# West Orange-Cove Consolidated I.S.D. v. Felipe Alanis, in His Official Capacity as the Commissioner of Education

> Texas Supreme Court · May 29, 2003

URL: https://www.frixlaw.com/law-library/cases/2833131

## Case

- **Court:** Texas Supreme Court
- **Decided:** May 29, 2003
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE SUPREME COURT OF
TEXAS
No. 02-0427
West Orange-Cove Consolidated
I.S.D.
et al., Petitioners
v.
Felipe Alanis, in his official
capacity as
the Commissioner of Education, et
al., Respondents
On Petition for Review from the
Court of Appeals for the Third District of Texas
Argued March 27, 2003
Justice Hecht delivered the opinion of the Court, in which Chief Justice
Phillips, Justice Owen, Justice O'Neill, Justice Jefferson, Justice Schneider,
and Justice Wainwright joined.
Justice Enoch filed a concurring opinion.
Justice Smith filed a dissenting opinion.
Article VIII, section 1-e of the Texas Constitution states: "No State ad
valorem taxes shall be levied upon any property within this State."
(1) We have held that "[a]n ad valorem tax is a state tax when it is
imposed directly by the State or when the State so completely controls the levy,
assessment and disbursement of revenue, either directly or indirectly, that the
[taxing] authority employed is without meaningful discretion."
(2)
The maintenance and operation of Texas public schools are funded mostly by ad
valorem taxes levied by local school districts under comprehensive state
regulation that, among other things, caps the rates at which districts can tax
and redistributes local revenue among districts. In 1995, we held that the
State's control of this school funding system had not made local property taxes
an unconstitutional state tax because school districts retained meaningful
discretion in generating revenue, but we foresaw a day when increasing costs of
education and evolving circumstances might force local taxation at maximum
rates.
(3) At that point, we said, the conclusion that a state property tax
had been levied would be "unavoidable".
(4)
In the case before us, four plaintiff school districts allege that that day
has come. Specifically, they contend that they and other districts have been
forced to tax at maximum rates set by statute in order to educate their
students. These taxes, they say, have become indistinguishable from a state ad
valorem tax prohibited by article VIII, section 1-e.
The district court dismissed the case on the pleadings, holding that a
constitutional violation could not be alleged because far fewer than half of
Texas' 1,035 school districts were taxing at the maximum rates allowed. The
court of appeals affirmed, focusing not on how many districts were taxing at
maximum rates but on whether any of them were forced to do so just to provide an
accredited education as defined by statute.
(5) We disagree with both courts and therefore reverse and remand the
case to the trial court for further proceedings.
I
This is the fifth in a series of cases to come before us challenging the
constitutionality of the Texas public school finance system on various
grounds.
(6) Central to some of the cases and basic to them all is article VII,
section 1 of the Texas Constitution, which states:
A general diffusion of knowledge being essential to
the preservation of the liberties and rights of the people, it shall be the duty
of the Legislature of the State to establish and make suitable provision for the
support and maintenance of an efficient system of public free schools.
(7)
By assigning to the Legislature a duty, this section both empowers and
obligates. It gives to the Legislature the sole authority to set the policies
and fashion the means for providing a public school system.
(8) Thus we have said that "[w]e do not prescribe the means which the
Legislature must employ in fulfilling its duty."
(9) But the provision also requires the Legislature to meet three
standards. First, the education provided must be adequate; that is, the public
school system must accomplish that "general diffusion of knowledge
. . . essential to the preservation of the liberties and rights of the
people". Second, the means adopted must be "suitable". Third, the system itself
must be "efficient". "[T]hese are admittedly not precise terms," as we have
acknowledged, but "they do provide a standard by which this court must, when
called upon to do so, measure the constitutionality of the legislature's
actions."
(10) The final authority to determine adherence to the Constitution
resides with the Judiciary.
(11) Thus, the Legislature has the sole right to decide how
to meet the standards set by the people in article VII, section 1, and the
Judiciary has the final authority to determine whether they have been
met.
(12)
In 1989, we decided Edgewood I , the first case challenging the
constitutionality of the public school finance system under article VII, section
1. The system's principal component for funding maintenance and operations was
the Foundation School Program, a two-tiered mechanism that the Legislature had
set up in 1975.
(13) The first tier was designed to fund a basic education.
(14) Every school district that could not, by taxing at a specified
minimum rate, generate a certain level of revenue per student in "weighted
average daily attendance" ("WADA" -- weighted by taking into account special
needs and conditions such as special or bilingual education) was given state
funds to make up the difference.
(15) Despite its stated purpose, first-tier funding did not cover the
cost of meeting bare educational requirements mandated by the Legislature.
(16) The system's second tier provided state funds to guarantee a
certain level of additional revenue per student in WADA for each penny a school
district increased its tax rate above the prescribed minimum.
(17) School district tax rates were capped at $1.50 per $100 property
valuation
(18) as they had been for decades.
(19) Smaller components of the school finance system were the
Available School Fund established by the Constitution,
(20) which provided all school districts about $300 per student,
(21) and federal funding.
(22) Facilities and other expenses were funded separately.
(23)
Then, as now, local ad valorem taxes supplied more than half the funding for
public schools,
(24) the tax bases of the more than 1,000 school districts, and
consequently the tax revenue available to them, were vastly different,
(25) and state tax revenues were inadequate to level local funding
disparities.
(26) At that time, local tax revenues were not redistributed among
school districts as they are now. We described the situation thus:
There are glaring disparities in the abilities of
the various school districts to raise revenues from property taxes because
taxable property wealth varies greatly from district to district. The wealthiest
district has over $14,000,000 of property wealth per student, while the poorest
has approximately $20,000; this disparity reflects a 700 to 1 ratio. The 300,000
students in the lowest-wealth schools have less than 3% of the state's property
wealth to support their education while the 300,000 students in the
highest-wealth schools have over 25% of the state's property wealth; thus the
300,000 students in the wealthiest districts have more than eight times the
property value to support their education as the 300,000 students in the poorest
districts. The average property wealth in the 100 wealthiest districts is more
than twenty times greater than the average property wealth in the 100 poorest
districts. . . .
* * *
Because of the disparities in district property
wealth, spending per student varies widely, ranging from $2,112 to $19,333.
Under the existing system, an average of $2,000 more per year is spent on each
of the 150,000 students in the wealthiest districts than is spent on the 150,000
students in the poorest districts.
The lower expenditures in the property-poor
districts are not the result of lack of tax effort. Generally, the property-rich
districts can tax low and spend high while the property-poor districts must tax
high merely to spend low. In 1985-86, local tax rates ranged from $.09 to $1.55
per $100 valuation. The 100 poorest districts had an average tax rate of 74.5
cents and spent an average of $2,978 per student. The 100 wealthiest districts
had an average tax rate of 47 cents and spent an average of $7,233 per student.
. . . A person owning an $80,000 home with no homestead exemption
would pay $1,206 in taxes in the east Texas low-wealth district of Leveretts
Chapel, but would pay only $59 in the west Texas high-wealth district of
Iraan-Sheffield. Many districts have become tax havens.
(27)
The plaintiffs in Edgewood I asserted that this public school
finance system was not efficient within the meaning of article VII, section 1.
"'Efficient,'" we said, "conveys the meaning of effective or productive of
results and connotes the use of resources so as to produce results with little
waste; this meaning does not appear to have changed over time."
(28) Given these circumstances, a unanimous Court had little
difficulty concluding that the constitutional standard of efficiency had not
been met:
We hold that the state's school financing system is
neither financially efficient nor efficient in the sense of providing for a
"general diffusion of knowledge" statewide, and therefore that it violates
article VII, section 1 of the Texas Constitution. Efficiency does not require a
per capita distribution, but it also does not allow concentrations of resources
in property-rich school districts that are taxing low when property-poor
districts that are taxing high cannot generate sufficient revenues to meet even
minimum standards. There must be a direct and close correlation between a
district's tax effort and the educational resources available to it; in other
words, districts must have substantially equal access to similar revenues per
pupil at similar levels of tax effort. Children who live in poor districts and
children who live in rich districts must be afforded a substantially equal
opportunity to have access to educational funds. Certainly, this much is
required if the state is to educate its populace efficiently and provide for a
general diffusion of knowledge statewide.
(29)
Because constitutional efficiency does not require absolute equality of
spending, we expressly acknowledged that "local communities would [not] be
precluded from supplementing an efficient system established by the
legislature", but we added that "any local enrichment must derive solely from
local tax effort."
