Austin Centrist

This is the first installment in Austin Centrist’s four-part series on school finance in Texas. Governor Rick Perry has called a special session, set to begin on April 17, to address the issue.

The first installment answers the question:

How did we get here?

In the Beginning…

From its earliest days, Texas has held education as a priority. One of the grievances against the Mexican government listed in the Texas Declaration of Independence in 1836 was its failure “to establish any public system of education, although possessed of almost boundless resources. Two years later Mirabeau B. Lamar, president of an independent Texas nation, promoted the setting aside of public lands for public schools, and in 1839 Congress designated three leagues of land for public schools for each Texas county and 50 leagues for a state university. The lawmaking body bestowed an additional league per county in 1840.

Nevertheless, it would be another five years, and annexation into the United States, before Texas would establish a system of public school finance. The Texas State Constitution of 1845 called on the legislature to allocate a minimum ten percent of tax revenue to public schools. Also during this era, $2 million of the $10 million in five percent US indemnity bonds the state received for ending its claims to lands north and west of its present boundaries was reserved to a permanent school fund. A new constitution in 1869 would increase to twenty-five percent the amount of general revenue to be sent towards public education, and would direct all sales of public land toward the permanent school fund. And in 1875 the legislature allowed incorporated towns and cities the ability to tax for education purposes.

A Finance System Emerges

The end of the Civil War and Reconstruction brought about Texas’ final state constitution, established in 1876. In addition to allocating millions of acres toward school support, this constitution established a permanent endowment, officially named the Permanent School Fund. This fund was to be based mostly on the value of half of the public domain of the state, was directed to be invested in bonds, and was distributed on a per student basis. In addition, the new constitution set twenty-five percent of occupation taxes and a one dollar poll tax (outlawed by the twenty-fourth amendment to the US Constitution in 1964) to go to public education, and set local taxation provisions.

Those school laws were revised between 1883 and 1884. In addition to other reforms, a maximum twenty-cent state ad valorem school tax was instituted, and the Permanent School Fund was invested in county and other bonds in order to increase revenue.

In the early 1900s the Texas Legislature made attempts to equalize school funding between poor and rich school districts (independent school districts having been created at the turn of the century). In 1915 the legislature appropriated $1 million to aid rural school districts taxing at the maximum rate allowed. Moreover, the lawmaking body passed a law in 1917 authorizing a state property tax in order to purchase textbooks.

Texas would not see further major reforms to education until 1949, with the passage of the Gilmer-Aikin laws. The legislation made a number of reforms, most notably the creation of the Texas Education Agency to administer the state’s public school system. Regarding finances, Gilmer-Aikin established the Minimum Foundation Program, a funding system whereby state equalization funding supplemented local taxes. Furthermore, it raised teacher salaries and made state funding dependent on student attendance.

Over the next two decades the Texas school-finance system would be shaped and tweaked. Bills were passed regulating local taxes for education purposes, and regulations providing state aid to rural school districts were either passed or amended. Also of note during this period is the 1968 amendment to the state constitution abolishing ad valorem state property taxes, which, as noted previously, had been used as a source for funding education.

The Edgewood Cases

One could very well argue that the roots of the modern-day issues surrounding school finance can be traced to the 1971 landmark court case Rodriguez v. San Antonio ISD. On May 16, 1968, hundreds of students from San Antonio’s Edgewood High School, a school in a poor district with an overwhelmingly minority population, held a walkout and demonstration to protest their schools lack of both supplies and qualified teachers. In response, parents of the students took action. Aided by lawyer Arthur Gochman, the parents filed suit in federal court on behalf of the students. Their argument was twofold:

1) that the student’s rights were being violated because the Fourteenth Amendment to the US Constitution established education as a “fundamental right,” and
2) the school finance system treated poor and Mexican-American families as a “suspect class.”

The presiding three-judge panel agreed with the first argument, holding the Texas school finance system to be unconstitutional under the “equal protection clause of the Fourteenth Amendment. The state appealed and the case went before the US Supreme Court. In a five-to-four ruling in 1973, the high court overruled the panel’s opinion, explaining that Texas’ school financing is a state and not federal issue.

More than a decade later, another major legal challenge to the state’s school finance system would emerge – Edgewood v. Kirby – though this time it was alleged that the funding practices violated state law instead of federal. Though originally the Mexican American Legal Defense and Educational Fund filed suit in 1984 on behalf of the Edgewood Independent School District, ultimately sixty-seven other school districts and a host of parents and students joined as plaintiffs. This group contended that the state’s heavy reliance on local property taxes to fund education created unfair system because property values differed from district to district and therefore led to an imbalance in available funds.

Shortly after MALDEF filed suit, the legislature passed a measure increasing aid to poorer schools. The plaintiffs, however, did not think this went far enough, and simply amended their suit to take the law into account. The case was finally heard in 1987 by district Judge Harley Clark. Clark ruled in favor of the plaintiffs, saying that the Texas school finance system violated the Texas Equal Protection clause, plus other state provisions and laws. In addition, he found that education was a “fundamental right” for Texas students and equal access to funding was included in that right. Clark ordered the legislature to devise a new funding plan.

