Mike Morath, Commissioner of Education The Texas Education Agency And the Texas State Board of Education v. La Feria ISD Joaquin ISD and the Equity Center

ACCEPTED

03-17-00338-CV

21306123

THIRD COURT OF APPEALS

AUSTIN, TEXAS

12/14/2017 4:33 PM

JEFFREY D. KYLE

No. 03-17-00338-CV CLERK

In the Court of Appeals FILED IN

3rd COURT OF APPEALS

for the Third Judicial District AUSTIN, TEXAS

12/14/2017 4:33:18 PM

Austin, Texas JEFFREY D. KYLE

Clerk

Mike Morath, Commissioner of Education;

The Texas Education Agency; and The Texas

State Board of Education,

Appellants,

v.

La Feria ISD; Joaquin ISD; and The Equity Center,

Appellees.

On Appeal from the

261st Judicial District Court, Travis County

REPLY BRIEF FOR APPELLANTS

Ken Paxton Scott A. Keller

Attorney General of Texas Solicitor General

Jeffrey C. Mateer Beth Klusmann

First Assistant Attorney General Assistant Solicitor General

State Bar No. 24036918

Office of the Attorney General beth.klusmann@oag.texas.gov

P.O. Box 12548 (MC 059)

Austin, Texas 78711-2548 Counsel for Appellants

Tel.: (512) 936-1700

Fax: (512) 474-2697

Table of Contents

Page

Index of Authorities ............................................................................................... iii

Introduction ............................................................................................................ 1

Argument................................................................................................................ 1

I. The Court Lacks Jurisdiction Over Claims Regarding the 2016-

2017 School Year and the Former Proposed Rule. ..................................... 1

A. Because the 2016-2017 school year is over, no relief for that

year can be granted.............................................................................. 2

B. Because TEA has proposed and adopted a new rule, any

previous rule-based challenges are moot. ............................................ 3

II. Plaintiffs’ Alleged Injuries Are Too Attenuated from the

Commissioner’s Recapture Decision to Satisfy the Standing

Requirements. ........................................................................................... 4

A. Plaintiffs will not suffer any injury unless multiple events,

controlled by multiple third parties, occur. .......................................... 5

B. Case law does not support finding that Plaintiffs have

standing. ............................................................................................. 8

III. Plaintiffs Have Not Demonstrated That Their Claims Regarding

Future Years Are Ripe. ............................................................................ 11

IV. Plaintiffs Have Not Identified a Waiver of Sovereign Immunity. ............. 12

A. Texas Government Code section 2001.038 does not waive

sovereign immunity for Plaintiffs’ claims. ......................................... 13

B. Because the Commissioner acted within his discretion,

Plaintiffs cannot demonstrate an ultra vires claim. ............................ 16

C. The UDJA does not waive sovereign immunity in this case............... 19

V. Plaintiffs Have Not Demonstrated Their Entitlement to the

Temporary Injunction. ............................................................................ 21

Prayer ................................................................................................................... 23

Certificate of Service............................................................................................. 24

Certificate of Compliance ..................................................................................... 24

ii

Index of Authorities

Page(s)

Cases

Butnaru v. Ford Motor Co.,

84 S.W.3d 198 (Tex. 2002) .............................................................................. 21

City of El Paso v. Heinrich,

284 S.W.3d 366 (Tex. 2009) .................................................................. 2, 16, 20

El Paso Hosp. Dist. v. Tex. Health & Human Servs. Comm’n,

247 S.W.3d 709 (Tex. 2008) ............................................................................ 14

Fin. Comm’n of Tex. v. Norwood,

418 S.W.3d 566 (Tex. 2013) ......................................................................... 9, 10

Fleming Foods of Tex., Inc. v. Rylander,

6 S.W.3d 278 (Tex. 1999) ................................................................................. 19

Good Shepherd Med. Ctr., Inc. v. State,

306 S.W.3d 825 (Tex. App.—Austin 2010, no pet.) ...........................................8

Hall v. McRaven,

508 S.W.3d 232 (Tex. 2017) ............................................................................. 16

Heckman v. Williamson Cty.,

369 S.W.3d 137 (Tex. 2012) ............................................................................... 5

Humble Oil & Ref. Co. v. Calvert,

414 S.W.2d 172 (Tex. 1967) ............................................................................. 19

Lujan v. Defenders of Wildlife,

504 U.S. 555 (1992) ............................................................................................ 5

M.D. Anderson Cancer Ctr. v. Novak,

52 S.W.3d 704 (Tex. 2001) ................................................................................ 4

Patel v. Tex. Dep’t of Licensing & Regulation,

469 S.W.3d 69 (Tex. 2015)............................................................................... 11

Patterson v. Planned Parenthood of Hous. & Se. Tex., Inc.,

971 S.W.2d 439 (Tex. 1998) ............................................................................. 12

Pub. Util. Comm’n v. City of Austin,

728 S.W.2d 907 (Tex. App.—Austin 1987, writ ref’d n.r.e.) ...................... 19, 20

iii

State Bd. of Ins. v. Deffebach,

631 S.W.2d 794 (Tex. App.—Austin 1982, writ ref’d n.r.e.) ..............................8

Tex. Dep’t of Protective & Regulatory Servs. v. Mega Child Care, Inc.,

145 S.W.3d 170 (Tex. 2004) ........................................................................ 18, 19

Tex. Dep’t of Pub. Safety v. Moore,

985 S.W.2d 149 (Tex. App.—Austin 1998, no pet.) ................................... 19, 20

Tex. Dep’t of State Health Servs. v. Balquinta,

429 S.W.3d 726 (Tex. App.—Austin 2014, pet. dism’d).............................. 9, 10

Tex. Dep’t of Transp. v. Sefzik,

355 S.W.3d 618 (Tex. 2011) (per curiam) .........................................................20

Tex. Dep’t of Transp. v. Sunset Transp., Inc.,

357 S.W.3d 691 (Tex. App.—Austin 2011, no pet.) ..........................................20

Tex. Dep’t of Transp. v. Tex. Weekly Advocate,

No. 03-09-00159-CV, 2010 WL 323075

(Tex. App.—Austin Jan. 29, 2010, no pet.)........................................................ 4

