Texas Supreme Court Declares the State School Finance System Unconstitutional

The Texas Supreme Court recently issued a decision interpreting two key provisions of the state constitution concerning public education. The case, Neeley v. West Orange-Cove Consolidated Independent School District,¹ upheld a state district court’s ruling that local property taxes used to fund schools have effectively become a statewide property tax in violation of article VIII, section 1-e of the Texas Constitution. In the same opinion, the supreme court reversed the lower court’s finding that the current system violates article VII, section 1, which establishes standards of adequacy, efficiency, and suitability for public education.

I. School Districts Lack “Meaningful Discretion” to Set Local Property Tax Rates.

A group of 47 mostly affluent districts challenged the school finance system under article VIII, section 1-e , which provides simply that “No state ad valorem taxes shall be levied upon any property within this State.” Texas, like many other states, has historically relied primarily upon local property taxes to fund its public schools. In the early 1990’s, in Edgewood III, the supreme court declared the then-existing school finance system unconstitutional.² The court held that an article VIII, section 1- e violation results when a tax “is imposed directly by the State or when the State so completely controls the levy, assessment and disbursement of revenue, either directly or indirectly, that the authority employed is without meaningful discretion.”³

In the wake of Edgewood III, the legislature passed Senate Bill 7, which, among other things, imposed a cap on local property taxes for school maintenance and operations of $1.50 per $100 of assessed value.⁴ In 1993-1994, ninety percent of Texas school districts taxed at rates below $1.40.⁵ By 2005, only twenty percent of districts still taxed below this same rate, with nearly fifty percent of the districts taxing at the $1.50 cap.⁶

The trend toward higher local taxation has come about as the result of a confluence of factors. Like other states, Texas has pushed for more stringent curriculum, testing, and accreditation standards over the last decade. This push has come with significant cost in the form of higher property taxes. Senate Bill 7 also established a recapture system—known as “Robin Hood”—in an attempt to reduce the disparity in public education funds available for property-rich and property-poor districts. Under Robin Hood, propertyrich districts are required to transfer available tax revenue above a fixed level to the state for redistribution to property-poor districts. The amount of funds subject to recapture has doubled to over $1 billion in less than a decade.

Applying the standard articulated in Edgewood III, the supreme court found that the $1.50 tax rate has become both a “floor” and a “ceiling.”⁷ The court stated that “[t]he current situation has become virtually indistinguishable from one in which the State simply set an ad valorem tax rate of $1.50 and redistributed the revenue to the districts.”⁸ The court rejected the view that the raw number of districts taxing at the maximum rate was determinative of its finding of a constitutional violation. The court also rejected the state defendants’ suggestion, and the position embraced by Justice Brister in his lone dissent, that there can be no article VIII, section 1-e violation without a showing by the districts that their expenditures are truly “necessary for accreditation.”⁹ Such a position, the majority found, would undermine the control given local officials over school expenditures.

II. Public Education Meets the Requirements of Adequacy, Efficiency, and Suitability, at Least for Now.

Various districts also challenged the state education system under article VII, section I of the Texas Constitution. Article VII, section 1 states:

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 public free schools.

This right-to-a-quality-education provision incorporates three separate requirements for Texas schools—that they be adequate, efficient, and suitable.

Following a five week bench trial, the lower court found that Texas schools were unconstitutionally inadequate and unsuitable. The lower court focused on what the supreme court identified as “inputs”—factors such as funding, accreditation standards, and the number of teachers, curriculum, and statewide testing.¹⁰ The lower court concluded that school districts were without sufficient resources to provide an accredited education as defined by the legislature—that is, a “general diffusion of knowledge.”

The supreme court disagreed, but not before rejecting several of the state defendants’ key arguments. The state had asked the supreme court to reconsider a holding from its prior cases and find claims invoking the constitutional standards of adequacy, suitability, and efficiency to be nonjusticiable political questions. The political question doctrine cautions judicial abstention from questions involving either “a textually demonstrable constitutional commitment of the issue[s] to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving [them].”¹¹

While conceding that the standards enunciated in article VII, section 1 are “imprecise,” the supreme court stated that such standards “are not without content.”¹² The court noted that “[t]he judiciary is well-accustomed to applying substantive standards the crux of which is reasonableness.”¹³ Somewhere between the extremes of a remedial education and graduate level work, the court suggested, is a broad area that is consistent with the constitutional requirements. The state defendants also argued that courts would be treading into the realm of “judicial policy making” were they to evaluate the adequacy, efficiency, and suitability of Texas schools.¹⁴ The supreme court reaffirmed that the legislature has “‘the sole right to decide how to meet the standards set by the people in article VII, section 1,’” but that there is no question that “‘the Judiciary has the final authority to determine whether they have been met.’”¹⁵

