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Texas Supreme Court rules school finance system unconstitutional


The Texas Supreme Court issued its highly anticipated ruling on Nov. 22, 2005, in the latest, and, for now, definitive, round of school finance litigation. The litigation involved the state of Texas defending itself against a challenge by two groups of school districts asserting that the current system of school finance was unconstitutional because it was inadequate, inefficient and effectively constituted a statewide property tax which violates the Texas Constitution. The trial court agreed with the school districts on all major counts, except one relating to facilities funding. The state and districts involved agreed to skip the appellate court and bring an expedited appeal directly to the Supreme Court.

In summary, the Texas Supreme Court agreed with the trial court that the school finance system essentially establishes an unconstitutional statewide property tax. However, the Supreme Court reversed the ruling of the trial court with regard to adequacy and efficiency. Though TCTA certainly would have preferred that the Supreme Court rule that the schools were inadequately and inefficiently funded, the state’s win on these points appears to be a narrow one. As you will note from the excerpts from the actual decision below, the state appears to have “squeaked by” for now.

Eight of the Supreme Court's nine justices participated, with one justice dissenting to produce a seven-to-one decision. Dissenting Justice Scott Brister claims the Court goes too far by ruling that the Legislature should close schools until the statewide property tax issue is addressed, and yet also claims that the Court does not go far enough, because they fail to demand an "efficient system" and standing as Texas law requires.

The tangible result of the Supreme Court’s decision is that it will require a special legislative session, since it has given the Legislature only until June 1, 2006, to address the issue of the unconstitutional statewide property tax system. The next regular session of the Legislature isn’t scheduled until January 2007, so a special session will be required and is expected to take place sometime between the March primaries and the June 1 deadline.

It is often instructive to read what the Texas Supreme Court justices have said in their own words. The opinion itself is lengthy, and can be accessed at the Supreme Court Web site. Here are some highlights, extracted from the text, on issues of particular interest. All appear verbatim, though not necessarily in context. Text is organized by subject matter in these excerpts, and quoted material may not necessarily appear contiguously in the decision.

ON LEGISLATIVE VERSUS JUDICIAL ROLES IN PUBLIC EDUCATION

Whether public education is achieving all it should — that is, whether public education is a sufficient and fitting preparation of Texas children for the future — involves political and policy considerations properly directed to the Legislature. Deficiencies and disparities in public education that fall short of a constitutional violation find remedy not through the judicial process, but through the political processes of legislation and elections.

This is not to say that the standards in article VII, section 1 involve no political considerations beyond the judiciary’s power to determine. We have acknowledged that much of the design of an adequate public education system cannot be judicially prescribed. Litigation over the adequacy of public education may well invite judicial policy-making, but the invitation need not be accepted. The judiciary’s choice is not between complete abstinence from article VII, section 1 issues, and being, in the State defendants’ words, “the arbiter of education and policy, overseeing such issues as curriculum and testing development, textbook approval, and teacher certification”. Rather, the judiciary’s duty is to decide the legal issues properly before it without dictating policy matters. The constitutional standards provide an appropriate basis for judicial review and determination.

Like the majority of these states, we conclude that the separation of powers does not preclude the judiciary from determining whether the Legislature has met its constitutional obligation to the people to provide for public education.

Article VII, section 1 allows the Legislature a large measure of discretion on two levels. The Legislature is entitled to determine what public education is necessary for the constitutionally required “general diffusion of knowledge”, and then to determine the means for providing that education. But the Legislature does not have free rein at either level. “[T]he Legislature may [not] define what constitutes a general diffusion of knowledge so low as to avoid its obligation to make suitable provision imposed by article VII, section 1.” And “[w]hile the Legislature certainly has broad discretion to make the myriad policy decisions concerning education, that discretion is not without bounds.” It would be arbitrary, for example, for the Legislature to define the goals for accomplishing the constitutionally required general diffusion of knowledge, and then to provide insufficient means for achieving those goals. If the Legislature’s choices are informed by guiding rules and principles properly related to public education — that is, if the choices are not arbitrary — then the system does not violate the constitutional provision.

The public education system need not operate perfectly; it is adequate if districts are reasonably able to provide their students the access and opportunity the district court described.

ON THE UNCONSTITUTIONALITY OF LOCAL SCHOOL PROPERTY TAXES

We now hold, as did the district court, that local ad valorem taxes have become a state property tax in violation of article VIII, section 1-e, as we warned ten years ago they inevitably would, absent a change in course, which has not happened.

ON EQUITY

Although the districts have offered evidence of deficiencies in the public school finance system, we conclude that those deficiencies do not amount to a violation of article VII, section 1. We remain convinced, however, as we were sixteen years ago, that defects in the structure of the public school finance system expose the system to constitutional challenge.

