The Midland Independent School District is taking its fight over Texas' school finance system to court.
In a unanimous vote Tuesday night, the Midland ISD Board of Trustees approved a lawsuit against Texas Education Agency Commissioner Mike Morath, arguing that the state's school funding formula has stripped locally elected school boards of their authority to set tax rates and control their own budgets.
At the heart of the lawsuit is Texas' "Robin Hood" recapture system, which requires property-wealthy school districts to send a portion of their local property tax revenue back to the state. Those dollars are then redistributed to districts with lower property values.
The system has been in place since the early 1990s after the Texas Supreme Court ruled the state wasn't meeting its constitutional obligation to provide "an efficient system of public free schools."
For Midland ISD Board President Josh Guinn, the decision to sue has been years in the making.
"This has been something I've been looking at for quite a while. When I first came on the board, I asked … 'Why don't we just not pay it?' And obviously, that's not the right thing to do," Guinn told fellow trustees during Tuesday's meeting.
Instead, he said he began working with attorneys to find another path.
"So, I started working with the attorneys and just kind of tossed my idea around, and this is what we've landed on."
Guinn first revealed plans for the lawsuit in a July 4 Facebook post, saying Midland ISD has sent more than $1 billion to the state through recapture over the years.
The lawsuit argues that while Texas law says locally elected school boards have the authority to govern their districts, adopt budgets, set tax rates and appropriate funds, those powers no longer exist in practice.
"Texas law grants Midland ISD's Board of Trustees the exclusive authority to govern the district, adopt a budget, set a tax rate, and appropriate funds," the lawsuit states. It goes on to argue that under the Foundation School Program created through House Bill 3, "each of those grants of authority has become a legal fiction."
Under the current system, school districts levy a maintenance and operations tax rate to fund day-to-day operations. The state has gradually compressed that rate as part of property tax relief efforts. If a property-rich district collects more money than the state says it needs for basic education funding, the excess is recaptured and redistributed elsewhere.
According to the lawsuit, Midland ISD has virtually no control over that process.
"The Board adopts a tax rate and levy for Tier One that is calculated entirely by the Commissioner, with no discretion to adopt a different rate," the lawsuit says. "It adopts a budget in which the State controls the disbursement of nearly every dollar. And it must certify tax-increase notices for tax decisions the Board itself did not make."
In a news release issued Wednesday, Midland ISD put real numbers behind its argument.
The district said its maintenance and operations tax rate for the 2025-2026 school year will generate about $313 million from Midland taxpayers.
But according to the district, it will only keep about $241 million.
"Of that $313 million, the state allows Midland ISD to keep only $241 million. The remaining $83 million, 27 cents of every dollar Midland ISD taxpayers pay, is confiscated by the state through 'recapture' and sent to Austin," the district said. "And the state dictates how nearly every dollar of the $241 million Midland ISD does keep must be spent, leaving the district's own board with almost no say over its own taxpayers' money."
Guinn argued that if Midland ISD has already approved a budget, the district shouldn't be forced to collect more tax revenue simply so it can send millions back to Austin.
"In theory, we already approved the budget, so we know how much money we need for next year," he said. "When Austin is compressing our tax rate higher than the amount that we've already approved, and already said we need, so we can send money back to the state — that is essentially a property tax, a statewide property tax for the 2025-2026 school year."
Midland ISD expects to send the state an $83 million recapture payment next month.
"They set our tax rate $83 million higher than what we essentially needed. Right? That's the budget we approved," Guinn said. "That is a statewide property tax, and it's in violation of Article 8 of the Texas Constitution."
He later added, "When you're making school districts set a tax rate higher than what their community, their district needs, in order for us to send money back to the state — that's a statewide property tax. You can paint an apple orange and it's still an apple. All we are is the middleman tax collector for them."
To illustrate his point, Guinn turned to Midland ISD Chief Financial Officer Tucker Durham.
"If we as a board could work with you — you're the CFO — you know the finances of this district better than anybody. Why can't we set a tax rate to have a 'no new revenue' and give Midland taxpayers their $83 million back?" Guinn asked.
"Unfortunately, that's not how it works with the overall school finance system," Durham replied.
"I know that. You know that," Guinn responded. "That was just an example — that's essentially this lawsuit in a nutshell. We, as elected officials, do not have the authority to set the tax rate for Midland ISD. And I just find that a huge problem."
Midland ISD serves about 29,000 students in the Permian Basin. According to the district, 60% of its students are economically disadvantaged, 23% are emergent bilingual learners and 13% receive special education services.