Tex. Mun. Power Agency v. Pub. Util. Comm’n,

100 S.W.3d 510 (Tex. App.—Austin 2003, pet. denied) ............................ 19, 20

Tex. Nat. Res. Conservation Comm’n v. IT–Davy,

74 S.W.3d 849 (Tex. 2002) ................................................................................ 2

Tex. Dep’t of State Health Servs. v. Balquinta,

429 S.W.3d 726 (Tex. App.—Austin 2014, pet. dism’d).............................. 9, 10

Waco Indep. Sch. Dist. v. Gibson,

22 S.W.3d 849 (Tex. 2000) ......................................................................... 11, 12

Constitutional Provisions, Statutes, and Rules

Tex. Civ. Prac. & Rem. Code:

§ 37.003 ............................................................................................................. 2

§ 37.006 ...........................................................................................................20

Tex. Educ. Code:

§ 7.057 ............................................................................................................. 14

ch. 41 ............................................................................................................... 13

iv

§ 41.001(2)....................................................................................................... 16

§ 41.013(a) ....................................................................................................... 14

§ 41.013(c) ............................................................................................ 13, 14, 15

§ 41.013(d) ....................................................................................................... 15

§ 42.2517........................................................................................................ 3, 7

§ 42.252(a) ...................................................................................................... 16

§§ 42.2521-24 ................................................................................................ 3, 7

§ 42.2522 ...........................................................................................2, 16, 17, 18

§ 42.2522(a)..................................................................................................... 17

§ 42.2528 ....................................................................................................... 3, 7

§ 42.253(h) .................................................................................................... 2, 6

§ 46.003(a) ...................................................................................................... 16

Tex. Gov’t Code:

§ 403.302(d) .................................................................................................... 16

§ 403.302(d)(2)................................................................................................ 16

§ 403.302(j) ..................................................................................................... 18

ch. 2001 ...................................................................................................... 13, 14

§ 2001.003(6) .................................................................................................. 14

§ 2001.038 ................................................................................................... 2, 13

§ 2001.038(a) ..................................................................................................... 2

Tex. Tax Code § 11.13(n) ...................................................................................... 16

42 Tex. Reg. 4187 (2017).............................................................................. 3, 15, 22

42 Tex. Reg. 5747 (2017)......................................................................................... 4

42 Tex. Reg. 6663 (2017) ...................................................................................3, 15

Other Authorities

Act of May 30, 1999, 76th Leg., R.S., ch. 396, § 1.36,

1999 Tex. Gen. Laws 2471 ............................................................................... 18

Conf. Comm. Report, S.B. 1, 85th Leg., R.S. (2017), available at

http://www.lbb.state.tx.us/Documents/Appropria-

tions_Bills/85/Conference_Bills/SB1_Conference_Bill.pdf............................. 6

v

Introduction

Plaintiffs’ brief fails to demonstrate that this Court has jurisdiction over Plain-

tiffs’ claims. Plaintiffs do not dispute the key facts related to the standing and ripe-

ness arguments, namely that multiple contingent events, controlled by multiple third

parties, will all determine whether the Commissioner’s decision to use property val-

ues reduced by the local-optional homestead election (LOHE) will ever impact Plain-

tiffs. Without an imminent impact on their interests, Plaintiffs cannot challenge De-

fendants’ treatment of other school districts. Sovereign immunity also bars Plain-

tiffs’ claims because Plaintiffs have not identified a statute that would allow them to

bring Defendants into court. Neither Texas Government Code section 2001.038 nor

the Uniform Declaratory Judgments Act applies in this case. Moreover, the Com-

missioner was correct in his interpretation of the law, and Plaintiffs offer no textual

arguments to the contrary. The Court should reverse the ruling of the trial court and

dismiss this case for lack of jurisdiction or, alternatively, reverse the temporary in-

junction. 1

0F

Argument

I. The Court Lacks Jurisdiction Over Claims Regarding the 2016-2017

School Year and the Former Proposed Rule.

Since Defendants filed their opening brief, at least two significant events have

occurred that impact the arguments in this case. First, the 2016-2017 school year has

1

Because Plaintiffs’ brief makes no attempt to demonstrate any claim against the

State Board of Education or identify any allegedly improper action taken by the

Board, the Board should be dismissed regardless of the outcome of the remainder of

the appeal.

ended with no shortage of Foundation School Program (FSP) funding. And second,

TEA withdrew the proposed rule that was challenged in this case and adopted a new

rule with a more descriptive fiscal note. Both events eliminate claims originally

brought by Plaintiffs.

A. Because the 2016-2017 school year is over, no relief for that year

can be granted.

As Plaintiffs note, the 2016-2017 school year finished with a surplus of FSP fund-

ing. Appellees’ Br. 13. TEA, therefore, was not required to prorate FSP funding, see

Tex. Educ. Code § 42.253(h), and each district received the amount to which it was

entitled. The surplus funding was not, however, distributed to districts under Texas

Education Code section 42.2522 to compensate for their LOHEs.

