West Orange-Cove Consol. I.S.D. v. Alanis

• Decision Date: 29 May 2003
• Docket Number: No. 02-0427.,02-0427.
• Citation: 107 S.W.3d 558
• Parties: 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.
• Court: Texas Supreme Court

107 S.W.3d 558

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.

No. 02-0427.

Supreme Court of Texas.

Argued March 27, 2003.

Decided May 29, 2003.

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Haynes & Boone, L.L.P., Nina Cortell, Carrie L. Huff and Charles G. Orr, Dallas, W. Wade Porter, Austin, Mark Ryan Trachtenberg, Houston, and George W. Bramblett, Jr., Dallas, for Petitioner.

Greg Abbott, Atty. Gen. of Texas, Andy Taylor, First Asst. Atty. Gen., Jeffrey S. Boyd, Office of the Atty. Gen., Toni Hunter, Office of Atty. Gen. of Texas, Julie Caruthers Parsley, Office of the Solicitor Gen. of Texas, Barry Ross McBee, Office of the Attorney Gen., Rafael Edward Cruz, Office of the Atty. Gen., Austin, Randall Buck Wood, Doug W. Ray, Ray Wood & Bonilla LLP, Austin, Leticia Marie Saucedo, Nina Perales, Selena Norah Solis, Albert H. Kauffman, Joseph Berra, Mexican American Legal Defense (MALDEF), San Antonio, for Respondent.

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.

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 ....

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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" state-wide, 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...