It is shown in this episode that Butch is in the fifth grade, as he is shown to be in the same class as Lawson and his crew.
The fact that T.J. is sent to court for saying "Whomps" serves as a precursor to the episode "The Biggest Trouble Ever" when the gang is treated like criminals after they accidentally break a statue of Third Street's founder.
T.J. has a different appearance in the second grade (as seen in the episode's flashback sequence) than he does in the flashback sequence in "Teachers Lounge", and this version of his second grade appearance would stay constant for the rest of the series. The difference is that his look in this episode onwards has him a bit shorter and skinnier, as well as wearing his usual outfit without the jacket, while his original second grade look had him shorter, still chubby, and wearing a completely different outfit.