(30) In other words, the constitutional standard of efficiency
requires substantially equivalent access to revenue only up to a point, after
which a local community can elect higher taxes to "supplement" and "enrich" its
own schools. That point, of course, although we did not expressly say so in
Edgewood I , is the achievement of an adequate school system as
required by the Constitution. Once the Legislature has discharged its duty to
provide an adequate school system for the State, a local district is free to
provide enhanced public education opportunities if its residents vote to tax
themselves at higher levels. The requirement of efficiency does not preclude
local supplementation of schools. Although we were not called upon in
Edgewood I to consider what constitutional adequacy entails, the
interrelationship between the standards of adequacy and efficiency was
fundamental to our reasoning in that case.
We ordered that state funding of public schools cease on May 1, 1990, unless
the Legislature conformed the system to meet constitutional standards.
(31) Although we expressly did not "instruct the legislature as to the
specifics of the legislation it should enact . . . or order it to
raise taxes,"
(32) we cautioned that "[a] band-aid will not suffice; the system
itself must be changed."
(33) Eight months later, in a sixth special session, the Legislature
adjusted the system to provide incentives it believed would "achieve substantial
equity among the districts that educate 95% of our students."
(34) The plaintiffs in Edgewood I immediately challenged
this legislation, Senate Bill 1, again on the ground that the system was not
efficient within the meaning of article VII, section 1 of the Constitution.
Without attempting to determine whether the incentives added by Senate Bill 1
could realistically reach their goals, we concluded in Edgewood II
that the system as a whole remained constitutionally inefficient:
Even if the approach of Senate Bill 1 produces a
more equitable utilization of state educational dollars, it does not remedy the
major causes of the wide opportunity gaps between rich and poor districts. It
does not change the boundaries of any of the current 1052 school districts, the
wealthiest of which continues to draw funds from a tax base roughly 450 times
greater per weighted pupil than the poorest district. It does not change the
basic funding allocation, with approximately half of all education funds coming
from local property taxes rather than state revenue. And it makes no attempt to
equalize access to funds among all districts. By limiting the funding formula to
districts in which 95% of the students attend school, the Legislature excluded
132 districts which educate approximately 170,000 students and harbor about 15%
of the property wealth in the state. A third of our students attend school in
the poorest districts which also have about 15% of the property wealth in the
state. Consequently, after Senate Bill 1, the 170,000 students in the wealthiest
districts are still supported by local revenues drawn from the same tax base as
the 1,000,000 students in the poorest districts.
These factors compel the conclusion as a matter of
law that the State has made an unconstitutionally inefficient use of its
resources. The fundamental flaw of Senate Bill 1 lies not in any particular
provisions but in its overall failure to restructure the system.
(35)
We reaffirmed that efficiency did not preclude local supplementation of
school funding.
(36) On rehearing, we stressed:
The current system remains unconstitutional not
because any unequalized local supplementation is employed, but because
the State relies so heavily on unequalized local funding in attempting to
discharge its duty to "make suitable provision for the support and maintenance
of an efficient system of public free schools." Once the Legislature provides an
efficient system in compliance with article VII, section 1, it may, so long as
efficiency is maintained, authorize local school districts to supplement their
educational resources if local property owners approve an additional local
property tax.
(37)
Because the Legislature was then in session, we required that it respond
without delay, and it promptly enacted Senate Bill 351.
(38) The legislation created 188 new "county education districts". In
most instances, a CED comprised the school districts in a single county.
(39) The sole purpose of the CEDs was to levy, collect, and distribute
property taxes among their component school districts, respectively, in effect
consolidating school districts' tax bases while leaving them in control of their
own schools.
(40) CED tax rates and distributions were prescribed by statute to
ensure uniformity. This state-controlled tax-base consolidation "reduced the
geographical disparities in the availability of revenue for education"
(41) and was not challenged as failing to satisfy the efficiency
standard of article VII, section 1. It was, however, challenged as imposing a
state ad valorem tax in violation of article VIII, section 1-e of the
Constitution. We sustained that challenge in Edgewood III :
Senate Bill 351 mandates the tax CEDs levy. No CED
may decline to levy the tax. The tax rate for all CEDs is predetermined by
Senate Bill 351. No CED can tax at a higher rate or a lower rate under any
circumstances. Indeed, the very purpose of the CEDs is to levy a uniform tax
statewide. The distribution of the proceeds is set by Senate Bill 351. No CED
has any discretion to distribute tax proceeds in any manner except as required
by statute. Every function of the CEDs is purely ministerial. If the State
mandates that a tax be levied, sets the rate, and prescribes the distribution of
the proceeds, the tax is a state tax, regardless of the instrumentality which
the State may choose to use.
(42)
To place the situation created by Senate Bill 351 in the broader context of
the constitutional prohibition of state ad valorem tax, we explained:
An ad valorem tax is a state tax when it is imposed
directly by the State or when the State so completely controls the levy,
assessment and disbursement of revenue, either directly or indirectly, that the
authority employed is without meaningful discretion. How far the State can go
toward encouraging a local taxing authority to levy an ad valorem tax before the
tax becomes a state tax is difficult to delineate. Clearly, if the State merely
authorized a tax but left the decision whether to levy it entirely up to local
authorities, to be approved by the voters if necessary, then the tax would not
be a state tax. The local authority could freely choose whether to levy the tax
or not. To the other extreme, if the State mandates the levy of a tax at a set
rate and prescribes the distribution of the proceeds, the tax is a state tax,
irrespective of whether the State acts in its own behalf or through an
intermediary. Between these two extremes lies a spectrum of other possibilities.
If the State required local authorities to levy an ad valorem tax but allowed
them discretion on setting the rate and disbursing the proceeds, the State's
conduct might not violate article VIII, section 1-e. It is difficult, perhaps
impossible, to define for every conceivable hypothetical precisely where along
this continuum such taxes become state taxes. Therefore, if the Legislature, in
an effort to remedy Senate Bill 351 with as few changes as possible, chose to
inject some additional element of leeway in the assessment of the CED tax, it is
impossible to say in advance whether that element would remove the tax from the
prohibition of article VIII, section 1-e. Each case must necessarily turn on its
own particulars. Although parsing the differences may be likened to dancing on
the head of a pin, it is the Legislature which has created the pin, summoned the
dancers, and called the tune. The Legislature can avoid these constitutional
conundra by choosing another path altogether.
(43)
We also held that by levying a tax without an election, the CEDs violated
article VII, section 3(e) of the Constitution.
(44)
We delayed enforcement of our ruling for more than a year, until the end of
the next regular session of the Legislature in 1993.
(45) During that session, the Legislature's first reaction was to
attempt to amend the Constitution. A proposed amendment that would have
rewritten article VII, section 1 to remove its standards and commit the
responsibility for public education to local school districts was introduced but
not reported out of committee.
(46) A proposed amendment that would have authorized the system
structured by Senate Bill 351 passed the Senate and narrowly passed the House
(47) but was soundly defeated by the people before the session
ended.
(48) The Legislature then enacted Senate Bill 7.
(49)
Senate Bill 7 returned to the two-tiered Foundation School Program,
(50) the basic structure of which remains in place today.
(51) As before, "[t]he stated purpose of Tier 1 is to guarantee
'sufficient financing for all school districts to provide a basic program of
education that meets accreditation and other legal standards.'"
(52) At a minimum $0.86 tax rate, a school district that cannot
generate revenue equal to a "basic allotment" per student in WADA -- in 1993,
$2,300,
(53) and today, $2,537,
(54) subject to various adjustments
(55) -- receives state funds for the difference.
(56) As before, the basic allotment does not cover the cost of an
education that meets legislated accrediting standards.
(57) Tier 2 provides for partially state-supported local
supplementation.
(58) For each penny a district raises the tax rate above the minimum,
the state guarantees a certain yield per weighted student -- $20.55 in 1993,
(59) and $27.14 today.
(60) The tax rate for maintenance and operations continues to be
capped at $1.50, subject to various adjustments and exceptions.
(61) There is also some state funding for facilities, sometimes
referred to as Tier 3 in the system.
(62)
The major change that Senate Bill 7 made in the Foundation School Program was
to equalize school districts' "wealth per student" -- a district's taxable
property value divided by the number of students in WADA.
(63) A school district with wealth per student greater than a certain
amount -- $280,000 in 1993,
(64) and $305,000 today
(65) -- must transfer the excess, or the tax revenue generated from
it, either actually or effectively, so as to provide funding for school
districts with less wealth.
(66) The local tax revenue "recaptured" and redistributed by this
mechanism amounted to almost $1 billion in 2000.
(67) This taxable wealth equalization scheme, dubbed by some "Robin
Hood", eliminates the geographical disparities in available revenue among school
districts that characterized the pre-1993 version of the Foundation School
Program.
