What must a Texas county appraisal district do with leftover budget money, and can it pay its staff a bonus?

Plain-English summary

A county appraisal district is funded by the local taxing units (the county, cities, school districts, and others) that share its costs, and the Tax Code sets out how the district builds its budget and what happens to leftover money. State Representative Ryan Guillen, who chaired the House Committee on Culture, Recreation and Tourism, sent the Attorney General several questions about how far an appraisal district board can go with its budget, prompted by a district that wanted to move unspent money into a capital improvement fund or hand out a one-time lump-sum merit payment to staff.

The first question was what it means for money to be "obligated to be spent" under Tax Code section 6.06(j). The AG used the ordinary meaning of "obligate," to commit funds to meet or secure an obligation, and said funds the district commits in that way fall within the statute. The Comptroller's office, which reviews and audits appraisal districts, reads the statute to let a district obligate unspent funds during a year when it knows the payment will not go out that year, and its auditor guidelines say that moving leftover money into a reserve, replacement, or disaster account makes the money "obligated." Because the Comptroller oversees appraisal districts, the AG said a court would give that reading serious consideration.

The second question was whether money the district gets from outside its taxing units counts as "excess funds" that must be credited back. The AG said no. Section 6.06(j) speaks only of payments "made or due to be made by the taxing units," and by naming only those payments the Legislature left out other sources. Funds from elsewhere are not excess funds for crediting purposes. The AG went a step further and overruled a 1994 letter opinion (LO-94-067) that had reached the opposite result by analogy, explaining that the plain language of the statute controls.

Third, on whether a capital improvement fund could be budgeted when amounts were not in the proposed budget by the June 15 deadline, the AG explained that genuine excess funds must be returned or credited, but the budget timeline is flexible. The chief appraiser prepares a proposed budget by June 15, amendments are allowed with a final budget by September 15, and a new or amended line item can be added at any time. So missing the June 15 deadline for a particular item is not by itself fatal.

Fourth, on a one-time lump-sum merit payment, the AG explained that Article III, section 53 of the Texas Constitution bars extra pay for services an employee has already rendered, the concern being retroactive raises, but it does not bar additional compensation under prospective terms of employment. Because the opinion process cannot find facts and the office had only limited information, the AG declined to decide whether the specific payment was constitutional, advising only that a payment operating prospectively from its proper authorization is likely not unconstitutional.

Fifth, the AG concluded that taxing units may use section 6.10 of the Tax Code to disapprove a board's amendment of the budget. Section 6.10 lets taxing units disapprove board actions other than "adoption of the budget," and amending a budget is not the same as adopting it, so it is not excluded.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

Representative Guillen (as the opinion described it): The opinion answered each of his budget questions: defining "obligated to be spent," limiting "excess funds" to taxing-unit payments, describing the flexible budget timeline, setting out the prospective-versus-retroactive line under Article III, section 53 while declining to judge the specific payment, and concluding that taxing units may disapprove a budget amendment under section 6.10.

Appraisal districts and their boards (as the opinion described it): The opinion described funds committed to meet or secure an obligation, including money moved into reserve-type accounts per Comptroller guidance, as "obligated," required genuine excess funds to be returned or credited to the taxing units, and treated a missed June 15 deadline for a line item as not fatal because budgets can be amended and items added at any time.

Participating taxing units (as the opinion described it): The opinion described taxing-unit payments as the only money counted as excess funds owed back to the units, and concluded the units may use section 6.10 to disapprove a board's amendment of the budget.

Appraisal district employees (as the opinion described it): The opinion described Article III, section 53 as barring pay for services already rendered but not prospective compensation, and said a payment operating prospectively from proper authorization is likely not unconstitutional, while declining to rule on the specific merit payment because it could not find facts.

Common questions

What does a Texas appraisal district have to do with leftover budget money?
The AG explained that money from the taxing units that is not actually spent or obligated during the year is "excess funds" that the chief appraiser must credit back to the taxing units for the following year. Funds the district commits to meet an obligation, including amounts moved into reserve accounts, are treated as obligated.

