Neeley v. West Orange-Cove Consolidated Independent School District
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Shirley NEELEY, Texas Commissioner of Education, et al., Appellants,
v.
WEST ORANGE-COVE CONSOLIDATED INDEPENDENT SCHOOL DISTRICT, et al., Appellees
Alvarado Independent School District, et al., Appellants,
v.
Shirley Neeley, Texas Commissioner of Education, et al., Appellees
Edgewood Independent School District, et al., Appellants,
v.
Shirley Neeley, Texas Commissioner of Education, et al., Appellees.
Supreme Court of Texas.
*750 Rafael Edward Cruz, Greg Abbott, Atty. Gen., Jeffrey L. Rose, Amy Warr, Danica Lynn Milios, Joseph Hughes, Merle Hoffman Dover, Shelley Dahlberg, Edward D. Burbach, Barry Ross McBee, Austin, for Appellees.
Doug W. Ray, Randall Buck Wood, Ray, Wood & Bonilla, L.L.P., Austin, George W. Bramblett Jr., Mark Ryan Trachtenberg, Kirk Lane Worley, Nina Cortell, Charles G. Orr, Haynes & Boone, L.L.P., Dallas, Philip D. Fraissinet, Bracewell & Giuliani, LLP, Houston, Nina Perales, David G. Hinojosa, San Antonio, for Appellants.
Martha P. Owen, Deats, Durst, Owen & Levy, P.L.L.C., Marc A. Levin, Potts & Reilly, L.L.P., Austin, for amicus curiae.
*751 Justice HECHT delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice O'NEILL, Justice WAINWRIGHT, Justice MEDINA, Justice GREEN, and Justice JOHNSON joined.
Once again this Court is called upon to determine whether the funding of Texas public schools violates the Texas Constitution.[1] Three groups of school districts raise three separate challenges.
The plaintiffs, 47 districts led by West Orange-Cove Consolidated Independent School District,[2] which educate over a fourth of the State's more than 4.3 million school children, contend that property taxes, though imposed locally, have become in effect a state property tax prohibited by article VIII, section 1-e of the Texas Constitution, because the State leaves districts no meaningful discretion to tax below maximum rates. Article VIII, section 1-e states simply: "No State ad valorem taxes shall be levied upon any property within this State."[3] We held 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."[4]
The other two groups, intervenors, totaling an additional 282 districts, also educate about a fourth of the State's school children. One group is led by Edgewood Independent School District,[5] the other by Alvarado Independent School District.[6]*752 Intervenors contend that funding for school operations and facilities is inefficient in violation of article VII, section 1 of the Texas Constitution, because children in property-poor districts do not have substantially equal access to education revenue.
All three groups also contend that the public school system cannot achieve "[a] general diffusion of knowledge" as required by article VII, section 1 of the Texas Constitution, because the system is underfunded.
Article VII, section 1 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]
This provision sets three standards central to this case. One is that the public school system be efficient. In Edgewood I, we held:
There is no reason to think that "efficient" meant anything different in 1875 [when article VII, section 1 was written] from what it now means. "Efficient" conveys the meaning of effective or productive *753 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.[8]
As applied to public school finance, we added, constitutional efficiency requires that "[c]hildren 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."[9] We have referred to efficiency in the broader sense as "qualitative", and to efficiency in the context of funding as "financial".[10] The parties have also referred to financial efficiency as "quantitative".
Another standard set by the constitutional provision is that public education achieve "[a] general diffusion of knowledge... essential to the preservation of the liberties and rights of the people".[11] We have labeled this standard "adequacy",[12] and the parties have adopted the same convention. The label is simply shorthand for the requirement that public education accomplish a general diffusion of knowledge. In this context, the word "adequate" does not carry its broader dictionary meaning: "[c]ommensurate in fitness; equal or amounting to what is required; fully sufficient, suitable, or fitting."[13] Our responsibility in this case is limited to determining whether the public education system is "adequate" in the constitutional sense, not in the dictionary sense. That is, we must decide only whether public education is achieving the general diffusion of knowledge the Constitution requires. Whether public education is achieving all it should Β that is, whether public education is a sufficient and fitting preparation of Texas children for the futureΒinvolves political and policy considerations properly directed to the Legislature. Deficiencies and disparities in public education that fall short of a constitutional violation find remedy not through the judicial process, but through the political processes of legislation and elections.
A third constitutional standard is that the provision made for public education be "suitable". We have mentioned this requirement only once, in Edgewood IV:
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 would be violated.[14]
In essence, "suitable provision" requires that the public school system be structured, operated, and funded so that it can accomplish its purpose for all Texas children.
