DALLAS - The Texas attorney general's office has lifted its hold on approval of new school bond issues after a state district judge filed a clarification order on his recent ruling upholding a share-the-wealth education finance law.
"I think this order satisfies the concerns in the near term," said Jim Thomassen, public finance chief for the attorney general's office. But some bond issuers could have problems later on."
The order, signed by state District Judge Scott McCown late Monday afternoon, says that school districts can continue to issue unlimited taxation bonds in some cases under the state's education finance law that redistributes taxes from rich to poor school districts.
As a result, Thomassen said his section has approved several school bond issues that were delayed last week pending clarification of districts' ability to issue unlimited taxation bonds.
However, the order still could hold up some bond sales in the future because it changes at least one previous interpretation of the law. Under the judge's order Monday, districts issuing bonds that result in the tax rate exceeding a $1.50 limit per capita must offset increases by lowering the rate for operations and maintenance or by getting voter approval.
The order applies to bonds issued after June 1, 1993, which is the date that a new finance law, passed by the Texas Legislature this spring, became effective.
"Thus, the voters can determine whether they wish the additional rate necessary to pay the bonds to be provided by an offsetting reduction in the maintenance tax or ... by voting in an election held either prior to or subsequent to the issuance of the bonds," McCown said in his order.
In the past, districts could exceed the limit without an election if they met certain standards.
McCown's interpretation of the law is not expected to have any impact on bonds that have been issued, Thomassen said. However, in the future, problems could "emerge when school districts pushing the $1.50 limit want to issue bonds and find they can't," he said.
Bond industry sources said dozens of the almost 1, 100 school districts in Texas could feel the impact of the order, particularly fast-growing and poor districts along the Texas-Mexico border and fast-growing suburban districts outside of major cities, including Dallas, Houston, and Austin.
"I can guarantee you that it will be a bunch of them," said Chuck Kobdish, an attorney with McCall, Parkhurst & Horton, which represents hundreds of school districts. "Both rich and poor districts are going to be affected."
For example, the Eanes Independent School District, outside fast-growing Austin where high technology business is booming, has a tax rate per capita of $1.80. If the district has to cut 30 cents out of its operations budget, "you have severely crippled them," Kobdish said.
Fredric Weber, an attorney with the Houston law firm of Fulbright & Jaworski, agreed that the order could Precipitate troubles in some districts. issuing bonds until the case is heard on appeal, then serious problems with overcrowding could result," said Weber, whose firm also represents many Texas schools.
The McCown clarification order is the latest development in a nine-year-old legal dispute in Texas over shifting education funding from rich to poor districts. After a lengthy trial, the district judge upheld a school finance law passed by the Texas Legislature this spring, saying it provided a fairer method of funding education as far as it went.
But McCown said a more equitable system needed to be found for capital spending. As a result, he ordered the Legislature to come up with a fairer system by Sept. 1, 1995, or all bond issuance would be halted.
Meanwhile, the attorney general's office sought clarification of the judge's order to clear up confusion of bond approvals in the interim and several groups were planning to appeal the ruling to the Texas Supreme Court.
Weber has said he believes McCown's ruling may not hold on the expected appeals if past patterns are followed. The issue has gone to the Supreme Court Several times.
The battle in education funding began in 1984 when the Edgewood School District in San Antonio led other poor districts in filing a state court suit against Texas to change its funding formula.
Since then, the state has grappled with several plans. The most recent was SB 7, which gives 98 higher wealth districts five options to share Property taxes.
The law shifts an estimated $450 million in local property taxes to lower wealth districts from higher wealth districts, which are defined as those having more than $280,000 in property value per student.