Midland ISD Board of Trustees unanimously approved filing a lawsuit to challenge Texas’ school finance recapture or “Robin Hood” program, which requires property-wealthy school districts to send part of its local property tax revenue to help fund property-poor districts.
The lawsuit argues the system functions as an unconstitutional statewide property tax, prohibited under Article VIII, Section 1-e of the Texas Constitution.
“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,” Midland Board President Josh Guinn said, calling the district a “middleman tax collector” for the state.
The current recapture system operates under House Bill 3 from 2019, which replaced local rate-setting with a commissioner-calculated “maximum compressed rate” every district must adopt.
“We as elected officials do not have the authority to set the tax rate for Midland ISD,” Guinn said.
The lawsuit relies heavily on the Texas Supreme Court’s 1992 Edgewood III decision, which held that a local property tax becomes an unconstitutional statewide property tax when the state effectively controls the tax rate, requires districts to levy the tax, and dictates how the revenue is distributed.
The Texas Supreme Court upheld the recapture system in its 2016 decision in Morath v. Texas Taxpayer & Student Fairness Coalition. However, Midland argues that because the ruling predated House Bill 3, it no longer governs the current system.
District officials said Midland ISD has paid more than $1 billion in recapture payments since 2013 and is set to send another $83 million on August 15, roughly one-quarter of its local property tax revenue.
The lawsuit was filed Wednesday in a Travis County district court. Midland ISD trustees said they hope other school districts will join the challenge.
