DALLAS - More than 150 representatives from Texas school districts and other groups yesterday filled a state district courtroom in Austin when a trial on the constitutionality of a new school finance law began.
State District Judge Scott McCown is presiding over the trial, which is expected to continue for three to four weeks as dozens of school districts argue that the court should strike down a new Texas school finance law.
The trial is the latest skirmish in a nine-year-old legal battle over education funding that centers around a controversial "Robin Hood" plan forcing wealthy school districts to share funds with poorer districts.
Several months ago, the Texas Legislature passed a law that would require the 98 wealthiest school districts - those with more than $280,000 in property valuation per student - to share property tax revenues with poorer districts. Under the plan, up to $600 million could be shifted.
That law has now drawn challenges from both the high-wealth and low-wealth districts, and their arguments will be weighed by McCown in state district court.
Meantime, the bond industry in Texas is waiting to find out the results of McCown's ruling on the constitutionality of the law and its effect on school funding and debt issuance.
Despite the wariness of school districts, bond experts said they do not expect the trial to affect bond issuance in the short run but said it could have an effect once the judge rules or the case reaches the Texas Supreme Court.
For now, "it's a risk, but it is not preventing school districts from borrowing," said Will Carney, a vice president of public finance for the Dallas office of Rauscher Pierce Refsnes. But in the future, some issuers "are afraid the judge will shut them down," he said.
However, Jim Thomassen, director of the Texas Bond Review Board who will return to the state attorney general's office as public finance chief within two weeks, said he believes that McCown would not halt school bond issuance in the future.
"We never know, but I don't expect that," Thomassen said. The situation should become more clear in several months, when the case will be probably appealed to and reviewed by the Texas Supreme Court, he said.
Earlier this year, the attorney general's office placed a moratorium on selling debt after June 1 until a "constitutionally sufficient plan" was agreed on. The moratorium was lifted this summer when McCown signed an interim order allowing bond financing to go forward.
"Therefore, this office will continue to review and approve school district obligations ... unless and until there is adverse court action," wrote Sheela Rai, former assistant attorney general in charge of public finance, in a letter dated Sept. 15.
Before the court takes any action, the opponents of the law will get their chance to argue against it.
Poorer school districts contend that the new system still leaves sizable funding gaps between high- and low-wealth districts and does little to change the inequities that prompted the original school finance lawsuit in 1984.
On the other hand, the more affluent school districts say the state's use of local property taxes is tantamount to a state property tax and therefore banned by the Texas Constitution.