The public school finance system set up by Senate Bill 7 was challenged on
numerous grounds, all of which we rejected in Edgewood IV . Two are
important for purposes of the present case. We held that the unequalized funding
available for local supplementation did not render the system constitutionally
inefficient:
It is apparent from the Court's opinions that we
have recognized that an efficient system does not require equality of access to
revenue at all levels. Otherwise, unequalized local supplementation, which we
expressly approved in Edgewood II, could never be justified.
Article VII, section 1 of the Constitution and our previous Edgewood
decisions mandate that efficiency be measured against both qualitative and
financial standards.
The district court viewed efficiency as synonymous
with equity, meaning that districts must have substantially equal revenue for
substantially equal tax effort at all levels of funding. This
interpretation ignores our holding in Edgewood II that unequalized
local supplementation is not constitutionally prohibited. The effect of this
"equity at all levels" theory of efficiency is to "level-down" the quality of
our public school system, a consequence which is universally regarded as
undesirable from an educational perspective. Under this theory, it would be
constitutional for the Legislature to limit all districts to a funding level of
$500 per student as long as there was equal access to this $500 per student,
even if $3500 per student were required for a general diffusion of
knowledge. Neither the Constitution nor our previous Edgewood decisions
warrant such an interpretation.
(68)
Constitutional efficiency under article VII, section 1 requires only that
"districts must have substantially equal access to funding up to the
legislatively defined level that achieves the constitutional mandate of a
general diffusion of knowledge."
(69) That legislatively defined level was an accredited education:
In Senate Bill 7, the Legislature equates the
provision of a "general diffusion of knowledge" with the provision of an
accredited education. The accountability regime set forth in [the statute], we
conclude, meets the Legislature's constitutional obligation to provide for a
general diffusion of knowledge statewide.
(70)
We cautioned, however, that the Constitution does not give the Legislature a
completely free hand in determining what level of education will achieve the
general diffusion of knowledge required by article VII, section 1:
As long as the Legislature establishes a suitable
regime that provides for a general diffusion of knowledge, the Legislature may
decide whether the regime should be administered by a state agency, by the
districts themselves, or by any other means.
This is not to say that the Legislature may 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. While
the Legislature certainly has broad discretion to make the myriad policy
decisions concerning education, that discretion is not without bounds.
(71)
The interrelated constitutional standards of efficiency and adequacy both
limit legislative discretion:
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.
(72)
"This is simply another way of saying that the State's provision for a
general diffusion of knowledge must reflect changing times, needs, and public
expectations."
(73)
In Edgewood IV , we also held that Senate Bill 7 did not impose
a state ad valorem tax in violation of article VIII, section 1-e of the
Constitution simply because a number of school districts were already taxing at
the maximum $1.50 rate. Some districts were taxing below the minimum $0.86 rate,
and it appeared that for the most part "[p]roperty-poor and property-rich
districts presently can attain the revenue necessary to provide suitably for a
general diffusion of knowledge at tax rates of approximately $1.31 and $1.22,
respectively."
(74) We acknowledged, however, that over time more districts would be
required to tax at the maximum $1.50 rate:
if the cost of providing for a general diffusion of
knowledge continues to rise, as it surely will, the minimum rate at which a
district must tax will also rise. Eventually, some districts may be forced to
tax at the maximum allowable rate just to provide a general diffusion of
knowledge. If a cap on tax rates were to become in effect a floor as well as a
ceiling, the conclusion that the Legislature had set a statewide ad valorem tax
would appear to be unavoidable because the districts would then have lost all
meaningful discretion in setting the tax rate.
(75)
Although we rejected all of the challenges to Senate Bill 7, we stressed that
the system was "minimally acceptable only when viewed through the prism of
history."
(76) In other words, it was better than it had been. But we added:
"Surely Texas can and must do better."
(77) In every session since 1993, the Legislature has amended the
Education Code,
(78) but little change has been made in funding the maintenance and
operation of public schools. As noted, the Tier 1 basic allotments, the Tier 2
guaranteed yields, and the equalization threshold have all been increased,
thereby providing more state funds for public education, but the structure of
the system remains essentially the same. Meanwhile, the level of state funding
has continued to fall, reliance on local property taxes has increased,
(79) and more school districts -- now 39% with 32% of the State's 4.1
million students, according to petitioners' calculations from data furnished by
the Texas Comptroller -- have reached maximum tax rates.
Presciently, we observed in Edgewood IV : "Our judgment in this
case should not be interpreted as a signal that the school finance crisis in
Texas has ended."
(80)
II
In the case now before us, filed in April 2001, four school districts
(81) assert that the public school finance system has come to involve
a state ad valorem tax in violation of article VIII, section 1-e, just as we
foresaw it might in Edgewood IV .
(82) Specifically, after quoting our admonition from
Edgewood IV , the plaintiffs alleged:
In the six years since the 1995
Edgewood IV decision, education costs have continued to rise. As
predicted in Edgewood IV , school districts, such as the
Plaintiffs, are required to tax at or near the maximum allowable $1.50 M&O
[maintenance and operation] tax rate in order to educate students in their
districts . Such school districts have lost all meaningful discretion in
setting their M&O tax rate. Accordingly, as contemplated by the Supreme
Court in Edgewood IV , the statutory cap on the M&O tax rate
has become a statewide ad valorem tax in violation of the Texas Constitution.
Without relief from the statutory cap on M&O tax rates, the Plaintiff school
districts must continue to take such measures as cutting programs, eliminating
teaching positions and/or increasing class size.
(Emphasis added.) Plaintiffs prayed for a judgment declaring the $1.50
statutory cap to be a constitutionally prohibited state ad valorem tax.
The defendants
(83) (collectively, "the State") answered with a plea to the
jurisdiction, plea in abatement, and special exceptions, asserting that the
action was not ripe and should be dismissed. Specifically, the State
asserted:
• "the system would not result in a statewide ad valorem tax unless and until
the 'cap on tax rates were to become in effect a floor as well as a ceiling'
[quoting Edgewood IV , 917 S.W.2d at 738] as to all
districts " (emphasis added), and plaintiffs do not and cannot allege that
this is the situation;
• "Plaintiffs do not allege that the system requires them or any other
district to tax at the rate of $1.50 in order to provide a general diffusion
of knowledge " (emphasis in original) as they must to allege a
constitutional violation, "but instead allege only that they must tax at (or
near) $1.50 'in order to educate students in their districts"; and
• because "each of the Plaintiff districts . . . has voluntarily
elected to grant an optional twenty percent homestead exemption . . .
they cannot plead or prove that the State system forces them to tax at
$1.50 just to provide an accredited education."
The State's ripeness and pleading arguments were thus related: in the State's
view, the claims the plaintiffs were required to plead in order to state the
constitutional violation they asserted were not ripe.
In response, the plaintiffs argued that:
• to show a state property tax they were required to prove only that
some , not all, school districts were forced to tax at maximum
rates;
• although the defendants contended that an accredited education could be
provided for $4,179 per student, plaintiffs were entitled to explore the factual
basis for that figure and to show that taxation at maximum rates was required to
provide an accredited education; and
• homestead exemptions should not be taken into account in determining
whether school districts were being forced to tax at maximum rates.
The plaintiffs contended that their pleadings were sufficient and stated
claims that were ripe.
Two groups of school districts intervened. While they opposed the plaintiffs'
claims, they alleged that the public school finance system remained flawed for
other reasons. The six Edgewood intervenors
(84) asserted:
The Edgewood Intervenors are Defendant Intervenors
to the extent that they agree that this case should be dismissed for lack of
ripeness and, therefore, lack of subject matter jurisdiction. On the other hand,
Edgewood Intervenors are Cross-Plaintiff Intervenors to the extent that they
agree that the Texas School Finance System at $1.50 does not provide sufficient
funding or equitable funding to guarantee a general diffusion of knowledge.
The thirty-four Alvarado intervenors
(85) asserted: "In spite of the fact that progress is being made,
Intervenors do not concede that the funding levels for Tier 2 districts set by
the legislature achieves an adequate level of funding for public schools in
Texas." They added that "the state is not contributing its fair share of monies
needed to maintain an adequate school finance system." Regarding the plaintiffs'
claims, they agreed with the defendants that they should be dismissed:
Intervenors view Plaintiffs' case as a pure
adequacy claim. As stated above, the $1.50 tax rate cap never becomes a factor
unless total revenues available to school districts are inadequate to provide
for a general diffusion of knowledge. Intervenors believe that the maintenance
of an equitable system is the best way to insure adequacy.
