School Funding Cases in Texas

in Texas Litigation

Historical Background

In the late ‘60s, plaintiffs in the property-poor and underfunded Edgewood school district filed Rodriquez v. San Antonio Independent School District, 411 U.S. 1 (1973) and asked a federal court to declare the state’s school funding system unconstitutional under the federal constitution due to gross disparities in funding among Texas school districts. In 1973, the U.S. Supreme Court rejected plaintiffs’ arguments, holding that education is not a “fundamental interest” under the federal constitution. That ruling clearly left the option open for plaintiffs to seek relief in state courts under state constitutions in which education would be a “fundamental interest.” Justice Thurgood Marshall, specifically recommended in his dissent, that plaintiffs seek redress through “review of state educational funding schemes under state constitutional provisions,” not only in Texas, but across the country.

In Texas, plaintiffs brought a state court litigation entitled Edgewood Independent School District v. Kirby, 777 S.W.2d 391 (1989) and prevailed  on their claim that the state eeducation finance system was violating the education clause of the state constitution.  After a series of legislative responses, each revising the finance system, and subsequent court decisions, Edgewood II, 804 S.W.2d 491 (1991), and Edgewood III, 826 S.W.2d 489 (1992), the third legislative effort was deemed constitutional by the court in Edgewood IV, 893 S.W.2d 450 (1995). The new system improved equity and adequacy of school funding and included partial recapture of local revenues the from the state’s wealthier school districts for redistribution to property-poor districts.

In 2001, high-property-wealth school districts filed a lawsuit claiming that the provision of the education finance system that limited local tax rates to $1.50 per $100 of assessed valuation constituted a violation of  the state constitution. In 2003, the Texas Supreme Court remanded the case, West Orange-Cove Consolidated ISD v. Nelson, 107 S.W.3d 558, for trial. Subsequently, plaintiff intervenors reshaped the case into one that also challenged the state’s school funding as inadequate, and they added hundreds of Texas school districts to the plaintiff ranks.

In 2004, trial court Judge John Dietz declared that “the State’s school finance system fails to provide an adequate, suitable, and efficient education system as required by…the Texas Constitution.” He also held that the state property tax system had become unconstitutional. A year later, on November 22, 2005, in West Orange-Cove Consolidated ISD v. Neeley, 176 S.W.3d 746, the Texas Supreme Court partially upheld and partially reversed his decision. The Supreme Court first rejected the state’s argument that the challenge was a non-justiciable political question, thus affirming the legitimacy of challenges brought under the education article. It then declared the system unconstitutional, basing its determination on the state constitution’s prohibition of a statewide property tax. At the same time, the court held that the system did not violate the state constitution’s education article. In its opinion, the court defined the state’s constitutional obligation as ensuring that districts be “reasonably able to provide all of their students with a meaningful opportunity to acquire the essential knowledge and skills reflected in…curriculum requirements….” Despite significant defects in the educational system, the court relied upon students’ improvement on standardized tests to conclude that the state had not violated the constitutional mandate to provide an adequate education.

Recent Events

The $5.4 billion budget cut that the legislature adopted for the current biennium that exacerbated many previously existing flaws in the state’s education finance system led over 500 Texas school districts to sue the state in four separate litigations that were initiated between October and December 2011. A group representing charter schools filed separate a lawsuit as well. All five cases have been consolidated and the trial started in October 2012.

On October 11, 2011, the Texas Taxpayer and Student Fairness Coalition, a grouping of more than 150 school districts, students, parents and businesses, filed a wide-ranging petition against the Texas State Commissioner of Education and the State  Board of Education. The petition claims that the current system for funding public education violates the equal protection, suitability, and state property tax provisions of the state constitution.The Texas Taxpayer & Student Fairness Coalition v. Texas. The petition alleges that many districts are no longer able to provide all of their students with “a meaningful opportunity to acquire the essential knowledge and skills reflected in…curriculum requirements.” Plaintiffs seek declaratory relief and an injunction to “enjoin the state and its officials from distributing any funds, under the current school finance system until an equitable remedy is created.”

On December 9, 2011, plaintiffs in Calhoun Co. Ind’t Sch.Dist v. Scott filed a complaint that recounts in detail the history of legislative attempts to deal with school funding issues since Neeley v. West Orange-Cove Consolidated ISD. To remedy the ad valorum tax issue the court had declared unconstitutional in Neely, the legislature lowered the property tax ceiling, and allowed several tiers of discretionary increases above that level. It promised to more than make up for the lessened local revenue with additional state funding to be drawn from  new business taxes. But, according to the plaintiffs’ complaint, those taxes never yielded the anticipated sums and for several years most districts operated in accordance with the hold harmless provisions enacted as part of the new law.