Instead, the state appealed. In 1988 the Texas Third Court of Appeals reversed the lower court’s ruling, deciding that education was not in fact a basic right and that the current funding system was constitutional. As a result, the plaintiffs took the case to the Texas Supreme Court, where in a unanimous decision the justices backed the original decision of the lower court. The high court ordered the legislature to pass and implement a new plan by the 1990-1991 school year.

Post-Edgewood Chaos

The Edgewood decision and subsequent court order laid the groundwork for four back-to-back, petulant special sessions of the legislature in 1990. Finally Senate Bill 1, a bill that increased state support to schools by $528 million but made no systematic changes, was passed and signed into law. The Edgewood plaintiffs were not satisfied with the legislation and requested another hearing. In 1991 Judge Scott McCown heard arguments and agreed with the plaintiffs that the law did not permit substantially equal access to education funds. On appeal the case returned to the state Supreme Court, though it too found the new funding plan unconstitutional, noting that SB 1 did nothing to fundamentally alter the state’s unjust property tax system. The court gave the legislature two months to come up with yet another plan.

Thanks to an extended deadline, the legislature was able to authorize a reform bill. This time around, 1,058 school districts were consolidated into 188 County Education Districts to ensure funds would be spent equally per student. Senate Bill 351 was signed into law in 1991. Immediately, lawyers for fifty-seven wealthy districts, who were set to lose money under the new law, appeared before Judge McCown to argue against the plan. McCown upheld the law, and the case was appealed to the Supreme Court, which in 1992 declared the new system illegal because the CED’s were unconstitutional taxing units. The court deadline for yet another new plan was set on June 1, 1993.

In late May 1993, the legislature passed Senate 7, now nicknamed the “Robin Hood” plan. The law required school districts above a certain wealth level to transfer some of that wealth to poorer districts, using one of the following methods:

1) merging its tax base with a poorer district;
2) sending money to the state to help pay for students in poorer districts;
3) contracting to educate students in other districts;
4) consolidating voluntarily with one or more other districts; or
5) transferring some of its commercial taxable property to another district’s tax rolls.

“Robin Hood” was signed into law that same year and given a stamp of approval from Judge McCown. Two years later the Supreme Court upheld the plan.

The Modern-Day Debacle

The “Robin Hood” system of school finance held sway until September 2004, when state district Judge John Dietz found in West Orange-Cove CISD v. Neeley that the state’s funding system was inadequate, inefficient, and unconstitutional. The case combined three groups of plaintiffs: one asserting that the $1.50 tax cap, which about half of the state’s school districts had hit, constituted an illegal statewide property tax; another claiming that the 38 percent of funding coming from the state into the overall school finance system was an inadequate amount; and yet another asserting that the state school finance plan left a wide gap between rich and poor districts, and was therefore in violation of the Texas Constitution. The state appealed the decision to the Supreme Court.

Despite the pending decision from the high court, lawmakers set out during the 2005 legislative session to fix the system. One regular session and two special sessions later, no one solution could be agreed upon. Even the three most influential leaders in the state – the Governor Rick Perry, Lt. Governor David Dewhurst, and Speaker of the House Tom Craddick – could not come to a consensus, and all three belonged to the same political party.

The Supreme Court made its ruling in November 2005. It found that local property taxes used to finance public schools results in an unconstitutional statewide property tax because many school districts are at or near the $1.50 per $100 valuation limit. However, the court did not find overall state funding for education to be inadequate or inefficient, and thus reversed the lower court’s findings on those issues. The court set June 1 as the deadline for revising the tax system, and in response Governor Rick Perry has called for a special session of the legislature to begin on April 17.


Resources

Article 8, Section 1-e. The Texas Constitution. http://www.capitol.state.tx.us/txconst/sections/cn000800-01-e00.html.

“Brief History of Public Education.” Texas Almanac. http://www.texasalmanac.com/education/history.html.

“District Court Judge Rules Texas School Finance System Unconstitutional.” TCTA.org. http://www.tcta.org/capital/txleg/schfinontrial.htm.

“Edgewood v. Kirby.” The Handbook of Texas Online. http://www.tsha.utexas.edu/handbook/online/articles/EE/jre2_print.html.

“Gilmer-Aikin Laws.” The Handbook of Texas Online. http://www.tsha.utexas.edu/handbook/online/articles/GG/mlg1.html.

“History of Public School Finance in Texas.” Latino Education Policy in Texas. http://www.edb.utexas.edu/latino/sch_finance_page_history.html.

“Rodriguez v. San Antonio ISD.” The Handbook of Texas Online. http://www.tsha.utexas.edu/handbook/online/articles/RR/jrrht_html.

“School Funding 101: A Brief History of School Funding in Texas.” Coalition to Invest in Texas Schools. http://www.investintexasschools.org/schoolfunding/history.php.

“The History of Public Education in Texas.” Texas Education Agency. http://www.tea.state.tx.us/tea/historyoverview.html.

“Texas Supreme Court rules school finance system unconstitutional.” TCTA.org. http://www.tcta.org/SupremeCourtDecision.htm.