Chapter 1: Introduction

1.1 Constitutional Mandate: *Edgewood* Through *Morath*

The Texas Constitution mandates the Legislature to "establish and make suitable provision for the support and maintenance of an efficient system of public free schools" (Tex. Const. Art. VII, §1). This sentence, written in 1876, is the constitutional basis for a public school finance system that today distributes over $70 billion annually. The system funds over 1,200 districts and approximately 180 charter school operators. Together, these entities serve the state's 5.5 million public school students. This constitutional mandate is the legal foundation for this research.

In the first century of public schools in Texas, grave disparities developed between property rich and property poor districts. José A. Cárdenas, former Edgewood Independent School District (ISD) superintendent and founder of the Intercultural Development Research Association (IDRA) documents these disparities in his book, "Texas School Finance Reform: An IDRA Perspective" (Cárdenas, 1997). In 1968, Edgewood ISD became involved in school finance litigation. During the trial, Cárdenas served as an expert witness. In 1971, a lower federal court ruled the Texas school finance system unconstitutional on the basis of the equal protection clause of the 14th Amendment. On an appeal from the state's attorney general, the case San Antonio ISD v. Rodriguez (1973) ended up before the U.S. Supreme Court. In their ruling, the Supreme Court overturned the lower court's decision, finding education is not a fundamental right under the U.S. Constitution. While the Rodriguez case closed the federal courthouse door to school finance reform, it opened a state-level path. In the years that followed, the Mexican American Legal Defense and Educational Fund (MALDEF) began preparing a state constitutional challenge under Art. VII §1 (Cárdenas, 1997).

In 1989, a new case had made its way to the Texas Supreme Court. In Edgewood ISD v. Kirby (Edgewood I, 1989), the Court unanimously struck down the state's school finance system as unconstitutional. This case marked the beginning of a series of decisions that have come to define the constitutional floor for the state's school finance system. In the ruling, Justice Oscar Mauzy defined "efficient" as "substantially equal access to similar revenue per pupil at similar levels of tax effort" (777 S.W.2d 391, 397). In Edgewood II (1991), the Court struck down the Legislature's attempt at reform, Senate Bill 351 (SB 351, 1991), as insufficient. Finally in* Edgewood III* (1992), the Court's ruling upheld Senate Bill 7 (SB 7, 1992), which included the recapture system widely known as "Robin Hood". In the fourth and final decision (Edgewood ISD v. Meno, 1995), the Court ruled the Legislature has broad discretion as long as the structural floor is met.

The Court added a suitability requirement, ruling that the system must accomplish "a general diffusion of knowledge to all children". The Court established three quantitative benchmarks: 98% of revenues should be equalized, 85% of the state's students should be part of this equalized system, and the funding gap between districts must not exceed $600 per weighted student (893 S.W.2d 450).

Decades later, the Court further refined the constitutional floor. Plaintiffs from over 600 school districts, along with taxpayer groups and parents, sued the state arguing that the school finance system had deteriorated to the point of unconstitutionality. In Morath v. Texas Taxpayer and Student Fairness Coalition (2016), the Court upheld the system. In the ruling the Court articulated a three-prong test under Art. VII §1, establishing the standards of financial efficiency (substantially equal access to revenue per pupil at similar tax effort), suitability (whether the system's structure is sound enough to achieve its constitutional purpose), and adequacy (whether the system produces sufficient educational output). The adequacy test, measured by student performance rather than financial inputs,[a] was a key shift in the way the Court interpreted Art. VII §1. In the Morath decision, the Court found the system met all three standards, but just barely. The Court described the system as "ossified" and "ill-suited for 21st century Texas". The Court specifically flagged the use of frozen statutory funding weights, which have remained unchanged since 1984, warning that further deterioration of the system would not withstand judicial review (Morath v. The Texas Taxpayer and Student Fairness Coalition, No. 14-0776, Tex. 2016).

The Morath Court evaluated a system of 1,200 ISDs funded through the Foundation School Program (FSP). At the time of the ruling, approximately 700 charter campuses operated in overlapping service areas, receiving 100% state funding without property tax revenue or bond elections. The Court's three-prong constitutional test was applied exclusively to the ISD funding structure. No party raised the question of whether simultaneous state funding of ISDs and charter competitors in the same territory satisfies the efficiency standard.