Article VII, section 1, makes it "the duty of the Legislature" to provide for public education.[15] The judiciary's role, though important, is limited to ensuring that the constitutional standards are met. We do not prescribe how the standards should be met.
In this case, the district court, after a five-week bench trial, found in favor of *754 the school districts on all their claims except for inefficient operations funding and enjoined the defendants[16] (collectively "the State defendants") from continuing to fund the public schools.[17] The court issued its judgment on November 30, 2004, but stayed the effect of its injunction for ten months, until October 1, 2005, "to give the Legislature a reasonable opportunity to cure the constitutional deficiencies in the finance system".[18] The Legislature convened in regular session in January 2005, and while it gave much attention to public education issues, it did not reach consensus. After adjournment, the Governor called the Legislature into special session on June 21, 2005, and that session was in progress when we heard oral argument in this case on July 6. That session also ended without enactment of public education legislation, and the Governor immediately called a second special session to convene July 21. Thirty days later, the Legislature again adjourned without enacting public education legislation. The district court's injunction has been stayed by the State defendants' appeal.[19]
We now hold, as did the district court, that local ad valorem taxes have become a state property tax in violation of article VIII, section 1-e, as we warned ten years ago they inevitably would, absent a change in course, which has not happened.[20] Although the districts have offered evidence of deficiencies in the public school finance system, we conclude that those deficiencies do not amount to a violation of article VII, section 1. We remain convinced, however, as we were sixteen years ago, that defects in the structure of the public school finance system expose the system to constitutional challenge.[21] Pouring more money into the system may forestall those challenges, but only for a time. They will repeat until the system is overhauled.
The judgment of the district court is modified and affirmed in part, reversed in part, and remanded for reconsideration of the award of attorney fees.
I
We begin by summarizing first the structure of the public school finance system *755 in Texas as relevant to the issues in this case, then the evidence regarding the adequacy of public education thus financed, and finally the procedural background of the case. The record contains evidence through the end of the 2003-2004 school year, and our discussion of the present status of the system generally refers to that time frame unless otherwise noted.
A
The basic structure of Texas' present public school finance system derives from Senate Bill 7 enacted by the Legislature in 1993.[22] We have twice described the system thoroughly,[23] including its historical evolution,[24] and will not repeat here all that we have said before. In 1995, we held in Edgewood IV (among other things) that the system under Senate Bill 7 did not violate article VII, section 1, or article VIII, section 1-e of the Texas Constitution but noted that the system was "minimally acceptable only when viewed through the prism of history."[25] The parties in this case contend that the operation of the system has changed since Edgewood IV, and so in the discussion that follows we include several comparisons between then and now.
Texas has a little over 4.3 million children in public schools, and the number is growing by more than 72,500 per year. More than half qualify for federally subsidized, free or reduced-price lunches and are therefore categorized by the State as economically disadvantaged.[26] About 15% have limited proficiency in English. According to the State defendants' expert, the annual cost of public education is $30-35 billion, or about $7,000-8,000 per student, depending on what expenses are counted. More than half of the cost is funded by ad valorem taxes imposed by independent school districts on local property. The State funds only about 38% of the cost, down from about 43% in Edgewood IV,[27] the lowest level in more than 50 years.[28] The balance, usually around 89%, comes from the United States government.