The Alvarado intervenors specially excepted to the plaintiffs' pleading for
alleging only that they were required to tax at maximum rates "to educate their
students" rather than "to provide the constitutionally-required general
diffusion of knowledge to their students." The plaintiffs responded:
This special exception mischaracterizes Plaintiffs'
pleading and constitutes unnecessary hairsplitting over semantics. [Plaintiffs
quoted from Edgewood IV and] then made clear that their cause of
action was based on the [quoted] language, and that they are required to tax "at
or near the $1.50 M&O tax rate in order to educate students in their
districts", i.e., to provide a general diffusion of knowledge. Because the
"floor" described by the Court [in Edgewood IV ] is linked to the
"general diffusion of knowledge" standard, Plaintiffs were implicitly (if not
explicitly) alleging that they had to tax at or near $1.50 just to provide their
students with a general diffusion of knowledge.
Ten weeks after the case was filed, the trial court conducted a hearing on
the dilatory pleas and the special exceptions. The defendants argued, and the
trial court agreed, that this Court's admonition in Edgewood IV
that the finance system could result in a state property tax was dicta.
(86) The plaintiffs argued, however, that this Court had described
circumstances that could violate the constitutional prohibition of a state ad
valorem tax, and that they were entitled to prove that those circumstances had
come into existence. Regarding the plaintiffs' pleadings, the following colloquy
occurred:
THE COURT: Well, let me ask counsel for the
plaintiffs: are you . . . pleading that . . . you can't
provide an accredited system on $1.50 or are you pleading that the accredited
system isn't good enough to provide a general diffusion of knowledge and you
can't provide a general diffusion of knowledge on $1.50?
COUNSEL: All of the above. All the above.
. . . And again, we're involved in notice pleading. We pled it. It's
pretty clear what we're driving at. We're driving at page 738 of the
Edgewood [ IV ] majority opinion.
The trial court did not hear evidence but did take judicial notice of state
appropriations and school district tax levies.
Less than a month later, the trial court issued an order dismissing the case.
The court explained in the order:
Whether the Legislature has imposed a
state ad valorem tax is decided by reference to how the public school
finance system works throughout the state, not by reference to how the system
works in any one district. Moreover, to look at the question district by
district would mean that the tax could be constitutional in one district and
unconstitutional in another. Thus, the court must assess the system as a
whole.
* * *
Remember that the constitutional question is not
how many districts are at the cap, but how many districts must
be at the cap to provide an accredited education. The court today is merely
holding that a plaintiff must be able to plead that some significant number of
districts are at the cap to go forward with a claim that too many
districts must be at the cap. Naturally, the court has assumed on
special exceptions that if a district is at the cap, the district must be at the
cap. This pleading assumption builds in a significant margin of error in favor
of the plaintiff districts.
The margin of error is in favor of the plaintiff
districts because, on the merits, the plaintiffs must show that the
highly-acclaimed school districts taxing at $1.50 would plummet to
academically-unacceptable school districts at $1.49.
* * *
Though Edgewood IV provides limited
guidance on how many districts must have to tax at the cap to be
constitutionally significant, or, in other words, for the court to conclude that
the districts have lost "meaningful discretion" in levying the ad valorem tax,
based upon what the Supreme Court does teach, this court holds that for the
approved tax to become a prohibited state ad valorem tax, some
significant number of districts across the state must have to tax at the $1.50
cap in order to provide an accredited education. For the legislative design to
be an unconstitutional state ad valorem tax, the design must require a
significant number of districts to tax at the cap, something approaching or
exceeding half the districts.
Thus, a single number decides the case on special
exceptions -- the percentage of districts that are at the cap of $1.50. The
plaintiffs do not and cannot state a claim upon which relief can be granted
because a constitutionally insignificant number of districts are at the cap of
$1.50. Only 19% of the school districts even tax at the cap of $1.50, which
means that 81% do not. Indeed, two of the plaintiff districts do not tax at the
$1.50 rate. Moreover, many districts, including all four plaintiffs, have
granted local-option tax exemptions. Only 12% of the school districts tax at the
cap of $1.50 without a local-option exemption, which means that 88% do not.
Of course, the decision to grant a local-option
exemption in and of itself is the exercise of meaningful local discretion. By
granting a local-option exemption, for whatever worthy reason, a school district
takes a great amount of taxable wealth out of the system. . . . The
court is not implying that these exemptions are not appropriate; the court is
merely saying that they have the same effect as substantially lowering the tax
rate. As long as a district has an exemption, therefore, it is not at the tax
cap.
The court dismissed with prejudice the plaintiffs' allegation of an existing
violation of article VIII, section 1-e, and dismissed without prejudice the
plaintiffs' allegation that a violation was imminent.
The court of appeals affirmed,
(87) but not for the reasons given by the trial court. Although the
court of appeals considered the pleading and ripeness issues separately, it
recognized that the parties' arguments on both issues are related. In the court
of appeals' view, the number of school districts taxing at maximum rates was
irrelevant. "Whether the effect of the tax is experienced ' statewide '
or by a majority of districts in the state does not determine whether a tax is a
state tax."
(88) Rather, the court said, "the controlling factor in reviewing a
challenge to an alleged ad valorem tax is the State's involvement in the
levy."
(89) "Seen in this light," the court said, "the positions taken by the
district court . . . and by the parties in their briefs, are based on
a misunderstanding of the determinative factors of a state ad valorem tax."
(90)
Regarding the plaintiffs' pleadings, the court explained:
In determining the State's control over the
maintenance and operations property tax, the relevant inquiry is the
relationship between the tax and the districts' obligations to provide an
accredited education. As the court found in Edgewood IV, the
system may encourage districts to tax at or near the maximum rate. Whether it
does so is irrelevant for purposes of determining whether the system imposes a
state tax. But if the districts' abilities to fulfill a state mandate, here the
obligation to provide the minimum accredited education, forced the districts to
tax at the maximum rate, the system might approach an unacceptable level of
state control over the levy. Therefore, the allegation that a district is forced
to tax at the highest allowable rate to provide the bare, accredited education
is a necessary element of a cause of action brought by a district challenging
the cap.
(91)
The court concluded that the plaintiffs had failed to make this
allegation:
West Orange-Cove instead pleaded that it was forced
to tax at or near $1.50 to "educate its students." The enriched education that
West Orange Cove locally desires to provide its students is not the measure for
determining if the State is imposing an educational mandate that requires the
local district to levy a state-imposed rate of tax. West Orange-Cove's pleadings
simply fail to state a viable cause of action.
(92)
Because the plaintiffs'
allegation does not refer to the districts'
state-imposed obligation to provide an accredited education
. . . , the districts' pleadings fail to state a challenge to the
tax as a state tax. Accordingly, we hold that the trial court properly
dismissed the claim for failure to state a cause of action.
(93)
The court also held that the plaintiffs' claim that taxation at maximum rates
was necessary to achieve the constitutional standard of "a general diffusion of
knowledge" was nonjusticiable:
As the record makes clear, West Orange-Cove wants
to use this opportunity, framed as a tax challenge, to engage the judiciary in a
debate over policy choices that are within the province of the legislative
branch. Both the Legislature and the supreme court have equated the term
"general diffusion of knowledge" with accreditation standards. The court, in
addition, has insisted that the judiciary has a limited role in the area of
educational policy and should defer to the Legislature on matters involving
educational standards and funding . . . [citing
Edgewood IV, 917 S.W.2d at 726]. West Orange-Cove's claim would
involve the courts in deciding what is meant by the term "general diffusion of
knowledge" without reference to the accreditation standards set by the
Legislature. That body, however, has conclusively equated the two concepts,
thereby foreclosing the judicial inquiry West Orange-Cove seeks to pursue.
Moreover, as the supreme court has recognized, the meaning of a "general
diffusion of knowledge" and the development of appropriate accreditation
standards are policy choices best suited to the legislature. Id.
(94)
Summarizing its holdings, the court of appeals stated:
The instant case is not unripe because fewer than
half of all school districts are taxing at the maximum rate; rather, the claim
is unripe because the appellants have failed to demonstrate that they are forced
to set their rates of tax at the maximum allowable rate just to provide an
accredited education. That is, the districts have not pleaded that they have
lost all meaningful discretion in setting the rate of tax as it pertains to
their ability to meet a state-imposed obligation, which is the only relevant
concern in this lawsuit.
(95)
We granted the plaintiffs' petition for review and expedited oral argument.
(96)
III
We consider first what the plaintiffs must allege to state a violation of
article VIII, section 1-e, and then whether the plaintiffs can and do make that
allegation.
A
We adhere to the rule stated in Edgewood III that "[a]n ad
valorem tax is a state tax when it is imposed directly by the State or when the
State so completely controls the levy, assessment and disbursement of revenue,
either directly or indirectly, that the authority employed is without meaningful
discretion."
(97) The determining factor is the extent of the State's control over
the taxation process.
The State argues that local school district property taxes cannot be a state
tax unless every district is forced to tax at a specific rate, here,
the maximum $1.50 rate for maintenance and operation (subject to adjustments).
