Judge Dietz Finds School Finance System Unconstitutional

On Wednesday afternoon, Sept. 15, state District Judge John Dietz concluded a five-and-half-week trial by ruling unconstitutional the Texas system of public school finance. Following a brief recess in the immediate wake of the closing arguments, Dietz ruled that the state's method of funding public schools – shrunk in recent years to about 38% of the actual costs – violates the constitution on two grounds: 1) The amount of revenues is insufficient to meet the constitution's requirement to provide "an adequate suitable education"; 2) the property tax system, under which an increasing number of districts "are forced" to tax at the statutory cap of $1.50 to meet standards, has effectively removed "all meaningful discretion" from local authorities and become an unconstitutional state property tax. Therefore, ruled Dietz, the system is "neither financially efficient nor efficient in ... providing" a constitutional "adequate" education nor in meeting the requirements of other state laws. (For the judge's full ruling, see Neither Efficient nor Adequate.)

The decision meant a victory for the tripartite coalition of school districts – officially wealthy, middling, and poor – which had brought suit against the state to force action to reform the finance system first installed in 1993 and last determined to be constitutional by the state Supreme Court in 1995. In the wake of the ruling, Attorney General Greg Abbott, who was in the Travis Co. courtroom for Wednesday's final arguments, said that while the current finance system is neither "perfect" nor "without flaws," the state believes that the system "meets all constitutional mandates." Abbott said the state will appeal. Any appeal should go directly to the Supreme Court, because in issuing his ruling, Dietz said he would file an order effective Oct. 1 that would require the state to install a constitutional system within one year or else "state funding of public schools [will] cease."

In practice that will mean that the Legislature must enact a new system either in a special session called by Gov. Rick Perry or in the regular session beginning in January. The Legislature failed to come to a consensus on the issue in a special session convened earlier this year, and there is much speculation whether the judge's order will have the effect of forcing state leaders to come up with a financing plan. Discussions have repeatedly broken down over whether the priority should be funding the schools or lowering local property taxes – legislators have been unable to agree on an alternative tax or set of taxes to supplement or substitute for local property taxes, which now provide approximately 60% of school funding, compared to the state's 38%. (The remaining pittance comes from the federal government.)

The judge's decision came after a full day of final arguments from both sides, with three sets of attorneys arguing for the school districts that the system is both financially exhausted and inadequate to fulfill either the state constitutional mandate of "the general diffusion of knowledge" or increasingly high state and federal accountability standards of recent years. The team from the attorney general's office responded for the state that the current system is sufficient to fund all necessary educational requirements, that the districts have "meaningful discretion" to tax at adequate rates and to spend the money as they see fit, and that in any case the question of school funding is a legislative policy decision, not a matter of judicial decree. Although much public debate has been devoted to the recapture system (aka "Robin Hood"), under which property-wealthy districts must return a portion of locally collected tax revenues to the state for redistribution to poorer districts, that system never became a contested issue during the trial and went virtually unmentioned in final arguments. Although the case, officially known as West Orange-Cove v. Neeley, et al., began as an action brought by the wealthier districts, several hundred property-poor districts "intervened" in the suit in two groups, and the three teams of attorneys effectively worked together throughout the proceedings. "For the first time [in school finance legal history], the school districts are all together," said Buck Wood, attorney for the Alvarado intervenors (the less poor of the two "property poor" groups), "and we don't agree on everything, but we agree on the main points. And there are no districts on the state side." The districts repeatedly emphasized their support for an "equitable" system, and all argued that the current system is simply "out of capacity" – with no ability for districts to raise additional resources.

In response, attorneys for the state argued that rising standards and excellent academic programs demonstrated that the educational system is working well, and that the court should "resist the temptation" to usurp legislative responsibility by tinkering with school policy questions. "The evidence is overwhelming," declared Assistant Attorney General Jeff Rose, "that the system meets the requirements of the Texas constitution."

Judge Dietz did not agree. He prefaced his official ruling with a forceful commentary (see The Time to Speak Is Now) on the changing demographics of Texas and the inadequacies of the current educational system to meet the challenge of "closing the gap" between the states' "haves and have-nots." If the visible gap in academic achievement between the economically advantaged and the disadvantaged is not narrowed by 2040, Dietz said, "Texas in 2040 will have a population that is larger, poorer, less educated, and more needy than today." "The lesson is this," declared Dietz. "Education costs money, but ignorance costs more money." Before reading his ruling, he concluded, "It's the right thing to do."