There are 1,031 independent school districts[29] Β more than four times the number of counties. A fourth of public school students are educated in 12 districts in seven counties;[30] half are educated in 45 districts.[31]*756 The largest district, Houston ISD, has 211,499 students, more than the combined student population in half of all the other districts put together.[32] Two-thirds of the districts have fewer than 1,200 students each; half have fewer than 700 each; almost a fourth have fewer than 350 each; 11 districts have fewer than 60 each.[33] Divide Independent School District in Kerr County, the smallest, has 10 students.[34]
The Legislature's decision to rely so heavily on local property taxes to fund public education does not in itself violate any provision of the Texas Constitution,[35] but in the context of a proliferation of local districts enormously different in size and wealth, it is difficult to make the result efficient Β meaning "effective or productive of results and connot[ing] the use of resources so as to produce results with little waste"[36] Β as required by article VII, section 1 of the Constitution.[37] Compensation must be made for disparities in the amount of property value per student so that property owners in property-poor districts are not burdened with much heavier tax rates than property owners in property-rich districts to generate substantially the same revenue per student for public education. According to the evidence, in 2001, Dew ISD in Freestone County had an adjusted taxable value of $300,384,388, a "weighted average daily attendance" ("WADA") of 147.43 students,[38] and thus $2,037,488/WADA, while Boles ISD in Hunt County had an adjusted taxable value of $8,831,414, a WADA of 876.95 students, and thus $10,071/WADA. This 200-to-1 disparity was 700-to-1 in Edgewood I.[39] Also, many districts have been created as tax havens[40]Βlots of property and few students Β allowing property owners to escape paying their fair share of the cost of public education in Texas and making it more difficult to achieve efficiency.[41] A *757 system that operates with an excess of resources in some locales and a dearth in others is inefficient, as we held in Edgewood I[42] and Edgewood II.[43] Summing up in Edgewood III, we said:
The inefficiency was this gross disparity both in tax burden and in tax spending. To put it graphically, in some areas of the state, education resembled a motorcycle with a 1000-gallon fuel tank, and in other areas it resembled a tractor-trailer rig fueled out of a gallon bucket. Some vehicles were flooded, some purred along nicely, and some were always out of gas. A fleet of such vehicles is not efficient, even though a few of them may reach their destination. We did not hold that efficiency requires absolute equality in spending; rather, we said that citizens who were willing to shoulder similar tax burdens, should have similar access to revenues for education.[44]
The large number of districts, with their redundant staffing, facilities, and administration, make it impossible to reduce costs through economies of scale.[45] Bigger is not always better, but a multitude of small districts is undeniably inefficient. The justification offered for this situation is that as a matter of public policy, public schools should be locally controlled, although it has never been clear why the legitimate benefits of local control are so entirely inconsistent with efficiency in funding.[46] Districts are firmly entrenched and powerfully resistant to meaningful change, and while matters have improved somewhat over the past century, the number of school districts *758 has not declined significantly in the past two decades.[47]
The purpose of Senate Bill 7 was to try to make funding public education with local property taxes efficient by reducing the effects of the vast disparities among the more than 1,000 independent school districts. School maintenance and operations ("M & O") are funded separately from facilities. Tax rates set yearly are capped at $1.50/$100 valuation for M & O[48] (except for seven districts in Harris County[49]), as they have been for sixty years,[50] and $0.50/$100 valuation for debt service on facilities (referred to as "I & S", for "interest and sinking fund").[51] For M & O, disparities in available revenue among the school districts are reduced in two ways: by supplementing property-poor district tax revenues with state funds through the Foundation School Program ("FSP") under chapter 42 of the Education Code,[52] and by "recapture" Β a scheme under chapter 41 of the Education Code by which property tax revenue is taken from property-rich ("chapter 41") districts and given to property-poor ("chapter 42") districts Β referred to by some as "Robin Hood". Chapter 41 districts educate 12.3% of Texas students.
The FSP has two tiers for M & O. Tier 1 guarantees to all districts that tax at or above the rate of $0.86 per $100 valuation (and all districts but one do) a basic allotment of $2,537 per student in "average daily attendance" ("ADA"), subject to various special allotments and adjustments for district and student characteristics.[53] Thus, any district with less than $295,000 value/ADA ($2,537 = .0086 Γ $295,000) receives FSP funds to supplement local revenue as if it had that much property value per student, up to an $0.86 tax rate. The basic allotment includes a per capita distribution (usually $250-300[54]) for each student *759 from the Available School Fund ("ASF"),[55] which consists of certain appreciation from the Permanent School Fund, as required by the Constitution.[56] Districts with $295,000 value/ADA or more receive no Tier 1 state funds, although they do receive the ASF distribution. Tier 2 guarantees that for each $0.01 of tax rate above $0.86, the yield will be $27.14/WADA[57] Β the yield a district would have if it had $271,400 value/WADA ($27.14 = .0001 Γ $271,400). Thus, a district with only $100,000 value/WADA could generate only $10/WADA in local tax revenue for each $0.01 of tax rate, and the FSP would add $17.14/WADA to make up the difference. A district taxing at the maximum $1.50 rate is thus guaranteed $1,736.96/ WADA (($1.50-$0.86)[58] Γ $27.14). Districts with at least $271,400 value/WADA receive no Tier 2 funds. In Edgewood IV, the Tier 1 basic allotment was $2,300/ADA, and the Tier 2 guaranteed yield was $20.55/WADA, or $1,315.20/WADA at a tax rate of $1.50.[59]
Recapture helps fund the FSP[60] and further equalizes access to revenue among districts. Most districts with more than $305,000 value/WADA, and which therefore receive no funds under FSP Tier 1 or Tier 2 for M & O, must transfer that excess value Β in practical reality, the tax revenue derived from it Β to the State or other districts for distribution under the FSP to chapter 42 districts that have less.[61] In Edgewood IV, the statutory retained value/WADA cap was $280,000.[62] A chapter 41 district may choose to effectuate the transfer in one of five ways:[63] (1) consolidate with a chapter 42 district, to reduce the value/WADA to $305,000 or less;[64] (2) detach territory to a chapter 42 district, to achieve the same effect;[65] (3) purchase "average daily attendance credits" from the State;[66] (4) agree to pay to *760 educate students in a chapter 42 district;[67] or (5) consolidate tax bases with a chapter 42 district Β combining the finance mechanism while leaving district administration independent.[68] The third and fourth options call for a district to simply write a check directly to the State or other districts.[69] Options (1), (2) and (5) are rarely used.