For purposes of this litigation, then, 2016-2017 is no longer at issue. None of

Plaintiffs’ potential causes of action permit retroactive relief against the State. Texas

Government Code section 2001.038 and the Uniform Declaratory Judgments Act do

not permit retroactive relief, but allow only declaratory judgments. Tex. Gov’t Code

§ 2001.038(a); Tex. Civ. Prac. & Rem. Code § 37.003; see also Tex. Nat. Res. Conser-

vation Comm’n v. IT–Davy, 74 S.W.3d 849, 856 (Tex. 2002) (“[P]rivate parties can-

not circumvent the State’s sovereign immunity from suit by characterizing a suit for

money damages . . . as a declaratory-judgment claim.”). Likewise, a plaintiff bringing

an ultra vires claim may seek only prospective injunctive relief. City of El Paso v. Hein-

rich, 284 S.W.3d 366, 375-76 (Tex. 2009). Plaintiffs have not identified any waiver of

immunity that would permit a court to order the Commissioner or TEA to collect

2

recapture for a previous year. 2 Consequently, there is no jurisdiction over claims re-

1F

garding the 2016-2017 school year. This brief will, therefore, focus on claims in 2017-

2018 and beyond.

B. Because TEA has proposed and adopted a new rule, any previous

rule-based challenges are moot.

Next, TEA has withdrawn the proposed rule challenged by Plaintiffs, which re-

moved references to section 42.2522 from the Manual for Districts Subject to

Wealth Equalization (the “Wealth Equalization Manual”), along with its allegedly

insufficient fiscal note. 42 Tex. Reg. 4187, 4271 (2017). Instead, TEA has proposed

and adopted a nearly identical rule with a more descriptive fiscal note. 42 Tex. Reg.

6663, 6793-94 (2017); 42 Tex. Reg. 4187, 4222-24 (2017). The new rule took effect

on December 5, 2017. 42 Tex. Reg. at 6794.

As explained in the new fiscal note, the new rule will not have a fiscal impact on

state and local governments because it merely tracks the statutes enacted by the Leg-

islature. 42 Tex. Reg. at 4223. It is the statutes that cause any fiscal impact, not the

rule. Id. Regardless, TEA also clarified in its fiscal note that there will be a reduction

in recapture as a result of TEA modifying its practices to conform with the statute,

2

But even that order would not necessarily result in relief for Plaintiffs, as the Leg-

islature must then be given a chance to sweep the additional recapture back into Gen-

eral Revenue. 2.RR.179. If funds were left with the Commissioner, he must first

spend them on video surveillance in special-needs classes. Tex. Educ. Code

§ 42.2528. He then has multiple options, including payment for LOHEs, on how to

spend the funds. 2.RR.180; Tex. Educ. Code §§ 42.2517, .2521-24.

3

which is the information Plaintiffs claim was missing from the original fiscal note.

Id.; CR.111-12.

Although Defendants contend that the Commissioner’s decisions in this area

are not required to be adopted by rule, see infra at 13-15, any procedural questions

regarding the rule-making process have been mooted by the withdrawal of the old

proposed rule and adoption of a new rule. Tex. Dep’t of Transp. v. Tex. Weekly Advo-

cate, No. 03-09-00159-CV, 2010 WL 323075, at *2 (Tex. App.—Austin Jan. 29,

2010, no pet.). Plaintiffs’ rule-based challenge must, therefore, focus solely on any

alleged deficiencies in the new rule. 3

2F

II. Plaintiffs’ Alleged Injuries Are Too Attenuated from the Commis-

sioner’s Recapture Decision to Satisfy the Standing Requirements.

Plaintiffs do not have standing because they lack a sufficient stake in the outcome

of this litigation. See M.D. Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 707-08

(Tex. 2001). They do not explain how the Commissioner’s collection of recapture

from other school districts harms Plaintiffs in a way that is actual, imminent, and re-

dressable by a favorable ruling; instead, Plaintiffs simply assert that they will be in-

jured. Plaintiffs’ attempts to compare their alleged injury to other cases in which

courts have found standing fall short, as none of those cases involves the multiple

contingencies, many of which are outside of Defendants’ control, that this case does.

3

TEA has also published proposed Wealth Equalization Manuals for 2017-2018 and

2018-2019 in the Texas Register. 42 Tex. Reg. 5747, 5825-26 (2017). Both Manuals

follow the updated 2016-2017 Manual with respect to LOHEs and section 42.2522.

4

Plaintiffs do not dispute that standing generally requires showing an injury-in-

fact that is “(a) concrete and particularized, and (b) actual or imminent, not conjec-

tural or hypothetical.” Heckman v. Williamson Cty., 369 S.W.3d 137, 154 (Tex. 2012)

(quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quota-

tion marks omitted)); Appellees’ Br. 11-12. Nor do they dispute that the alleged in-

jury must be caused by the defendant’s conduct and that it will likely be redressed

by a favorable decision. Heckman, 369 S.W.3d at 154-55. But Plaintiffs fail to show

how their allegations satisfy these standards, either factually or legally.

A. Plaintiffs will not suffer any injury unless multiple events, con-

trolled by multiple third parties, occur.

Plaintiffs allege a monetary injury—either there will be insufficient FSP funding,

resulting in proration of FSP amounts, or there will be a smaller FSP surplus, lessen-

ing their chance at receiving additional funding. CR.108-09. They assert that there

was “uncontroverted evidence of severe fiscal impact to school districts statewide.”

Appellees’ Br. 12. There was not. Rather, Defendants explained (and Plaintiffs did

not contest) the lengthy and speculative chain of events that must take place before

Plaintiffs could possibly feel the effect of the Commissioner’s recapture decision.

1. As described in Defendants’ opening brief, proration of FSP funding is a last

resort, should other measures fail to produce sufficient FSP funds. Appellants’ Br.

7. First, there must be an insufficient amount of FSP funding, meaning all of the

sources of FSP, combined, fall short of what is necessary. 2.RR.176-78 (describing

the sources of FSP funding, which include legislative appropriations, tax revenues,

5

and lottery proceeds, in addition to recapture). Plaintiffs did not demonstrate that

this was likely.