The court also rejected a related argument by the state defendants that article VII, section 1 is not self-executing because “‘it merely indicates principles, without laying down rules by means of which these principles may be given the force of law.’”¹⁶ The court conceded that the provision “does not provide the courts a basis for declaring what education or finance systems will alone satisfy its standards.”¹⁷ But, by dictating what “the public education system cannot be”—that is, a system that fails to provide for a “general diffusion of knowledge”—article VII, section 1 is self-executing.¹⁸

The supreme court reviewed the public education system for “arbitrariness.”¹⁹ Arbitrariness, the court said, could be found at two levels: the legislature’s determination of the education necessary to meet the constitutional standard, and the provision of means for meeting the legislatively-designed standard.

In holding that the public system satisfies the constitutional standard of adequacy, the court found that Texas school districts “are reasonably able to provide their students the access and opportunity” to a quality education.²⁰ The supreme court credited “undisputed evidence” that “standardized test scores have steadily improved over time, even while tests and curriculum have been made more difficult.”²¹ The court faulted the district court for relying too heavily on educational “inputs” such as funding, and for finding a constitutional violation merely because districts have not yet achieved goals established by the legislature. Nevertheless, the court recognized that “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.”²² The court predicted a future finding of inadequacy absent imminent action by the legislature.

The supreme court also reversed the lower court’s finding that the system for funding school facilities violates the efficiency, or equity, requirement of article VII, section 1. While evidence exists that many districts’ facilities are inadequate, the court agreed with the state defendants that inefficiency cannot exist without a showing “that the districts’ needs are similar.”²³ The districts also failed to produce evidence that without additional or improved facilities they are unable to provide for a general diffusion of knowledge. The court stated that “[e]fficiency requires only substantially equal access to revenue for facilities necessary for an adequate system.”²⁴ For similar reasons, the court turned down the districts’ challenging of the entire school funding system on efficiency grounds.

Finally, the court rejected out-of-hand the lower court’s finding that the public education system is not “suitable” due to inadequate funding. The court noted that the suitability requirement “refers specifically to the means chosen to achieve an adequate education through an efficient system.”²⁵ With the districts having failed to appreciate the particularities of suitability, the court nevertheless found no violation on the record.

In dissent, Justice Brister argued that the school districts lacked standing to assert claims under article VII, section 1. This point, also raised by the state defendants, relies upon the plain language of the provision, which appears to grant rights to the people, but not school districts. Justice Brister noted the obvious shortcomings in evaluating the vitality of the public education system from the vantage point of district officials, whose interests presumably conflict with children and parents. The majority found otherwise, noting that parents were free to intervene in the litigation but had chosen not to, and that the school districts had stated a concrete injury— being forced to implement unconstitutional educational statutes— sufficient to create standing.

In the end, the Texas Supreme Court ordered the legislature to cure the article VIII, section 1-e violation by June 1, 2006. The legislature, despite having focused on school finance and property tax relief during its regular session and two special sessions called by Governor Rick Perry, failed to enact any sort of reform in 2005. No doubt a third special session will also provide an opportunity to reform the public education system so that the looming article VII, section 1 violation does not come to pass.

 

Endnotes

1 No. 04-1144, slip op. (Tex. Nov. 22, 2005).

2 Carrollton-Farmers Branch Indep. Sch. Dist. v. Edgewood Indep. Sch. Dist., 826 S.W.2d 489 (Tex. 1992) (“Edgewood III”).

3 Id. at 502.

4 Act of May 28, 1993, 73rd Leg., R.S. ch. 347, 1993 Tex. Gen. Laws 1479.

5 Neeley, No. 04-1144, slip op. at 77.

6 Id.

7 Id. at 79.

8 Id. at 81.

9 Id. at 79.

10 Id. at 65-66.

11 Id. at 49 (quoting Baker v. Carr, 369 U.S. 186, 217 (1962)).

12 Id. at 50.

13 Id. at 51.

14 Id.

15 Id. at 48 (quoting West Orange-Cove Consol. Indep. Sch. Dist. v. Alanis, 107 S.W.3d 558, 563-64 (Tex. 2003).

16 Id. at 55 (quoting Mitchell County v. City National Bank of Paducah, Ky, 43 S.W. 880, 883-84 (Tex. 1898)).

17 Id. at 58.

18 Id. at 57.

19 Id. at 59.

20 Id. at 64.

21 Id. at 68.

22 Id. at 69.

23 Id. at 72-73.

24 Id. at 73.

25 Id. at 75.

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