Texas School-Finance System Unconstitutional, Judge Rules

Texas’s school-finance system is unconstitutional because it falls short of the state’s obligation to provide an adequate and equitable public education to all children, a judge ruled.

“The court declares the current school finance system violates the Texas Constitution in that it is inefficient, inequitable, and unsuitable and arbitrarily funds districts at different levels below the constitutionally required level of the general diffusion of knowledge,” District Judge John Dietz in Austin said yesterday in agreeing with lawyers for most of the state’s school districts.

Rick Gray, an attorney for more than 400 poorer school districts, told Dietz yesterday in a non-jury trial that these districts tax property at higher rates than richer ones yet get less revenue per student. The difference can amount to $30,000 per classroom in neighboring districts, he said. The disparity has grown with cuts in state aid to education, he argued.

“These gaps are marked, they are extreme, and they are simply wrong,” Gray said. “Texas should be ashamed.”

The state court trial that started Oct. 22 consolidates six lawsuits by groups representing 75 percent of Texas’s 5 million schoolchildren, the second-largest student population in the U.S.

Gray called Dietz’s ruling “a win for all school districts.”

‘One Step’

Michael L. Williams, the state’s commissioner of education, said in a statement that the ruling “is simply one step on this litigation’s path. All sides have known that, regardless of the outcome at the district level, final resolution will not come until this case reaches the Texas Supreme Court.”

“The Texas Education Agency will continue to carry out its mission of serving the students and educators across our state,” Williams said.

David Thompson, a lawyer who represents some of the state’s largest districts including Houston, Dallas and Austin, said while an appeal is inevitable, the final solution will be up to state lawmakers.

“The Texas Supreme Court is not going to order the appropriation of money or tell the legislature to make the following specific changes in the system. That’s a legislative priority,” Thompson said after the ruling. “But our standards and our funding have to match up. Our legislators have always treated standard-setting and budget-setting as two completely separate conversations. That disconnect is the real problem.”

‘Permanent Solution’

The Texas Legislature should “start working immediately to find a permanent solution to fund our schools,” state Senator Kirk Watson, an Austin Democrat who chairs the Senate Democratic Caucus, said in a statement. “It’s sad, honestly, that it takes something like this to force the legislature to honor its constitutional responsibility to our children.”

Nicole Bunker-Henderson, one of Texas’s attorneys, told Dietz in her closing argument that all state agencies were forced “to do more with less” in difficult economic times. Texas school districts “have done amazing work within the existing resources in the past year,” including getting 80 to 90 percent of ninth graders to pass a tough new achievement test by their second try, she said.

Lawmakers in 2011 cut $5.4 billion from Texas’s education budget for the 2012-2013 budget year, just as the new academic achievement standards were implemented.

State’s Formula

Texas lawmakers have been adjusting the state’s formula for funding public education for more than 30 years. School districts and special-interest groups have been challenging these solutions in court for just as long.

“The Legislature’s failure to meet its responsibility to fund the system and provide for fair distribution of the available funds has crippled the system,” Gray said in court filings.

Texas ranked 37th among U.S. states in school spending per pupil in the 2009-2010 school year, according to the National Education Association, the union representing more than 3 million teachers, administrators and support staff.

Texas’s attorneys urged Dietz not to reject the current system and claimed school districts’ fiscal problems stem from unwise spending decisions. Schools can meet state academic goals at current funding levels by reducing waste and cutting spending for things that don’t boost students’ scores, the state claims.

Raising Standards

Thompson, the lawyer for some of the state’s largest districts, said state spending per student has declined to $6,293 this year from $7,128 in 2004, the last time the state’s school funding system wound up in court.

“Even as our standards have gone up and even as our student population has changed, our funding per student has declined,” Thompson told the judge.

More than a third of ninth graders who took the state’s new tougher academic achievement test last year failed, he said. To succeed economically in the future, Texas needs all students to reach the higher standards. He said it was the state’s duty to figure out a funding system that accomplishes that, he said.

Texas has historically relied heavily on local property taxes to fund public schools, as its constitution forbids a statewide property tax. The disparity in property values between rich and poor communities has led to gaps of thousands of dollars in how much neighboring districts have to spend educating each student.

Dietz yesterday ruled the school finance system had created a state property tax.

Budget Cuts

Recent state budget cuts magnified structural funding inequalities by targeting education programs that helped poor and minority students, who make up a rising share of Texas’s student body, David Hinojosa, an attorney for the Mexican American Legal Defense and Education Fund, or MALDEF, said in court papers.

In 2005, the Texas Supreme Court upheld part of a revenue- sharing system lawmakers devised to shift tax revenue to poorer districts from wealthier districts, a plan widely known as “Robin Hood.” The court also found that the plan’s legislated cap on local property-tax rates violated the constitutional prohibition against a statewide property tax.

The Legislature responded in 2006 by reducing the amount the state took from property taxes by a third, while boosting state funding for public education from general revenue and freezing district spending levels until lawmakers could draft a solution.

Funding Freeze

The funding freeze remained in place for five years, even as the state added more than 80,000 students a year. In 2011, lawmakers reduced education spending to balance the state’s budget, prompting more than 600 Texas school districts to sue.

While Texas education funding has been litigated for three decades, the current trial marks the first time charter schools have entered the fight. The publicly funded private schools, which operate outside many of the rules that the state imposes on public schools, have achieved higher test scores and graduation rates on lower budgets, according to filings by the Texas Charter School Association.

The association is suing the state, seeking public funding for facilities and an end to the cap on the number of charter schools. More than 56,000 students are on waiting lists for charter schools in Texas, and many of the more popular charter schools hold lotteries to determine admission.

Dietz yesterday declined to lift the cap on the number of charter schools.

The cases are consolidated as Fort Bend Independent School District v. Texas Education Agency, D-1-GV-11-002028, Texas 200th Judicial District Court, Travis County (Austin).

To contact the reporter on this story: Laurel Brubaker Calkins in Austin at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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