In actual operation, however, this gap is wider. According to the intervenors’ expert, on average, at a tax rate of $1.48, chapter 41 districts’ revenue is $5,457/WADA while chapter 42 districts’ revenue is $4,330/WADA, a difference of $1,127/WADA or 26%. By comparison, at the time of Edgewood IV (as reflected in the record but not our opinion), the average tax rate was only $1.17, chapter 41 districts’ average revenue was $3,510/WADA, and chapter 42 districts’ average revenue was $3,005/WADA, a difference of $505 or 17%. The proportional size of the gap in actual operation has thus increased by about half, from 17% to 26%.

ON SYSTEMIC PROBLEMS IN SCHOOL FINANCE

Pouring more money into the system may forestall those challenges, but only for a time. They will repeat until the system is overhauled.

ON SMALL SCHOOL DISTRICTS

There are 1,031 independent school districts — more than four times the number of counties. A fourth of public school students are educated in 12 districts in seven counties; half are educated in 45 districts. The largest district, Houston ISD, has 211,499 students, more than the combined student population in half of all the other districts put together. Two-thirds of the districts have fewer than 1,200 students each; half have fewer than 700 each; almost a fourth have fewer than 350 each; 11 districts have fewer than 60 each.

The large number of districts, with their redundant staffing, facilities, and administration, make it impossible to reduce costs through economies of scale. Bigger is not always better, but a multitude of small districts is undeniably inefficient. The justification offered for this situation is that as a matter of public policy, public schools should be locally controlled, although it has never been clear why the legitimate benefits of local control are so entirely inconsistent with efficiency in funding. Districts are firmly entrenched and powerfully resistant to meaningful change, and while matters have improved somewhat over the past century, the number of school districts has not declined significantly in the past two decades.

ON LOCAL CONTROL

Edgewood I, 777 S.W.2d at 398 (“Some have argued that reform in school finance will eliminate local control, but this argument has no merit. An efficient system does not preclude the ability of communities to exercise local control over the education of their children. It requires only that the funds available for education be distributed equitably and evenly.”).

ON PERFORMANCE STANDARDS AND RESOURCES

In 2000, controlling for socioeconomic and family characteristics, Texas was first out of 47 states overall, first for white students, fifth for African-American students, ninth for Hispanic students, first for fourth- and eighth-graders in math, and second in rate of improvement. In 2003, Texas ranked first in the nation in closing the gap between African-American and white fourth-graders in math, and second in the nation in closing the gap between Hispanic and white fourth-graders in math and reading. But unadjusted NAEP data, which may more accurately reflect college preparation, showed Texas sinking to 37th among the states in fourth-grade and eighth-grade reading, although it had risen to 22nd in fourth-grade math and remained 34th in eighth-grade math.

The State defendants contend that the district court focused too much on “inputs” to the public education system — that is, available resources. They argue that whether a general diffusion of knowledge has been accomplished depends entirely on “outputs” — the results of the educational process measured in student achievement. We agree that the constitutional standard is plainly result-oriented. It creates no duty to fund public education at any level other than what is required to achieve a general diffusion of knowledge. While the end-product of public education is related to the resources available for its use, the relationship is neither simple nor direct; public education can and often does improve with greater resources, just as it struggles when resources are withheld, but more money does not guarantee better schools or more educated students. To determine whether the system as a whole is providing for a general diffusion of knowledge, it is useful to consider how funding levels and mechanisms relate to better-educated students. This, we think, is all the district court did.

The district court did not find that the system is so designed that it cannot accomplish a general diffusion of knowledge as defined by the statutory provisions just quoted. Rather, the district court found that the system is not producing a general diffusion of knowledge because the State has not provided sufficient funding.

In the extensive record before us, there is much evidence, which the district court credited, that many schools and districts are struggling to teach an increasingly demanding curriculum to a population with a growing number of disadvantaged students, yet without additional funding needed to meet these challenges. There are wide gaps in performance among student groups differentiated by race, proficiency in English, and economic advantage. Non-completion and dropout rates are high, and the loss of students who are struggling may make performance measures applied to those who continue appear better than they should. The rate of students meeting college preparedness standards is very low. There is also evidence of high attrition and turnover among teachers statewide, due to increasing demands and stagnant compensation. But the undisputed evidence is that standardized test scores have steadily improved over time, even while tests and curriculum have been made more difficult. By all admission, NAEP scores, which the district court did not mention, show that public education in Texas has improved relative to the other states. Having carefully reviewed the evidence and the district court’s findings, we cannot conclude that the Legislature has acted arbitrarily in structuring and funding the public education system so that school districts are not reasonably able to afford all students the access to education and the educational opportunity to accomplish a general diffusion of knowledge.

We recognize that the standard of arbitrariness we have applied is very deferential to the Legislature, but as we have explained, we believe that standard is what the Constitution requires. Nevertheless, the standard can be violated. There is substantial evidence, which again the district court credited, that the public education system has reached the point where continued improvement will not be possible absent significant change, whether that change take the form of increased funding, improved efficiencies, or better methods of education. Former Lieutenant Governor Ratliff, the author and principal sponsor of Senate Bill 7 in 1993, echoed the considered judgments of other witnesses at trial when he testified:

I am convinced that, just by my knowledge of the overall situation in Texas, school districts are virtually at the end of their resources, and to continue to raise the standards . . . is reaching a situation where we’re asking people to make bricks without straw.

