, their value being collec-
tively reported under the broad category, trans-
portation equipment, in Department of Commerce
Reports. The economic index calculatedby this
Agency for Harrison County does not include nor
add a value for 'payrolls'at Thlokol; this be-
cause the reservationor Thlokol is not recognized
as a retail, wholesale or service establishment
referred to in subdivisionc for payroll factor
purposes.
"A school district in Harrison County. . .
vigorously complains and contends that value
of manufacture of products manufacturedat
Thlokol legally should not have come Into the
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Hon. J. W. Edgar, page 3 (C- 232)
calculationsof the economic Index for Harrison
County, that such value should have been ascer-
tained from proper Governmentreporting agencies
and deducted from the total 'value added by man-
ufacture,'determined for Harrison County In ar-
riving at that county's economic index. Further,
that not to deduct such 'value'results in an
Improper and unfair charging of higher local
fund assignments against the local school dis-
tricts of Harrison County and particularlythe
Marshall district; that the law itself contem-
plates that value of manufacture of tax exempt
reservationsor corporations,such as Thlokol,
should not be used In arrlvlng at the economic
index.'
Section 3 of Article 2922-16, In so far as pertinent
to the presentationherein, prescribes as follows:
'In determiningthe taxpaying ability of
each school district, the State Commissioner
of Education, subject to the approval of the
State Board of Education, shall calculate an
economic index of the financial ability of-
each county to support th F d tl School
Program. The economic inzex"xy E c&ty shall
be calculated to approximate the
=$%%%ich
the total taxpaying ability in the
is in a given county, and shall constitute
for the purpose of thisAct a measure of one
county's ability to support schools in relation
to the ability of other counties of the State.
.Theeconomic index for each county shall be
,based upon and determined by the following
weighted factors:
a. Assessed valuation of the county,
weighted by. . .(20);
b. Scholasticpopulation of the county,
weighted by. . .(8);
c. Income for the county measured by:
Value added by manufacture, value
of minerals produced, value of agri-
cultural products, payrolls for retail
establishments,payrolls for wholesale
establishments,payrolls for service
establishments,weighted collectively
by. . .(72).
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- .
Hon. J. W. Edgar, page 4 (C-232)
!I ‘I
. . .
Se&Ion 5 of Article 2922-16 recites the formula
for determination(annually)of the amount of local funds
to be charged to each school district in support of its local
school operation as follows:
"Divide the State and county assessed
valuation of all property in the count
ject to school district taxation I53%e%&t
preceding school year Into the State and county
assessed valuation of the district for the next
preceding school year, findlng the district's
percentage of the county valuation. Multiply
the district'spercentage of the county valua-
tion by the amount of funds assigned to all of
the districts in the county. The product shall
be the amount of local funds that the district
shall be assigned to raise toward the financing
of its foundation school program.
"Provided,however, that in any district
containing. . ., Federal-ownedmilitary reser-
vations. .'.the amount assigned to such school
district shall be reduced In proportion that
the area included in the above-named classifi-
bears to the total area of the district.
catiol;f.
. . .
Section 3 of Article 2922-16 of Vernon's Civil
Statutes provides that the Texas Education Agency shall cal-
culate an economic index of the financial ability of each
county to support the Foundation School Program. It further
provides three guides to measure the wealth of a county:
land value, (2) scholasticpopulation and (3) Income. In(%.s
instance we are concernedwith the third, i.e., Income, specifi-
cally, income for the county measured by value added by manu-
facturing within that county.
Although there is a specific exclusion of federally-
owned military reservationareas in the county, this office can
find no extilusionsin the statutes or cases which would support
a contention that income created ,bythe manufacturingof trans-
portation equipment (rocket fuel) on a federal reservation by
an independentcontractor should not be included In determining
the economic index of a county.
Furthermore,we cannot conceive of any reason why,
from an economic standpoint,the income from a manufacturing
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Hon. J. W. Edgar, page 5 (C- 232)
independentcontractor,who sells all of his manufactured
products to the Federal Government, is not the same and should
not stand on the same footing as other manufacturingconcerns
in arriving at the economic index of a county.
SUMMARY
In determiningthe economic index and In
calculatingthe amount of funds to be charged
to each county, the Texas Education Agency
should include the income for the county using
the "value added by manufacturing"of an independ-
ent contractor on a federally-ownedmilitary
reservation.
Yours very truly,
WAQQONER CARH
Attorney General
BY'B&r!!%?~
BMjr:sj:mkh Assistant ' *
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Pat Bailey
Paul Phy
Paul Robertson
Gordon Appleman
APPROVED FOR THE ATTORNEY GENERAL
BY: H. Grady Chandler
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