Morath v. The Texas Taxpayer and Student Fairness Coalition

The Texas school system included over 1,000 school districts. Under the Texas Constitution, Texas (plaintiff) must establish and fund an adequate and financially efficient public school system. Texas did not set a statewide minimum school funding amount. School districts were funded by a combination of federal funds, state funds, and local property taxes. The state capped the amount a school district could charge in property taxes for school maintenance and operations but did not cap property taxes for facilities and supplemental programs. School district property tax rates were set by local voters. Texas provided different levels of funding to school districts depending on the local property tax rate, geographic variations, and student attendance. Because there was a huge disparity in property tax revenue among school districts, Texas recaptured excess property tax revenue from high-income districts to help fund education statewide. A group comprised of over 500 school districts (defendants) sued the state, arguing that (1) the Texas school system failed to meet constitutional adequacy and financial efficiency requirements; and (2) Texas’s school funding system imposed a statewide ad valorem tax, which was prohibited under the Texas Constitution. At that time, 94.5 percent of Texas school districts met state educational standards, 92 percent of students passed their state graduation exams, and 88 percent of students graduated, tying for second in the nation. The district court held that (a) the Texas school system was inadequate; and (b) Texas’s school funding system imposed an unconstitutional state ad valorem tax. Texas appealed.