Does money the district raised from outside sources have to be returned to the taxing units?
No. The AG concluded that only payments made by the taxing units count as excess funds under section 6.06(j), so funds from other sources do not have to be credited back. The opinion overruled a 1994 letter opinion that had said outside funds should be returned.

Can an appraisal district give its employees a one-time bonus?
The AG would not rule on the specific payment because it could not find facts. It explained the general rule: Article III, section 53 forbids extra pay for work already done, but a payment that operates prospectively from its proper authorization is likely not unconstitutional.

Can taxing units block a budget amendment by the appraisal district board?
Yes. The AG concluded taxing units may use section 6.10 of the Tax Code to disapprove a board's amendment of the budget, because section 6.10 excludes only "adoption of the budget," not amendments.

Is a line item dead if it missed the June 15 budget deadline?
Not necessarily. The AG explained the chief appraiser prepares a proposed budget by June 15, but amendments are allowed with a final budget by September 15, and a line item can be added at any time, so missing the deadline for an item is not by itself fatal.

Background and statutory framework

Tax Code section 6.06 governs appraisal district budgets. The chief appraiser prepares a proposed budget each year listing positions, salaries, benefits, capital expenditures, and each taxing unit's allocation, submitted by June 15 (Tex. Tax Code Ann. § 6.06(a) (West 2008)), with amendments allowed and a final budget by September 15 (id. § 6.06(b)), and line items addable at any time (id. § 6.06(c)). Subsection 6.06(d) sets the formula for each taxing unit's proportionate share (id. § 6.06(d)). Subsection 6.06(j) requires the chief appraiser to credit back amounts that exceed what was "actually spent or obligated to be spent" (id. § 6.06(j)), a phrase the Code does not define (id. § 1.04). The AG drew the meaning of "obligate" from Black's Law Dictionary and deferred to the Comptroller's reading, given the Comptroller's authority to review and audit appraisal districts (id. §§ 5.102, 5.12; §§ 5.03, 5.04-.042; Pruett v. Harris Cnty. Bail Bond Bd., 249 S.W.3d 447, 452-53 (Tex. 2008)), while noting that the propriety of a particular board's action is for a court (Barrington v. Cokinos, 338 S.W.2d 133, 142 (Tex. 1960)).

On excess funds, the AG applied expressio unius est exclusio alterius, the express inclusion of one thing excluding others (United Servs. Auto. Ass'n v. Brite, 215 S.W.3d 400, 403 (Tex. 2007); TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011)), to limit excess funds to taxing-unit payments and to overrule the contrary 1994 letter opinion. On compensation, the AG relied on Article III, section 53's bar against retroactive extra pay (Tex. Const. art. III, § 53) while recognizing prospective compensation is permitted. On disapproval, the AG read section 6.10 to reach board actions other than budget adoption, including amendments (Tex. Tax Code Ann. § 6.10 (West 2008)).

Citations

Statutory and constitutional provisions:

• Tex. Tax Code Ann. § 6.06(a) (West 2008) (proposed budget; June 15 submission)
• Tex. Tax Code Ann. § 6.06(b) (West 2008) (amendments; September 15 final budget; disapproval mechanism)
• Tex. Tax Code Ann. § 6.06(c) (West 2008) (line items added at any time)
• Tex. Tax Code Ann. § 6.06(d) (West 2008) (proportionate-share formula)
• Tex. Tax Code Ann. § 6.06(j) (West 2008) (crediting excess funds to taxing units)
• Tex. Tax Code Ann. § 1.04 (West 2008) (definitions)
• Tex. Tax Code Ann. §§ 5.102 (West Supp. 2013), 5.12 (Comptroller review and audit of appraisal districts)
• Tex. Tax Code Ann. §§ 5.03, 5.04-.042 (West 2008 & Supp. 2013) (Comptroller authority over appraisal districts)
• Tex. Tax Code Ann. § 6.10 (West 2008) (taxing-unit disapproval of board actions)
• Tex. Const. art. III, § 53 (no extra compensation for services already rendered)

Cases:

• Barrington v. Cokinos, 338 S.W.2d 133, 142 (Tex. 1960)
• Pruett v. Harris Cnty. Bail Bond Bd., 249 S.W.3d 447, 452-53 (Tex. 2008)
• United Servs. Auto. Ass'n v. Brite, 215 S.W.3d 400, 403 (Tex. 2007)
• TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011)

