      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-01-00491-CV



West Orange-Cove Consolidated Independent School District; Coppell Independent School
        District; La Porte Independent School District; and Port Neches-Groves
                        Independent School District, Appellants

                                                 v.

   Felipe Alanis, Texas Commissioner of Education; The Texas Education Agency; Carol
         Keeton Rylander, Texas Comptroller of Public Accounts; and The Texas
                State Board of Education; Alvarado I.S.D.; Anthony I.S.D.,
                       Aubrey I.S.D.; Bangs I.S.D.; et al., Appellees




    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
        NO. GV100528, HONORABLE F. SCOTT MCCOWN, JUDGE PRESIDING




                Four school districts led by West Orange-Cove Consolidated Independent School

District (West Orange-Cove) appeal the dismissal of their action seeking a declaratory judgment that

the present school finance system is unconstitutional.1 The interested parties include Felipe Alanis,2

Commissioner of Education, the Texas Education Agency, the Comptroller of Public Accounts, and

the Texas State Board of Education (collectively “the State”), and two groups of intervening school




       1
           We will refer to appellants collectively as West Orange-Cove.
       2
          Jim Nelson was the Commissioner of Education when this appeal was submitted; he has
since resigned. Felipe Alanis was sworn in as Commissioner of Education on March 25, 2002 and
is automatically substituted as appellee. See Tex. R. App. P. 7.2(a).
districts, collectively the Alvarado intervenors and the Edgewood intervenors, who are generally

aligned with the State. We will affirm the judgment of the trial court.


                                           BACKGROUND

                The current educational financing system was crafted in response to several federal

and state constitutional challenges to the long-standing school financing plan and to the initial

attempts to correct the identified constitutional infirmities. The first attacks were brought in federal

court;3 ultimately, however, the challenges have been pursued through the state courts. In 1989, the

Texas Supreme Court held the school finance system unconstitutional because it violated the

following constitutional mandate: “A general diffusion of knowledge being essential to the

preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State

to establish and make suitable provision for the support and maintenance of an efficient system of

public free schools.” Edgewood Indep. Sch. Dist. v. Kirby, 777 S.W.2d 391, 393 (Tex. 1989)

(Edgewood I) (citing Tex. Const. art. VII, § 1). The basis of the court’s holding were the gross

disparities among the schools throughout the state caused by the system’s heavy reliance on local

property taxes to provide educational funds. Id. at 392-93. At the time of the Edgewood I decision,

local ad valorem taxes accounted for half of all available educational funds. Id. at 392.4 As the


        3
          See San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 55 (1973) (reversing lower
court decision holding that Texas school financing system violated the Equal Protection Clause of the
Fourteenth Amendment).
        4
          Despite reforms to the system discussed infra, the state’s reliance on local property taxes
to fund the educational system continues. The supreme court has remarked that once used merely
to “supplement” state funding, “local ad valorem taxes now are expected to provide most of the basic
needs of education.” Carrollton-Farmers Branch Indep. Sch. Dist. v. Edgewood Indep. Sch. Dist.,
826 S.W.2d 489, 494 (Tex. 1992) (Edgewood III). The system’s dependence on local revenue has
been a persistent problem that was recognized as early as seventy years ago: “The inequality of

                                                     2
amount of revenue that can be raised by property taxes depends on the property wealth within each

district, there were staggering differences between the state’s poorest and wealthiest districts. Id.


        The wealthiest district has over $14,000,000 of property wealth per student, while the
        poorest has approximately $20,000; this disparity reflects a 700 to 1 ratio. The
        300,000 students in the lowest-wealth schools have less than 3% of the state’s
        property wealth to support their education while the 300,000 students in the highest-
        wealth schools have over 25% of the state’s property wealth; thus the 300,000
        students in the wealthiest districts have more than eight times the property value to
        support their education as the 300,000 students in the poorest districts.


Id.

