Fitch: Texas Court Leaves School Funding System in Place

AUSTIN, Texas--(BUSINESS WIRE)-- A ruling by the Texas Supreme Court on Friday means public school districts in the state will continue to operate under the current public education funding system, according to Fitch Ratings. The court ruled that the state funding system, while flawed, meets minimum constitutional requirements. One component of the system that was challenged is a local property tax rate cap, a characteristic that limits local revenue-raising flexibility and is common to K-12 education funding in many parts of the U.S. Fitch had made no assumption regarding the outcome of the appeal in its ratings of Texas school district debt since the litigation process began.

Noting the system's current shortcomings, the Supreme Court in its ruling advocated major reforms as opposed to periodic piecemeal programmatic changes. The various parties that had challenged the current funding system now must turn to the state legislature for reforms. The next legislative session begins in January 2017.

A district judge in 2014 had ruled the system unconstitutional, finding the system inefficient, inequitable, and underfunded. The judge had also ruled that local school property taxes are effectively a statewide property tax due to lack of local discretion and therefore are unconstitutional. That ruling was appealed directly to the state Supreme Court.

Additional information is available at 'www.fitchratings.com'.

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Source: Fitch Ratings

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