San Antonio, TX – Texas education officials illegally changed how property taxes are calculated in wealthy school districts, with the effect of substantially reducing the funds available for schools in poorer districts, a lawsuit filed Thursday charged.
The change would cost the state’s poorer schools districts and their students approximately $440 million per year or $880 million for the two-year funding cycle, according to the lawsuit filed by MALDEF (Mexican American Legal Defense and Educational Fund) and the law firms Gray & Becker, P.C. and Ray & Wood, on behalf of Le Feria and Joaquin Independent School Districts.
The La Feria Independent School District in Cameron County and the Joaquin Independent School District in Shelby County want the court to permanently block the newly amended rule adopted February 1, calling it invalid and unenforceable.
“Breaking the rules to once again benefit property-wealthy districts to the detriment of our property-poor districts is not the fix we need for our broken public school system,” said Marisa Bono, MALDEF Southwest regional counsel. “We look forward to vindicating in court our clients’ efforts to ensure fair funding for all students.”
Texas’ system of “recapture” requires wealthier school districts with more valuable property to send some of their tax funds to the state to help fund poorer districts. Those funds are then administered through the Foundation School Program.
The recapture formula assesses the contributions of wealthier districts based on the full value of each property. But those districts may provide two types of tax deductions to residents. The first is a mandated $25,000 homestead exemption. The second deduction allows districts the option of granting an additional homeowners exemption of up to 20 percent of a home’s value, known as a local optional homestead exemption (“LOHE”).
State law allows some wealthy districts to reduce their contributions to recapture and the Foundation School Program by recognizing the LOHE-reduced property values. However, state law provided clear conditions to ensure that poor districts aren’t underfunded. Those conditions required that either state lawmakers appropriate more funding, or that there be a surplus in the Foundation School Program. Until recently, the Texas Education Agency (TEA) interpreted the law to apply only when those conditions were met.
But in February, state education officials issued a statement changing its longstanding rule. Lawyers for the two plaintiff school districts argue that education officials illegally bypassed the existing rule, allowing certain wealthy districts with LOHE’s to reduce their contribution to recapture, without appropriating funds to fill the gap.
“The Education Code provides that the mission of the public education system of this state is to ensure that all Texas children have access to a quality education,” said Richard Gray of Gray & Becker, P.C. “The recent actions of the Commissioner work squarely against that mission and will result in funding flowing only to students in certain property-wealthy districts of TEA’s choosing while at the same time cutting funding to other districts. It is estimated that the recent actions of the Commissioner could cost close to one billion dollars for the 2018-2019 school year and that cost will only increase in future years.”
Under the new rule, La Feria ISD will lose over $225,000 per year, or $1,435 per classroom a year. Joaquin ISD will lose over $48,000 per year, or $1,548 per classroom. These financial losses are reflective of the financial loss that many property-poor school districts throughout the state will incur as a result of the new rule.
The lawsuit comes as state lawmakers debate how Texas will finance public education for the more than 5 million students currently enrolled in schools across the state. The Texas Supreme Court ruled in May last year that while the state’s school finance system met “minimal constitutional requirements,” it needed comprehensive reform.
Read the lawsuit here.