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MALDEF gets injunction in recapture lawsuit

From their website:

Please attribute the following statement on a Texas court ruling ordering state education officials to cease bypassing existing school funding rules to Marisa Bono, Southwest regional counsel of MALDEF (Mexican American Legal Defense and Educational Fund):

“MALDEF is pleased that the District Court saw through efforts by the Texas Education Agency to circumvent school funding rules. The court was abundantly clear in its finding that efforts to relieve wealthier school districts of their responsibilities to poorer districts under ‘recapture’ amounted to ‘an inadequate, improper, and invalid attempt at a rule amendment.’ As MALDEF argued, and the court found, state education officials failed to comply with the mandatory requirement that any changes in funding rules must include a fiscal impact statement – TEA’s own witness confirmed that this rule change will cost public schools $88 million a year. We call on the Texas legislature to take immediate and binding steps to bar the TEA from doing this again.”

Read the injunction order here.

Read the jurisdiction order here.

See here for the background. I started writing this before there was any reporting on it, just a bit of chatter on Facebook that led me to Google and the MALDEF statement. Now here is the Chron story.

Just weeks after voters approved a $77.5 million payment to the state in so-called “recapture” fees, the Houston school district could be stuck with another $60 million in fees after a judge’s ruling that the state improperly slashed wealthy districts’ bills.

The ruling, by state District Judge Darlene Byrne in Travis County, temporarily halts an agreement by the Texas Education Agency that allowed the Houston Independent School District and other property-rich districts to reduce the amount of “equalization” payments required to fund public education.

The ruling throws HISD’s recapture bill back into question and could affect more than a dozen other property wealthy districts across the state, though no official list has been released.

“We understand the financial situation even wealthy school districts are in, which is why we’re pushing for school finance reform in the Legislature,” said Marisa Bono, southwest regional council for the Mexican American Legal Defense and Educational Fund, a civil rights organization that filed the suit.

“But the solution is not to give wealthy districts a tax break on the backs of property poor districts.”

[…]

The deal was cut in February, when TEA said it would give districts such as HISD credit for half of their local homestead exemptions, along with adjustments for student enrollment and property values, to cut the districts’ recapture bills.

The changes were outlined in a Feb. 1 memo penned by TEA Chief School Finance Officer Leo Lopez that were later incorporated into TEA’s recapture manual.

TEA officials at the time concluded the would result in “no fiscal implications to state or local government, including local school districts.”

But attorneys for the property-poor districts argued the state would lose $88 million in funding, causing significant financial loss to local governments.

In a ruling released late Friday, Byrne concluded that the reprieve granted by TEA was “inadequate, improper and invalid,” and that the TEA manual did not contain an accurate financial note describing the fiscal impact of the changes.

She granted a temporary injunction to halt the recapture calculations until the case can go to trial Aug. 11.

Unless the state works out another way to grant HISD and the other districts a reprieve, the district could be forced to pay $137 million. The adjustments for enrollment and property values were allowed to stand, said Bono, the MALDEF lawyer.

So there you have it. It’s very frustrating, especially with the Senate undermining efforts to address the problem. I don’t know what happens next, but I hope HISD and the TEA can work something out that will be accepted by the judge and the plaintiffs.

MALDEF files suit over change to recapture

This is a twist.

Texas education officials illegally changed how property taxes are calculated in wealthy school districts, with the effect of substantially reducing the funds available for schools in poorer districts, a lawsuit filed Thursday charged.

The change would cost the state’s poorer schools districts and their students approximately $440 million per year or $880 million for the two-year funding cycle, according to the lawsuit filed by MALDEF (Mexican American Legal Defense and Educational Fund) and the law firms Gray & Becker, P.C. and Ray & Wood, on behalf of Le Feria and Joaquin Independent School Districts.

The La Feria Independent School District in Cameron County and the Joaquin Independent School District in Shelby County want the court to permanently block the newly amended rule adopted February 1, calling it invalid and unenforceable.

“Breaking the rules to once again benefit property-wealthy districts to the detriment of our property-poor districts is not the fix we need for our broken public school system,” said Marisa Bono, MALDEF Southwest regional counsel. “We look forward to vindicating in court our clients’ efforts to ensure fair funding for all students.”

Texas’ system of “recapture” requires wealthier school districts with more valuable property to send some of their tax funds to the state to help fund poorer districts. Those funds are then administered through the Foundation School Program.

The recapture formula assesses the contributions of wealthier districts based on the full value of each property. But those districts may provide two types of tax deductions to residents. The first is a mandated $25,000 homestead exemption. The second deduction allows districts the option of granting an additional homeowners exemption of up to 20 percent of a home’s value, known as a local optional homestead exemption (“LOHE”).

State law allows some wealthy districts to reduce their contributions to recapture and the Foundation School Program by recognizing the LOHE-reduced property values. However, state law provided clear conditions to ensure that poor districts aren’t underfunded. Those conditions required that either state lawmakers appropriate more funding, or that there be a surplus in the Foundation School Program. Until recently, the Texas Education Agency (TEA) interpreted the law to apply only when those conditions were met.

But in February, state education officials issued a statement changing its longstanding rule. Lawyers for the two plaintiff school districts argue that education officials illegally bypassed the existing rule, allowing certain wealthy districts with LOHE’s to reduce their contribution to recapture, without appropriating funds to fill the gap.

