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 ֱ Education Agency (TEA) has developed a comprehensive methodology to identify districts that may be in violation of ֱ 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, TEA 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 TEA’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. TEA 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 TEA. These plans detail the strategies each district will implement to bring their tax practices into compliance within three years.
Presentations
TEA 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