Texas’ Supreme Court has ruled that a lawsuit challenging South Texas Independent School District’s decades‑old property tax may move forward, holding that taxpayers—but not a neighboring school district—have standing to sue.
The case could establish how far local entities may go in changing the use of voter‑approved taxes without going back to the ballot box.
Background
The dispute stems from a special property tax in Willacy County that was originally approved by voters in 1974 to fund the Rio Grande Rehabilitation District for Handicapped Persons, not a traditional school district.
In 1983, that rehabilitation district unilaterally repurposed itself into South Texas ISD, a regional magnet school district, and continued collecting the same tax without ever returning to voters for approval of the new purpose.
Willacy County taxpayers argue they are now being double‑taxed to support both Lyford CISD and South Texas ISD, even though voters never authorized a school district tax for STISD. They also contend the tax has created an unequal funding landscape, with STISD collecting substantial local revenue on top of full state funding.
As previously reported, STISD is flush with cash. As of 2022, it had over $40 million in unassigned funds, compared with Lyford CISD’s roughly $6 million.
The Lawsuit
After STISD set its 2023 property tax rate, Willacy County taxpayers and Lyford CISD filed a lawsuit, asking a Willacy County district court to block collection of the tax and to declare it unlawful.
Municipal attorney Art Martinez de Vara told Texas Scorecard that, in his view, “the wrongful act here is not the collection of the tax, but its expenditure on uses not authorized by voters,” emphasizing the case as a test of taxpayers’ ability to hold government entities accountable for how they spend public funds.
The district court initially granted the taxpayers a temporary restraining order, but the 13th Court of Appeals reversed, concluding that neither the taxpayers nor Lyford CISD had standing to challenge the tax.
Despite acknowledging that the original tax should have gone back to voters before the rehabilitation district converted into a school district, the appellate court said Willacy County residents had effectively ratified STISD’s change in purpose by paying the tax and accepting its benefits for decades. The court warned that undoing a 40‑year‑old revenue stream could disrupt government operations.
Plaintiffs immediately appealed to the Supreme Court of Texas.
The Ruling
Last week, Texas’ Supreme Court ruled that Willacy County taxpayers have standing to sue—reversing the appellate court ruling.
The Court determined that taxpayers face a real and imminent injury as a result of STISD’s conduct. This “pocketbook injury” is continuous and could be redressed by a ruling in the favor of the taxpayers, regardless of how long it has been ongoing or how expectant STISD may be of receiving these funds.
“The Taxpayers here each allege a particularized injury-in-fact that is traceable to the defendants, and they seek a remedy that would redress that injury: an injunction barring STISD’s unlawful assessment and the County defendants’ impending unlawful collection of the challenged tax,” reads the opinion.
However, the Supreme Court of Texas agreed with the court of appeals that LCISD lacked standing—partially because its claimed injuries are merely speculative. Only the taxpayers’ claims will move forward.
The case has been remanded to the appeals court to consider additional jurisdictional hurdles that may bar the taxpayers’ claims—including an assertion by STISD that it is protected by governmental immunity.
Should the taxpayers clear those additional procedural hurdles, the case would return to the trial court for a substantive decision on whether STISD’s property tax—repurposed without voter approval four decades ago—violates the Texas Constitution.
Any final ruling could have broader implications for taxpayer standing and for how far local entities may go in changing the use of voter‑approved taxes without going back to the ballot box.
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