DALLAS - Texas lawmakers have agreed in principle on a new wealth-sharing plan that would give property-rich districts five options for shifting as much as $600 million a year in taxes to the state's poorest schools.
Bond lawyers familiar with the proposal say, however, that at least two of the five options for tax sharing may be unconstitutional and might not pass muster with the courts, which have given the Legislature until June 1 to devise a new school finance law.
Under a compromise reached late Sunday, lawmakers would redistribute property tax revenues from 109 high-wealth districts, shifting between $400 million and $600 million annually to the poorest schools.
While the proposal mirrors past wealth-sharing plans, this one would give the wealthier districts five options of how their money could be shifted to equalize funding as the Texas Supreme Court has mandated. They are: Merge their tax base with other districts, undergo voluntary consolidation, transfer a part of their tax wealth to the poorest schools, send revenues to the state to be redistributed, or make direct payments to poorest schools.
Gov. Ann Richards and legislative leaders expressed their support for the measure. "I feel very good about the fact that there appears to be a compromise," she said.
Bond lawyers said yesterday that the last two options are unconstitutional and in violation of the landmark Love v. Dallas case that prohibits sharing of property taxes between jurisdictions. They also say that past rulings of the state Supreme Court have made it clear that such proposals are unacceptable.
"I think there is a problem with those," said Fredric A. Weber, a bond lawyer at Fulbright & Jaworski in Houston.
Other bond counsel agreed, but said they would defer final judgment until the Legislature's conference committee finishes outlining the specifics of the bill. "It's so clear that two of those alternatives are unconstitutional that I would hope the Legislature would just knock those measures out," Weber said. "Even though portions of it are unconstitutional, I think the plan as a whole could be saved."
Legal debate over the bill could be moot, since the 10-member House and Senate Conference Committee must agree on the details of the compromise package by today or Wednesday for it to be passed by the June 1 deadline under legislative rules.
Observers say that passing a compromise school finance bill may not be easy because lawmakers are being pressured on several fronts. The courts have said that state funding of schools will be cut off after June I if the Legislature does not pass a finance law that gives the state's 1,048 districts equal access to funding.
At the same time, House and Senate members have bickered over the substance of the legislation. For instance, efforts to reach a compromise nearly collapsed over the weekend when House members insisted on including a measure to give schools relief from costly state mandates. Senate members rejected the idea.
"This compromise is a very delicate thing," said an aide to the House Public Education Committee. "The key is to cover the basics and try to keep out those proposals that may be time bombs waiting to explode. That ain't easy."
One idea expected to be included in the final legislative package is a measure that would have the state create a fund of up to $50 million a year to provide direct debt service subsidies to poor districts. The plan would replace a long-delayed $750 million revenue bond bank to help Texas schools build facilities.
However, it was not clear yesterday if the bill would affect the ability of all districts to issue unlimited tax debt as they now do.
Because of the pending court deadline, schools have been told by the Texas attorney general to complete any debt sales by this Friday. After that warning, which was given April 22, districts submitted 54 issues totaling $749 million for approval, officials said.
Since Jan. 1, districts have sold 117 bond issues totaling $1.69 billion, according to Securities Data Co. Because the bonds closed before the June 1 deadline, bond lawyers say they will be grandfathered from future court or legislative action.
"Any bond delivered prior to June 1 will be all right." said Sheela Rai. assistant attorney general for public finance. For now, most school district officials are taking a wait-and-see position.
"Most schools have sold their bonds and are preparing for the possibility of a cutoff of funding," said a San Antonio investment banker who works with schools. "They expect that it may be a very long summer this year."
