Last week, trustees with Midland Independent School District voted to sue the Texas Education Agency, challenging Texas’ school finance system over the state’s mandatory school property tax rate and recapture program.
In a unanimous decision, trustees voted to sue TEA Commissioner Mike Morath and state leaders, targeting House Bill 3, which was passed during the 86th Texas Legislature.
House Bill 3 is a sweeping school finance law that changed the order in which funds are applied to finance the Foundation School Program. It also created the Tax Reduction and Excellence in Education Fund, which “consists of certain dedicated funding sources and is to be used to pay the cost of tier one allotments or to reduce district maintenance and operation (M&O) tax rates.”
The law also eliminates the gifted and talented student allotment, high school allotment and the small and mid-sized district and cost of education adjustments to the basic allotment.
According to the lawsuit, the Legislature prohibits Midland ISD from raising and spending money to meet the needs of its students.
“We can sit here on this stage, and we can complain about it,” Midland ISD Board President Josh Guinn said before the vote. But nothing changes, Guinn added, “until you have four people — elected school board members — in the state of Texas say, ‘Enough’s enough. You’re going to stop stealing our community’s money.'”
During the 2025-26 school year, the TEA set Midland ISD’s Maximum Compressed Rate (MCR) at $0.5814 per $100 of taxable value.
The lawsuit argues that Morath, the TEA, and state officials violated Midland ISD’s rights under Article VIII, Section 1-e of the Texas Constitution. It also argues that the Texas Supreme Court “has reached the merits of claims that a school property tax violates Article VII, Section 3’s voter- approval requirement, in circumstances materially indistinguishable from those presented here.”
Midland ISD is asking Travis County court for a declaratory judgment that the MCR levy mandate and recapture provisions in Chapters 48 and 49 of the Texas Education Code constitute a prohibited state ad valorem tax.
According to The Dallas Express, if Midland ISD is successful, the lawsuit could require state lawmakers to restructure the formulas governing school property taxes, recapture and local control across Texas.
