Judge Finds Texas School Finance System Unconstitutional

A Travis County District Court judge ruled Thursday that Texas’s school finance system violates the Texas Constitution.  The judgment and associated findings of fact and conclusions of law are available here.  Review of the decision will go directly to the Texas Supreme Court.  The judge wrote that his ruling would not be implemented until July 1, 2015 to give the Texas Legislature time to cure the constitutional defects in the 2015 legislative session.

The judge ruled that Texas’s school finance system is unconstitutional for several reasons.  First, the judge found that the Texas school finance system effectively imposes a state property tax, in violation of the provision of the Texas Constitution that prohibits a state property tax.  This is because the nature of the Texas school finance system gives local school districts no meaningful discretion over how local property taxes are raised, assessed, or spent.  The judge also ruled that the amount of funding the Texas school finance system provides is not enough to provide an adequate education for all Texans and accomplish a “general diffusion of knowledge,” as the Texas Constitution requires.  Further, the judge found that the Texas school finance system violates the Texas Constitution because it fails to provide equal opportunity between children who live in poor districts and children who live in rich districts.

The ruling has raised speculation about exactly what the Texas Legislature will do in the upcoming session to cure these constitutional defects (assuming the Texas Supreme Court does not overrule it).  The last time the courts found that the Texas school finance system violated the Texas Constitution, the Texas Legislature enacted the revised Texas franchise tax (the Texas margin tax) as part of a stated effort to raise additional funding for Texas schools.  Based on the current state of the Texas budget and the educational needs of Texas children, a similarly large tax increase or tax overhaul may be necessary to cure these constitutional impacts.

We will post additional updates on this case and any changes the Texas Legislature makes to the Texas tax laws on this blog.


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