                Stating that the purpose of an “efficient system” as that term is used in the constitution

was to provide for a “general diffusion of knowledge,” id. at 396, the court noted that the then-

present system “provides not for a diffusion that is general, but for one that is limited and

unbalanced,” id. “The resultant inequalities,” the court concluded, “are thus directly contrary to the

constitutional vision of efficiency.” Id. In addition, the court found that the system was financially

inefficient because property-rich districts could generate substantial revenues at low tax rates, while

property-poor districts had to tax at high rates “merely to spend low.” Id. at 393. The low rates of

property-rich districts also allowed valuable sources of the available tax base to be underutilized; thus,

additional revenues were consistently lost to the system. Id. The court noted that many wealthy

districts had become “tax havens” and that “if forced to tax at just average tax rates, these districts




educational opportunities in the main arises from natural conditions. . . . The type of school which
any community can have must depend upon the population of the community, the productivity of its
soil, and generally its taxable wealth.” Mumme v. Marrs, 40 S.W.2d 31, 36 (Tex. 1931). The
problem remains despite attempts to lessen the dependence on local property taxes as a source of
revenue. See generally Edgewood III, 826 S.W.2d at 494-498.

                                                    3
would generate additional revenues of more than $200,000,000 annually for public education.” Id.

The court held that the system violated the Constitution because it was “neither financially efficient

nor efficient in the sense of providing for a ‘general diffusion of knowledge’ statewide,” and exhorted

the legislature to fulfill its obligation to provide an efficient system. See id. at 397.

                The first legislative attempt to do so failed. In Edgewood II, the court struck down

the legislation, holding that the system remained in violation of section one of article VII. Edgewood

Indep. Sch. Dist. v. Kirby, 804 S.W.2d 491, 498 (Tex. 1991) (Edgewood II). The court noted that

while the legislation had made some reforms to the system, it left intact the same funding scheme

“with the same deficiencies we reviewed in Edgewood I.” Id. at 495. “Even if the approach of

Senate Bill 1 produces a more equitable utilization of state educational dollars, it does not remedy

the major causes of the wide opportunity gaps between rich and poor districts.” Id. at 496. The

court noted that the proposed system


        does not change the boundaries of any of the current 1052 school districts, the
        wealthiest of which continues to draw funds from a tax base roughly 450 times
        greater per weighted pupil than the poorest district. It does not change the basic
        funding allocation, with approximately half of all education funds coming from local
        property taxes rather than state revenue. And it makes no attempt to equalize access
        to funds among all districts.


Id. The court reiterated that “[t]o be efficient, a funding system that is so dependent on local ad

valorem property taxes must draw revenue from all property at a substantially similar rate.” Id.

Emphasizing that “‘[a] Band-Aid will not suffice; the system itself must be changed,’” id. at 498

(quoting Edgewood I, 777 S.W.2d at 397), the court held that the proposed scheme continued to

violate article VII, section one, id.


                                                    4
                The Legislature’s next attempt to craft an “efficient” system ran into an independent

constitutional obstacle. In Edgewood III, the court reviewed a challenge that was based not on the

ground that the legislative design was inefficient,5 but rather on the ground that it imposed a state ad

valorem tax in violation of article VIII, section 1-e. Carrollton-Farmers Branch Indep. Sch. Dist.

v. Edgewood Indep. Sch. Dist., 826 S.W.2d 489, 502 (Tex. 1992) (Edgewood III) (“while the

Legislature has some latitude in the manner it chooses to discharge its duty to establish and maintain

an efficient public school system, it cannot go so far as to violate another constitutional provision in

attempting to comply with article VII, section 1.”). In an attempt to ameliorate disparities while

retaining the historical dependence on local ad valorem taxes, the legislation created 188 county

education districts, or “CEDs,” which were composed of school districts. Id. at 498. The CEDs had

no educational duties; rather, the CEDs were created to perform what had heretofore been the

districts’ responsibility to administer local ad valorem taxes. Id. The CEDs had little discretion in

fulfilling this duty. The CEDs did not determine their own tax rates but instead “lev[ied], collect[ed],

and distribute[d] property taxes as directed by the Legislature.” Id.

                The state constitution generally authorizes local ad valorem taxes, which are taxes in

proportion to the property’s value, but when the State imposes an ad valorem tax, it violates article

VIII, section 1-e. See Tex. Const. art. VIII, §§ 1(b); 1-e. Various school districts and individual

citizens
 discretion
         complained
            meant that
                    that
                       thethe
                            State
                              scheme
                                  effectively
                                      constituted
                                              levieda the
                                                      statetax. Edgewood
                                                             ad valorem taxIII,
                                                                            because
                                                                                826 S.W.2d
                                                                                     the CEDs’
                                                                                           at 500.
                                                                                               lackThe
                                                                                                    of

court agreed, emphasizing the indicia of state rather than local control over the ad valorem tax:




        5
         The court specifically stated that the issue of the constitutional standard of efficiency was
not before it. Carrollton-Farmers Branch (Edgewood III), 826 S.W.2d at 494.