“The Education Code provides that the mission of the public education system of this state is to ensure that all Texas children have access to a quality education,” said Richard Gray of Gray & Becker, P.C. “The recent actions of the Commissioner work squarely against that mission and will result in funding flowing only to students in certain property-wealthy districts of TEA’s choosing while at the same time cutting funding to other districts. It is estimated that the recent actions of the Commissioner could cost close to one billion dollars for the 2018-2019 school year and that cost will only increase in future years.”

Under the new rule, La Feria ISD will lose over $225,000 per year, or $1,435 per classroom a year. Joaquin ISD will lose over $48,000 per year, or $1,548 per classroom. These financial losses are reflective of the financial loss that many property-poor school districts throughout the state will incur as a result of the new rule.

The lawsuit comes as state lawmakers debate how Texas will finance public education for the more than 5 million students currently enrolled in schools across the state. The Texas Supreme Court ruled in May last year that while the state’s school finance system met “minimal constitutional requirements,” it needed comprehensive reform.

Read the lawsuit here.

This would of course affect HISD, though MALDEF did not mention them by name in that release. KUHF has the only news coverage of this I’ve seen so far.

HISD is not a party in the lawsuit, but said in a statement that it believes the commissioner’s decision was legal and will monitor the case and “is prepared to intervene if necessary to protect the interests of our students and taxpayers.”

At the very least, this puts a bit of uncertainty into the May 6 recapture re-vote, which the HISD Board is trying to sell to voters. One possible way to satisfy the conditions MALDEF is suing over is for the Lege to make up the difference to the school districts that are affected by the re-interpretation of the recapture rules. Rep. Dan Huberty’s HB21 might be able to do this, in an amended form if need be. I don’t know how likely that is to happen, but it’s a possibility. There are a lot of ways this can go, so we’ll have to wait to see what the defendants, the Lege, and the courts do.

What’s the Lege going to do with the revenue?

Not as much as it should, of course, because the Lege never comes close to doing as much as it should. It’s a question of whether they’ll try to address some real problems, or just engage in an orgy of tax cutting.

BagOfMoney

Texans can expect tax relief, a laser focus on border security and more efforts to fight traffic congestion when a cash-flush Legislature convenes in January.

The budget priorities line up with campaign promises from Republican state leaders and lawmakers, who handily won their spots with a message of keeping state government lean while carefully weighing any additional spending for its benefits.

At least some outnumbered Democrats also appear to be on the tax-relief bandwagon, as the state welcomes the prospect of having $5 billion or more in greater-than-expected revenue when the current two-year budget period ends. Anticipated economic growth is expected to yield billions more, with the caveat that uncertain oil prices must temper expectations.

The tax-relief issue “crosses party lines,” said Senate Finance Committee Chair Jane Nelson, R-Flower Mound. “Property taxes are really something that people would like to address.”

Besides property-tax relief – pushed by Sen. Dan Patrick, the incoming lieutenant governor – the potential for cutting the state’s business tax has been highlighted by Attorney General Greg Abbott, the governor-elect.

The devil, as always, is in the details of a state budget that totals $200 billion in the current two-year fiscal period, including state and federal funds that are largely spoken for before lawmakers convene. Education and health and human services alone take up nearly three-quarters of the total.

“I fully expect there to be some tax relief. The question is, what’s the nature of it?” said Rep. John Otto, a Dayton Republican who serves on the House Appropriations Committee.

[…]

What’s clear is that despite the billions of greater-than-predicted dollars awaiting lawmakers’ allocation, the list of programs that can use more money is far longer than the dollars can cover, especially in light of a spending cap on certain general revenue.

“It’s sort of easy when there’s not a lot of money. You just say we haven’t got the money,” said Rep. John Zerwas, a Richmond Republican who serves on the House Appropriations Committee. “Whereas now, I call it kind of a food fight. You’ve got a lot of food on the table, and people are going to start grabbing for it and trying to make sure they get their programs funded at a level that they want.”

Simply keeping current levels of services to a growing population would cost an additional $6 billion to $7 billion in state general revenue, said Eva De Luna Castro of the Center for Public Policy Priorities, which focuses on services important to middle- and lower-income Texans. That’s without addressing the lingering cuts from 2011.

“All we’re hearing about is tax cuts. Nobody is talking about, ‘What did we cut out of the budget in 2011?’ ” she said. “I don’t think it’s exaggerating to say that our future economy and prosperity are at stake. We need good roads but we also need good schools and universities.”

If you think that last bit is just the usual liberal happy talk, you should see what the Texas Association of Business’ wish list for the legislative session looks like. They expect to spend the next six to eight months fighting against the people they just supported for election on these issues, because that’s how they roll. “Border security” is a huge boondoggle for which all indicators are always that we should keep doing what we’ve been doing, which is to say to spend more and more and more on it. And no, the feds aren’t going to cover that check no matter how nicely Greg Abbott asks the President for it. As for property tax “relief”, the proposals put forth by Sen. Kirk Watson and others to increase the homestead exemption would be the most equitable way of doing this, which means it is also the least likely way of it happening. But I suppose anything is still possible before the session begins, just like the possibility than your favorite NFL team can go 16-0 while training camp is still going on. We’ll see what happens when the games start getting played for real.