The trial court rejected this argument but held that there can be no state tax
unless most districts are forced to tax at maximum rates. Both
positions presuppose that the issue is the extent of the tax and that the
determination must be made from the perspective of the system as a whole rather
than with respect to each district. As the trial court stated: "Whether the
Legislature has imposed a state ad valorem tax is decided by reference
to how the public school finance system works throughout the state, not by
reference to how the system works in any one district." This premise has no
support in the constitutional text or the rule we have stated for applying it.
The Constitution prohibits "State ad valorem taxes . . . upon
any property within this State" (emphasis added) and is not limited to
statewide ad valorem taxes. The provision expressly contemplates that a
state ad valorem tax could be levied on only some property. The
prohibition does not permit the State to set rates for hospital districts, or
junior college districts, or mosquito control districts, or fire prevention
districts, or noxious weed control districts -- to name but a few of the many
taxing authorities
(98) -- just because such districts are confined to a few areas of the
State, nor does the Constitution permit the State to control the tax rate for
even one such district. Were it otherwise, then as we observed in
Edgewood III:
The State could create County Highway Districts, or County Prison Districts,
or all-purpose County Funding Districts to levy taxes at set rates for
prescribed purposes, and by such means accomplish what it could not do itself.
(99)
The concern is not the pervasiveness of the tax but the State's control of
it. A state ad valorem tax is just that -- one imposed by the State, whether it
acts directly or through control of another entity, and whether the tax falls on
the entire population or only a few.
Thus, a single district states a claim under article VIII, section 1-e if it
alleges that it is constrained by the State to tax at a particular rate. How a
constitutional violation in one or a few school districts would impact the
public school finance system as a whole is not before us.
B
The State argues that for four reasons the plaintiffs cannot allege that they
are forced to tax at maximum rates. To sustain the dismissal of the plaintiffs'
case on the pleadings, however, the State must establish the plaintiffs'
inability to plead a constitutional violation as a matter of law.
(100) We examine each of the State's reasons in turn.
1
The State asserts that it exerts no control over taxation by local school
districts and that the districts are free to tax at any levels they choose up to
the maximum. The State's argument runs as follows. The duty to provide an
adequate public education belongs to the Legislature, not local school
districts. School districts are "forced" to do nothing; they choose to
tax and educate at desired levels. While the State may encourage certain
choices, it does not compel them.
This argument, in essence, is that nothing short of virtually absolute state
control of ad valorem taxation violates article VIII, section 1-e. We plainly
rejected the argument in Edgewood III :
How far the State can go toward encouraging a local
taxing authority to levy an ad valorem tax before the tax becomes a state tax is
difficult to delineate. Clearly, if the State merely authorized a tax but left
the decision whether to levy it entirely up to local authorities, to be approved
by the voters if necessary, then the tax would not be a state tax. The local
authority could freely choose whether to levy the tax or not. To the other
extreme, if the State mandates the levy of a tax at a set rate and prescribes
the distribution of the proceeds, the tax is a state tax, irrespective of
whether the State acts in its own behalf or through an intermediary. Between
these two extremes lies a spectrum of other possibilities. If the State required
local authorities to levy an ad valorem tax but allowed them discretion on
setting the rate and disbursing the proceeds, the State's conduct might not
violate article VIII, section 1-e. It is difficult, perhaps impossible, to
define for every conceivable hypothetical precisely where along this continuum
such taxes become state taxes.
(101)
Certainly, the State does not now control taxation by school districts to the
same extent it controlled taxation by the CEDs. But as we have said, the
constitutional prohibition is violated whenever state control denies a taxing
authority "meaningful discretion".
(102)
The Legislature has deprived school districts of any meaningful discretion to
provide an inadequate education, as indeed it is constitutionally bound to do.
The Legislature's duty under article VII, section 1 is to make suitable
provision for a general diffusion of knowledge through free public schools. "As
long as the Legislature establishes a suitable regime that provides for a
general diffusion of knowledge, the Legislature may decide whether the regime
should be administered by a state agency, by the districts themselves, or by any
other means."
(103) "Certainly, if the Legislature substantially defaulted on its
responsibility such that Texas school children were denied access to that
education needed to participate fully in the social, economic, and educational
opportunities available in Texas, the 'suitable provision' clause [of article
VII, section 1] would be violated."
(104) "In Edgewood I , we reaffirmed that the requirement
of suitability is a judicially-enforceable mandate . . . ."
(105) A public school system dependent on local districts free to
choose not to provide an adequate education would in no way be suitable. In
fact, the Legislature has acted to ensure that that is not the system.
Chapter 39 of the Education Code, entitled "Public School System
Accountability", sets school accreditation standards,
(106) rewards achievement of these standards,
(107) and imposes sanctions for non-compliance ranging from
admonitions to closure of the district.
(108) These provisions are legislated requirements that school
districts provide an adequate education, and they leave no meaningful discretion
for districts to do otherwise.
We also rejected the position for which the State now argues in
Edgewood IV , expressly recognizing that school districts could
indeed be "forced" -- our word -- by increasing costs "to tax at the maximum
allowable rate just to provide a general diffusion of knowledge."
(109) The "ceiling", we said, could become a "floor" as well, in which
event "the conclusion that the Legislature had set a statewide ad valorem tax
would appear to be unavoidable because the districts would then have lost all
meaningful discretion in setting the tax rate."
(110) The State successfully argued to the trial court that these
statements were dicta,
(111) but they were an important part of our rationale.
(112) We held in Edgewood IV that local ad valorem taxes
were not state ad valorem taxes because of then-existing circumstances that
allowed school districts meaningful discretion in setting tax rates, and we
expressly acknowledged that those circumstances could, and probably would,
change. That distinction defined the reach of the Court's decision in the case.
Had we thought that local school district property taxes could never violate
article VIII, section 1-e, our decision would certainly have been far
easier.
We remain of the view that school districts can be forced by the current
system to tax at maximum rates. An allegation that this has occurred states a
claim under article VIII, section 1-e.
2
Alternatively, the State argues that its only requirement of school districts
is that they provide an accredited education as defined by the Legislature, and
that the plaintiffs cannot allege in good faith that any district is forced to
tax at the maximum rate just to meet this requirement. On the contrary, the
State says, school districts taxing at maximum rates do so to provide enhanced
educational opportunities and not merely to maintain accreditation. The court of
appeals appears to have agreed with this argument.
Again, the State's argument suffers a flawed premise. Accreditation standards
are not the only requirements the State imposes on school districts. As we have
just explained, because the State has chosen to rely heavily on school districts
to discharge its duty to provide a constitutionally adequate education -- that
is, "[a] general diffusion of knowledge . . . essential to the
preservation of the liberties and rights of the people"
(113) -- the State must require that school districts achieve this
goal; otherwise, the public school system is not suitable for its purpose.
Consistent with its constitutional duty, the Legislature has stated:
The mission of the public education system of this
state is to ensure that all Texas children have access to a quality education
that enables them to achieve their potential and fully participate now and in
the future in the social, economic, and educational opportunities of our state
and nation. That mission is grounded on the conviction that a general diffusion
of knowledge is essential for the welfare of this state and for the preservation
of the liberties and rights of citizens.
(114)
We acknowledged in Edgewood IV that the Legislature in 1993
equated an accredited education with a general diffusion of knowledge and
discharged its duty to provide for the latter by demanding accountability of
school districts.
(115) But we also insisted that the "State's provision for a general
diffusion of knowledge must reflect changing times, needs, and public
expectations",
(116) and that the Legislature is not the sole arbiter of the
constitutional standard.
(117) The public school system the Legislature has established
requires that school districts provide both an accredited education and a
general diffusion of knowledge. It may well be that the requirements are
identical; indeed, as in Edgewood IV , we presume they are, giving
deference to the Legislature's choices. But it is possible for them not to be --
an accredited education may provide more than a general diffusion of knowledge,
or vice versa -- and because both are binding, a district may allege that
taxation at a maximum rate in order to satisfy either is a state ad valorem
tax.
The court of appeals concluded that to "involve the courts in deciding what
is meant by the term 'general diffusion of knowledge' without reference to the
accreditation standards set by the Legislature" would "engage the judiciary in a
debate over policy choices that are within the province of the legislative
branch."
(118) We agree, as we have already explained, that it is outside the
scope of judicial authority to review the Legislature's policy choices in
determining what constitutes an adequate education, and we emphasize that the
courts cannot undertake to review those choices one by one or attempt to define
in detail an adequate education. But once policy choices have been made by the
Legislature, it is the judiciary's responsibility in a proper case to determine
whether those choices as a whole meet the standard set by the people in article
VII, section 1.
