Midland ISD trustees will vote Tuesday, July 21, 2026, on whether to authorize a constitutional lawsuit targeting Texas’ mandatory school property-tax rate and recapture system, a case that could force lawmakers to rewrite major parts of public-school finance if the district ultimately prevails.
The board’s agenda lists the proposal as Item 9.6: “Discussion and Possible Board Action to Authorize Litigation Challenging Texas Foundation School Program under Article VIII, Sec. 1-e of Texas Constitution.” Board President Josh Guinn will present the item during the 5:30 p.m. meeting at Bowie Fine Arts Academy.
A 74-page draft petition attached to the public agenda names Texas Education Commissioner Mike Morath, in his official capacity, and the State of Texas as proposed defendants. The document remains unfinished. It leaves the judicial district blank and uses placeholders for taxpayer plaintiffs, confirming that Midland ISD has not filed the case.
Draft targets state control of local taxes
The proposed lawsuit argues that House Bill 3, the 2019 school-finance overhaul, stripped local trustees of meaningful control over the Tier One maintenance-and-operations tax that funds basic education.
The Texas Education Agency calculates a maximum compressed rate, or MCR, for every district. The petition contends that Midland ISD must adopt that rate or face a corresponding reduction in state funding, while state formulas also dictate how much revenue the district keeps and how it may spend much of that money.
The district would argue that this level of control transforms a nominally local tax into the state property tax that Article VIII, Section 1-e of the Texas Constitution prohibits. That provision states, “No State ad valorem taxes shall be levied upon any property within this State.” The petition separately argues that Midland voters never approved the Tier One levy as Article VII, Section 3(e) requires.
TEA set Midland ISD’s final 2025-26 MCR at $0.5814 per $100 of taxable value. The draft petition says the rate produced approximately $313 million in Tier One collections and projects that the district will remit about $83 million through recapture on August 15. A chart in the draft totals actual and estimated recapture payments since the 2013-14 school year at more than $1.08 billion, including the projected 2025-26 payment.
The proposed relief reaches far beyond one payment. Midland ISD would ask a Travis County district court to declare key provisions of Education Code Chapters 48 and 49 unconstitutional and unenforceable to the extent they impose a state property tax, compel a levy without voter approval or deny the local board meaningful control.
A ruling at that scale could disrupt the formulas that Texas uses for every school district. Any final statewide change, however, would likely follow years of litigation and appeals.
A fight built on decades of litigation
The draft builds its argument around a line of Texas Supreme Court school-finance cases.
In 1992, the court struck down a county education district system in Edgewood III because the state mandated the tax, set its rate and controlled the proceeds without voter approval. Three years later, the court upheld the modern recapture framework in Edgewood IV, meaning Midland cannot prevail merely by arguing that recapture exists.
The court again found an unconstitutional state property tax in 2005 after concluding that the state’s tax cap had effectively become both a floor and a ceiling for many districts. In 2016, however, the court upheld the school-finance system then in place, finding that districts generally retained meaningful discretion. The justices wrote that, despite its flaws, the system met “minimum constitutional requirements.”
Midland’s draft argues that House Bill 3 changed the legal landscape after that 2016 ruling. Rather than allowing boards to select a Tier One rate within a range, the petition says the post-2019 system requires each district to adopt a commissioner-calculated MCR. The 2016 opinion also left open the possibility that one district could prove a violation by showing it had no meaningful choice but to tax at or near a state-imposed rate.
Existing precedent still gives the state substantial defenses. The Supreme Court has upheld recapture as an equalization tool, and districts retain some discretion to raise Tier Two enrichment revenue above the MCR.
State describes recapture as school funding
The Legislative Budget Board says Chapter 49 uses recapture to address unequal access to education revenue. It describes recaptured money as a method of financing the state’s Foundation School Program obligations and says the state does not use it for unrelated appropriations.
The budget board projects Texas will collect about $2.5 billion in recapture from 213 districts in fiscal year 2027. The Midland petition argues that the statewide program uses commingled recapture revenue for state priorities that include aid to charter schools. It also acknowledges that officials cannot trace Midland’s specific dollars after the state combines them with other Foundation School Program funding.
Attorneys Kevin O’Hanlon and Kara Belew signed the draft petition. Their firm says O’Hanlon previously served as TEA general counsel and worked on public-education litigation that included the original Edgewood dispute. Belew’s biography lists senior leadership roles at TEA, the governor’s office and the Texas Attorney General’s Office.
Recapture has already sparked open resistance from other districts. As previously reported by The Dallas Express, Keller ISD voted in 2023 to withhold a scheduled payment after Spring Branch ISD took similar action. Midland’s proposal instead aims directly at the constitutionality of the post-House Bill 3 system.
The board may consult its attorneys in closed session, but Texas law requires any final vote or action to occur in open session. Because the petition remains a draft and the board has not authorized litigation, neither Morath nor the state has filed a response.