                                                   5
        Senate Bill 351 mandates the tax CEDs levy. No CED may decline to levy the tax.
        The tax rate for all CEDs is predetermined by Senate Bill 351. No CED can tax at
        a higher rate or a lower rate under any circumstances. Indeed, the very purpose of
        the CEDs is to levy a uniform tax statewide.


Id. In holding that this CED scheme constituted an unconstitutional ad valorem tax, the court set

forth the following test:


        An ad valorem tax is a state tax when it is imposed directly by the State or when the
        State so completely controls the levy, assessment and disbursement of revenue, either
        directly or indirectly, that the authority employed is without meaningful discretion.
        How far the State can go toward encouraging a local taxing authority to levy an ad
        valorem tax before the tax becomes a state tax is difficult to delineate. Clearly, if the
        State merely authorized a tax but left the decision whether to levy it entirely up to
        local authorities, to be approved by the voters if necessary, then the tax would not be
        a state tax. The local authority could freely choose whether to levy the tax or not.
        To the other extreme, if the State mandates the levy of a tax at a set rate and
        prescribes the distribution of the proceeds, the tax is a state tax, irrespective of
        whether the State acts in it own behalf or through an intermediary. Between these
        two extremes lies a spectrum of other possibilities.


Id. at 502-03.

                 In response to the court’s decision, the Legislature crafted a system that attempted

to comply with the constitutional directive of efficiency without impinging on the proscription against

state property taxes.6 Finally, in Edgewood IV, the court held that the legislature had created a

funding system that passed constitutional muster. See Edgewood Indep. Sch. Dist. v. Meno, 917

S.W.2d 717, 750 (Tex. 1995) (Edgewood IV). All sides to the present dispute agree that the current




        6
            See Act of May 28, 1993, 73d Leg., R.S., ch. 347, §§1.01-9.02, 1993 Tex. Gen. Laws
1479.

                                                   6
school finance system is essentially the same system upheld by the court in Edgewood IV. A brief

overview of the current provisions is helpful to an understanding of that decision.

                The financing mechanisms presently in place seek to ensure that every district has

adequate resources to provide an accredited education and “substantially equal access to funds to

provide an enriched program” and additional funds for facilities. Tex. Educ. Code Ann. § 42.002(b)

(West Supp. 2002). These goals are implemented by the “Foundation School Program” (the

Program), which establishes two “tiers” of funding for participating districts. Id. To be eligible to

participate in the Program, a district must set its maintenance and operations tax at a rate of at least

$0.86 per $100 valuation of property.7 Id. §§ 42.252; 45.002; 45.003 (West 1996 & Supp. 2002).

In return, the district receives for every student a “basic allotment” of $2,537. Id. §§ 42.101; 42.252

(West Supp. 2002).8 This is known as “Tier one” of the Program. The schools, however, may tax

at a rate that exceeds $0.86 per $100 of property. Under the “Tier two” provisions, every district

that taxes at a rate of more than $0.86, up to the maximum rate of $1.50, receives an additional

amount for “enrichment” and for school facilities. Id. §§ 42.302; 45.003. For each penny that the




        7
           In addition to the “maintenance and operations tax,” a school district may also levy ad
valorem taxes to service bonds issued to pay for the construction of school buildings, the acquisition
or refinancing of property, the purchase of land for school buildings, and the purchase of new school
buses. Tex. Educ. Code Ann. § 45.001 (West Supp. 2002). The $1.50 cap does not apply to the rate
of taxes levied to service the bonds, which may be set at any rate sufficient to pay the principal and
interest on the bonds. Id. § 45.003.
       8
         This amount is subject to increase by way of legislative appropriations. Tex. Educ. Code
Ann. § 42.101 (West Supp. 2002).

