Senator Eliot Shapleigh - El Paso, Texas

An Austin judge declared the Texas school finance system unconstitutional Wednesday and ordered the state to close public schools by Oct. 1, 2005 unless lawmakers create a new system.

Attorney General Greg Abbott said he would appeal the decision to the Texas Supreme Court.

District Judge John Dietz said there is not enough money in the system to provide an adequate education as required by the Texas Constitution. He said school districts are limited by the state-mandated cap on their local property tax rates.

"These districts have lost all meaningful discretion" in setting their tax rates, Dietz said.

The lawyers representing about 30 school districts that sued the state argued that a shortage of state funding has caused many school boards to set their tax rates at the state maximum for maintenance and operations, which is $1.50 per $100 in property value.

The state Constitution forbids a statewide property tax, but district lawyers argued that the cap has become a statewide tax because 48 percent of Texas districts hit the maximum last year and 67 percent of districts were within 5 cents.

The districts, which all have low per-student property values, argued that the system allows districts with higher property values to spend as much as $1,700 more per student.

"The plaintiff school districts have no discretion in their spending," Charles Bramblett, a lawyer for a group of districts including Austin, said during closing arguments Wednesday.

In a 1995 ruling upholding the current system, the Texas Supreme Court said the property-tax cap effectively would be a statewide tax if it became "a floor as well as a ceiling."

Districts also argued that the system does not provide the money needed for some of the state's fastest-growing populations, such as those who speak little English or come from low-income families.

"The current system, for all the good we've done in the past, is constitutionally inadequate to meet the higher needs and expectations the Legislature has set," said school district lawyer David Thompson.

State lawyers argued that the system meets the minimum demands of the Texas Constitution.

They said districts exert considerable control over their budgets and are not forced to tax at the maximum level. They also presented a study from Texas A&M University researchers saying there is enough money in the system to provide an acceptable education, but that some districts are not spending wisely.

Deputy Associate Commissioner Joe Wisnoski of the Texas Education Agency testified earlier this week that school districts could raise about $300 million more per year if none of them gave optional homestead exemptions. That amount accounts for almost 1 percent of annual education spending in Texas.