Even if the plaintiffs' claims were limited to taxing to provide an
accredited education, there is no factual record for determining what the cost
of an accredited education is. The plaintiffs urged in the trial court that they
were entitled to discover the State's evaluation of that cost and to present
evidence that the true cost is greater. For the trial court, this factual
dispute was irrelevant, given its view that the plaintiffs could not allege a
constitutional violation because they could not allege that half or close to
half of all school districts were taxing at maximum rates. But since we have
concluded, as the court of appeals did, that the number of districts taxing at
maximum rates is not determinative of the plaintiffs' claims, the subsisting
dispute over the cost of an accredited education precludes dismissal of the case
on the pleadings.
Thus, to obtain dismissal of the plaintiffs' claims on the merits based
solely on the pleadings, the State must establish as a matter of law that the
plaintiff school districts are not forced to tax at maximum rates either to meet
accreditation standards or to provide a general diffusion of knowledge. The
State has done neither.
3
The Legislature has granted a partial homestead exemption from school
district taxation,
(119) which a district may increase up to a certain amount at its
option,
(120) as many districts do. The State argues that no school district
that has opted for an increased homestead exemption can allege that it is forced
to tax at maximum rates because it has meaningful discretion to deny the
increased exemption and tax at a lower rate. The trial court agreed with this
argument, and the court of appeals did not address it.
We reiterate that to obtain dismissal of the plaintiffs' action based solely
on the pleadings, the State must establish that the mere existence of
local-option exemptions precludes as a matter of law the allegation that school
districts are forced to tax at maximum rates. The State has not met this burden.
For one thing, the plaintiffs may be able to show that even without granting
additional homestead exemptions, they could not provide an accredited education
or a general diffusion of knowledge. For another thing, while school districts
obviously have discretion whether to increase homestead exemptions, it is far
from obvious that their discretion is meaningful. By authorizing local-option
homestead exemptions, knowing that some constituencies will insist on them, the
Legislature may actually have increased the pressure on school districts to tax
at maximum rates. In any event, the plaintiffs are entitled to attempt to show
that homestead exemptions do not afford them meaningful discretion.
4
Finally, the State argues that the plaintiffs cannot allege a violation of
article VIII, section 1-e unless they tax at the applicable absolute maximum
rate, not merely near that rate, as apparently only two of the four plaintiffs
do. This is simply not the case. The constitutional issue remains the extent of
the State's control. It may be that a school district taxing at $1.47 instead of
$1.50 has exercised meaningful discretion, but that is not necessarily the case.
A district taxing a few cents below the maximum rate that can no longer provide
an accredited education or a general diffusion of knowledge even by raising the
rate to the maximum need not do so just to prove the point.
C
The last matter is whether the plaintiffs did plead what they must
to allege a violation of article VIII, section 1-e. The plaintiffs alleged that
they were required to tax at maximum rates "to educate their students". In
response to special exceptions, the plaintiffs stated that their allegation was
tantamount to pleading that taxing at maximum rates was necessary to provide for
a general diffusion of knowledge. When asked by the trial court whether the
plaintiffs were pleading that they could not provide an accredited education or
a general diffusion of knowledge at maximum rates, counsel responded, "All of
the above." The plaintiffs repeatedly stated that they were pleading that the
situation we foresaw in Edgewood IV would violate article VIII,
section 1-e had in fact occurred. No reasonable argument can be made that the
plaintiffs' pleadings did not put the State on notice of their claims. Of
course, on special exceptions the trial court has discretion to further clarify
the issues to be litigated by requiring the plaintiffs to allege specifically,
for example, whether they are taxing at maximum rates to provide an accredited
education, or to provide for a general diffusion of knowledge, or both, and
whether the costs are different.
III
We add a few words in response to the dissent.
First: The dissent would hold that plaintiffs lack standing to sue. While
"standing, as a component of subject matter jurisdiction, cannot be waived"
(121) and may thus be raised at any time, the fact that the State has
not challenged the plaintiffs' standing to sue, nor was the standing of any
school district challenged in Edgewood I ,
Edgewood II , Edgewood III , or
Edgewood IV , is some indication of the weakness of the dissent's
argument. In Nootsie, Ltd. v. Williamson County Appraisal District , we
held that a county appraisal district had standing to seek a declaratory
judgment that the Legislature had unconstitutionally defined open-space land for
tax purposes to include ecological laboratories.
(122) We see no difference in the standing of an appraisal district to
assert its claims in Nootsie and the standing of the school districts
here. The dissent argues that Nootsie is at odds with federal standing
jurisprudence, but even if it were -- something we need not decide here -- the
dissent does not explain why any difference between Texas law and federal law is
reason enough for us not to follow our own recent precedent. The dissent also
argues that because the plaintiff school districts do not have and do not claim
to have a constitutional right to meaningful discretion, they have no standing
to seek a determination that taxation at maximum rates is a constitutionally
prohibited state ad valorem tax. Again conceding the premise solely for argument
purposes, we fail to see how the declaration the school districts request in
this case is any different from the one the appraisal district requested in
Nootsie . As we explained in Nootsie , the argument that
the district has no inherent vested rights
protected by the Constitutions of Texas and the United States . . .
misses the mark because the district does not contend that the statute violates
constitutional rights belonging to the district. Instead, the district asserts
an interest because it is charged with implementing a statute that it believes
violates the Texas Constitution. This interest provides the district with a
sufficient stake in this controversy . . . that the declaration sought
will resolve.
(123)
Finally, the dissent argues that Nootsie can be distinguished
because there the appraisal district represented aligned interests while here
the plaintiff school districts represent disparate and conflicting interests. We
do not understand this distinction. Nootsie allowed an appraisal
district to challenge the constitutionality of a tax exemption that at least one
of its taxpayers, Nootsie, Ltd., claimed and others may have opposed. We fail to
see how the interests of the taxpayers and citizens in the appraisal district in
Nootsie were any less at odds than the interests of the taxpayers and
citizens in the plaintiff school districts are here. For the same reasons we
explained in Nootsie , we hold that the plaintiff school districts in
this case have standing to assert their claims.
Second: Contrary to the dissent's assertion, we do not hold that school
districts have a constitutional duty to provide for a general diffusion of
knowledge. The districts' obligation is imposed by the Legislature, not the
Constitution, as the passage of our opinion to which the dissent refers
expressly states -- " [t]he public school system the Legislature has
established requires that school districts provide both an accredited
education and a general diffusion of knowledge" (emphasis added) -- and we
repeat elsewhere and now again here. The Legislature has expressly defined the
mission of the public school system, including school districts, to accomplish a
general diffusion of knowledge.
(124) As we have explained, the Legislature has chosen to make
suitable provision for a general diffusion of knowledge by using school
districts, and therefore the State cannot be heard to argue that school
districts are free to choose not to achieve that goal. If they were, the
Legislature's use of districts to discharge its constitutional duty would not be
suitable, since the Legislature would have employed a means that need not
achieve its end.
Third: The dissent would hold, contrary to Edgewood III and
Edgewood IV , that a state ad valorem tax is a tax used for a state
purpose rather than a tax levied by the State. We find nothing in the text or
history of article VIII, section 1-e to require that a state tax be determined
by its purpose rather than by the extent of state control over its employment.
Nor are we clear how such a purpose-oriented standard would operate. In the
dissent's view, any effort to equalize tax revenues among school districts for
public education violates article VIII, section 1-e because education is a state
purpose. This directly contradicts the Court's holdings in
Edgewood III and Edgewood IV . We do not agree with
the dissent that the importance of stare decisis can be minimized in
this area. For fourteen years the Legislature has worked to bring the public
school finance system into conformity with constitutional requirements as
declared by this Court. To announce now that we have simply changed our minds on
matters that have been crucial to the development of the public education system
would not only threaten havoc to the system, but would, far more importantly,
undermine the rule of law to which the Court is firmly pledged.
Fourth: The dissent argues that this Court's construction of article VII,
section 1 since Edgewood I and perhaps dating back to Mumme v.
Marrs
(125) necessarily draws the judiciary into making detailed policy
decisions about the elements of an adequate education. We reiterate that the
Constitution requires, not that courts make such policy decisions, but that they
determine, in a proper case, whether the Legislature on the whole has discharged
its constitutional duty.
* * * * *
For these reasons, we conclude that the lower courts erred in dismissing the
plaintiffs' action on the pleadings. The judgment of the court of appeals is
reversed and the case is remanded to the trial court for further proceedings
consistent with this opinion.
Nathan L. Hecht
Justice
Opinion delivered: May 29, 2003
1. Tex. Const. art. VIII, § 1-e.
2. Carrollton-Farmers Branch Indep. Sch. Dist. v.
Edgewood Indep. Sch. Dist. , 826 S.W.2d 489, 502 (Tex. 1992)
[ Edgewood III ].