                                                   7
tax is set above $0.86, subject to the $1.50 cap, the district receives a guaranteed yield of $25.81 per

each student. Id. § 42.302.9

                In Edgewood IV, the supreme court reviewed the current financing scheme in terms

of efficiency, as it had done in the first two Edgewood opinions, and in terms of “revenue,” that is,

the “mechanisms through which [the system] provide[d] the funds to achieve efficiency,” as it had

done in Edgewood III. 917 S.W.2d at 734. The court examined the current provisions in light of the

many issues raised by the efficiency and revenue challenges. A consistent theme of the court’s

extensive analysis is that the relevant measuring stick for the system is the accredited education,

which the court equated with the constitutional term a “general diffusion of knowledge.” See id. at

730 (noting that in the legislation authorizing the current school financing scheme, the “Legislature

equates the provision of a ‘general diffusion of knowledge’ with the provision of an accredited

education”); see also id. at 731 n.10 (stating that “accreditation standards . . . [are] the legislatively

defined level of efficiency that achieves a general diffusion of knowledge”). That is, whether the

court was discussing the efficiency of the system or the revenue mechanisms, the court’s focus was

on the system’s ability to provide a general diffusion of knowledge.

                The court first concluded that the legislation was both educationally and financially

efficient because it ensured a general diffusion of knowledge, or accredited education, for all students.

Id. at 730-31. The court noted that in addition to making financial reforms, the legislation which

forms our present system also made significant educational reforms to the Education Code by

establishing an “accountability regime” that emphasizes academic achievement. Id. at 728-29. The


        9
        This amount is also subject to increase by way of legislative appropriations. Tex. Educ.
Code Ann. § 42.302 (West Supp. 2002).

                                                    8
court concluded that the accountability regime fulfilled the legislature’s “constitutional obligation to

provide for a general diffusion of knowledge statewide.” Id. at 730. The court also found that the

system was financially efficient because both tiers of funding allowed every school district to provide

a general diffusion of knowledge:


       Based on the evidence at trial, the district court found that meeting accreditation
       standards, which is the legislatively defined level of efficiency that achieves a general
       diffusion of knowledge, requires about $3,500 per weighted student. After
       adjustments, the Tier 1 allotment provides, on average, only $2,537 per weighted
       student. Tier 2, however, enables a district to add up to $1,315.20 to this amount
       ($20.55 per cent of tax10 times 64 cents [i.e., the difference between 1.50 and 0.86]).
       Thus, the district court found that every district can provide an accredited education
       with funding provided by Tiers 1 and 2.


Id. at 731 n.10.11 Thus, the educational and financial efficiency of the system, judged by its ability

to provide students with a general diffusion of knowledge, met the constitutional standard.

                Similarly, the financing mechanisms through which this efficiency was achieved, when

measured in terms of the districts’ ability to meet the state-required accredited education, did not

violate any constitutional provisions. Id. at 750. Of particular relevance to this appeal is the court’s

conclusion that the tax provisions enabled all districts to provide an accredited education for their

students without violating the constitutional prohibition on state taxes. See id. at 738. The court




       10
         The current number is $25.81 per every cent between $0.86 and $1.50. Tex. Educ. Code
Ann. § 42.302 (West Supp. 2002).
       11
          The court also found the system efficient because, relevant to concerns raised in Edgewood
I and Edgewood II, the system provided students with “substantially equal access to the [available]
funds”; significantly, the court stated that the legislation decreased the disparity in access to funds
from the 700 to 1 ratio that existed at the time of Edgewood I to a ratio of 28 to 1. Edgewood Indep.
Sch. Dist. v. Meno, 917 S.W.2d 717, 730-31 (Tex. 1995).

                                                   9
found that while the tax provisions did not allow the districts total discretion, the tax was unlike the

CED scheme struck down in Edgewood III. The current tax system, according to the court, “lies

somewhere in that ‘spectrum of possibilities’” recognized in Edgewood III. Id. at 737 (citation

omitted). “To receive any Foundation School Fund payments at all, a district must tax at an effective

rate of at least $0.86. [The legislation] does not, however, mandate a set rate or prescribe the

distribution of the proceeds. While a district may maximize its state aid by taxing at $1.50, there is

no requirement that it do so.” Id. The court acknowledged that the legislature had imposed a

minimum and a maximum rate of tax for maintenance and operations, but stated that “the imposition

of such limits does not render [the system] unconstitutional. Id. Within these limits, the statute

afforded the districts a range of possible tax rates, thus leaving them meaningful discretion. Id. at

737-38.

