DALLAS - A Texas judge yesterday issued a temporary restraining order to stop a property-rich school district from circumventing the state's share-the-wealth education finance law and withholding millions of dollars in taxes from its poorer counterparts.
In addition, state district Judge Scott McCown scheduled a hearing in Travis County Court for Monday morning to consider whether a permanent injunction should be granted to block Calhoun County Independent School District from agreeing to a tax abatement with a local manufacturer.
While not wanting to prejudge the issue, McCown indicated from the bench that tax abatements could not be used to avoid sharing property taxes with poorer districts as outlined in Senate Bill 7, according to Buck Wood, the Austin attorney representing the 120 poor school districts that requested the order.
The judge said that "if you grant a tax abatement or extend a tax abatement, you cannot have it deducted from the property tax value of the district," Wood said. "Given the circumstances, it is unlikely that the judge will change his mind."
The hearing was precipitated by a plan proposed by the Calhoun Independent School District to extend a property tax abatement to Formosa Plastics Corp. for several years. In return, the Texas Gulf Coast manufacturer would provide the district millions of dollars in gifts instead of property taxes and that would help the district skirt the school finance law, which requires equalization of property tax wealth. The tax abatements would have amounted to more than $50 million in three years.
The plan, which already had received Calhoun County approval, was set to be acted on by the school district until the judge issued the restraining order.
Calhoun school district officials could not be reached for comment, but other sources said they were concerned that the move could have set a precedent for other wealthy districts trying to skirt the school finance law, approved by the state legislature last year.
Under the law, the almost 100 wealthy school districts that have property valuations of more than $280,000 per student need to redistribute wealth to poorer districts.
The Calhoun district, which is located in Port Lavaca near the Texas Gulf Coast, had a taxable value of $378,947 per student and had to surrender $2.9 million to that state this year. As a result, the tax abatement could have saved the district much money.
"They had their hand caught in the cookie jar, and we caught them. Now, they don't get any cookies," said Craig Foster, executive director of the Equity Center that is representing more than 300 low-wealth districts in Texas and is the primary mover behind the restraining order.
Foster and Wood said they expect McCown to grant the permanent injunction, partially because state attorneys did not oppose the temporary restraining order.
Ron Dusek, a spokesman for for Attorney General Dan Morales, said state attorneys contend that "abatement should not be allowed to work to defeat the effect of Senate Bill 7."
The hearing was the latest skirmish in a 10-year legal battle over the constitutionality of the state's school finance system. In December, McCown upheld the latest so-called Robin Hood law, but the decision has been appealed to the Texas Supreme Court. A Supreme Court ruling is expected this year or early next year.