In a long-awaited decision announced Aug. 28, 2014, Travis County District Court Judge John Dietz declared Texas' current school finance system to be unconstitutional and gave the State of Texas until July 1, 2015, to create a constitutional school finance system.

The judge's ruling means that all state funding for public schools will be shut down as of July 1, 2015, unless the state Legislature enacts a different school finance system or unless a higher court extends the deadline or overrules his decision. Judge Dietz specifically extended the deadline until after the 2015 legislative session in order to give the Legislature an opportunity to address the issues raised in the decision.

The state is expected to appeal the matter directly to the Texas Supreme Court. Most observers believe that the Legislature will not take action until and unless the higher court upholds the district court ruling, but it is unclear at this time whether an appeal will extend the July 1, 2015, deadline, although the Texas Supreme Court could extend the deadline before it issues a final decision in the appeal.
 
While the court ruled in favor of virtually all of the claims raised by the various coalitions made up primarily of independent school districts (referred by the court as the “ISD Plaintiffs"), the court ruled against the so-called “Efficiency Intervenors,” who were asking for such relief as elimination of the provisions in state law that provide rights and benefits for Texas educators. The court also ruled against the charter school intervenors, except to the extent they supported the adequacy claims asserted by the ISD Plaintiffs.

As the court had previously orally announced before the trial was reopened after the 2013 legislative session, the Aug. 28 written order finds that the current school finance system is unconstitutional under the Texas Constitution for the following reasons:

  1. The school finance system violates the prohibition against a state property tax because school districts do not have meaningful discretion over the levy, assessment, and disbursements of local property taxes. Specifically, the court holds that school districts proved that they are unable to use local tax dollars for meaningful local enrichment at both the $1.04 maintenance and operations tax rate that can be enacted without local voter approval or even at the $1.17 maximum maintenance and operations tax rate. The court further holds that the districts proved a systemic violation of the prohibition against a statewide property tax.
  2. The court also finds the current school finance system to be inadequate, ruling that the state has failed to make suitable provision for a general diffusion of knowledge. Specifically, the court finds that the ISD Plaintiffs have shown that the costs of providing a general diffusion of knowledge exceed the funding provided through the current system and that the funding and weights for economically disadvantaged and English Language Learner students prevent districts from generating sufficient resources to accomplish a general diffusion of knowledge. The court finds that insufficient funding is available to provide Texas school children, particularly economically disadvantaged and ELL students, access to the education necessary to participate fully in the social, economic, and educational opportunities available in Texas and that the school districts are unable to accomplish a general diffusion of knowledge at either a $1.04 or $1.17 maintenance and operations tax rate.
  3. The court also holds that the current system is constitutionally inadequate due to the current facilities funding or lack thereof.
  4. While the court upholds the claims asserted by the relatively property-wealthy school districts, the court also upholds the claims by the property-poor school districts that the school finance system is inequitable due to the current structure of the school finance system and the fact that the system allows so much unequalized local supplementation as to destroy the efficiency of the system. 

In short, the court upholds almost all claims by the ISD Plaintiffs with the exception of a claim by one group of plaintiffs that the school finance system violates a separate provision of the Texas Constitution that requires all taxation to be equal and uniform.

Following the announcement of the decision, Commissioner of Education Michael Williams issued this statement:
 
“Today’s decision is just a first step on a very familiar path for school finance litigation in Texas. Regardless of the ruling at the district court level, all sides have known this is an issue that will again be resolved by the Texas Supreme Court. Texas is committed to finding solutions to educate every student in every classroom. However, it should be our state leaders making those decisions, not a single judge. Any revisions to our school finance system must be made by members of the Texas Legislature. The Texas Education Agency will continue carrying out its responsibilities in providing funding for our public schools based on the current system and ultimately the legislative decisions made at the end of this legal process.”