The net effect of recapture, generally speaking, is that a district with more than $305,000 value/WADA must pay, either to the State or to another district or districts directly, its local tax revenue that exceeds what the retained value generates. Thus, for example: a district with a 10,000 WADA and $366,000/WADA in property value, taxing at a $1.50 rate, for a revenue of $5,490/WADA, would be required to purchase 2,000 credits from the State at $5,490 each, totaling $10,980,000, to increase its deemed WADA to 12,000, reducing its deemed value/WADA to $305,000, leaving it $4,575/WADA for its own use. For the 1993-1994 school year, the first under Senate Bill 7, 99 chapter 41 districts transferred $433 million. For 2003-2004, 134 chapter 41 districts transferred over $1 billion. For 2004-2005, the amount of recapture is estimated to be over $1.2 billion. Thus, recapture has doubled in less than a decade, and in 12 years it may have almost tripled.
Several other statutory provisions reduce recapture payments and thus in effect raise the chapter 41 districts' average actual retained value/WADA above the statutory limit of $305,000. A chapter 41 district receives an early-agreement discount of the lesser of 4% of its total recapture payment or $80/student for agreeing to the payment by September 1,[70] and an efficiency discount of the lesser of 5% or $100/student for agreeing to pay a chapter 42 district or districts directly, rather than *761 sending the payment to the State.[71] These discounts saved chapter 41 districts $43.4 million in recapture payments in the 2003-2004 school year, but the efficiency discount also benefitted chapter 42 districts, who received $81.4 million more than they would have had the recapture payments been made through the State. Neither of these discounts existed when Edgewood IV was decided.
Also, as we said above, most districts may retain only $305,000 value/WADA, but there is an exception: for a district taxing at the maximum $1.50 rate, recapture cannot reduce its revenue/WADA, excluding the ASF distribution, below the level for the 1992-1993 school year.[72] This exception was designed to mitigate the impact of Senate Bill 7 on the wealthiest districts and was initially intended to last only three years,[73] but it has become permanent and has even been increased.[74] There are 34 of these so-called "hold-harmless" districts, educating less than 1% of Texas students.[75] On average they retain $421, 373/WADA instead of $305,000/WADA, thereby saving about $38 million in revenue that would otherwise have been transferred to the FSP. This raises the average retained value/WADA of all chapter 41 districts to $341,457. In Edgewood IV we held that the effect of the hold-harmless districts was not so great as to render the entire system inefficient, especially since they were to be phased out in three years.[76]
Senate Bill 7 thus retains in its design a gap in available per-student M & O revenue attributable to property-wealth disparities among school districts. We discussed this gap in Edgewood IV. To compare its size then and now, we must exclude hold-harmless districts, discounts, and other factors that effectively raise the statutory cap on a district's retained wealth/WADA, disregard for purposes of a benchmark comparison the differences between ADA and WADA and other Tier 1 and Tier 2 formula differences, and assume a maximum tax rate of $1.50. With these assumptions, the FSP guarantees $4,273.96/student,[77] while a district with a tax base of $305,000/student has $4,575/student Β a difference of $301.04/student, or 7%. Under the statutory parameters that existed in Edgewood IV, this gap was $584.80/student, or 16%.[78] If a $300 ASF distribution is added to the *762 non-FSP revenue, the gap is enlarged to 14% at present and 24% in Edgewood IV.