A few days after the Calhoun Co. Ind’t Sch case was filed, the Edgewood Ind’t Sch. Dist. and three other districts representing mainly low-income and Latino students filed a separate law suit. Plaintiffs in this case, who also include a number of parents, are represented by the Mexican American Legal Defense Fund. Edgewood’s new complaint primarily raises equity issues, asserting that the gap between the funds available in the lowest wealth and highest wealth school districts now substantially exceed the $600 per student unit that the Texas Supreme Court had held to be the  constitutionally permissible limit in previous cases. The complaint also raises adequacy concerns, stating that since 2006, “the Texas Legislature has retreated from its obligation to provide an efficient public finance system, while at the same time, it has continued to ratchet up accountability and curriculum standards for individual students and school districts. “ Plaintiffs further allege that the overall inadequate funding for low income and English language Learner students.

In late December, Houston, Dallas, Austin and 60 other school districts, representing 1.5 million students or one-third of the lone star state’s school population, filed a suit challenging the state’s school funding system on both adequacy and equity grounds. Fort Bend Ind’t Sch. Dist. v. Scott. The Fort Bend petition accuses the state of failing to heed the state supreme court’s warning six years ago in Neely to make “significant structural changes.”  Plaintiffs also claim that the legislature has failed to provide funding to keep up with the state’s increasing school population, about 60% of whom are low-income and at-risk students. Plaintiffs have requested a strong remedy. They ask that the court require the state to remedy the constitutional violations, undertake a study to determine “the true costs of meeting the State‘s performance requirements for all school districts and students, including appropriate weights and adjustments to accurately reflect the cost associated with specific groups of students,” and retain jurisdiction to ensure compliance. If the state does not comply “within a reasonable time,” plaintiffs request that the court enjoin all state spending on public education until a constitutionally-acceptable system is in place.

In late February of 2012, a group of parents, students, and tax-payers, who call themselves the “efficiency intervenors” made a motion to intervene in Fort Bend Ind’t Sch Dist v. Scott. They seek a declaratory judgment that the current public education system is unconstitutional “in that it is not efficient in providing for [a] general diffusion of knowledge.’” Plea in Intervention of Efficiency Intervenors.They claim that the state supreme court’s had in Neely called for the parties to consider “efficiency,” but that the issue of qualitative efficiency is absent from the pleadings in the recently-filed litigations initiated between October and December 2011. The would-be intervenors set forth a number of “efficiency” issues that they ask the court to consider, including lifting a cap on charter schools, and changing existing laws and practices on teacher retention. The court granted them intervention status on August 21 so they are now part of the combined school funding cases.

Texas Charter School advocates filed a suit in June arguing that funding disparities and the cap on new schools were violations of the state constitution. While the “efficiency intervenors” noted in their intervention plea back in February that “more money may or may not be required for an efficient system of public free schools,” this new group of charter school advocates asserts that money is definitely an issue, particularly when it comes to facilities for charter schools.

After hearing twelve weeks of testimony, a Texas district court held the state’s education finance system unconstitutional in a ruling issued on February 4, 2013. Texas Taxpayer and Student Fairness v WilliamsJudge John Dietz found that the state failed to provide adequate funding to districts, failed to distribute the funding fairly, and denied low wealth school districts meaningful discretion in setting their tax rates because the lack of state funds forced them to tax at or near the maximum rate. In his remarks delivered from the bench, Judge Dietz pointed out the flawed logic in demanding schools meet higher standards while refusing to provide districts with the funds to hire new teachers, increase teacher training, upgrade technology, and provide more tutoring and remediation for struggling students. Remarks by Judge John K. Dietz, Feb. 4, 2013.

The Texas Legislature voted on May 27th 2013 to restore $3.4 billion to schools, concentrating funds in lower and middle-income districts. In light of the legislative developments, Judge Dietz re-opened the case in January 2014. At the new trial, plaintiffs argued that the amount of money restored is insufficient, and that student achievement rates are at an historical low point. The state argued that funding disparities between affluent and poor districts have decreased since 2006. The trial concluded in February, 2014 and Judge John Dietz indicated that he will issue a decision in March 2014.

Costing Out

Researchers have undertaken two “adequacy” cost studies for Texas education and one, narrow NCLB cost study. Both adequacy studies showed the need for increased funding, even though the goal being measured was only 55 percent of each district’s students testing at a “proficient” level in just two subjects: English and math. The studies were both published in 2004 and they used the cost function approach.

Attorneys for the plaintiffs in West Orange-Cove Consolidated ISD v. Nelson, rejected the findings and standards of the Taylor study, saying that it used a very low definition for “minimally adequate education.” In recognition of this criticism, Imazeki and Reschovsky undertook three additional analyses, based on 60, 70 and 90% pass rates on the state’s student achievement test. Needless to say, the latter analyses came out with much higher cost figures.

Useful Resources

A report on school finance and formula adjustments, published by the Texas House Research Organization (2004).

J. Steven Farr and Mark Trachtenberg, The Edgewoord Drama: An Epic Quest for Education Equity, 17 Yale Law & Policy Review 607 (1999).

Dick Lavine, Edgewood: The Supreme Court Opinions (1994).

Last Updated: March 2014


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