School financing system in Texas is unconstitutional

Over the past two years, the state legislature failed repeatedly to pass a tax package to finance schools. The Texas Supreme Court now says lawmakers must find a solution by June 1 or schools won’t open next fall.

The ruling overturns the decision of a state district judge in September 2004 that found school funding inadequate.

The Supreme Court’s 7-1 ruling says the state’s reliance on local property taxes for more than half of the funding for public education has left school districts with no control over their tax rates.

To lower property taxes, the legislature is expected to raise other taxes, such as sales or business taxes. Gov. Rick Perry plans to call a special legislative session “at an appropriate time” to address the court’s ruling. It’s expected the special session will take place after the March 7 primaries when Perry and many lawmakers will be up for re-election.

The case, known as West Orange-Cove, was filed by hundreds of districts, including some that are property-rich and some that are poor. They argued that they had to impose the highest allowable property taxes to pay for state mandates -- such as class sizes of no more than 22 students and tougher new assessments -- and that amounted to an illegal statewide property tax.

While the state Supreme Court agreed with that argument, it disagreed with the plaintiffs’ arguments that overall school funding is inadequate and that districts lack equal access to money for facilities.

According to Perry, the ruling “validates the demands of Texas taxpayers who are fed up with property tax bills that climb higher and higher with each passing year.”

“The current situation has become virtually undistinguishable from one in which the state simply set an ad valorem tax rate of $1.50 and redistributed the revenue to the districts,” says Justice Nathan Hecht in the majority opinion.

The ruling says “the constitutional violation cannot be corrected without raising the cap on local tax rates or changing the system.”

That would help the 134 districts that now have to share revenue with poor districts.

Perry and Republican lawmakers made property tax relief a top priority, but were unable to accomplish this goal, even though two special sessions were held this summer to develop a new business tax to offset property tax cuts. Perry appointed a tax reform commission in November, which is expected to come up with recommendations next spring.

Hecht warned that Texas may be headed in the wrong direction, citing wide gaps in student performance along racial and economic lines, high drop­out rates, low levels of students meeting college preparedness standards, and high teacher turnover rates.

But Hecht says the state has met its constitutional requirement of providing a “general diffusion of knowledge” because there is “undisputed evidence that standardized test scores have steadily improved over time,” even though tests and curricula “have been made more difficult.”

He also says “the public education system has reached the point where continued improvement will not be possible absent significant change, whether that change takes the form of increased funding, improved efficiencies, or better methods of education.”

According to Hecht: “Defects in the structure of the public school finance system expose the system to constitutional challenge. Pouring more money into the system may forestall these challenges but only for a time.”