Other authority:

• Tex. Att'y Gen. Op. No. GA-0030 (2003); GA-0750 (2009); GA-0492 (2006); GA-0322 (2005); JC-0361 (2001); JC-0147 (1999)
• Tex. Att'y Gen. LO-94-067 (1994) (overruled to the extent inconsistent)
• Black's Law Dictionary 1178 (9th ed. 2009)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1040
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2014/ga1040.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

January 31, 2014

The Honorable Ryan Guillen Opinion No. GA-1040
Chair, Committee on Culture,
Recreation & Tourism Re: The authority of a county appraisal
Texas House of Representatives district to place excess funds in a capital
Post Office Box 2910 improvement fund or to spend excess funds
Austin, Texas 78768-2910 on a one-time, lump-sum payment to its
employees (RQ-1143-GA)

Dear Representative Guillen:

You ask several questions about the authority of a county appraisal district over its budget.[1] You first ask "[w]hat qualifies as payments that are obligated to be spent in ... Tax Code Section 6.06(j)." Request Letter at 1. As part of your first question you ask: If a County Appraisal District Board of Directors votes to spend funds that it knows have not been spent and are not going to be spent during the fiscal year for a "one-time lump sum merit pay" for its employees has the Board obligated those funds for purposes of subsection 6.06(j). Id. at 1. You ask the same question about placing the funds in a "Capital Improvement Fund." Id. at 2.

Section 6.06 of the Tax Code contains budget provisions for appraisal districts. It requires the chief appraiser each year to prepare a proposed budget for the appraisal district. TEX. TAX CODE ANN. § 6.06(a) (West 2008). The proposed budget shall include "a list showing each proposed position, the proposed salary for the position, all benefits proposed for the position, each proposed capital expenditure, and an estimate of the amount of the budget that will be allocated to each taxing unit." Id. Subsection 6.06(d) provides the formula used to determine the proportionate share that each taxing unit participating in the appraisal district must pay to the appraisal district. Id. § 6.06(d) (establishing formula involving the proportionate share as the taxes imposed by a taxing unit in relation to the total taxes imposed in the appraisal district for all taxing units); see also Tex. Att'y Gen. Op. No. GA-0030 (2003) at 1 ("The appraisal district is funded by the taxing units that participate in it.").

Subsection 6.06(j) provides that

[i]f the total amount of the payments made or due to be made by the taxing units participating in an appraisal district exceeds the amount actually spent or obligated to be spent during the fiscal year for which the payments were made, the chief appraiser shall credit the excess amount against each taxing unit's allocated payments for the following year [in a proportion enumerated by the subsection].

TEX. TAX CODE ANN. § 6.06(j) (West 2008). The Tax Code does not define the phrase "spent or obligated to be spent." See generally id. § 1.04 ("Definitions"). A common meaning of the term "obligate" is "to commit (funds, property, etc.) to meet or secure an obligation." BLACK'S LAW DICTIONARY 1178 (9th ed. 2009). Utilizing this definition, we can generally construe subsection 6.06(j) to refer to funds that are committed to meet or secure an obligation. Thus, to the extent the votes for the two expenditures involve funds that are committed to meet or secure an obligation, those funds are within the scope of subsection 6.06(j)'s phrase "obligated to be spent."

The Comptroller's office has construed subsection 6.06(j) to grant an appraisal district the authority to obligate unspent funds during a fiscal year when it knows the payment would not be made in the fiscal year.[2] The Comptroller's office is authorized to periodically review and audit appraisal districts. See TEX. TAX CODE ANN. §§ 5.102 (West Supp. 2013) (requiring Comptroller to review appraisal districts), 5.12 (authorizing Comptroller to audit appraisal districts). The Comptroller's office has issued guidelines to instruct its appraisal district auditors.[3] These guidelines directly address your concern, noting that where the appraisal district

sees it will have unobligated funds left at the end of the budget year, [if i]nstead of refunding or crediting the funds to the entities, the board votes to move the funds into [its] reserves for replacement account, or disaster fund account, or some similar account, then the funds become obligated ....

