By Corrie MacLaggan
AUSTIN, Texas Feb 4 (Reuters) - The Texas school finance system violates the state constitution because it is inequitable and not adequately funded, a state district judge ruled on Monday in a move that could force an overhaul in how the state pays for public schooling.
State District Judge John Dietz also declared that the system prevents school districts from exercising meaningful discretion in setting tax rates as required by the constitution, which prohibits a statewide property tax.
The state is expected to appeal to the Texas Supreme Court.
Lawyers for hundreds of Texas school districts besieged by rapid population growth and deep budget cuts argued in a massive school finance trial in Austin that began in October that the state had not adequately funded public education or resolved inequities among districts.
The legal action was brought on behalf of about 650 of the state's 1,000-plus school districts, accounting for some 3.7 million of Texas' 5 million school children.
Many Texas students, particularly those from low-income families, are struggling with Texas' new state exams and are not on track to graduate, said David Thompson, a Houston lawyer representing the largest group of districts suing the state. They need tutoring and smaller classes, he said.
"There's just a disconnect between those standards that we have for all the kids and the system that will get us to those standards," Thompson said after the ruling.
Similar battles are playing out across the country. Active school finance lawsuits are pending in 16 states, including Texas, according to the National Education Access Network, which tracks such court action across the country.
In Kansas, a three-judge panel ruled in January that the state was unconstitutionally short-changing its students by underfunding education needs and must increase spending by about $400 million.
In Texas, the lawsuits came after the Republican-controlled legislature acted in 2011 to trim $5.4 billion in education funding to help balance the state's two-year budget.
The result was widespread teacher layoffs and larger class sizes as schools struggled to meet higher state and federal standards and school enrollment soared, attorneys for the districts said.
Lawyers for the state argued that although everyone was asked to do more with less, Texas schools provide what the state constitution requires.
"Our system did not collapse; it did not fall off the bridge," Nicole Bunker-Henderson, a lawyer for the state, said during closing arguments Monday.
Lawsuits filed by six groups were merged into a single trial that spanned more than 240 hours in court, according to Dietz.
Four of the six groups suing the state represent school districts. The others are advocates for charter schools and a group of business people pushing for more efficient schools.
Dietz declared that it was within the legislature's discretion to fund charter schools differently than traditional public school districts and that the concerns raised by the business groups were matters for lawmakers to consider.
Monday's ruling is just one step for this litigation, Texas Education Commissioner Michael Williams said in a statement.
"All sides have known that, regardless of the outcome at the district level, final resolution will not come until this case reaches the Texas Supreme Court," Williams said.
State Representative Donna Howard, an Austin Democrat, said lawmakers should restore the money cut from education now rather than waiting for the case to be resolved.
"Our children's education should not be placed on hold while the legislature waits for instruction from the courts," she said in a statement.
Michael Quinn Sullivan, president of Texans for Fiscal Responsibility which advocates for limited government, said he's glad Dietz doesn't have the last word.
"He was not persuaded by evidence showing just how inefficient schools are at spending the money they already get," Sullivan said in a statement.