3. Edgewood Indep. Sch. Dist. v. Meno , 917
S.W.2d 717, 738 (Tex. 1995) [ Edgewood IV ].
4. Id.
5. 78 S.W.3d 529 (Tex. App.--Austin 2002).
6. Edgewood Indep. Sch. Dist. v. Kirby , 777 S.W.2d
391 (Tex. 1989) [ Edgewood I ]; Edgewood Indep. Sch. Dist. v.
Kirby , 804 S.W.2d 491 (Tex. 1991) [ Edgewood II ];
Edgewood III , supra note 2; Edgewood IV ,
supra note 3.
7. Tex. Const. art. VII, § 1.
8. Mumme v. Marrs , 40 S.W.2d 31, 36 (Tex. 1931)
("Since the Legislature has the mandatory duty to make suitable provision for
the support and maintenance of an efficient system of public free schools, and
has the power to pass any law relative thereto, not prohibited by the
Constitution, it necessarily follows that it has a choice in the selection of
methods by which the object of the organic law may be effectuated. The
Legislature alone is to judge what means are necessary and appropriate for a
purpose which the Constitution makes legitimate.").
9. Edgewood II , 804 S.W.2d at 498 .
10. Edgewood I , 777 S.W.2d at 394 ;
accord Edgewood IV , 917 S.W.2d at 736 .
11. Marbury v. Madison , 5 U.S. (1 Cranch) 137,
176-178 (1803) ("The powers of the legislature are defined and limited; and that
those limits may not be mistaken or forgotten, the constitution is written. To
what purpose are powers limited, and to what purpose is that limitation
committed to writing, if these limits may, at any time, be passed by those
intended to be restrained? . . . So if a law be in opposition to the
constitution; if both the law and the constitution apply to a particular case,
so that the court must either decide the case conformably to the law,
disregarding the constitution; or conformably to the constitution, disregarding
the law; the court must determine which of these conflicting rules governs the
case. This is of the very essence of judicial duty."); Love v. Wilcox ,
28 S.W.2d 515, 520 (Tex. 1930) ("Since Marbury v. Madison , [ 5 U.S. (1
Cranch) 137, 166-167 (1803)], the courts of last resort of the several states
have almost universally followed the opinion of Chief Justice Marshall to the
effect that it is clear that: 'Where a specific duty is assigned by law, and
individual rights depend upon the performance of that duty, . . . the
individual who considers himself injured, has a right to resort to the laws of
his country for a remedy.'").
12. Edgewood IV , 917 S.W.2d at 726 ("This
Court's role under our Constitution's separation of powers provision should be
one of restraint. We do not dictate to the Legislature how to discharge its
duty. As prominent as this Court's role has been in recent years on this
important issue, it is subsidiary to the constitutionally conferred role of the
Legislature. The people of Texas have themselves set the standard for their
schools. Our responsibility is to decide whether that standard has been
satisfied, not to judge the wisdom of the policy choices of the Legislature, or
to impose a different policy of our own choosing.").
13. Edgewood I , 777 S.W.2d at 392 ;
Edgewood II , 804 S.W.2d at 495 ; Edgewood III , 826
S.W.2d at 496 ; Texas Legislative Budget Board, Financing Public Education in
Texas Kindergarten Through Grade 12 Legislative Primer at 25-26 (2d ed. 2000)
[hereinafter LBB Primer].
14. Edgewood II , 804 S.W.2d at 495 .
15. Id.
16. Edgewood I , 777 S.W.2d at 392 .
17. Edgewood II , 804 S.W.2d at 495 .
18. Act of June 2, 1969, 61st Leg., R.S., ch. 889,
§ 1, 1969 Tex. Gen. Laws 2735 , 2895-2896.
19. See Act of May 17, 1945, 49th Leg., R.S., ch.
304, § 1, 1945 Tex. Gen. Laws 488 .
20. Tex. Const. art. VII, § 5(a) ("The principal of
all bonds and other funds, and the principal arising from the sale of lands
hereinbefore set apart to said school fund, shall be the permanent school fund,
and all the interest derivable therefrom and the taxes herein authorized and
levied shall be the available school fund. The available school fund shall be
applied annually to the support of the free public schools.").
21. Edgewood II , 804 S.W.2d at 495 n.10.
22. Edgewood I , 777 S.W.2d at 392 .
23. Id.
24. Id. ("Of total education costs, the state
provides about forty-two percent, school districts provide about fifty percent,
and the remainder comes from various other sources including federal funds.");
see LBB Primer, supra note 13, at 1 ("For the 2000-01
biennium, state taxes are estimated to generate approximately 44 percent of the
total funds and local school district property taxes 47.5 percent of the total.
The federal government provides approximately 8.5 percent of the revenue, most
of it earmarked for specific federal education programs.").
25. Edgewood I , 777 S.W.2d at 392-393 ; LBB
Primer, supra note 13, at 6 (stating, as of 2000: "There are 1,035
school districts in the state. The tax base among these districts varies
considerably. Kenedy County Wide ISD has more than $3 million in property wealth
per enrolled student, while Boles ISD has less than $10,000 in property wealth
per enrolled student.").
26. Edgewood I , 777 S.W.2d at 392 ;
see LBB Primer, supra note 13, at 21 (stating, as of 2000:
"The number of districts subject to the recapture provisions range from 85 to
100 in a given year. The associated recapture revenue is anticipated to total
$949.8 million in the 2000-01 biennium.").
27. Edgewood I , 777 S.W.2d at 392-393 .
28. Id. at 395 (citations omitted).
29. Id. at 397 .
30. Id. at 398 .
31. Id. at 399 ; accord
Edgewood II , 804 S.W.2d at 493 .
32. Edgewood I , 777 S.W.2d at 399 .
33. Id. at 397 .
34. Edgewood II , 804 S.W.2d at 495 .
35. Id. at 496 .
36. Id. at 495 n.11 ("The question of local
enrichment continues to be controlled by this Court's opinion in
Edgewood I, 777 S.W.2d at 397-98 .").
37. Id. at 500 (emphasis in original) (citation
and footnotes omitted).
38. Edgewood III , 826 S.W.2d at 492 .
39. Id. at 498 .
40. Id.
41. Id. at 500.
42. Id. (citation and footnote omitted).
43. Id. at 502-503.
44. Id. at 506; see Tex. Const. art. VII,
§ 3(e) ("The Legislature shall be authorized to pass laws for the
assessment and collection of taxes in all school districts and for the
management and control of the public school or schools of such districts,
whether such districts are composed of territory wholly within a county or in
parts of two or more counties, and the Legislature may authorize an additional
ad valorem tax to be levied and collected within all school districts for the
further maintenance of public free schools, and for the erection and equipment
of school buildings therein; provided that a majority of the qualified voters of
the district voting at an election to be held for that purpose, shall approve
the tax.").
45. Edgewood II , 826 sw2d at 522-523.
46. Tex. H.J. Res. 10, H.J. of Tex., 73rd Leg., R.S. 184
(1993).
47. Tex. S.J. Res. 7, 73rd Leg., R.S., 1993 Tex. Gen. Laws
5560 (passed Senate 27-4 and House 102-43).
48. Votes on Proposed Amendments to the Texas
Constitution 1875 - May, 1993 , at 27, reprinted in [4] 1993 Tex.
Gen. Laws (amendment submitted May 1, 1993, defeated 755,417 to 1,293,224);
Edgewood IV , 917 S.W.2d at 727 .
49. Act of May 28, 1993, 73rd Leg., R.S., ch. 347, 1993
Tex. Gen. Laws 1479 [hereinafter Chapter 347]; see
Edgewood IV , 917 S.W.2d at 727 .
50. Edgewood IV , 917 S.W.2d at 727 .
51. LBB Primer, supra note 13, at 2.
52. Edgewood IV , 917 S.W.2d at 727 (quoting
former Tex. Educ. Code § 16.002(b), Chapter 347, supra note 49, at
1492, now Tex. Educ. Code § 42.002(b)(1)(A)); see LBB Primer,
supra note 13, at 2.
53. Chapter 347, supra note 49, at 1498 (codifying
former Tex. Educ. Code § 16.101).
54. Tex. Educ. Code § 42.101.
55. LBB Primer, supra note 13, at 14-16.
56. Edgewood IV , 917 S.W.2d at 727 (citing
former Tex. Educ. Code § 16.254, Chapter 347, supra note 49, at
1509-1511); see LBB Primer, supra note 13, at 2.
57. See Edgewood IV , 917 S.W.2d at
731 n.10 ("Based on the evidence at trial, the district court found that meeting
accreditation standards, which is the legislatively defined level of efficiency
that achieves a general diffusion of knowledge, requires about $3,500 per
weighted student.").
