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 the late 1980s, 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 Texas’s education 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.

The litigations at the end of the 20th, century, however, did not portend an end to legal battles over state financing of education.  Indeed, Texas has been a hotbed of educational equity and adequacy litigation in the new millennium.  In 2001, for example, four high-property-wealth school districts filed a lawsuit entitled West-Orange Cove Consolidated ISD v. Nelson 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 voted 8-1 to reverse dismissal of the complaint and sent it back to the trial court for further consideration.   West Orange-Cove Consolidated ISD v. Nelson, 107 S.W.3d 558. As the litigation proceeded, plaintiff-intervenors expanded the scope of the case by also bringing a challenge against the state’s school funding as inadequate and adding 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 found that the state property tax system was unconstitutional.

The Texas Supreme Court partially upheld and partially reversed Judge Dietz’s decision in 2005.  West Orange-Cove Consolidated ISD v. Neeley, 176 S.W.3d 746. The Supreme Court first affirmed the legitimacy of challenges brought under the education article by rejecting the state’s argument that the challenge brought by the districts was a non-justiciable political question. The court then found the school finance system unconstitutional on the grounds that it violated the state constitution’s prohibition of a statewide property tax.  On the other hand, the court found that the financing system did not violate the state constitution’s education article. According to the Texas Supreme Court, the state’s core constitutional obligation under the education article was to ensure that the school 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 evidence of significant defects in the educational system, the court found that the evidence of students’ improvement on standardized tests supported a conclusion that the state had met its constitutional mandate to provide students an adequate education.

Recent Events

Between October and December 2011, in direct response to a $5.4 billion budget cut approved by the Texas legislature, over 500 school districts sued the state in four separate litigations.  A group representing charter schools filed separate a lawsuit as well. All five cases were consolidated as Texas Taxpayer and Student Fairness v. Williams and went to trial in October 2012.

After hearing twelve weeks of testimony, Texas district court judge John Dietz again found the state’s education finance system unconstitutional in a ruling issued on February 4, 2013. Texas Taxpayer and Student Fairness v WilliamsJudge 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.

On May 27, 2013, the Texas Legislature voted to restore $3.4 billion to schools, concentrating funds in lower and middle-income districts. Judge Dietz subsequently re-opened the case in January 2014 to consider the issues raised by the Texas Taxpayer and Student Fairness v. Williams case in light of the legislative developments. At the new trial, plaintiffs argued that the amount of money restored by the state was still constitutionally insufficient, and that student achievement rates were at an historical low point. The state, for its part, argued that funding disparities between affluent and poor districts had decreased since 2006.

In August 2014, Judge Dietz once again found Texas’s education finance system unconstitutional.  In his sprawling 364 page decision, the Judge noted at least four constitutional defects in the system, including that the system: (i) is structured in such a way that it cannot provide an adequate education for all students; (ii) does not provide for the constitutionally mandated “general diffusion of knowledge”; (iii) denies all children equal access to the funding necessary to provide for the constitutionally mandated “general diffusion of knowledge”; and (iv) limits the ability of local school districts to raise sufficient funds and, in essence, establishes a state property tax that is prohibited by the state constitution.  The remedy Judge Dietz ordered for these violations was dramatic.  Specifically, he held that all state spending through the current education finance system will be enjoined, unless the state corrects the constitutional defects outlined in the 364-page decision.

Issuing its seventh ruling since 1989 on the constitutionality of the state’s education finance system, the Texas Supreme Court in May, 2016, unanimously reversed the trial court’s ruling. In ,Morath v. The Texas Taxpayer and Student Fairness Coalition et al, the Court re-iterated its prior holding that school funding suits are justificiable and that there are judicially manageable standards for determining these constitutional claims. Here, however,  it applied an “arbitrariness” standard that provided a broad degree of discretion to the legislature: legislative actions that meet a “reasonableness” test will be upheld. The Court held that the current system met that test.

Rejecting  cost studies and cost analyses presented by a number of expert witnesses for the plaintiffs, the Court cited language from the U.S. Supreme Court’s 1973 ruling in San Antonio Ind’t Sch. Dist. v. Rodriguez in stating that the social science research on the “cost-quality link” between increased funding and greater student performance was still unsettled. It further held that, in its view, adequacy depends not on inputs but on outputs — i.e. results.  Although a Texas statute required the legislature to undertake an annual cost analysis —- a practice which the legislature had not followed in recent years —- and the court agreed that annual cost analyses “might be a better practice,” it held that they are not constitutionally required.

Analyzing “results,” the Court first emphasized that the overwhelming majority of school districts and individual campuses met state accountability and accreditation standards. Looking at student test scores, the Court discounted low scores on newly-instituted state achievement tests, as a possible phase-in phenomenon, especially since the scores had risen slightly in more recent years. It also cited high passage rates on end of course exams and the state’s high graduation rates, that tied for second highest in the nation.

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: June 2016

 

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