Senator Robert "Bob" Deuell, M.D.
The Texas State Senate
District 2

For Immediate Release
September 29, 2003

***CAPITOL UPDATE***

Update on Pubic School Finance

Recently, the Senate Research Center published "School Days and Legal Maze, Constitutional Challenges to Public School Finance in Texas."  The report focuses on the Edgewood court cases, and I have included portions of the report in this article.  Copies of the full report can be obtained by contacting my Capitol Office.

On May 29, 2003, a majority of the Texas Supreme Court (seven justices, with another concurring in the judgment), in West Orange-Cove Consolidated I.S.D v. Alanis, 207 S.W. 3d 558 (Tex. 2003), reversed lower court decisions dismissing a claim brought by four plaintiff school districts, and remanded the case to the trial court for further proceedings. The majority ruled only that the allegations in the plaintiffs' petition were sufficient to state a claim that the state's system of funding public education in effect forced the districts to impose a state ad valorem tax, which is barred by the Texas Constitution. The decision did not rule on the constitutionality of the state's current system of public schools, instead remanding this issue for consideration in the trial court.

The issue concerned Article VII, Section 1, of the Texas Constitution, which provides that: A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of free public schools.

In 1989, in Edgewood Independent School District v. Kirby, 777 S.W.2d 391 (Tex. 1989), the Texas Supreme Court ruled that the state's public school finance system, with its heavy dependence on local property taxes, violated this provision of the state constitution. The system, held the court, resulted in wide disparities in the quality of public education between poorer and wealthier school districts. The Texas Legislature responded with legislation, which was subsequently challenged, resulting in a series of cases known as the Edgewood cases. In 1995, in Edgewood Independent School District v. Meno (Edgewood IV), 893 S.W.2d 450 (Tex. 1995), the court finally ruled that the revised system implemented by the Texas Legislature met constitutional muster. However, the court in that case warned that the new system, because of remaining funding disparities, could again become unconstitutional.

The warning in Edgewood IV concerned Article VIII, Section 1-e, of the Texas Constitution, which prohibits the levying of state ad valorem taxes. The funding system challenged in Edgewood IV created a two-tiered system:

The court in Edgewood IV ruled that this system did not impose an unconstitutional state ad valorem tax, because while it did set minimum and maximum tax rates, districts and their voters still had the discretion within these parameters to choose the tax rate and control the distribution of the proceeds. However, the court warned that if the cost of education rose to the point that a district was forced to tax at the maximum tax allowed under the bill just to meet minimum accreditation standards, the tax would in effect become an unconstitutional state-mandated ad valorem tax.

In West Orange-Cove Consolidated I.S.D, four school districts alleged that the court's warning had been confirmed, because they and other districts were now forced to tax at maximum rates set by statute in order to educate their students. These local taxes, they alleged, had now effectively become an unconstitutional state-mandated ad valorem tax. The district court dismissed the plaintiffs' complaint and the appellate court confirmed.

The state had argued in part that the plaintiffs' suit was not ripe because the system did not require all districts throughout the state to tax at the rate of $1.50, and therefore did not result in a statewide ad valorem tax. The majority rejected this argument, stating that the constitution prohibits state ad valorem taxes upon any property within this state. The issue, the majority said, is not the pervasiveness of the tax, but the state's control over it. An illegal state ad valorem tax is a tax imposed by the state, either directly or indirectly. Therefore, the majority asserted, a single district could make a claim that it is unconstitutionally constrained by the state to tax at a particular rate.

The state made four other arguments which were rejected by the majority:

By authorizing local-option homestead exemptions, knowing that some constituencies will insist on them, the legislature may actually have increased the pressure on school districts to tax at maximum rates. In any event, the majority ruled, the plaintiffs are entitled to attempt to show that homestead exemptions do not afford them meaningful discretion.

To contact Sen. Deuell about the legislative process, contact the Capitol Office at (512) 463-0556 or mail to Sen. Bob Deuell, Texas Senate, P.O. Box 12068, Austin, TX 78711.  The website for the Texas Senate is www.Senate.state.tx.us.  The e-mail address for Sen. Deuell is: bob.deuell@senate.state.tx.us.

Top