It’s property tax season, and thousands of Texans have been writing checks to pay their dreaded property tax bills for 2019. Thousands more are paying monthly (as it’s rolled into their mortgages).
We know much of that money is used to fund public schools, but exactly where does the money go, and how is it spent? That’s complicated.
Texas’ school finance system has undergone litigation in eight significant court cases throughout the last four and half decades. The first, a precedent-setting federal case, was ruled on by the U.S. Supreme Court in 1973. The remaining seven cases were state cases, each ultimately being decided by the Texas Supreme Court between 1989 and 2016.
At the end of those seven state cases the “score” stood 4-3. Four times Texas’ highest court found that the school finance system either failed to meet constitutional standards or violated a provision of the constitution. In the other three cases the court held that the system met constitutional requirements, though it consistently warned that the system was walking a fine line of constitutionality.
The Texas Constitution says in Article VII that the state must provide an “efficient” system of education. And efficiency within the school finance system was the primary question in the early court cases. On two separate occasions, the school finance system was ruled unconstitutional due to inefficiency.
At the heart of that inefficiency was the use of local property taxes to fund education. As is shown in our new paper, “Education and Property Taxes: A Texas-Sized Conundrum,” building a system that must be efficient around an inefficient tax structure creates a wobbly foundation for the school finance system.
In later cases, new funding schemes were challenged on the argument that they created a state-wide property tax, which was constitutionally banned in 1982.
Though Texas cannot have a statewide property tax, the state does require school districts to levy a minimum property tax in order to receive their full entitlement from the state. Only the wealthiest districts in Texas could provide a comparable level of education funding without state aid. Because of this, it has been argued that Texas requires property taxes because, to receive full funding, districts must levy them at certain levels.
The Texas Supreme Court has ruled twice that the local property taxes did constitute a statewide tax—due to either a lack of discretion in setting their rates, or the creation of administrative districts that levied a tax whose rate was set by the Legislature.
In the most recent Texas Supreme Court ruling (Coalition v. Morath), the court held that the system did not violate the constitution. However, that ruling was not accompanied by a supportive view of the system. In fact, it was the opposite. The Supreme Court described the system as “Byzantine,” “ossified,” and “ill-suited for 21st century Texas.”
Reliance on a finance system that just barely scrapes by on constitutionality is not what Texans deserve.
There are ways to reduce education’s reliance on local property taxes without requiring a reduction in education spending. Fun fact: education is the largest item in the Texas budget, at more than 37 percent of all funds. Clearly, education is a priority to Texas and that won’t change, regardless of the funding source.
The Legislature made notable strides to improve school finance in 2019 in an attempt to shore up the school finance system. While those reforms do make the school finance system more secure and less likely to fall under legal scrutiny in the near future, they still maintain elements that could leave it open to constitutional concerns one day.
Eliminating Texas’ reliance on local property taxes would go a long way toward stabilizing the school finance system and satisfying the desires of a majority of Texas voters.