Taxpayers challenge South Texas ISD's ability to collect taxes

Lyford Consolidated Independent School District (LCISD) and group of individual taxpayers filed a lawsuit, challenging the ability of South Texas ISD to collect taxes and requesting that the court permanently enjoin South Texas ISD from doing so. The district court dismissed the lawsuit and the plaintiffs appealed, with the case ultimately presented to the Supreme Court of Texas.

The Supreme Court began its analysis by describing the history of South Texas ISD. Before federal law required public schools to provide free and appropriate education for students with disabilities via IDEA, Texas created "rehabilitation districts" to "provide education, training, special services and guidance" for persons with mental or physical disabilities. These districts had the authority to levy and collect taxes and there was no procedure in place to disband them. South Texas ISD was originally formed under this statute as the Rio Grande Rehabilitation District for Handicapped Persons and was given the authority to levy ad valorem property taxes.

After IDEA was passed, the Texas Legislature amended the law to permit rehabilitation districts to "provide the opportunity for vocational training to handicapped and nonhandicapped scholastics." The Rio Grande Rehabilitation District changed its name to South Texas ISD. The law authorizing rehabilitation districts was ultimately repealed, but South Texas ISD continues to operate under its provisions today and levies and collects taxes, even though the number of disabled students attending school at the district decreased significantly. Today approximately 11% of students at South Texas ISD receive special education services, which is similar to other school districts.

The issue before the Texas Supreme Court was whether LCISD and taxpayers were the correct people to bring the lawsuit, which is a legal concept called "standing." The court examined LCISD and the taxpayers separately. With respect to the taxpayers, the court concluded that they had standing because:

• They had potentially suffered an injury in the sense that they had to pay the taxes levied by South Texas ISD.
• Their injury was traceable to the actions of South Texas ISD in that the board of directors decides each year to levy the tax and sets a rate.
• The remedy that the taxpayers was requesting would solve their problem, because they would no longer have to pay the tax if it was granted.

The result was different for LCISD. The school district claimed that it had standing because over the years, South Texas ISD had been servicing fewer students with disabilities, which increased the number of students that LCISD was required to service. This led to an increase in costs associated with servicing those students. 

However, the court held that LCISD's situation was different than the taxpayers because it could always call a vote to raise its tax rate, regardless of what South Texas ISD did. Also, funding to schools is controlled by the Texas Legislature. Therefore, the LCISD's alleged financial injury could not be traced to South Texas ISD. 

Finally, LCISD was not able to show that if South Texas ISD stopped levying and collecting taxes, that would improve its financial situation.

The Supreme Court of Texas held that the taxpayers had standing to proceed with their claims against South Texas ISD but that LCISD did not.