In actual operation, however, this gap is wider. According to the intervenors' expert, on average, at a tax rate of $1.48, chapter 41 districts' revenue is $5,457/WADA while chapter 42 districts' revenue is $4,330/WADA, a difference of $1,127/WADA or 26%. By comparison, at the time of Edgewood IV (as reflected in the record but not our opinion), the average tax rate was only $1.17, chapter 41 districts' average revenue was $3,510/WADA, and chapter 42 districts' average revenue was $3,005/WADA, a difference of $505 or 17%. The proportional size of the gap in actual operation has thus increased by about half, from 17% to 26%. But as we have noted, we did not consider in Edgewood IV the effect of hold-harmless districts that would have made the gap much larger, and other discounts and factors that would affect these figures did not exist. According to the intervenors' expert, these elements together contribute at least $599 to the present difference. Assuming they would have impacted the calculations at the time of Edgewood IV similarly, the increase in the gap since then would be much smaller.
Looking to the extremes rather than at averages, with similar tax rates near the maximum, districts at or above the 95 percentile level of property value per student have $5,895/WADA, while districts at or below the 5 percentile level have only $4,217/WADA, a difference of $1,678, or 40%. In Edgewood IV, this gap was projected to be about $600 Β actually, according to the evidence, $4,440 vs. $3,868, or 16% Β with hold-harmless districts phased out and all districts taxing at a $1.50 rate.[79]
To generate the same revenue per student that the FSP guarantees to an average chapter 42 district that taxes at the maximum $1.50 rate, taking into account differences between Tier 1 and Tier 2 formulas, the average chapter 41 district need only tax at the rate of $1.33. A different comparison was made in Edgewood IV. There we calculated that to generate $3,500/WADA, which the trial court had found to be the cost of an adequate education Β or in the words of article VII, section 1 of the Texas Constitution, "[a] general diffusion of knowledge"[80] Β districts at or below the 15 percentile level of property value per student, averaging a $26.74 yield per $0.01 of tax, were required to tax at a $1.31 rate while districts at or above the 85 percentile level, averaging a $28.74 yield per $0.01 of tax, needed only a $1.22 rate.[81] The parties in this case have not attempted to replicate this calculation for current data.
Since the 1993-1994 school year, which we reviewed in Edgewood IV, M & O tax rates have migrated to the $1.50 maximum. That year, most districts' tax rates were below $1.20; now, only about 2% of the districts, with less than one-fourth of 1% of the students, tax below $1.20. The concentration of districts at the higher tax rates is shown in the following table:
*763 1993-1994 2003-2004 $1.50 2% of the districts with 48% of the districts with 1% of the students 54% of the students β₯$1.45 6% of the districts with 67% of the districts with 6% of the students 81% of the studentsIn the 1993-1994 school year, school districts spent only 83.3% of the revenue that could have been generated at maximum tax levels for public education; now they spend over 97%. The trial court found that Β
any remaining capacity is not realistically available because accessing this capacity would require (1) a virtually 100% tax collection rate (practically impossible); (2) the repeal of any property tax exemptions (politically improbable); and (3) a district to have stable or increasing property values. In other words, these percentages represent virtual full funding for most of the larger districts in the system.Up to this point we have been describing the financing of school maintenance and operations. For instructional facilities (as opposed to facilities used for administration and extracurricular purposes),[82] the FSP includes what may be considered a third tier[83] that partially equalizes access to funding up to the maximum $0.50 tax rate to support bonds.[84] Through the Instructional Facilities Allotment ("IFA"), the State guarantees districts a yield of $35/ADA for each $0.01 of I & S tax rate for bonds for new facilities, with certain exceptions,[85] up to a maximum of the lesser of $250/ADA or $100,000,[86] for the life of the bonds. To retire preexisting debt, the Existing Debt Allotment ("EDA") guarantees districts $35/ADA for each $0.01 of I & S tax rate up to $0.29, with certain exceptions.[87] However, unlike the FSP Tier 1 and Tier 2, both the IFA and the EDA are subject to funding being appropriated by the Legislature. A district that receives an EDA grant for debt service in one biennium has no guarantee that the grant will be renewed at all or at the same level for the life of the debt, and must assume the risk that the assistance provided will be limited. Neither the IFA nor the EDA assists districts too poor to levy taxes in the first place.
Property-poor districts are given priority for IFA funding[88] but not for EDA. New and existing IFA awards now total about $270 million, but substantial requests have gone unfunded. In the 2002-2003 *764 school year, 520 school districts got $457.5 million in EDA allotments. Together, the two allotments equalize districts' access to revenue for 90% of eligible debt service. I & S rates are excluded from Tier 2 allotments[89] and are not used in recapture calculations,[90] so that districts' retained wealth for I & S taxes is not capped as it is for M & O taxes. Thus, property-rich districts have more than 20 times as much value/WADA to tax for facilities as property-poor districts. By contrast, in Edgewood IV, I & S tax rates for debt service were included within Tier 2 allotments[91] and used for recapture calculations to cap retained value.
