Tax Rate Compliance
Effective September 1, 2021, , was amended by House Bill 1525, enacted by the 87th Legislature. This statute prohibits school districts from levying or increasing their Maintenance and Operations (M&O) tax rate with the intent of generating a surplus in maintenance tax revenue for the purpose of servicing debt obligations.
Identification and Compliance
In response to this legislative change, the ²ÝÝ®ÊÓƵ has developed a comprehensive methodology to identify districts that may be in violation of Texas Education Code (TEC) §45.0021. This process involves a multi-year review of financial data, including annual audit disclosures, Public Education Information Management System (PEIMS) submissions, and historical tax rate trends. Specifically, ²ÝÝ®ÊÓƵ examines instances where an increase in the M&O tax rate coincides with a decrease in the Interest and Sinking (I&S) tax rate, as well as cases where the I&S fund balance is insufficient to cover debt service payments.
As part of the ²ÝÝ®ÊÓƵ’s annual compliance review, districts identified as potentially in violation of TEC §45.0021(a) will receive formal notification. These districts will be afforded the opportunity to present a detailed explanation of their adopted tax rates and underlying budgetary decisions. If noncompliance is confirmed, the district must develop and submit a corrective action plan outlining the specific steps it will take to achieve compliance within a three-year period. ²ÝÝ®ÊÓƵ will provide guidance and support throughout this process to help ensure that, where feasible, the corrective measures do not result in a net increase to the district’s total tax rate.
At present, all districts identified as having adopted a M&O tax rate in violation of TEC §45.0021(a) have submitted corrective action plans to ²ÝÝ®ÊÓƵ. These plans detail the strategies each district will implement to bring their tax practices into compliance within three years.
Presentations
²ÝÝ®ÊÓƵ Update on School District Tax Compliance - February 2023
Rules And Related Attorney General Opinions
- , as amended by House Bill 3, 86th Legislature 2019
- , as amended by House Bill 1525, 87th Legislature 2021