58. See LBB Primer, supra note 13, at 2.
59. Edgewood IV , 917 S.W.2d at 728 (citing
former Tex. Educ. Code § 16.302, Chapter 347, supra note 49, at
1514).
60. Tex. Educ. Code § 42.302; see LBB Primer,
supra note 13, at 16-17.
61. Edgewood IV , 917 S.W.2d at 728 (citing
former Tex. Educ. Code § 16.303, Chapter 347, supra note 49, at
1514); Tex. Educ. Code §§ 42.303, 45.003(d).
62. See LBB Primer, supra note 13, at 2,
19-20.
63. Edgewood IV , 917 S.W.2d at 728 (citing
former Tex. Educ. Code § 36.002, Chapter 347, supra note 49, at
1480); Chapter 347, supra note 49, at 1479 (codifying former Tex. Educ.
Code § 36.001); Tex. Educ. Code §§ 41.001-.002; LBB Primer,
supra note 13, at 20-21.
64. Edgewood IV , 917 S.W.2d at 728 (citing
former Tex. Educ. Code § 36.002, Chapter 347, supra note 49, at
1480).
65. Tex. Educ. Code § 41.002; LBB Primer,
supra note 13, at 21.
66. Edgewood IV , 917 S.W.2d at 728 (citing
former Tex. Educ. Code §§ 36.003-.004, Chapter 347, supra note 49,
at 1480); Tex. Educ. Code §§ 41.003-.004 (requiring that a school district
with excess wealth per student effectuate a reduction by one or more of the
following: consolidation with another district, detachment of territory,
purchase of average daily attendance credit, education of nonresident students,
or tax base consolidation); LBB Primer, supra note 13, at 21.
67. LBB Primer, supra note 13, at 21.
68. Edgewood IV , 917 S.W.2d at 729-730
(emphasis in original).
69. Id. at 730 ; accord id . at
731 ("The State's duty to provide districts with substantially equal access to
revenue applies only to the provision of funding necessary for a
general diffusion of knowledge.").
70. Id. at 730 .
71. Id. at 730 n.8 (citation omitted).
72. Id. at 732 (emphasis in original).
73. Id . at 732 n.14; cf. Mumme v.
Mars 40 S.W.2d 31, 36 (Tex. 1931) ("The word 'suitable,' used in connection
with the word 'provision' in this section of the Constitution, is an elastic
term, depending upon the necessities of changing times or conditions, and
clearly leaves to the Legislature the right to determine what is suitable, and
its determination will not be reviewed by the courts if the act has a real
relation to the subject and object of the Constitution." (citation omitted)).
74. Edgewood IV , 917 S.W.2d at 731 (footnote
omitted).
75. Id. at 738 .
76. Id. at 726 .
77. Id.
78. See Act of May 27, 1995, 74th Leg., R.S., ch.
260, 1995 Tex. Gen. Laws 2207 ; Act of June 1, 1997, 75th Leg., R.S., ch. 1071,
1997 Tex. Gen. Laws 4087 ; Act of May 30, 1999, 76th Leg., R.S., ch. 396, 1999
Tex. Gen. Laws 2471 ; Act of May 28, 2001, 77th Leg., R.S., ch. 1187, 2001 Tex.
Gen. Laws 2667 .
79. Texas Legislative Budget Board, Financing Public
Education in Texas Kindergarten Through Grade 12 Legislative Primer at 1 (3d ed.
2001).
80. Edgewood IV , 917 S.W.2d at 725 .
81. West Orange-Cove Consolidated I.S.D., Coppell I.S.D.,
La Porte I.S.D., and Port Neches-Groves I.S.D.
82. See supra note 75 and accompanying text.
83. Felipe Alanis, in his official capacity as the
Commissioner of Education; Texas Education Agency; Carol Keeton Strayhorn, in
her official capacity as Texas Comptroller of Public Accounts; and Texas State
Board of Education.
84. Edgewood I.S.D., Ysleta I.S.D., Laredo I.S.D., San
Elizario I.S.D., Soccorro I.S.D., and South San Antonio I.S.D.
85. Alvarado I.S.D., Anthony I.S.D., Aubrey I.S.D., Bangs
I.S.D., Bells I.S.D., Community I.S.D., Cooper I.S.D., Covington I.S.D., Detroit
I.S.D., Early I.S.D., Fannindel I.S.D., Hutto I.S.D., Karnes City I.S.D.,
Kaufman I.S.D., Kirbyville I.S.D., Krum I.S.D., La Joya I.S.D., Mercedes I.S.D.,
Meridian I.S.D., New Boston I.S.D., Nocona I.S.D., Olfen I.S.D., Orange Grove
I.S.D., Poteet I.S.D., Robinson I.S.D., Rosebud-Lott I.S.D., Rusk I.S.D.,
Southside I.S.D., Tornillo I.S.D., Trenton I.S.D., Tulia I.S.D., Uvalde I.S.D.,
Venus I.S.D., and Weaterford I.S.D.
86. The trial court stated in its order: "The
changed-circumstances warning in Edgewood IV appears to be obiter
dictum. Should the Supreme Court consider the present case, this court
respectfully urges a reconsideration of this dictum. For the reasons cited, the
court has concerns about the historical and analytical foundations of this
dictum. Of course, dictum or not, the court today has faithfully followed the
teachings of the Supreme Court, heeded the changed-circumstances warning, and
applied the meaningful-discretion test."
87. 78 S.W.3d 529 (Tex. App.--Austin 2002).
88. Id. at 542 (emphasis in original).
89. Id.
90. Id.
91. Id. at 539.
92. Id.
93. Id. at 540 (emphasis in original).
94. Id.
95. Id. at 542.
96. 46 Tex. Sup. Ct. J. 426 , 428 (Feb. 13, 2003).
97. Edgewood III , 826 S.W.2d at 502 .
98. See Tex. Tax Code § 1.04(12).
99. Edgewood III , 826 S.W.2d at 501 .
100. See Friesenhahn v. Ryan , 960 S.W.2d
656, 658 (Tex. 1998).
101. Edgewood III , 826 S.W.2d at 502-503 .
102. Id. at 502 .
103. Edgewood IV , 917 S.W.2d at 730 n.8.
104. Id. at 736 .
105. Id. at 735 .
106. Tex. Educ. Code § 39.072.
107. Id. §§ 39.091-.112.
108. Id. § 39.131; see
Edgewood IV , 917 S.W.2d at 729 ("Districts that chronically fail
to maintain accreditation standards are subject to penalties, including
dissolution of the offending school district and its annexation to another
district.").
109. Edgewood IV , 917 S.W.2d at 738 .
110. Id.
111. See note 86 supra.
112. See Seminole Tribe of Fla. v.
Florida , 517 U.S. 44, 67 (1996) ("'Although technically dicta,
. . . an important part of the Court's rationale for the result it
reache[s] . . . is entitled to greater weight . . . .'"
(quoting Sheet Metal Workers v. Equal Employment Opportunity Comm'n ,
478 U.S. 421, 490 (1986) (O'Connor, J., concurring))).
113. Tex. Const. art. VII, § 1.
114. Tex. Educ. Code § 4.001(a).
115. Edgewood IV , 917 S.W.2d at 730 ("In
Senate Bill 7, the Legislature equates the provision of a 'general diffusion of
knowledge' with the provision of an accredited education. The accountability
regime set forth in Chapter 35, we conclude, meets the Legislature's
constitutional obligation to provide for a general diffusion of knowledge
statewide.").
116. Id . at 732 n.14.
117. Id. at 730 n.8 ("This is not to say that the
Legislature may 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. While the Legislature certainly has broad discretion to make the
myriad policy decisions concerning education, that discretion is not without
bounds.").
118. 78 S.W.3d 529 , 540 (Tex. App.--Austin 2002).
119. Tex. Tax Code § 11.13(b)-(c).
120. Id. § 11.13(d)-(f), (n).
121. Texas Ass'n of Bus. v. Texas Air Control
Bd. , 852 S.W.2d 440, 445-446 (Tex. 1993).
122. 925 S.W.2d 659, 661-662 (Tex. 1996) (citing
Robbins v. Limestone County , 268 S.W. 915, 917 (1925) (holding that
county and road districts can sue the state highway commission on the ground of
the invalidity of statutes)).
123. Id. at 662 (citations omitted).
124. Tex. Educ. Code § 4.001(a).
125. 40 S.W.2d 31, 36 (Tex. 1931) ("The legislative
determination of the methods, restrictions, and regulations is final, except
when so arbitrary as to be violative of the constitutional rights of the
citizen.").

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2833131. Public record. Not legal advice.