The district court found:
Lacking sufficient funding, property-poor districts such as the Edgewood Intervenors have been unable to provide adequate facilities for all the children in their districts. Substandard conditions include: overcrowded schools and classrooms; out-of-date buildings, equipment and fixtures; inadequate libraries, science labs, cafeterias, gymnasiums, and other school facilities.The court identified health and safety concerns raised by some conditions, like inadequate heating, air conditioning, and ventilation, and science laboratories without emergency eye washes, fume hoods, exhaust fans, and other safety features. The court found that inadequate facilities negatively impacted student scores on standardized tests, and that "property-poor districts like the Edgewood Intervenors lack all the facilities essential to providing students a learning environment in which to attain a general diffusion of knowledge."
The State makes a few other contributions to public education finance besides the programs and allotments we have described. It paid districts $110 per student for the 2003-2004 school year, and it has funded other projects, like Head Start and the High School Completion Initiative. But 95% of all funds for public education flow through the Foundation School Program, including the IFA and the EDA, and are thereby equalized among the districts. The other 5% includes tax revenue that is not recaptured, taxes above the $1.50 M & O level in seven districts, and I & S tax revenue that exceeds the IFA and EDA yields or is not included under these allotments. On the whole, about 85% of the student population resides in districts with revenue equivalent to a district with $271,400/student.
B
The finance system we have described funds an education system with four integrated components: a state curriculum, a standardized test to measure how well the curriculum is being taught, accreditation standards to hold schools accountable for their performance, and sanctions and remedial measures for students, schools, and districts to ensure that accreditation standards are met.
The Legislature has prescribed the following basic public school curriculum:
Each school district that offers kindergarten through grade 12 shall offer, as a required curriculum:(1) a foundation curriculum that includes:(A) English language arts;(B) mathematics;(C) science; and*765 (D) social studies, consisting of Texas, United States, and world history, government, and geography; and(2) an enrichment curriculum that includes:(A) to the extent possible, languages other than English;(B) health;(C) physical education;(D) fine arts;(E) economics, with emphasis on the free enterprise system and its benefits;(F) career and technology education; and(G) technology applications.[92]The Legislature has also required that "[t]he State Board of Education [`SBOE'], with the direct participation of educators, parents, business and industry representatives, and employers shall by rule identify the essential knowledge and skills of each subject of the required curriculum that all students should be able to demonstrate".[93] After years of consultation and study, over a thousand public meetings, and thousands of public comments, the SBOE adopted the Texas Essential Knowledge and Skills ("TEKS") curriculum for use beginning in the 1998-1999 school year. The Legislature has also required the SBOE to "determine curriculum requirements for the minimum, recommended, and advanced high school programs that are consistent with the required curriculum".[94] In 2000, after study and input, the SBOE revised these programs, making them more difficult and restricting future participation in the minimum program. Beginning in the 2004-2005 school year, no high school student may be enrolled in the minimum program unless the student, the student's parent or guardian, and a school administrator agree.[95]
To correspond to the curriculum changes, the Legislature required the development of a new state standardized test Β the Texas Assessment of Knowledge and Skills ("TAKS") test Β to replace the Texas Assessment of Academic Skills ("TAAS") test.[96] The TAKS test, developed after consultation with educators and testing experts and first given in the spring of 2003, has harder questions, covers more subjects Β five (reading/English Language Arts, writing, math, science, and social studies) instead of three (for most of TAAS's duration) Β and is given at more grade levels.[97] A student must pass portions of the test for promotion to the fourth and sixth grades (and in school year 2007-2008 to the ninth grade),[98] and cannot graduate high school without passing an exit-level test first administered in the eleventh grade.[99] A student may take the test as many as three times in order to pass it for promotion,[100] and for any student who fails any part, the district must provide accelerated instruction,[101] an individualized graduation plan,[102] and study guides to the student's parents.[103] A student *766 may retake a necessary exit-level test any time it is administered.[104] There are special tests for Spanish-speaking students, students with limited English proficiency, and disabled students.[105]