Id. at 2. Given the Comptroller's oversight authority over appraisal districts, a court would give this administrative construction of subsection 6.06(j) serious consideration. See Pruett v. Harris Cnty. Bail Bond Bd., 249 S.W.3d 447, 452-53 (Tex. 2008) (recognizing that courts will accord deference to the construction of a statute by the agency charged with the statute's administration so long as the construction is reasonable and does not contradict the statute); see also TEX. TAX CODE ANN. §§ 5.03, 5.04-.042 (West 2008 & Supp. 2013) (concerning Comptroller's authority over appraisal districts).

Your first question's remaining subpart asks: "Do funds that have been acquired by the Appraisal District from sources outside its taxing units qualify as excess funds for which the taxing units must be credited under Section 6.06(j)?" Request Letter at 2. Subsection 6.06(j) expressly provides that it is the "total amount of the payments made or due to be made by the taxing units participating in an appraisal district" that are considered excess funds. TEX. TAX CODE ANN. § 6.06(j) (West 2008). By including in subsection 6.06(j) only the payments from the taxing units, the Legislature excluded other sources of funds. See United Servs. Auto. Ass'n v. Brite, 215 S.W.3d 400, 403 (Tex. 2007) (explaining the doctrine of expressio unius est exclusio alterius, which provides that the express inclusion of one thing excludes other things not expressly included); see also TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011) (presuming "that the Legislature chooses a statute's language with care, including each word chosen for a purpose, while purposefully omitting words not chosen"). Thus, funds received by an appraisal district from sources other than its taxing units do not qualify as excess funds for which the taxing units must be credited under subsection 6.06(j).[4]

You next ask: "May a County Appraisal District's 'Capital Improvement Fund' be budgeted for the fiscal year 2014 and onwards if excess funds are being automatically appropriated into said account and/or if the proposed amount for the 'Capitol Improvement Fund' was not prepared in the proposed budget by the June 15 deadline?" Request Letter at 2. You do not explain how "excess funds" are being "automatically appropriated into" the capital improvement fund in the 2014 fiscal year budget process. If the funds you describe are excess funds under subsection 6.06(j), they must be returned or credited to the taxing entities according to statute. TEX. TAX CODE ANN. § 6.06(j) (West 2008). With respect to future fiscal years, subsection 6.06(a) requires a proposed budget to be prepared by the chief appraiser and to be submitted to the taxing units and the appraisal district's board of directors prior to June 15. Id. § 6.06(a). Subsection 6.06(b) also allows for amendments to the proposed budget with a final budget being approved prior to September 15. Id. § 6.06(b). The statutory process does not prevent changes to the proposed budget after the public hearing process and as the budget is finally approved. See id. § 6.06(a)-(d). Moreover, a new or amended line item could be added "at any time" to the approved budget pursuant to subsection 6.06(c). Id. § 6.06(c).

You also ask:

If a County Appraisal District Board of Directors votes to give its employees an across-the-board "one-time lump sum merit payment" ... not part of the ... employee compensation policy ... at the time of such vote, and states that such payment is . . . a payment of salary for future services at a temporary rate, does that violate Article III, section 53 of the Texas Constitution?

Request Letter at 2. Article III, section 53 of the Texas Constitution prohibits the granting of any extra compensation, fee, or allowance to a public employee for services after the employee has rendered them. TEX. CONST. art. III, § 53. A key concern of article III, section 53 is that public compensation not be increased retroactively. See Tex. Att'y Gen. Op. No. GA-0492 (2006) at 2. Article III, section 53 does not prohibit payment of additional compensation or benefits under prospective terms of employment. Tex. Att'y Gen. Op. Nos. GA-0322 (2005) at 5-6, JC-0147 (1999) at 3-4. This office has previously recognized that adoption by a commissioners court of the necessary budget amendments for prospective salary payments does not offend article III, section 53. See Tex. Att'y Gen. Op. Nos. JC-0361 (2001) at 3 (considering salary increases for county employees based on budget authority), JC-0147 (1999) at 3-4 (same). As we have only limited information about the compensation policy about which you ask and because we cannot find facts in the opinion process, we do not determine whether this particular payment conforms to article III, section 53. We advise only that if the payment operates prospectively from its proper authorization, it is likely not unconstitutional.