1.2 The Foundation School Program Explained

The FSP is broken into two tiers. Tier 1 establishes a basic allotment per student in average daily attendance (ADA), adjusted by the Cost of Education Index for geographic cost differences. Tier 1 funding is further adjusted according to the size of the district (Tex. Educ. Code § 48.051). On top of the adjusted allotment, districts receive weighted supplements for special education, bilingual education, career and technical education (CTE), and compensatory education (Tex. Educ. Code §§ 48.102, 48.104, 48.105, 48.106). Tier 2 provides additional funding tied to local tax effort, guaranteeing a minimum yield per penny of tax rate (Tex. Educ. Code § 48.202).

There are two types of taxes to consider. Maintenance and Operations (M&O) are taxes levied to fund salaries, instructional materials, utilities, and school programs. M&O taxes are subject to recapture ("Robin Hood"). This means that property-wealthy districts send excess local revenues to the state for redistribution to property-poor districts (Tex. Educ. Code § 49.001). In school year 2023-24, recapture transferred approximately $4.7 billion from property-wealthy districts to property-poor districts statewide. In contrast, Interest and Sinking (I&S) taxes are debt service on bonds for facility construction, renovations, and technology (Tex. Educ. Code § 46.003). I&S taxes are exempt from recapture. Recapture applies only to M&O revenue. I&S revenue, which funds bond debt service, is exempt.

Charter schools are funded under a separate fiscal structure. They generate no local property tax revenue and do not hold bond elections, and receive 100% of their revenue from the state through per-pupil allotments. For facilities, charter operators rely on a combination of state per-pupil facility allotments (set at $372.90 per ADA under House Bill (HB) 2 in 2025), revenue bonds backed by their FSP income stream, Charter School Finance Corporation (CSFC) bond issuances, federal Charter School Program (CSP) grants, and private financing. Because charter facility funding does not require voter approval, charter operators can open new campuses based on organizational capacity and market demand rather than community electoral support.

An ISD seeking to build a new school must place a bond proposition before voters, win majority approval, and then issue bonds backed by I&S tax revenue. ILTexas, a charter operator, received TEA approval for three new Liberty County campuses in a single amendment cycle, with a 3-day public comment window and no voter approval required. Cleveland ISD, the local ISD, failed four of five bond elections between 2019 and 2023 during the same period. The state paid Cleveland ISD's per-pupil FSP allotment and simultaneously paid ILTexas's per-pupil allotment for each student who enrolled in the new charter campuses.

Charter enrollment in Texas grew from approximately 250,000 students in 2016 to over 400,000 by 2024 (Texas Education Agency, 2024). The Morath Court issued its ruling in May 2016. The expansion that followed occurred without judicial review of the dual-track funding arrangement.

1.3 Post-*Morath* Development: Charter Expansion

Charter school origins are rooted in market theory. In 1955 Milton Friedman proposed a school voucher program as an alternative school funding mechanism (as cited in Ravitch, 2013). These government-funded vouchers would be redeemable at any school, public or private. He asserted that if parents were given school choice and funding followed the student, then underperforming schools would close through market self-correction. In this model, test scores serve as the consumer information mechanism (Ravitch, 2013).

In Texas, Texas Education Code (TEC) Chapter 12 authorizes open-enrollment charter schools as an alternative to traditional ISDs (Tex. Educ. Code § 12.101). The State Board of Education (SBOE) originally held chartering authority, but the Legislature transferred that authority to the Commissioner of Education in 2001 (Tex. Educ. Code § 12.101). A charter holder receives a state contract to operate campuses and is accountable to academic performance standards, but is exempt from many regulations that apply to ISDs.

The charter sector has grown substantially over the past two decades. Texas now has approximately 180 charter operators running roughly 800 campuses and serving over 400,000 students (Texas Education Agency, 2024). Several operators have grown into large networks, including KIPP Texas (59 campuses), ILTexas (38), IDEA (137 across Texas and Louisiana), and Harmony (58) (Texas Education Agency, 2024).