At the Legislature's direction,[106] the SBOE determined after public input what scores would constitute passing Β "cut scores" Β and decided that they should be lower at first, increasing over three years, to give teachers and students time to adjust to the new and more difficult test. To pass the 2004 TAKS test, an 11th grader was required to answer correctly 37 out of 73 questions (50.7%) on the reading test, 24 out of 55 questions on the science test (43.6%), and 25 out of 60 questions (41.7%) on the math test. The passing rates for the 2004 TAKS test, calculated statewide and for five different student populations Β African-American, Hispanic, white, economically disadvantaged ("ED"),[107] and limited-English-proficiency ("LEP")[108] Β are shown in this chart:[109]
Grade State African-American Hispanic White ED LEP 11 72% 8% 61% 83% 58% 24% 10 49% 30% 34% 65% 32% 8% 9 57% 42% 45% 74% 43% 17% 8 63% 46% 53% 78% 50% 21% 7 65% 49% 56% 79% 53% 22% 6 73% 59% 64% 86% 62% 35% 5 62% 44% 51% 78% 49% 27% 4 75% 62% 69% 85% 66% 56%These passing rates were somewhat lower than those for 2002, the last year the TAAS test was given. TAAS passing *767 scores had increased significantly leading up to 2002, as shown in the following chart for reading, math, and writing tests in grades three through eight and ten (1994-2002), and social studies and science tests in the eighth grade (1995-2002):
subjects all students African-American Hispanic White ED reading 76% β 92% 60% β 87% 64% β 88% 87% β 97% 62% β 87% math 59% β 93% 37% β 86% 46% β 90% 72% β 97% 44% β 89% writing 78% β 89% 65% β 85% 69% β 84% 87% β 94% 67% β 83% social studies 65% β 84% 46% β 77% 48% β 76% 80% β 92% 47% β 76% science 76% β 93% 56% β 87% 63% β 90% 90% β 98% 62% β 89%In 1994 the minimum passing rate for an "academically acceptable" rating was 25%, and by 2002 it had climbed to 55%.
For accountability, schools and districts are rated "exemplary", "recognized", "academically acceptable", or "academically unacceptable"[110] based on "academic excellence indicators" chosen by the Commissioner of Education.[111] Those indicators are standardized test scores, high-school completion rates, and seventh- and eighth-grade dropout rates. For each accountability rating, the required test passing rate must be met in each of five student groups Β all students, African-American, Hispanic, white, and economically disadvantaged. The completion rate is the percentage of students entering the ninth grade who have either completed or are continuing their high school education four years later. If any school in a district is rated "academically unacceptable", the district cannot be rated "exemplary" or "recognized". With certain exceptions, the minimum requirements for each rating are as follows:
rating passing TAKS completion dropout exemplary β₯90% all subjects β₯95% β€0.2% recognized β₯70% all subjects β₯85% β€0.7% acceptable β₯50% English, writing, & β₯75% β€2% social studies β₯35% math β₯25% scienceThese test passing rate requirements remain the same for the three years 2004-2006 that the test cut scores are phased in, then they increase incrementally for three years to the point that a district must have a test passing rate of at least 70% for all student groups in all subjects to be rated "academically acceptable". After 2006, GED recipients will no longer be counted as completers. In 2005, the maximum dropout rate for an "academically acceptable" rating falls to 1%, and in 2007 a broader definition of dropout will be used.
Before the change to the TAKS test in 2003, many districts improved their accreditation *768 rating, but at the same time the number of "academically unacceptable" districts also grew. After the change to the harder test, ratings predictably slid, although the number of "academically unacceptable" districts also declined. The following table summarizes these trends:
1994 2002 2004 exemplary 6 149 13 recognized 54 426 365 acceptable 983 449 655 unacceptable 3 16 4 total 1046 1040 1037As sanctions for an "academically unacceptable" rating, the Commissioner of Education may, among other things, order a school board to hold a public hearing on the deficiency,[112] order the school board president and superintendent to appear before the Commissioner,[113] or order an on-site evaluation and recommendations for reform.[114] After a year, the Commissioner may appoint a board of managers in place of the school board.[115] After two years, the Commissioner may annex the district to an adjoining district.[116] (For example, the Commissioner has recently announced her intention to annex the Wilmer-Hutchins Independent School District to the Dallas Independent School District, pending pre-clearance by the United State Department of Justice under the federal Voting Rights Act.[117])
Academic success is also measured by the National Assessment of Educational Progress ("NAEP") achievement test, as witnesses for all parties at trial acknowledged. In 2000, controlling for socioeconomic and family characteristics, Texas was first out of 47 states overall, first for white students, fifth for African-American students, ninth for Hispanic students, first for fourth- and eighth-graders in math, and second in rate of improvement. In 2003, Texas ranked first in the nation in closing the gap between African-American and white fourth-graders in math, and second in the nation in closing the gap between Hispanic and white fourth-graders in math and reading. But unadjusted NAEP data, which may more accurately reflect college preparation, showed Texas sinking to 37th among the states in fourth-grade *769 and eighth-grade reading, although it had risen to 22nd in fourth-grade math and remained 34th in eighth-grade math.
