Midland ISD trustees voted unanimously Tuesday night to authorize a constitutional lawsuit challenging Texas’ school-finance system, setting up a fight over the state’s mandatory school property-tax rate and recapture program that district leaders said could force a statewide rewrite.
All six trustees present voted in favor shortly after 9 p.m. on July 21, following about 44 minutes of public discussion. Board President Josh Guinn said Tuesday that attorneys planned to file the lawsuit Wednesday in Travis County District Court.
The vote moves Midland beyond the proposal stage previously reported by The Dallas Express. The district’s 74-page proposed petition names Texas Education Commissioner Mike Morath, in his official capacity, and the State of Texas as defendants.
Board calls district a state tax collector
Guinn said the state, not Midland’s elected trustees, determines the Tier One maintenance-and-operations tax rate that funds basic education. “All we are is the middleman tax collector for them,” Guinn said. “We’re collecting the taxes, we’re sending it to the state.”
The lawsuit targets House Bill 3, the 2019 school-finance overhaul that created the current maximum compressed rate, or MCR, structure. The Texas Education Agency calculates each district’s Tier One rate, and the petition argues Midland must adopt it or face a corresponding funding reduction.
Midland contends that this level of state control transforms a nominally local levy into a state property tax prohibited by Article VIII, Section 1-e of the Texas Constitution. The petition separately argues that Midland voters never approved the required Tier One levy as Article VII, Section 3(e) requires.
TEA set Midland ISD’s final 2025-26 MCR at $0.5814 per $100 of taxable value. The petition says the rate generated approximately $313 million in Tier One collections and requires the district to send about $83 million through recapture by August 15. A chart in the petition totals actual and estimated recapture payments since the 2013-14 school year at more than $1.08 billion.
District seeks to protect disputed $83 million payment
Attorney Kevin O’Hanlon told trustees that the Texas Attorney General’s Office contacted him before the vote about Midland’s upcoming recapture obligation. O’Hanlon said the district would try to negotiate a Rule 11 agreement identifying where the money could remain while the lawsuit proceeds.
If the parties cannot reach an agreement, O’Hanlon said the district could deposit the payment into the court registry. He said that approach would seek to keep Midland in technical compliance while preserving the district’s ability to recover the money if it ultimately wins.
Guinn said attorneys estimated the litigation could cost approximately $1 million, depending on how long the case continues. O’Hanlon estimated it could take about a year and a half to work through the courts.
O’Hanlon said Midland had not solicited other districts before the vote. Trustees said they expected other recapture districts to join and share the expense, but Guinn said Midland would proceed regardless.
Trustees answer questions about cost and precedent
Midland resident Amber Davidson questioned the proposal during public comment. She asked what had changed since the Texas Supreme Court upheld the school-finance system in 2016, how the district would pay for prolonged litigation, what would happen if Midland lost and whether other districts would participate.
O’Hanlon said the case would turn on the constitutional limits of state control, not on disputed facts about how the school-finance system operates. “The numbers are the numbers. The money goes where it goes,” he said. “This is going to be a legal challenge, not a factual challenge.”
O’Hanlon said Midland’s claim differs from the adequacy and equity arguments that dominated the 2016 school-finance case.
The petition builds on a long line of Texas Supreme Court school-finance cases. The court struck down a state-controlled county education district tax in Edgewood III in 1992 but upheld the modern recapture mechanism in Edgewood IV three years later.
The court upheld the system then in place in 2016, finding that districts generally retained meaningful discretion. Midland argues that House Bill 3 changed that structure by requiring districts to adopt a commissioner-calculated MCR. The 2016 ruling also left open the possibility that a single district could prove a violation by showing it had no meaningful choice but to tax at or near a state-imposed rate.
Existing precedent still gives the state substantial defenses. The Supreme Court has upheld recapture as an equalization mechanism, and districts retain some authority to raise Tier Two enrichment revenue above the MCR.
Challenge could force statewide rewrite
Midland plans to ask a Travis County district court to declare parts of Education Code Chapters 48 and 49 unconstitutional and unenforceable to the extent they impose a state property tax, compel a levy without voter approval or deny local trustees meaningful control over Tier One revenue.
The Legislative Budget Board describes recapture as a method of addressing unequal access to school revenue and financing the Foundation School Program. State projections cited in Midland’s petition show recapture reaching about $2.5 billion from 213 districts in fiscal year 2027.
A Midland victory would not automatically create a replacement system. It could instead require lawmakers to restructure the formulas that govern school property taxes, recapture and local control across Texas.
Before the vote, Guinn said, “The only guarantee I can make on this deal is if we do nothing today, nothing changes tomorrow.”
Provided by Dallas Express