Even so, if there is shortfall, Plaintiffs may not be harmed. If the shortfall is in

the first year of the biennium, Defendants may use funding from the second year of

the biennium to make up the gap. If the shortfall is in the second year of the bien-

nium, the Legislature has the option to make a supplemental appropriation to cover

the gap. Tex. Educ. Code § 42.253(h). With a single exception in the 1980s, the Leg-

islature has always provided supplemental funding when necessary. 2.RR.142-43.

Only if the Legislature chooses not to act will FSP funding be prorated before being

repaid in full the next year. Tex. Educ. Code § 42.253(h) (“The following fiscal year:

(1) a district’s or school’s entitlement under this section is increased by an amount

equal to the adjustment made under this subsection . . . .”).

Plaintiffs do not discuss section 42.253 or proration anywhere in their brief, so it

appears that they have abandoned this argument. Regardless, Plaintiffs have not

shown that reducing recapture will cause FSP funding to fall short of FSP entitle-

ments in any future year. Excluding recapture payments and federal funds, the Leg-

islature has appropriated approximately $21 billion for school finance for the 2017-

2018 school year. Conf. Comm. Report, S.B. 1, 85th Leg., R.S. (2017). 4 There is no

3F

showing that this amount will be insufficient. Consequently, any injury to Plaintiffs

under this theory is not actual and imminent, but rather speculative, as it depends on

4

http://www.lbb.state.tx.us/Documents/Appropriations_Bills/85/Conference_

Bills/SB1_Conference_Bill.pdf (see art. III, p. 247).

6

the performance of other sources of FSP funding and the Legislature’s appropriation

decisions.

2. Plaintiffs’ other argument is that they “could be” awarded “additional

funding” in the event of a surplus and that the Commissioner’s decision makes that

possibility less likely. Appellees’ Br. 13. But Plaintiffs do not have an entitlement to

additional funding under section 42.2522—only a possibility of funding, should

other contingencies fall into place. Appellants’ Br. 8. If there is a surplus in FSP

funding (which, again, depends on a variety of factors including lottery proceeds,

taxes, and legislative appropriations), the Legislature may choose to sweep that sur-

plus back into General Revenue, as it has done in the past. 2.RR.179. If the Legisla-

ture leaves the surplus with the Commissioner, he must first pay for video surveil-

lance in special-needs classrooms. Tex. Educ. Code § 42.2528; 2.RR.180. If there is

funding left after that, the Commissioner has multiple options on which to spend the

surplus, one of which is payment for LOHEs under section 42.2522. 2.RR.180; see,

e.g., Tex. Educ. Code §§ 42.2517, .2521-2524.

In other words, even if a surplus existed, section 42.2522 does not require the

Commissioner to use that surplus to pay Chapter 42 districts for their LOHEs. Plain-

tiffs have not, then, been “den[ied] . . . a monetary benefit to which they would oth-

erwise be legally entitled.” Appellees’ Br. 12. At most, the Commissioner’s recap-

ture decision has lessened the possibility that someday the Commissioner might

choose to distribute surplus funds under section 42.2522.

Plaintiffs cannot demonstrate the requisite actual and imminent harm that they

will incur as a result of the Commissioner’s conduct towards other districts. Multiple

7

events, controlled by multiple non-party actors, must occur before Plaintiffs could

possibly feel any impact (for better or worse) of the Commissioner’s recapture deci-

sion. Moreover, given that many of the contingencies, such as the performance of

certain taxes, income from lottery proceeds, and legislative decisions, are outside of

Defendants’ control, it is impossible to redress Plaintiffs’ alleged injuries with an

order in this case. See Good Shepherd Med. Ctr., Inc. v. State, 306 S.W.3d 825, 836-37

(Tex. App.—Austin 2010, no pet.). The alleged harms are too attenuated from the

Commissioner’s conduct to give Plaintiffs a stake in the outcome of this litigation.

Plaintiffs do not have standing.

B. Case law does not support finding that Plaintiffs have standing.

Plaintiffs’ attempts to compare themselves to plaintiffs in other cases in which

standing was found fall short. In those cases, the plaintiffs were directly injured, or

very likely to be injured, by the actions of the government agency. There was not a

series of contingent events that had to first occur before any harm would be felt. And

enjoining the governmental action in those cases would have unquestionably re-

dressed the problem.

For example, in State Board of Insurance v. Deffebach, the State Board of Insur-

ance promulgated rules setting presumptively reasonable insurance rates. 631

S.W.2d 794, 797 (Tex. App.—Austin 1982, writ ref’d n.r.e.) (cited in Appellees’ Br.

12). An insurance agent sued because the presumptive rates acted as a cap on the

amount of commission he could earn. Id. This Court determined that the agent had

standing, as he would suffer financial injury. Id.

8

Plaintiffs assert that their alleged future financial injury is, likewise, sufficient to

confer standing. It is not. The presumptive rates in Deffebach would necessarily re-

duce commissions to the plaintiff; no speculation was required. For the reasons ex-

plained above, however, it is possible—and perhaps likely—that Plaintiffs will never

suffer a legal injury as a result of the Commissioner’s actions. Deffebach is not similar.

Plaintiffs attempt the same reasoning with Finance Commission of Texas v. Nor-

wood, 418 S.W.3d 566 (Tex. 2013), and Texas Department of State Health Services v.

Balquinta, 429 S.W.3d 726 (Tex. App.—Austin 2014, pet. dism’d), claiming that the

financial injuries in those cases are similar to Plaintiffs’ own purported injury. Ap-

pellees’ Br. 14. But the circumstances are not comparable. In Norwood, the plaintiffs

were individual homeowners who challenged government agencies’ interpretations

of law regarding home equity loans. 418 S.W.3d at 574-75. The parties agreed that

the interpretations would affect the plaintiffs, should they seek home equity loans in

the future, as the interpretations would increase the amount the plaintiffs would have

to pay. Id. at 582-83. The only question was whether the plaintiffs had sufficiently

pleaded that they intended to take out such loans in the future. Id. The Texas Su-

preme Court held that the plaintiffs had adequately pleaded that they intended to

seek home equity loans in the future. Id. at 583. Thus, unlike this case, the Norwood

plaintiffs’ injury was non-speculative and not dependent on a chain of events unre-

lated to the defendants’ actions.