Charter expansion is governed by 19 Texas Administrative Code (TAC) Section 100.1035, which evaluates a charter operator's own performance record when considering amendment requests to add new campuses or increase enrollment caps. The rule contains no requirement that the Texas Education Agency (TEA) analyze the fiscal or operational impact on the ISDs whose service area the charter will enter. TEC Section 12.1101 requires TEA to notify affected ISDs and legislators of a proposed expansion, but provides no consultation period, no formal comment mechanism, and no requirement that TEA consider the ISD's response before approving the amendment.

The Commissioner of Education holds discretionary authority to grant expansion waivers to charter operators that do not meet the standard performance criteria for expansion. Before Commissioner Mike Morath took office in January 2016, only three such waivers had been granted in the program's history (McNeel, 2021). Under Commissioner Morath, at least 17 expansion waivers were approved between January 2016 and December 2024, with 12 leading to authorized expansions (McNeel, 2021). Before Morath, three waivers had been granted across the entire history of the charter program.

Senate Bill (SB) 1882, passed in 2017, allows ISDs to partner with charter operators to manage low-performing campuses (Tex. Educ. Code § 11.174). Partnering campuses receive additional per-pupil funding and may be excluded from the district's accountability rating. Austin ISD partnered with Third Future Schools (TFS) to operate Mendez Middle School under an SB 1882 contract beginning in March 2022. Mendez had received an F accountability rating since 2013. Under TFS management, the campus earned a B rating in 2023. The campus operated at 16.4% building utilization during the partnership. TFS transferred $49 million in Texas public education revenue to fund its Colorado operations during the same period (Shipp, 2024; Lee, 2024). Austin ISD will resume direct management of Mendez in 2026-2027.

This expansion occurred entirely outside of judicial review. The Morath Court did not evaluate a system in which the state simultaneously funds ISDs and charter competitors in the same territory. The dual-track funding question is constitutionally untested.

1.4 Post-*Morath* Development: Bond Election Dependence

Texas school districts fund facility construction and renovation almost exclusively through General Obligation (GO) bonds, which require voter approval in a local election. A district's board of trustees places a bond proposition on the ballot specifying the dollar amount and intended use. If voters approve, the district issues bonds and levies an I&S tax to service the debt. If voters reject the proposition, the district cannot proceed with the planned construction.

The state provides limited equalization assistance for facility costs. The Instructional Facilities Allotment (IFA, TEC Chapter 46A) guarantees a yield of $35 per ADA per penny of I&S tax effort, frozen since 1999. IFA is competitive and appropriation-limited. It requires a passed bond election as a prerequisite, and excludes charter schools entirely. The Existing Debt Allotment (EDA, TEC Chapter 46B) provides automatic equalization at a guaranteed yield of $40 per ADA per penny. This rate has been frozen since 2017. Charter schools receive a partial EDA yield of $40 per ADA per penny. The New Instructional Facilities Allotment (NIFA) provides $1,000 per student in the first year of operation at a newly constructed campus. NIFA is available only to ISDs.

IFA's guaranteed yield of $35 per ADA per penny has not been adjusted since 1999. The Texas construction cost index has increased over 40% during that period. Cleveland ISD, a district in Liberty County with 14,200 students as of 2023-24, failed four of five bond elections between 2019 and 2023. During the same years, the surrounding student population grew by approximately 3,000 students as Colony Ridge, a residential development of over 60,000 residents, expanded within the district's boundaries.

Facility funding outcomes correlate with property wealth and voter demographics rather than educational need. Districts with identical growth trajectories pass or fail bonds based on factors unrelated to necessity. This is a direct application of the Edgewood equal-access standard that has not been tested through litigation.

Forney ISD, Princeton ISD, Liberty Hill ISD, and Hutto ISD each experienced enrollment growth rates between 15% and 40% over the same 2019-2023 period. All four passed every non-athletic bond proposition placed on the ballot: 22 of 22. Cleveland ISD, with comparable growth, passed one of five. The four comparator districts have property values per student ranging from $350,000 to $550,000 and majority-white electorates. Cleveland ISD's property value per student is approximately $180,000, and its electorate shifted from 68% white in 2016 to 52% Hispanic in 2022.