Cf. Exodus 5:6-19.

ON THE DRIFT TOWARD CONSTITUTIONAL INADEQUACY

But an impending constitutional violation is not an existing one, and it remains to be seen whether the system’s predicted drift toward constitutional inadequacy will be avoided by legislative reaction to widespread calls for changes.

The intervenors argue that constitutional efficiency does not permit substantially unequal access to funds to supplement an adequate education, but we have previously rejected this argument. In the earlier appeal in this case, we explained:

As long as efficiency is Maintained, it is not unconstitutional for districts to supplement their programs with local funds, even if such funds are unmatched by state dollars and even if such funds are not subject to statewide recapture. We caution, however, that the amount of “supplementation” in the system cannot become so great that it, in effect, destroys the efficiency of the entire system. The danger is that what the Legislature today considers to be “supplementation” may tomorrow become necessary to satisfy the constitutional mandate for a general diffusion of knowledge.

ON EFFICIENCY AND LOCAL SUPPLEMENTATION

Supplementation must be just that: additional revenue not required for an education that is constitutionally adequate. For such supplementation we have never held that districts must have substantially equal access to funds.

Accordingly, we conclude that the public school finance system is not inefficient in violation of article VII, section 1.

The Legislature may well find many ways of improving the efficiency and adequacy of public education — ways not urged by the parties to this case — that do not involve increased funding.

Neither the structure nor the operation of the funding system prevents it from efficiently accomplishing a general diffusion of knowledge. The State may discharge its duty to make suitable provision for free public schools through school districts by relying on local tax revenues, even as heavily as it now does. Such reliance, especially given the multitude and diversity of school districts, inevitably makes it difficult to achieve efficiency because of the vast disparities in local property wealth, but efficiency is not impossible. We have suggested that these difficulties might be avoided by fundamental changes in the structure of the system, but the possibility of improvement does not render the present system unsuitable for adequately and efficiently providing a public education. Accordingly, we conclude that the system does not violate the constitutional requirement of suitability.

ON FUNDING AND MEANINGFUL DISCRETION

Meaningful discretion cannot be quantified; it is an admittedly imprecise standard. But we think its application in this case is not a close question

The district court found that due to inadequate funding: 52.8% of the newly hired teachers in 2002 were not certified, up from 14.1% in 1996; more teachers were being required to teach outside their areas of expertise; and attrition and turnover were growing. The court cited the higher costs of educating economically disadvantaged students and students with limited English proficiency, noting that 90% of the growth in the student population has come from low-income families. And as set out in more detail above, the district court noted the increased curriculum, testing, and accreditation standards, and the increased costs of meeting them. These are facts, not opinions. The State defendants point to evidence of some discretionary spending on programs not essential to accreditation, but there is also evidence that such programs are important to keeping students in school.

Even if each category of evidence would not, by itself, prove a constitutional violation, all of this evidence taken together, along with the extensive record before us, clearly shows that school districts have lost meaningful discretion to tax below maximum rates and still provide an accredited education. In reaching this conclusion, we do not alter any standard we have previously announced, as the dissent charges, or adopt positions the Court has previously rejected, as the dissent suggests. The question, as we stated in Edgewood III, is whether school districts have meaningful discretion to tax below maximum rates, and the answer is that they do not.

Accordingly, we conclude that the public school finance system violates article VIII, section 1-e of the Texas Constitution. Various legislative proposals during the past year to remedy perceived problems with the public education system and its funding would reduce the maximum ad valorem tax rate and allow it to be exceeded for certain purposes. While we express no view on the appropriateness of any of these proposals, we are constrained to caution, as we have before, that a cap to which districts are inexorably forced by educational requirements and economic necessities, as they have been under Senate Bill 7, will in short order violate the prohibition of a state property tax.

ON THE INJUNCTION AND JUNE 1, 2006 DEADLINE

The Constitution does not require a particular solution. We leave such matters to the discretion of the Legislature. To end the constitutional violation, we agree with the district court that the use of the current system must be enjoined. The district court delayed the effect of its injunction until October 1, 2005, to allow the Legislature time to respond. Since the injunction issued, the Legislature has undertaken to respond in a regular session and two special sessions. Its inability to do so appears to be due not to any lack of expertise in the issues but to the absence of agreement. At this point in time, it is unlikely that material changes could be made in the public education system that would affect the current school year. School districts will next begin to prepare budgets and set tax rates in the summer of 2006. To allow the State ample time to fully consider structural changes in the public education system, and to allow the system time to adjust to those changes, we postpone the effective date of the district court’s injunction to June 1, 2006.