Plaintiffs also cite the Norwood majority’s statement that “greater specificity is

unreasonable,” which it made in response to the dissent’s argument that the plain-

tiffs’ pleadings were too general. Appellees’ Br. 16 (citing Norwood, 418 S.W.3d at

9

584). As the Supreme Court explained, the specifics of any particular home equity

loan would not be known until it was effectively too late to obtain a judicial remedy.

Norwood, 418 S.W.3d at 584. But the fact of an injury, if not its complete scope, was

still apparent. Id. Again, that is different from the situation here. Plaintiffs’ failure to

demonstrate standing does not stem from a failure to identify precise dollar amounts,

but rather from their inability to identify if, when, and how the Commissioner’s re-

capture decision will affect them.

In Balquinta, various Planned Parenthood entities sued when new state rules

prohibited them from participating in a government-created health-care market. 429

S.W.3d at 735, 740. This injury was not remote or speculative, but actual and immi-

nent. The State was not creating an incidental impact on the plaintiffs by regulating

other entities, but was directly regulating the plaintiffs’ ability to participate in the

market. Id. at 740. Those plaintiffs’ claims are not comparable to Plaintiffs’ claims

here, which are based on decisions regarding other school districts.

All of Plaintiffs’ arguments stem from the theory that any impact on FSP fund-

ing could someday impact Plaintiffs. If that theory is correct, then Plaintiffs would

have standing to sue regarding any source of FSP funding, be it tax decisions made

by the Comptroller or decisions of the Texas Lottery Commission. Standing cannot

stretch that far. There is no limiting principle to Plaintiffs’ position, and they do not

attempt to identify one. Plaintiffs’ alleged harm is too far removed from the actions

of the Commissioner in collecting recapture and will not be redressed by a favorable

decision. The Court should dismiss Plaintiffs’ lawsuit for lack of standing.

10

III. Plaintiffs Have Not Demonstrated That Their Claims Regarding Fu-

ture Years Are Ripe.

Other than citing the legal standard for ripeness, Plaintiffs make no argument

that their claims regarding future years are ripe. Appellees’ Br. 12. A claim is ripe

when “at the time a lawsuit is filed, the facts are sufficiently developed so that an

injury has occurred or is likely to occur, rather than being contingent or remote.”

Patel v. Tex. Dep’t of Licensing & Regulation, 469 S.W.3d 69, 78 (Tex. 2015) (internal

quotation marks and emphasis omitted). But for the reasons described above, Plain-

tiffs’ claims are entirely contingent on uncertain future events, many of which are

not within the Commissioner’s control. Speculating about events that may or may

not come to pass is not constitutionally permissible, nor a good use of judicial re-

sources. Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 852 (Tex. 2000) (explain-

ing that ripeness doctrine prevents advisory opinions and avoids premature adjudi-

cation of issues).

Several decisions from the Texas Supreme Court demonstrate that Plaintiffs’

claims are not ripe. In Gibson, Waco ISD adopted a policy that required students to

pass certain standardized tests before being promoted to the next grade. Id. at 850.

Parents sued over this policy, claiming that it would disproportionately harm minor-

ity students, id., but the Court held that the case was not ripe.

At the time suit was filed, the test results had not been released, no student had

been retained, and no harm had occurred. Id. at 852. Absent an existing injury, the

Court considered whether the plaintiffs had shown that injury was likely in the fu-

ture. Id. The Court concluded that there was insufficient evidence in the record that

11

minorities would fail all three testing opportunities in disproportionate numbers,

meaning the case was based on speculation and conjecture. Id. at 852-53. Thus, the

Court dismissed the case. Id. at 853. Likewise here, Plaintiffs have not yet been

harmed, and there is insufficient evidence that they are likely to suffer harm in the

future.

The Court reached a similar conclusion in Patterson v. Planned Parenthood of

Houston & Southeast Texas, Inc., 971 S.W.2d 439 (Tex. 1998). There, several Planned

Parenthood entities sued regarding the future implementation of a budget rider that

might have resulted in a loss of federal family planning funds in Texas. Id. at 440-41.

But the evidence showed that the state agency had not yet decided how to implement

the rider, and there was no evidence regarding the federal government’s plans to

continue funding. Id. at 444. The Supreme Court concluded that these contingencies

prevented the claim from being ripe. Id.

As in Patterson, “[t]his is precisely the kind of case in which resolution of the

claim presented depends on the occurrence of contingent future events that may not

occur as anticipated or may not occur at all.” Id. Tax revenues, lottery proceeds,

appropriations, legislative discretion, and more will all determine whether the Com-

missioner’s recapture decision will ever impact Plaintiffs. And none of that infor-

mation can be known now. Plaintiffs’ claims are not ripe and should be dismissed.

IV. Plaintiffs Have Not Identified a Waiver of Sovereign Immunity.

Even if the Court determines that Plaintiffs have established standing and that

their claims are ripe, their suit is still barred by sovereign immunity. None of the

statutes identified by Plaintiffs permits this lawsuit, and any ultra vires claim is

12

barred because the Commissioner’s actions are in compliance with the law. Thus,

for this additional reason, Plaintiffs’ claims should be dismissed.

A. Texas Government Code section 2001.038 does not waive sover-

eign immunity for Plaintiffs’ claims.

Plaintiffs attempt to bring a rule challenge under Texas Government Code sec-

tion 2001.038, but section 2001.038 does not apply in these circumstances. The Leg-

islature has decreed that Chapter 2001 of the Texas Government Code does not ap-

ply to the Commissioner’s decisions under Chapter 41 of the Texas Education Code.