Subsection 6.06(b) gives the participating taxing units a mechanism by which to disapprove an appraisal district's approved budget. TEX. TAX CODE ANN. § 6.06(b) (West 2008). In your last question, you ask whether taxing units are able to disapprove budget amendments that are approved by an appraisal district's board under section 6.10 of the Tax Code. Request Letter at 2. Where the taxing units adopt resolutions that disapprove "an action, other than adoption of the budget, by the appraisal district board" and file the resolutions with the appraisal district board within a specified period, section 6.10 provides that the appraisal district board action is revoked on the specified day. TEX. TAX CODE ANN. § 6.10 (West 2008) (emphasis added). Section 6.06 distinguishes between the adoption of the budget and the amendment of the budget. Compare id. § 6.06(a)-(b) (concerning adoption of budget), with id. § 6.06(c) (concerning amendment of the approved budget). The plain language of section 6.10 excludes only the "adoption of the budget." Id. § 6.10; cf. id. § 6.06(b) (providing method in budget process to disapprove the appraisal district's approved budget). No other action of the board is excluded. Thus, taxing units may avail themselves of the procedures in section 6.10 to disapprove the amendment of a budget by an appraisal district board.

SUMMARY

An expenditure an appraisal district has committed during the fiscal year to meet or secure an obligation is an expenditure that is obligated to be spent under subsection 6.06(j) of the Tax Code.

Only "payments made or due to be made by the taxing units" should be included in the excess-funds calculation and returned or credited back to the taxing units as required by subsection 6.06(j).

Excess funds must be returned or credited to the participating taxing units as required by subsection 6.06(j). The fact that a particular line item is not prepared in the proposed budget by the June 15 deadline is not by itself fatal to the expenditure. The budget process in section 6.06 does not prevent amendments to the proposed budget after the public hearing process and before the budget is finally approved.

A proposed salary increase is likely not unconstitutional under Texas Constitution article III, section 53 if it operates prospectively from the time of its proper authorization.

An appraisal district's participating taxing units may utilize section 6.10 of the Tax Code to disapprove the amendment of a budget by an appraisal district board.

Very truly yours,

GREG ABBOTT
Attorney General of Texas

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Charlotte M. Harper
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Ryan Guillen, Chair, Comm. on Culture, Rec. & Tourism, to Honorable Greg Abbott, Tex. Att'y Gen. at 1-2 (Aug. 2, 2013), http://www.texasattorneygeneral.gov/opin (hereinafter "Request Letter").

[2] Any questions about the propriety of a particular appraisal district board's actions are for a district court to consider. See Barrington v. Cokinos, 338 S.W.2d 133, 142 (Tex. 1960) (recognizing that where a governmental body "acts illegally, unreasonably, or arbitrarily, a court of competent jurisdiction may so adjudge"); see also Tex. Att'y Gen. Op. No. GA-0750 (2009) at 2 (declining to address a question suggesting that a political subdivision acted intentionally with an improper purpose).

[3] See 2012-13 Methods & Assistance Program Instructions & Checklists, http://www.window.state.tx.us/taxinfo/proptax/map/doc/2012/2012_3_MAPGuidelinesTier1.pdf.

[4] This office previously concluded that funds received from another appraisal district should be included in the excess-funds calculation and returned or credited to the taxing entities. Tex. Att'y Gen. LO-94-067 (1994) at 2-3. The letter opinion did not engage in a considered analysis of subsection 6.06(j). Id. Instead, it noted that the subsection did not explicitly provide for the return of funds received from other sources and then used the subsection as an analogy to conclude that funds from a source other than the taxing units should nevertheless be returned to the taxing units. Id. Contrary to LO-94-067, the plain language of subsection 6.06(j) requires the conclusion that the subsection involves only the payments received from the participating taxing units. Because it incorrectly interprets subsection 6.06(j), we overrule LO-94-067 to the extent it is inconsistent with our conclusion here.