Because more students are failing the TAKS test than were failing the TAAS test, and because passing the TAKS test is now required for promotion to the fourth and sixth grades, the districts must spend more for remediation through summer school, remedial classes, curriculum specialists, reduced class-size, and more math and science teachers. There is a worsening undersupply of teachers, aggravated by high attrition and turnover. Additionally, the percentage of LEP and ED students, who generally cost more to educate, has increased. The FSP provides an extra bilingual education allotment for LEP students[118] and an extra compensatory education allotment for ED students,[119] but the attendance weights used to determine those allotments have not increased since 1985.
Based on the eleventh-grade exit-level TAKS test, the percentages of student groups meeting the college-readiness standards of the Texas Higher Education Coordinating Board for English and math are shown in this table:
subjects all students African-American Hispanic White LEP English 28% 18% 20% 36% 3% math 42% 21% 28% 55% 13%In 2003, Texas ranked last among the states in the percentage of high school graduates at least 25 years old in the population. Texas also has a severe dropout problem: more than half of the Hispanic ninth-graders and approximately 46% of the African-American ninth-graders leave the system before they reach the twelfth grade. The gaps between white students on the one hand and African-American and Hispanic students on the other are especially troublesome since the African-Americans and Hispanics are projected to be about two-thirds of Texas' population in 2040. According to the plaintiffs' expert, if these gaps are not reduced, Texas will "have a population that not only will be poorer, less well-educated, and more in need of numerous forms of state services than its present population, but also less able to support such services ... [and] less competitive in the increasingly international labor and other markets."
It is difficult to quantify the cost of an adequate education Β one that achieves a general diffusion of knowledge. The parties offered competing cost function studies prepared by economists, examining statistical relationships between spending and student performance, taking into account student and school characteristics. We do not attempt to describe here the detailed procedures used in the studies but focus only on the conclusions. The study offered by plaintiffs and intervenors, done by Dr. Jennifer Imazeki and Dr. Andrew Reschovsky (the "I/R study"), concluded that to achieve a 55% statewide pass rate on the 2005 TAKS test would require additional spending of from $1.653 billion to $6.171 billion Β between $401 and $1,511 more per student. The study offered by the State defendants, done by Dr. Lori Taylor (the "Taylor study"), concluded that *770 some 17% of school districts Β 117 out of 695 studied[120] Β could not achieve a 55% pass rate in 2003 at a $1.50 tax rate without additional revenue of $563-$731 million. The district court accepted the I/R study and found the Taylor study flawed in several respects. Despite those flaws, the court continued, the Taylor study showed that school funding was insufficient to provide an adequate education in many districts. The court also found that both studies underestimated the costs of meeting accreditation standards. As the State defendants noted, however, the cost studies and court findings overlook the reality that almost all schools are meeting accreditation standards with current funding.
C
Four of the plaintiff school districts initiated this action in April 2001, alleging that the $1.50 maximum M & O tax rate had become in effect a state property tax prohibited by article VIII, section 1-e of the Texas Constitution,[121] because they and other districts had lost all meaningful discretion to tax at any lower rate.[122] Forty school districts intervened in two groups, six with Edgewood ISD and 34 with Alvarado ISD, opposing the plaintiffs' position but asserting that the public school finance system was inefficient, inadequate, and unsuitable in violation of article VII, section 1 of the Texas Constitution,[123] because the State does not provide sufficient funding.[124] About three months after suit was filed, the trial court dismissed the plaintiffs' claims on the pleadings, concluding that the plaintiffs could not prove an unconstitutional state ad valorem tax unless about half of the school districts, more or less, were taxing at maximum rates, and by the plaintiffs' own admission, less than a fifth of the districts were at the cap at the time.[125] The court of appeals affirmed, not because so many school districts were still taxing below maximum rates, but because it concluded that the plaintiffs had not alleged that taxing at maximum rates was necessary just to provide an accredited education, rather than being used for additional programs.[126]
We reversed. The Legislature, we said, is constitutionally obligated "to make suitable provision for a general diffusion of knowledge through free public schools",[127] and because it "has chosen to rely heavily on school districts to discharge its duty",[128] school districts must tax at levels necessary to achieve the constitutional mandate[129] as well as to meet statutory accreditation standards that the Legislature has imposed to achieve a general diffusion of knowledge.[130] If school districts are forced to tax at or near maximum rates to meet constitutional and statutory requirements, then contro