Tax Rate Compliance
Texas Education Code (TEC) §45.0021, was amended by House Bill 1525 of the 87th Legislature, 2021 and become effective September 1, 2021. A school district may not levy or increase the school district's Maintenance and Operations (M&O) taxes at a rate intended to create a surplus in maintenance tax revenue for the purpose of paying the district's debt service.
The Texas Education Agency (TEA) shall develop a method to identify school districts that may have adopted a M&O tax rate in violation of TEC §45.0021(a), which includes review of multiple years of data.
Identification and Compliance
TEA is in the process of developing a method to identify school districts that may be in violation of TEC §45.0021. Which includes looking at:
- Annual financial audit disclosures
- PEIMS submissions including codes 8911 Operating Transfers Out from the general fund to 7915 Operating Transfers In in the debt service fund
- Historical tax rate analysis of an increase to the M&O tax rate with a corresponding decrease to the I&S tax rate in the same year.
- Insufficient I&S fund balance amount to cover the debt service payment.
TEA will notify each school district that has been identified as possibly being in violation of TEC §45.0021. The school district will have the opportunity to explain their Interest and Sinking Fund (I&S) tax rate and their budget preparation methodology.
School districts that have been identified as having adopted a M&O tax rate in violation of TEC §45.0021(a):
- Will need to comply with the tax rate rule no later than three years after it has been ordered to comply.
- TEA will assist the school district in developing a corrective action plan that, to the extent feasible, does not result in a net increase in the district's total tax rate.
All school districts identified as having adopted a M&O tax rate in violation of TEC §45.0021(a) have provided a corrective action plan to TEA detailing how they will get into compliance within three years.
Presentations
TEA Update on School District Tax Compliance - February 2023
Rules And Related Attorney General Opinions
- Texas Education Code (TEC) §44.004 (c-2), as amended by House Bill 3, 86th Legislature 2019
- Texas Education Code (TEC) §45.0021, as amended by House Bill 1525, 87th Legislature 2021
- Texas Attorney General Opinion GA-0775
- Texas Attorney General Opinion KP-0154