School finance describes the method in which Texas public schools are funded. Public elementary and secondary education in Texas is financed by a combination of state and local revenue.
The local source of operating revenue for school districts is the property tax. This is what leads to wide disparities in education spending, as some districts with expensive commercial property have high tax bases, and other districts with low tax bases have to impose higher tax rates to raise less money.
Over the years, poor Texas districts struggled to maintain minimal education programs, while rich districts built more classrooms, attracted better teachers and, in some cases, could build indoor football practice facilities.
In a 1968 case called Rodriguez v San Antonio Independent School District, a group of parents challenged the system. A three-judge panel ruled in 1971 that the Texas school finance system was unconstitutional. But the state appealed, and the U.S. Supreme Court reversed the lower court decision in 1973. The Supreme Court said the Texas school finance system was unfair but held that it did not violate the U.S. Constitution.
Another lawsuit, Edgewood ISD v. Kirby, challenged the school finance system in 1984. In 1987, an Austin district judge ruled the school finance system violated the state constitution. The Third Court of Appeals then reversed the district judge in 1988. But the Texas Supreme Court, in a unanimous decision, struck down the finance system and ordered lawmakers to replace it by May 1990. That led Governor Bill Clements to call the Legislature into a special session, but after four special sessions lawmakers could only agree to a small increase in the state sales tax to boost funding to poor school districts.
Edgewood plaintiffs were unsatisfied and took the state back to court. District Judge Scott McCown of Austin ruled in 1990 that the plan was unconstitutional because it did not narrow the gap between rich and poor school districts. The Texas Supreme Court upheld the lower court decision.
Lawmakers approved a new school finance law by 1993 that called for wealthy districts to share their wealth with poor districts. Rich districts objected to the requirement, and poor districts argued the new law was inadequately funded. This became known as the "Robin Hood plan."
The Texas Supreme Court upheld the 1993 law in January 1995.
By the late 1990s, the Legislature had increased public education funding but did not keep up with the increasing school enrollment in Texas. By 2003, local property taxes were paying for the majority of public education costs. The finance system again returned to court when several school districts filed a lawsuit arguing the 1993 law was unconstitutional.
The struggle led Gov. Rick Perry to call multiple special sessions in 2004 and in 2006 to address the school finance crisis. A 2006 deal resulted in a property tax cut combined with a small increase in business, or margins, tax to help pay for education.