AUSTIN, Texas -- Lawyers for property-rich districts in Texas yesterday argued that the state's new school finance law is illegal because it violates the Texas constitutional ban on statewide property taxes.

In the opening day of a week-long hearing, lawyers argued that the plan would illegally force some districts to share an estimated $400 million of their tax wealth with neighboring schools.

"What this bill is doing is devastating to the school districts that are the educational leaders in Texas," said Earl Luna, attorney for the wealthy, suburban Dallas schools fighting the plan.

Travis County District Judge Scott McCown yesterday began what would be the first of at least two sets of hearings concerning the constitutionality of SB 351, the school finance law adopted in April by Texas legislators.

But lawyers for the plaintiffs in the landmark Edgewood v. Kirby case said rich districts are not the only ones that will see taxes increase because of the new law.

"All the tears are for naught because all they have to do is raise their taxes," said Al Kauffman, lead attorney in the case. "To some extent, the legislature has punished the poor districts by saying that, in order to have equity, you're going to pay a very high price for it."

The plan creates a two-tier funding system by establishing countywide education districts empowered to collect a state-set tax of 72 cents per $100 of assessed valuation next year. That property tax would rise to $1 per $100 by 1994.

The money collected would be redistributed within the district to schools on an equalized basis.

At the same time, the new system allows each of the states' 1,054 districts to levy up to 50 cents per $100 of assessed valuation to pay new debt service, build facilities, or finance academic programs.

Lawyers argued that the new system is nothing more than a statewide property tax -- which is prohibited by the state constitution.

"It's been the law of Texas for 100 years that you can't do that," Mr. Luna told reporters during a break in the proceedings.

He is not alone.

"The statute creates a tax system, and the legislature sets the tax and mandates how it is to be used," argued James George, a lawyer representing South Texas taxpayers. "Those are the components that make it a state tax."

During the morning session, Judge McCown decided to hear only arguments on the validity of the new tax structure. However, he deferred hearings on whether a new law is adequate or equitable until after the Texas Legislature writes its fiscal 1992-93 budgets during a special session set to begin July 8.

At the same time, Mr. McCown refused to hear arguments over whether the countywide education districts violate the federal constitutional principle of one man, one vote.

Lawyers for the plan argued that because the countywide district boards would consist of one appointed representative for each school district, small and large schools alike would have the same number of votes.

Assistant Attorney General Toni Hunter argued that the system is constitutional, adding, "This is the kind of blueprint that's in the court's decision."

In January, the Texas Supreme Court struck down the state's school funding system for the second time since 1989, and ordered lawmakers to devise a more equitable plan.

During the first day of testimony yesterday, there was agreement by advocates and critics of the new system that a fair plan was needed to fund education. But there was disagreement over how to pay for it.

William Sternberg, a south Texas farmer, testified that the new funding system would more than double the property taxes on his home and farm.

While agreeing that a more equitable system was needed, he told the judge, "They are trying to do it all with property taxes. I think we need to spread the cost around."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.