Tex. Educ. Code § 41.013(c) (stating that Chapter 2001 of the Texas Government

Code “does not apply to a decision of the [C]ommissioner” under Chapter 41). Rel-

evant here, Chapter 2001 contains the procedures for contested-case hearings, the

rule-making process, and section 2001.038, which permits certain challenges to ad-

ministrative rules.

The Commissioner has decided that he must use LOHE-reduced property val-

ues to determine the amount of recapture a Chapter 41 district must pay. Whether

considered as a single decision or a series of individual decisions (one for each district

paying recapture), section 41.013(c) exempts the Commissioner’s decisions from (1)

contested-case proceedings, (2) the rule-making process, and (3) challenges under

section 2001.038. Thus, section 2001.038 cannot be used to waive sovereign immun-

ity in this case.

To avoid this outcome, Plaintiffs claim that the Commissioner’s decision is re-

ally a “rule” under Chapter 2001. Plaintiffs first argue that a “decision” as used in

13

section 41.013(c) refers only to the result of a contested-case proceeding under Chap-

ter 2001, and because there was no contested-case proceeding, the Commissioner’s

action was not a decision, but a rule. Appellees’ Br. 18. But that argument fails as a

textual and logical matter. Neither Texas Education Code Chapter 41 nor Texas

Government Code Chapter 2001 define “decision.” But section 41.013(a) states that

a “decision” of the Commissioner “under this chapter” can be appealed under

Texas Education Code section 7.057. Section 7.057 does not require any contested-

case proceedings before an appeal may be taken. Assuming the word “decision” has

the same meaning in subsection (a) of section 41.013 as it does in subsection (c), a

“decision” does not require a contested-case proceeding. Thus, there is no textual

support for Plaintiffs’ position.

Nor is Plaintiffs’ argument supported by logic. Contested-case proceedings are

governed by Chapter 2001 of the Texas Government Code, which expressly does not

apply to the Commissioner’s decisions. It is unclear what would be reviewed in a

contested-case proceeding, other than a decision of the Commissioner, in which case

Plaintiffs’ reasoning is entirely circular.

Plaintiffs also argue that the Commissioner’s decision to use LOHE-reduced

property values meets the definition of a “rule” in Texas Government Code section

2001.003(6) and related precedent. Appellees’ Br. 19 (citing El Paso Hosp. Dist. v.

Tex. Health & Human Servs. Comm’n, 247 S.W.3d 709, 714 (Tex. 2008)). But, again,

by exempting the Commissioner’s decisions from Chapter 2001, the Legislature also

exempted them from the rule-making process found in Chapter 2001. Decisions that

do not meet the definition of a “rule” are not subject to Chapter 2001 in the first

14

place, so it would not be necessary for the Legislature to explicitly exempt them from

Chapter 2001. The only way to give full effect to section 41.013(c) is to hold that it

exempts the Commissioner’s decisions from the rule-making process, even when

such decisions might otherwise be considered a “rule.”

TEA’s choice to amend its Wealth Equalization Manual through the rule-mak-

ing process does not waive the protections of section 41.013(c). As it explained when

adopting recent amendments to the manual, TEA did not intend to waive section

41.013(c) or subject itself to Chapter 2001. 42 Tex. Reg. at 4223. TEA can choose to

formalize and publicize its wealth-equalization policies through the Texas Register,

Tex. Educ. Code § 41.013(d), but it is not required to do so, id. § 41.013(c).

And even if the adoption of the Wealth Equalization Manual is a “rule” and not

a decision, Plaintiffs’ challenge still does not fall within section 2001.038’s waiver of

immunity. The amendments to the Wealth Equalization Manual simply removed

references to LOHEs and section 42.2522. 42 Tex. Reg. at 6793-94. As adopted, the

Manual does not require the use of LOHE-reduced property values for determining

recapture, but instead is silent on the question. Because the Manual does not affirm-

atively state that LOHE-reduced property values should be used in calculating re-

capture, there is no rule regarding LOHE-reduced property values for Plaintiffs to

challenge. Instead, it is the Commissioner’s decision (that was not adopted as a rule

and was not required to be adopted as a rule) that they oppose. And that decision is

exempt from challenge under section 2001.038. Plaintiffs must look elsewhere for a

waiver of immunity.

15

B. Because the Commissioner acted within his discretion, Plaintiffs

cannot demonstrate an ultra vires claim.

In order to demonstrate jurisdiction over an ultra vires claim, a plaintiff must

plead and prove an act that is outside the scope of the government official’s author-

ity. Hall v. McRaven, 508 S.W.3d 232, 234 (Tex. 2017); Heinrich, 284 S.W.3d at 372.

In other words, if the government official is not violating the law, there is no juris-

diction over an ultra vires claim. Here, the Commissioner’s decision to limit the ap-

plication of section 42.2522 to calculations under Chapter 42 is within his discretion

because it is what the law requires.

Stated as simply as possible, using LOHE-reduced property values benefits a

school district, regardless of whether it is a Chapter 41 or 42 district. Chapter 41

districts pay less in recapture, and Chapter 42 districts receive additional state aid.

Appellants’ Br. 5-6. But the Texas Legislature has limited the use of LOHE-reduced

property values in Chapter 42 calculations. Tex. Educ. Code § 42.2522.

Chapters 41, 42, and 46 all refer to the “taxable value” of property, as “deter-

mined under Subchapter M, Chapter 403, Government Code.” See, e.g., Tex. Educ.

