Texas School Finance System Unconstitutional

Published January 1, 2006

The Texas Supreme Court ruled November 22 that the state’s school finance system–commonly referred to throughout the state as “Robin Hood” because it takes money from property-rich school districts and gives it to property-poor ones–is unconstitutional because it levies a statewide property tax.

“The Court recognized–as all Texans recognize–that we can and should do a better job of educating students in Texas,” Attorney General Greg Abbott said. “But just because we can do a better job does not mean that the job being done now is unconstitutional.”

The lawsuit was filed by 300 school districts against the state in December 2003. In November 2004, a district court ruled for the school districts, finding the state’s education funding system inadequate and inequitable, and it deemed unconstitutional the tax cap of $1.50 per $100 of assessed property value.

The state appealed to the Texas Supreme Court two months later. During oral arguments in July 2005, state officials argued the legislature should fix the school finance problem.

In its November decision, the Texas Supreme Court disagreed with the district court in part, determining that school spending is neither inadequate nor inequitable. But it also agreed with the district court that the property tax cap is unconstitutional, because under the cap school boards are deprived of authority to set their tax rates. The court gave the legislature until June 1, 2006 to fix the tax system.

The supreme court’s ruling reversed the award of attorney fees granted by the district court and remanded the case to the district court for reconsideration of what, if any, attorney fees are appropriate.

Gov. Rick Perry (R) called the decision “an important victory for Texas schoolchildren and property taxpayers.

“Our entire tax system needs substantial reform to make it fairer [and] more modern, and that will ensure schools have a reliable stream of revenue,” Perry said. “The court also made note of an important point. While the $10 billion in increased funding Texas has provided for education since 1999 has had a positive and measurable impact on our schools, it is possible for the legislature to implement new reforms that will improve student success without necessarily spending additional dollars.”

Legislators Must Fix System

Legislators didn’t necessarily see it that way.

“The supreme court’s ruling is disappointing,” said Sen. Judith Zaffarini (D-Laredo), a member of the Senate Education Committee. “The good news is that the legislature is required to address only the statewide property tax before June 1. Consequently, any attempt to dismantle the current funding system or equity provisions can be opposed without jeopardizing the court’s injunction.”

The ruling underscored arguments Americans for Prosperity (AFP), a group that favors small government, has been making for years.

“The court has ruled that increased funding does not necessarily equate to improved education,” AFP Director Peggy Venable said. “AFP has consistently called for more education for our dollars before we put more dollars into education. The school district’s attorneys have, after hearing this court’s ruling, made it clear they will continue to sue. We must prohibit, through legislation if needed, school districts from time and time again using taxpayer dollars to sue the state for more taxpayer dollars.”

“I was pleased that the Supreme Court did not rule our schools were inadequately funded,” said Don McLeroy, a member of the State Board of Education’s Finance Committee. “Adequacy is a highly subjective assessment. The best way to judge an adequate education is to let the parents decide–give them the right to choose their child’s school.”

Connie Sadowski ([email protected]) is director of the Education Options Resource Center at the Austin CEO Foundation.

For more information …

The district court’s ruling in West Orange Cove School Districts, Edgewood School Districts and Alvarado School Districts et al. v. Texas Public School Finance System – Findings of Fact and Conclusions of Law is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to http://www.heartland.org, click on the PolicyBot™ button, and search for document #16632.

The majority and dissenting opinions from the state supreme are also available through PolicyBot™. Search for documents #18160 (majority, 88 pages) and #18161 (dissent, 48 pages).