Lawsuit Filed Against Texas HB 101: Constitutional Challenge to Property Tax and School Finance Reforms
A significant legal challenge has been mounted against recently enacted state legislation in Texas. On April 28, 2025, a coalition comprising key statewide organizations filed a lawsuit in Travis County District Court contesting the constitutionality of House Bill 101 (HB 101). The challenging parties are led by the Texas Association of School Boards (TASB) and Texans for Fair Taxation. This action initiates a potentially lengthy legal battle over the future of property taxation and public school funding in the state.
Understanding House Bill 101
HB 101, signed into law by Governor Greg Abbott on May 1, 2025, represents a comprehensive effort by the state legislature to address concerns regarding rising property taxes and to potentially restructure the public school finance system. The bill introduces significant alterations to the existing property tax appraisal framework, aiming to provide relief to taxpayers. Furthermore, it proposes a new formula for the distribution of state funds to public schools, with implementation slated to begin in the 2026-2027 academic year. Proponents of the bill argue it streamlines the tax system, reduces the burden on property owners, and modernizes an often-criticized school funding model.
Plaintiffs’ Core Arguments: Constitutional Violations and Financial Impacts
The coalition filing the lawsuit contends that HB 101, despite its stated intentions, suffers from fundamental constitutional flaws under the Texas Constitution. Their central arguments revolve around the state’s obligation to provide an adequate and equitable system of public education, as well as the principle of local control for school districts.
Plaintiffs argue that the bill’s changes to the property tax system and the new funding formula will inevitably lead to a significant reduction in available revenue for school districts across the state. They project that, under the provisions of HB 101, Texas public schools could experience statewide revenue losses exceeding $5 billion over the next five years. This anticipated financial impact, they assert, directly undermines the constitutional mandate for adequate school funding, potentially forcing districts to cut essential programs, increase class sizes, or reduce staff.
Furthermore, the lawsuit alleges that HB 101 infringes upon the principle of local control. Texas has a long history of debates surrounding the balance of power between state mandates and local district autonomy, particularly in areas like taxation and resource allocation. The plaintiffs argue that the bill’s prescriptive nature regarding property tax appraisal and its rigid funding formula diminish the ability of local school boards to make decisions tailored to the specific needs and priorities of their communities and students. This loss of local flexibility, they claim, is constitutionally impermissible.
The State’s Defense
In response to the lawsuit, the State of Texas, represented by Attorney General Ken Paxton, has announced its intention to vigorously defend the constitutionality and legality of HB 101. Attorney General Paxton issued a statement affirming the state’s position, arguing that the law is a necessary and beneficial reform for Texans.
The state’s defense is expected to emphasize that HB 101 is a legitimate exercise of legislative authority aimed at providing essential tax relief to property owners burdened by rising valuations. They will likely contend that the new school funding structure, while different, remains constitutional by providing a stable and adequate level of funding, and that any projections of revenue loss by opponents are speculative or based on misinterpretations of the bill’s mechanisms. The state is expected to argue that the changes modernize a complex and sometimes inefficient funding structure, ensuring resources are distributed more effectively across districts.
Legal Landscape and Potential Outcomes
This lawsuit marks the latest chapter in Texas’s long history of legal battles over public school finance. The state’s school funding system has been repeatedly challenged in court on grounds of adequacy and equity, leading to numerous legislative reforms over the decades, often prompted by judicial rulings. The current case brings the familiar themes of constitutional compliance, financial impact, and local control back before the judiciary.
The Travis County District Court will first consider preliminary matters, including potential requests for injunctions to prevent the law’s implementation while the case is pending. The core of the lawsuit will involve detailed legal arguments and potentially expert testimony regarding the projected financial impacts of HB 101 on school districts and its adherence to constitutional requirements.
The outcome of this legal challenge could have profound implications for both property taxpayers and the state’s public education system. A ruling in favor of the plaintiffs could force the legislature back to the drawing board to craft new property tax and school funding legislation, potentially disrupting the planned 2026-2027 funding rollout. Conversely, a ruling upholding HB 101 would validate the state’s approach but would require school districts to navigate the changes and potential financial impacts projected by the TASB-led coalition. Given the significance of the case, any decision by the District Court is likely to be appealed to higher state courts, including the Texas Supreme Court, suggesting that a final resolution may be months or even years away.