Code §§ 41.001(2), 42.252(a), 46.003(a). Subchapter M of the Government Code

contains only one definition for “taxable value”—found in section 403.302(d). In

addition to other adjustments not relevant here, taxable value in Subchapter M is

“the market value of all taxable property less: . . . one-half of the total dollar amount

of any residence homestead exemptions granted under Section 11.13(n), Tax Code,

in the year that is the subject of the study for each school district.” Tex. Gov’t Code

§ 403.302(d)(2). Thus, notwithstanding Plaintiffs’ suggestion, Appellees’ Br. 26,

16

references to taxable value in Chapters 41, 42, and 46 refer to the LOHE-reduced

property value. 5

4F

Chapter 42, however, contains an exception to the use of LOHE-reduced prop-

erty values found in section 42.2522. Plaintiffs do not dispute that, under that sec-

tion, the Commissioner may not use the LOHE-reduced property value to “provide

funding” unless (1) the Legislature specifically appropriates funds for that purpose,

or (2) there is a surplus of FSP funding. Tex. Educ. Code § 42.2522(a). Section

42.2522 is limited to the provision of funding under “this chapter,” which is Chapter

42. Therefore, the limitation on the use of LOHE-reduced property values is only as

to Chapter 42, not Chapters 41 and 46. The plain language of the text does not permit

any other interpretation. 6

5F

Similarly, the legislative history that Plaintiffs cite discusses “state aid.” Appel-

lees’ Br. 6. Chapter 41 concerns recapture, in which districts send money to the

State. It does not involve state aid or the provision of funding to districts. Because

section 42.2522 does not impact Chapter 41, it makes sense that the legislative his-

tory of section 42.2522 does not refer to Chapter 41. The absence of any reference

5

For this reason, Plaintiffs are incorrect to claim that Joaquin ISD’s LOHE will not

be considered. Appellees’ Br. 13. It will be considered for Chapter 46 funding, and

Joaquin will receive additional funding as a result. 2.RR.69, 89.

6

The Commissioner denies Plaintiffs’ suggestion that he was seeking to favor

wealthy school districts. Appellees’ Br. 1, 14. The Commissioner considered the

comments of several districts and concluded that he had been misinterpreting the

law. 2.RR.55, 59. That the Commissioner’s decision provides greater benefits to

Chapter 41 districts is a function of the law the Legislature wrote, not some improper

desire to benefit wealthy districts.

17

to recapture in the legislative history of section 42.2522 is not proof of what the Leg-

islature intended when the statutory language is clear.

Plaintiffs point to former Texas Government Code section 403.302(j), Appel-

lees’ Br. 25-26, which required the Comptroller to provide both total property values

and LOHE-reduced property values to the Commissioner. Act of May 30, 1999, 76th

Leg., R.S., ch. 396, § 1.36, 1999 Tex. Gen. Laws 2471, 2486. But that subsection ex-

plicitly referred to section 42.2522. Id. (stating “[f]or purposes of Section

42.2522”). Because section 42.2522 gives the Commissioner the option, in certain

circumstances, of providing funding based on either value, it makes sense to have

both values prepared. Former section 403.302(j) did not refer to Chapters 41 or 46

because those chapters refer to only one value—the LOHE-reduced property value. 7 6F

Plaintiffs continue to argue that the doctrine of legislative acceptance binds the

Commissioner to his previous (incorrect) interpretation of the Texas Education

Code. Appellees’ Br. 27-28. That argument fails for two reasons. First, the statute at

issue must be ambiguous before the doctrine applies. Tex. Dep’t of Protective & Regu-

latory Servs. v. Mega Child Care, Inc., 145 S.W.3d 170, 176 (Tex. 2004). As just ex-

plained, there is no ambiguity about (1) the meaning of Chapter 41.001(2); or (2) the

scope of section 42.2522. Moreover, the doctrine cannot be used to bind an agency

7

It is of no moment that former section 403.302(j) required the Comptroller to pro-

vide both values for all districts, which would include Chapter 41 districts. Appel-

lees’ Br. 26. Despite the shorthand used in this case, all districts have their FSP en-

titlements calculated under Chapter 42. Rather than carving out districts that might

not receive funding under Chapter 42 (an ever-changing subset), the Legislature

simply included all districts in this requirement.

18

to an incorrect interpretation of a statute. See Fleming Foods of Tex., Inc. v. Rylander,

6 S.W.3d 278, 282 (Tex. 1999).

Second, the statutes at issue (sections 41.001(2) and 42.2522(a)) have not been

re-enacted, which is the second requirement for legislative acceptance. Mega Child,

145 S.W.3d at 176. In Humble Oil and Refining Co. v. Calvert, the Supreme Court

applied the legislative-acceptance doctrine when an entire statutory scheme had

been codified with the same language. 414 S.W.2d 172, 180 (Tex. 1967). No such

legislative act exists here. At most, portions of other statutes or subsections were

amended, Appellees’ Br. 27-28, but the relevant sections never were. A decision not

to amend a portion of a statute is different from affirmatively re-adopting the same

language. The latter indicates an intent to accept the previous interpretation of that

language, while the former indicates only a desire to alter different language.

The Commissioner was correct to interpret the statutes as he did. Because his

actions were within the scope of his discretion, there can be no ultra vires claim and

no jurisdiction over the Commissioner.

C. The UDJA does not waive sovereign immunity in this case.

Plaintiffs cite three cases from this Court to argue that the UDJA permits a plain-

tiff to sue a state agency to resolve dispute about the interpretations of law. Appel-

lees’ Br. 21-22 (citing Tex. Mun. Power Agency v. Pub. Util. Comm’n, 100 S.W.3d 510,

518 (Tex. App.—Austin 2003, pet. denied), Tex. Dep’t of Pub. Safety v. Moore, 985

S.W.2d 149, 154 (Tex. App.—Austin 1998, no pet.), and Pub. Util. Comm’n v. City

of Austin, 728 S.W.2d 907, 910-11 (Tex. App.—Austin 1987, writ ref’d n.r.e.)). But

these cases all rested on the erroneous conclusion that sovereign immunity did not

19

bar a plaintiff from suing the State for a determination of his rights under the law.

