Texas Supreme Court Hears Oral Arguments in School Finance Lawsuit

For the seventh time the Texas Supreme Court heard arguments yesterday on a school lawsuit.  School districts, and others, are once again suing the state claiming the school finance system is unconstitutional.  After a district court ruled in favor of the plaintiffs, they faced off against state lawyers in the Texas Supreme Court.

I’ve read several account of the proceedings, but the most complete and succinct explanation was provided the Texas Taxpayers and Research Association in their Update from the Tax Front email message today.  Here is the article in its entirety:

Texas Supreme Court Hears Oral Arguments in School Finance Lawsuit

The Texas Supreme Court heard oral arguments today in the largest school finance lawsuit ever filed.  The lawsuit was initially filed in October 2011 and has finally reached the state’s highest court.  Over 30 attorneys participated in the lawsuit filed by 600 plaintiff school districts, two “Efficiency Intervenors,” and Charter Schools.  The Court allotted 2 ½ hours for the arguments.

The Attorney General’s Office began by stating that the case is not ripe because the data examined by the District Court did not contain changes made by the Legislature in 2013 and 2015.  The Supreme Court should, therefore, dismiss the case or remand it back to District Court for re-hearing.  In addition, the remedy sought by the Plaintiffs — an injunction prohibiting the state from sending revenue to school districts — would do further harm to school districts.  They stated that both the Nebraska Supreme Court and the Oklahoma Supreme Court had refused to hear further school finance cases because the lawsuits are continuous.  The Attorney General’s office urged the Texas Supreme Court to dismiss the case and refuse to hear further cases.

Plaintiffs argued that the system is not adequately funded, and that experts testified during the District Court trial that it required a minimum of $6,576 per weighted student for a district to be able to provide a “general diffusion of knowledge.”  Most school districts do not receive that amount of money today.  They argued that it would take a tax rate of $1.31 for the poorest 15% of school districts to raise that amount (well above the maximum allowable $1.17 rate under current law), while the wealthiest 15% of districts can raise that amount at a rate of $0.94.  This disparity in required tax rates is unconstitutionally inequitable.  The Attorney General countered that whether or not the system is adequately funded should be judged on outputs — test scores, graduation rates, college and career readiness — and not solely by the money put into the system.  They stated that Texas ranks 2nd in the nation on graduation rates and that 92% of high school students passed all tests necessary to graduate.  In addition, it has not been proven that $6,576 per weighted student is necessary to provide a “general diffusion of knowledge.”

Plaintiffs argued that the system is inequitable because the “Edgewood I court-accepted $600 funding gap” between what property poor school districts and property wealthy school districts can raise per weighted student had increased to a gap of $3,436.  The Attorney General responded that plaintiffs’ calculations were based on all school districts being at the maximum allowable tax rate which was unrealistic.  The system should be examined as it exists today.

Plaintiffs argued that the system violates the prohibition against a state property tax because approximately 25% of all school districts are at the $1.17 M&O tax rate cap, and another 55% are at $1.04 M&O rate, the rate above which voter approval is required.  They argued that these school districts do not have “meaningful discretion” over their tax rates because it is politically impossible for the districts to hold a successful tax ratification election (TRE) in order to tax higher than $1.04.  The Attorney General argued that almost all of the school districts currently taxing at the M&O rate cap of $1.17 increased their rate to that level in one election without regard to what rate was actually necessary to fund their budget.  In addition, those districts at $1.04 have not even attempted to increase their rate due to fear of holding an election.

The Efficiency Intervenors argued that the system is “qualitatively inefficient” because there is enormous waste in the public school system.  The Cost of Education Index, which was last revised over 20 years ago, distributes billions of dollars to school districts based on conditions that do not exist today.  They stated that the Legislative Budget Board is required to recommend updated funding elements to the Legislature every biennium, but has not done so in over 10 years.  The Attorney General countered that just because funding elements have not been updated in several years does not make the entire system inefficient.

The Charter Schools argued that they should receive funding for facilities from the state, and the lack of this funding provides them with $1,000 less per student than public schools receive.  The Attorney General argued that charter schools voluntarily enter into a written contract with the state which does not provide funding for facilities, and the charter schools cannot then sue the state for following the terms of the contract.

The Supreme Court justices asked many questions regarding the definitions of a “general diffusion of knowledge,” “adequacy” and “suitable” and how the violation of any of these standards can be determined.  They gave no indication of when a decision might be issued, but it typically takes 4-5 months for a decision.  If the ruling is against the state, there will most likely be an injunction with a deadline for legislative action, either necessitating a special session or action by the Legislature in the 2017 Regular Session.

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