Law & Courts

Texas School Finance Ruling Draws National Attention

By David J. Hoff — December 06, 2005 6 min read
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A school finance decision handed down by the Texas Supreme Court late last month will change property-tax bills in the Lone Star State and may eventually influence school spending in other states, some legal experts say.

The court ruled on Nov. 22 that the state legislature needs to change the property-tax laws for Texas’ finance system for schools to be constitutional.

In the same decision, though, the court said that the $36.8 billion that Texas is spending on K-12 education this school year is enough even if it doesn’t provide a perfect education—a line of legal reasoning that goes against recent rulings in other states, where courts have ordered increases in state aid to schools.

“There is much evidence … that many schools and districts are struggling to teach an increasingly demanding curriculum to a population with a growing number of disadvantaged students, yet without additional funding needed to meet these challenges,” Justice Nathan Hecht wrote in Neeley v. West Orange-Cove Consolidated Independent School District. “But the undisputed evidence is that standardized-test scores have steadily improved over time, even while tests and curriculum have been made more difficult.”

And that progress is enough, the court ruled on a 7-1 vote, to satisfy the Texas Constitution’s requirement that the legislature “make suitable provision for the support and maintenance of an efficient system of public free schools.”

The decision is a big victory for states defending themselves against lawsuits claiming states don’t adequately finance schools, said a lawyer who represents states in such cases.

Several other state supreme courts have held states to standards as high as ensuring all students complete the equivalent of a college-preparatory curriculum, said Alfred A. Lindseth, an Atlanta-based lawyer who has represented New York and other states and who was a consultant to Texas Attorney General Greg Abbott in the West Orange-Cove case.

“What we see now … is the court saying: We’re not going to hold a state to a standard, but we’re going to make sure that they have the essentials in place and make sure [those policies] are working,” Mr. Lindseth said.

What’s Reasonable?

The wide-ranging Texas Supreme Court decision grew out of a case in which school districts and interest groups sued the state for different reasons.

One group of districts representing wealthy areas said the state’s property-tax cap violated the state’s prohibition on a statewide property tax, an argument that the supreme court endorsed.

Another set of districts and groups, representing low-income and minority students, said the finance system failed to raise enough money to provide all students the suitable education the constitution guarantees. The court rejected that argument.

While the property-tax debate will be a hot topic in Texas, it has little significance for the rest of the nation because it deals with Texas’ specific constitutional requirements barring statewide property taxes. On the other hand, the ruling on whether Texas schools are adequately funded could influence other courts to scale back orders to pour large sums of money into public schools to ensure their students get an adequate education, said Mr. Lindseth, the school finance lawyer.

In February, for example, a New York trial-court judge ordered the state to increase its spending on the New York City public schools by $5.6 billion over the next five years, a 44 percent increase over the city’s current operating budget of $12 billion. (“Judge Orders Billions for Schools in N.Y.C.,” Feb. 23, 2005.) That order is based on a decision from the state’s highest court that all students should be given the chance to earn a diploma under the state’s challenging Regents program, Mr. Lindseth said.

By contrast, the Texas high court is satisfied with the general progress of students on the state’s accountability system and the National Assessment of Educational Progress—a federal testing program designed to measure student performance based on a sampling of students.

“What the [justices] are saying is that they’re going to look at what the legislature does, and if it’s reasonable, they’re not going to disturb it,” Mr. Lindseth said.

Earlier this year, Massachusetts’ highest court issued a decision similar to the Texas ruling. Although Massachusetts hadn’t eliminated educational inadequacies since the court found its school funding method unconstitutional in 1993, the state had spent more than $30 billion over the past decade trying to do so, and appeared ready to continue that effort. (“Massachusetts Meets Education Guarantee, State High Court Says,” Feb. 23, 2005.)

Other courts are almost certain to look at the Massachusetts and Texas rulings for guidance, if not precedents, Mr. Lindseth said. (“Finance Suits Being Pursued in Conn., Mo.,” this issue.)

But advocates for poor and minority students say that the Texas court’s standard falls short.

“To provide an adequate education is to provide one for every single child in Texas,” said David Hinojosa, a staff lawyer for the Texas chapter of the Mexican American Legal Defense and Educational Fund, one of the plaintiffs in the case. “What the supreme court deems a constitutionally adequate system is nowhere near what a quality system should be.”

Rewriting the Code

While the court’s decision won’t require the Texas legislature to dramatically increase the amount it spends on K-12 education, it will force lawmakers to rewrite the tax code.

The Texas high court gave the legislature until June 1 to fix the property-tax system. The system caps districts’ tax rates at $1.50 per $100 of assessed value and redistributes revenue from wealthy districts to poor ones. Because an increasing number of districts tax at the highest rate, and more than $1 billion is redistributed throughout the state, the high court ruled that the property tax is “virtually indistinguishable” from a state-imposed property tax.

While the justices didn’t demand that the state remove the cap on property-tax rates, they hinted that any cap would be unconstitutional if too many districts were forced to tax at that rate just to maintain their K-12 services.

State leaders said the decision would give them another opportunity to rewrite the tax code, while at the same time lowering property taxes.

“Our entire tax system needs substantial reform to make it fairer, more modern, and that will ensure schools have a reliable stream of revenue,” Gov. Rick Perry, a Republican, said in a statement following the decision.

Before the ruling, Mr. Perry had appointed a 24-member commission to recommend changes to the tax code, and Lt. Gov. David Dewhurst, a Republican who presides as the Senate president, said he would appoint a separate task force comprised of senators to address the educational and tax issues raised by the finance decision.

The legislature failed to rewrite the school finance law and tax code in its biennial regular session and in two special sessions earlier this year. (“Two Special Sessions Fail to Produce Aid Overhaul,” Aug. 31, 2005.)

The sticking point was how to raise taxes to replace revenues lost from lower property taxes. The legislature is not scheduled to have a regular session in 2006, so lawmakers will need to convene a special session, most likely in the spring, to respond to the court decision.

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