Tex. Mun. Power Agency, 100 S.W.3d at 515; Moore, 985 S.W.2d at 154; City of Austin,

728 S.W.2d at 911. The Supreme Court in Heinrich held to the contrary, stating that

such claims are barred by immunity and must be brought against the individual in an

ultra vires suit, not the entity. 284 S.W.3d at 371-72. The Court should not, there-

fore, give weight to the immunity discussions in those earlier cases.

Instead, the Court should look to the Texas Supreme Court’s decision in Hein-

rich, which explains why the UDJA does not waive immunity in this case. Id. at 373

n.6. As described by the Court, the UDJA waives the government’s sovereign im-

munity only for challenges to the validity of a statute or ordinance. Id. (citing Tex.

Civ. Prac. & Rem. Code § 37.006). There, the plaintiff was not challenging the va-

lidity of a statute or ordinance, but rather the actions of a board under an ordinance.

Id. Therefore, the UDJA did not waive sovereign immunity. Id.

The same is true here. Plaintiffs are not challenging the validity of any statute.

Instead, they challenge the Commissioner’s actions under a statutory scheme. This

does not fall within the waiver of immunity, as defined by the Texas Supreme Court. 8 7F

Absent a challenge to the validity of a statute, the UDJA “does not enlarge the

trial court’s jurisdiction but is merely a procedural device for deciding cases already

within a court’s jurisdiction.” Tex. Dep’t of Transp. v. Sefzik, 355 S.W.3d 618, 621-

22 (Tex. 2011) (per curiam). Because Plaintiffs have not challenged the validity of a

8

To the extent Plaintiffs have pleaded a valid rule challenge, the UDJA claim should

be dismissed under the redundant-remedies doctrine. Tex. Dep’t of Transp. v. Sunset

Transp., Inc., 357 S.W.3d 691, 705 (Tex. App.—Austin 2011, no pet.).

20

statute, the UDJA does not provide jurisdiction, and Plaintiffs have identified no

other potential waiver of immunity. The Court should, therefore, dismiss Plaintiffs’

claims as barred by sovereign immunity.

V. Plaintiffs Have Not Demonstrated Their Entitlement to the Tempo-

rary Injunction.

A. Plaintiffs are not entitled to a temporary injunction. All of the above argu-

ments demonstrate why Plaintiffs have not shown a (1) cause of action against De-

fendants; (2) a probable right to the relief sought; or (3) a probable, imminent, and

irreparable injury in the interim. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex.

2002).

Plaintiffs have not shown a cause of action against Defendants because their

claims are moot and unripe, and Plaintiffs lack standing to complain about Defend-

ants’ treatment of other school districts. See supra pp. 1-12. Moreover, their claims

are also barred by sovereign immunity. See supra pp. 12-21.

Plaintiffs have also not demonstrated a probable right to the relief sought. The

Commissioner correctly interpreted the law, which distinguishes between calcula-

tions under Chapter 41 and Chapter 42. See supra pp. 16-19. To the extent that TEA

was required to follow the rule-making procedures in Chapter 2001, it has now done

so. See supra pp. 3-4. Plaintiffs do not have a right to demand that the Commissioner

collect millions of dollars in recapture from other school districts simply because

there is a small chance that doing so might someday impact Plaintiffs.

Finally, Plaintiffs have not shown an imminent and irreparable injury. Indeed,

the fact that the 2016-2017 year ended without an FSP deficit and no proration

21

demonstrates that Plaintiffs were not about to suffer an irreparable injury. There is

no evidence regarding whether FSP funding will come up short in future years and,

therefore, no evidence of future injury.

B. The temporary injunction entered by the trial court did not maintain the

status quo as a factual matter. Appellees Br. 30-31. The injunction did not require

Defendants to provide any funding to Plaintiffs—it required only that Defendants

recapture additional funding from non-party districts. CR.228-29. For those dis-

tricts, the “last, actual, peaceable, non-contested status” was using the LOHE-re-

duced property values. Indeed, the Commissioner had collected over half of the re-

capture due in 2016-2017 using those amounts at the time of the hearing. 2.RR.171.

For those districts (the Chapter 41 districts with LOHEs), the temporary injunction

would upend their settled expectations, whereas Plaintiffs would receive no addi-

tional funding. Thus, even if there is jurisdiction over this lawsuit, Plaintiffs have not

shown their entitlement to a temporary injunction, and the trial court’s order should

be reversed. 9

8F

9

The trial court’s order remanding the proposed rule is moot, as TEA withdrew that

proposed rule. 42 Tex. Reg. at 4271. Therefore, that portion of the injunction should

be vacated.

22

Prayer

The Court should reverse the rulings of the district court and dismiss the case

for lack of subject-matter jurisdiction. Alternatively, the Court should reverse the

district court’s grant of a temporary injunction.

Respectfully submitted.

Ken Paxton Scott A. Keller

Attorney General of Texas Solicitor General

Jeffrey C. Mateer

First Assistant Attorney General /s/ Beth Klusmann

Beth Klusmann

Office of the Attorney General Assistant Solicitor General

P.O. Box 12548 (MC 059) State Bar No. 24036918

Austin, Texas 78711-2548 beth.klusmann@oag.texas.gov

Tel.: (512) 936-1700

Fax: (512) 474-2697 Counsel for Appellants

23

Certificate of Service

On December 14, 2017, this document was served electronically on Richard E.

Gray III, lead counsel for Appellees, via rick.gray@graybecker.com.

/s/ Beth Klusmann

Beth Klusmann

Certificate of Compliance

Microsoft Word reports that this brief contains 6012 words, excluding the por-

tions of the brief exempted by Rule 9.4(i)(1).

/s/ Beth Klusmann

Beth Klusmann

24