In 2021, ILTexas received TEA amendment approval for three new Liberty County campuses. The Commissioner used their discretion to fast-track the expansion, despite the charter network having 2 F-rated and 6 D-rated campuses at the time. The public comment window lasted three days. No voter approval was required. ILTexas funded these facilities through revenue bonds backed by its FSP income stream and federal Charter School Program grants. By 2024-25, ILTexas enrolled approximately 7,000 students across its Liberty County campuses. Cleveland ISD, which serves the same geographic area, still operates portable buildings at multiple campuses due to the failed bond elections.

1.5 Post-*Morath* Development: The Frozen Weight Problem

TEC §29.081 defines multiple criteria under which a student may be classified as "at-risk" of dropping out of school, including failure on a state assessment, limited English proficiency, previous dropout status, homelessness, foster care status, and residence in a residential placement facility. TEC §48.104 and §48.105 generate funding based on the count of economically disadvantaged and bilingual students. These allotments are generally directed toward at-risk students, but the funding is determined through a count of economically disadvantaged and bilingual students.

The compensatory education weight was established at 0.20 by HB 72 in 1984 (Tex. Educ. Code § 48.104). The bill created Section 16.152 of the Education Code, which entitled each district to "an annual allotment equal to the adjusted basic allotment multiplied by 0.2" for each educationally disadvantaged student (Act of July 13, 1984, 68th Leg., 2d C.S., ch. 28, § 16.152). The number of eligible students was determined by averaging the best six months' enrollment in the federal free or reduced-price lunch program.

HB 72 (1984) simultaneously created an accountability mechanism for this weight. Sections 16.201 through 16.203 established the Accountable Costs framework, requiring the State Board of Education to "determine each biennium the real, accountable costs school districts incur in providing quality education programs, personnel, and facilities that meet the accreditation standards prescribed by law and rule." (Act of July 13, 1984, 68th Leg., 2d C.S., ch. 28, §§ 16.201-16.203). The legislature was required to consider this report when setting the basic, special, and transportation allotment amounts. An advisory committee of nine members, primarily school principals and superintendents, would assist in the cost determination.

The first Accountable Costs study was completed in 1986 under the direction of Deputy Commissioner Lynn M. Moak. The study confirmed the 0.20 compensatory weight but found that the bilingual education weight of 0.10 (set in Section 16.153 of HB 72) was inadequate. The committee recommended raising the bilingual weight to 0.26. The Legislature never enacted this increase. The bilingual weight remains at 0.10 in current law, now codified as TEC §48.105 (Texas Education Agency & Accountable Costs Advisory Committee, 1986).

The 1986 study also recommended equalized state construction funding for school facilities. The committee recognized that districts with low property wealth could not generate sufficient local revenue for adequate facilities even with maximum tax effort. The Legislature did not act on the 1986 facilities recommendation. Cleveland ISD's 2023-24 IFA allotment was $117 per ADA, down from $503 per ADA in 2020-21. ILTexas, operating in the same service area, received state per-pupil facility allotments and issued revenue bonds without voter approval.

The compensatory weight of 0.20 has not changed since 1984. The bilingual weight of 0.10 has not changed since 1984. No Accountable Costs study has been conducted since 1988, despite the statutory mandate for biennial review under TEC §§ 16.201-16.203. In 1984, Texas enrolled 3.3 million public school students. In 2024-25, that number exceeded 5.5 million. The statewide economically disadvantaged rate rose from approximately 40% in 1984 to 60.9% at secondary campuses in 2023-24. Post-pandemic chronic absenteeism affected 18.2% of students statewide in 2023-24. The Morath Court described these frozen weights as evidence that the system had become "ossified" and "ill-suited for 21st century Texas" (Morath v. The Texas Taxpayer and Student Fairness Coalition, No. 14-0776, Tex. 2016). The compensatory weight (0.20), the bilingual weight (0.10), the IFA guaranteed yield ($35, frozen since 1999), and the EDA guaranteed yield ($40, frozen since 2017) have all remained static.

1.6 The Teacher Incentive Allotment

House Bill 3 (2019) created the Teacher Incentive Allotment (TIA) under TEC §48.112. Districts and charter schools that implement a Local Designation System (LDS) can designate teachers as Recognized ($3,000-$9,000 per teacher), Exemplary ($6,000-$18,000), or Master ($12,000-$32,000), with the range determined by a campus socioeconomic tier multiplier from 1.0x to 2.5x. As of 2023-24, 232 districts and charter operators participate in TIA. Across the state's 8,674 campuses, 46.1% of campuses in the highest-need quartile (Q4) have zero TIA-designated teachers.

