Midland ISD trustees could take the first step Tuesday toward what may become one of the biggest school finance lawsuits Texas has seen in years.
The board is scheduled to vote on whether to authorize a constitutional challenge to the state's school funding system, arguing that Texas has taken so much control over local property taxes that they have effectively become an illegal state property tax.
The item appears on Tuesday night's agenda as "Discussion and Possible Board Action to Authorize Litigation Challenging Texas Foundation School Program under Article VIII, Sec. 1-e of Texas Constitution." Board President Josh Guinn is expected to present it during the 5:30 p.m. meeting at Bowie Fine Arts Academy.
If trustees approve the measure, Midland ISD would move forward with filing a lawsuit that could eventually force lawmakers to revisit major pieces of Texas' public school funding system.
A lawsuit that's still taking shape
The proposed lawsuit isn't filed yet.
A 74-page draft petition attached to the board agenda names Texas Education Commissioner Mike Morath, in his official capacity, and the State of Texas as defendants. But it also leaves several blanks, including the court where it would be filed and the names of taxpayer plaintiffs, making clear the document is still a draft.
Tuesday's vote is simply about whether the district wants to move ahead.
The argument: Who really controls local taxes?
The heart of Midland ISD's case is House Bill 3, the Legislature's sweeping 2019 school finance overhaul.
The district argues that local trustees no longer have meaningful control over the tax rate that pays for basic classroom operations.
Instead, the Texas Education Agency calculates what's known as the Maximum Compressed Rate, or MCR, for every school district. According to the draft petition, districts must adopt that rate or risk losing state funding.
Midland argues that when the state sets the tax rate, decides how much money districts keep and dictates much of how it is spent, the tax stops being local.
The petition points to Article VIII, Section 1-e of the Texas Constitution, which states:
"No State ad valorem taxes shall be levied upon any property within this State."
The lawsuit also argues Midland voters never approved the Tier One maintenance and operations tax, as required under another section of the Texas Constitution.
More than $1 billion sent through recapture
According to the draft petition, Midland ISD's maximum compressed rate for the 2025-26 school year is set at $0.5814 per $100 of taxable value.
That rate is expected to generate roughly $313 million for Tier One funding.
The district also expects to send about $83 million back to the state through recapture on Aug. 15.
The draft includes a chart estimating Midland ISD has paid, or will have paid, more than $1.08 billion through recapture since the 2013-14 school year.
Rather than challenging a single payment, however, the district is taking aim at the system itself.
The proposed lawsuit asks a Travis County court to declare portions of the Texas Education Code unconstitutional if they require what Midland calls a state property tax, force districts to levy taxes without voter approval or prevent locally elected school boards from exercising meaningful control.
If a court ultimately agreed, the impact would reach well beyond Midland.
Texas uses the same funding formulas for every public school district, meaning a successful challenge could eventually require lawmakers to rewrite significant portions of the Foundation School Program.
That wouldn't happen overnight. Any case of this size would almost certainly spend years moving through the courts.
Building on decades of court battles
The draft petition leans heavily on a long line of Texas Supreme Court decisions involving school finance.
In 1992, the court struck down a county education district tax because the state controlled the tax rate and its revenue without voter approval.
Three years later, however, the court upheld the recapture system that's still in place today.
The court again ruled against the state in 2005 after concluding districts had little practical choice but to tax at the maximum rate allowed.
But in 2016, the justices upheld the school finance system then in place, writing that while it wasn't perfect, it still met "minimum constitutional requirements."
Midland argues House Bill 3 changed the landscape by replacing local discretion with commissioner-calculated tax rates.
Even so, the state would enter the case with strong legal precedent on its side. Texas courts have repeatedly upheld recapture as a constitutional way to equalize school funding, and districts still have some flexibility through Tier Two enrichment taxes.
The state's position
The Legislative Budget Board describes recapture as a tool that helps equalize education funding across Texas.
According to the board, the money supports the Foundation School Program rather than unrelated state spending.
The budget board projects the state will collect roughly $2.5 billion in recapture from 213 school districts during fiscal year 2027.
Midland's petition argues that once recapture dollars are pooled with other state education funds, they ultimately help pay for statewide priorities, including charter schools. The petition also acknowledges there's no way to trace Midland's individual tax dollars once they enter that larger funding pool.
What's next?
The draft petition was prepared by attorneys Kevin O'Hanlon and Kara Belew, both of whom previously served in senior legal and policy roles within Texas state government.
Trustees may discuss the proposal with attorneys behind closed doors Tuesday evening, but any decision to authorize the lawsuit must be made in open session.
As of now, the lawsuit remains just that—a proposal. Neither Commissioner Mike Morath nor the State of Texas has responded because no case has been filed.