TIA's design originated in the Dallas ISD Teacher Excellence Initiative (TEI), implemented in August 2012 under Superintendent Mike Miles. TEI evaluated teachers on three components: classroom observations (50%), student achievement on the State of Texas Assessments of Academic Readiness (STAAR) (35%), and student experience surveys (15%) (Texas Commission on Public School Finance, 2018). The composite scores assigned performance ratings that determined salary supplements, with the highest-performing teachers earning $8,000 to $10,000 above base salary.

An equity problem emerged during TEI's implementation that went unaddressed at the state level. Dallas ISD classroom teacher and Alliance-AFT Executive Board member Kristen DeRocha (2019) documented how TEI's salary supplements disproportionately flowed to choice and magnet campuses rather than the comprehensive neighborhood campuses serving the highest-need populations, challenging the claims of the policy makers advocating for TEI and TIA. The salary gap between the highest- and lowest-paid campuses grew from $2,394 in 2016-17 to $11,500 by 2019-20. Dallas ISD attempted to address this inequity in 2020-21 by creating separate distribution pools for choice and comprehensive campuses.

TIA replicates TEI's original design without this equity correction. The statewide program uses a single evaluation framework that does not distinguish between selective-admission campuses and open-enrollment neighborhood schools. The equity analysis in this research reveals that 46.1% of the highest-need campuses have zero TIA-designated teachers. The governance pipeline connecting TEI's creation in Dallas to TIA's statewide implementation is documented in the Dallas case study.

1.7 Research Questions

The central research question is whether the current Texas school finance system, as expanded to include charter school funding, TIA, and the continuation of ISD facility funding dependent on local bond elections, meet the constitutional standard of an "efficient system" of public free schools as defined through Edgewood v. Kirby (1989) and Morath v. The Texas Taxpayer and Student Fairness Coalition (2016)?

Four sub-questions guide the case studies. First, how does the Teacher Incentive Allotment interact with charter governance networks to create a policy pipeline that concentrates resources in already-advantaged schools? Second, to what extent does the parallel operation of charter schools and ISDs in overlapping service areas create structural inefficiency that violates the constitutional efficiency and suitability standards? Third, does the State's delegation of facility funding to local bond elections violate the requirement of "substantially equal access at similar levels of tax effort"? And finally, how do empirically derived at-risk funding weights compare to the frozen statutory weights, and would a needs-based funding model better satisfy constitutional equity standards?

Each of these sub-questions is examined through case studies of Texas metro areas and a statewide quantitative analysis. The four case studies form the basis of a single constitutional argument.

1.8 Significance and Contribution to Literature

This study makes four contributions to the scholarly and policy literature. No prior research applies Article VII §1's "efficient system" standard to charter duplication. The expansion of charter schools since Morath has created untested constitutional conditions, and this study provides the first constitutional analysis of charter/ISD dual-track funding. This study extends Templeton et al. (2023) by incorporating charter school funding data, which their study excluded by design. The inclusion of this data enables an ISD vs. charter school comparison. This study also introduces the At-Risk Coefficient (ARC; Hopper, 2026) model, which uses empirically derived funding weights as both a measurement of equity and a concrete policy proposal. ARC applies Toutkoushian and Michael's (2007) regression methodology to Public Education Information Management System (PEIMS) campus-level data from 8,674 campuses across 1,203 districts. ARC operationalizes IDRA's Element 3, Cárdenas's (1997) call for funding weights calibrated to varying pupil characteristics. The ARC regression produces empirically derived weights for each risk factor using 2023-24 PEIMS data. The difference between the statutory allotment (using the frozen 0.20 weight) and the regression allotment (using empirically derived weights) produces a statewide funding gap of $2.28 billion. The researcher administers homeless and foster care services at Austin ISD and worked on teacher incentive policy campaigns with Alliance-AFT in Dallas.

School vouchers (Texas Education Freedom Accounts, TEFA, signed into law in 2025) are excluded because insufficient enrollment and expenditure data was publicly available at the time of analysis. Multi-state comparison is excluded because the constitutional standard under Art. VII §1 is specific to Texas.