               The court stated that “[a]lthough financial incentives for property-poor districts and

the desire to maintain previous levels of revenue in the property-rich districts may encourage districts

to tax at the maximum allowable rate, the State in no way requires them to do so.” Id. at 738. A

state ad valorem tax issue would only arise, the court opined, if districts were forced to tax at the

maximum rate to fulfill the state-mandated requirement of providing an accredited education, or, in

the parlance of Edgewood IV, a general diffusion of knowledge. The court explained that the tax cap

might become both the “floor” and the “ceiling” if the cost of providing an accredited education was

the same as the maximum amount of revenue that could be raised, i.e., the $1.50 cap. Id. at 738. If

forced to tax at the maximum allowable rate to meet a state obligation, a district would be unable to

exercise any meaningful discretion. Assuming this hypothesis, the tax might then constitute an

unconstitutional state tax:

                                                  10
        [I]f the cost of providing for a general diffusion of knowledge continues to rise, as it
        surely will, the minimum rate at which a district must tax will also rise. Eventually
        some districts may be forced to tax at the maximum allowable rate just to provide a
        general diffusion of knowledge. If a cap on tax rates were to become in effect a floor
        as well as a ceiling, the conclusion that the Legislature had set a statewide ad valorem
        tax would appear to be unavoidable because the districts would then have lost all
        meaningful discretion in setting the tax rate.


Id.

The Instant Dispute

                  West Orange-Cove believes that the court’s warning has materialized due to rising

costs of educating students and that the $1.50 cap has now become the floor as well as the ceiling.

West Orange-Cove asserted that it is forced to tax at or near the $1.50 cap “to educate its students,”

and that barring the declaratory relief it seeks, it will have to continue to take cost-saving measures

such as eliminating teaching positions, cutting programs, and increasing class sizes.12 It asked the trial

court to declare that the tax approved in Edgewood IV has become an unconstitutional state ad

valorem tax.

                  Alvarado intervened and filed special exceptions to West Orange-Cove’s pleadings,

asserting that they failed to state a viable cause of action because the districts had pleaded only that



        12
           West Orange-Cove’s first amended petition, the live petition at the time of hearing,
requested the following relief:

             Accordingly, Plaintiffs request that the Court enter a judgment declaring that the
             $1.50 statutory cap on M&O tax rates constitutes an unconstitutional statewide
             ad valorem tax. This constitutional deficiency cannot be cured simply by raising
             the statutory cap, because such a solution would only aggravate the State’s
             overreliance on local property taxes as a means of financing the school system.
             Rather, Plaintiffs request that the State assume a greater responsibility for
             financing the school system and end its overreliance on the local property tax.

                                                    11
they were forced to tax at the cap to “educate their students.” According to Alvarado, the only

relevant inquiry regarding the tax was a district’s ability to meet the state-mandated accredited

education within the allowable range. Alvarado insisted that because the districts had failed to allege

that they were “required to adopt a $1.50 tax rate in order to provide the constitutionally-required

general diffusion of knowledge to their students,” they had failed to allege an essential element of

their cause of action and urged the court to dismiss the claim.13

                West Orange-Cove responded to the special exceptions. It also amended its original

petition, but did not add any allegation that it was forced to tax at or near the maximum rate to

provide an accredited education. A hearing was held at which Alvarado urged its special exception

on June 28, 2001. On July 24, 2001, the district court signed a modified final order dismissing the

case on special exceptions, finding that West Orange-Cove had failed to state a cause of action. 14


                                            DISCUSSION

I. Failure to State a Claim

Standard of Review

                The Alvarado intervenors sought dismissal of the suit by way of special exceptions on

the ground that West Orange-Cove had failed to state a cognizable cause of action by omitting a




        13
           Although the special exceptions filed by Alvarado were designated to be included in the
record for appeal, they were not included in our record. Nonetheless, West Orange-Cove’s response
to Alvarado’s special exceptions, in which it quotes from Alvarado’s pleading, is in our record, as is
a transcript of the hearing on the plea to the jurisdiction and the special exceptions, at which Alvarado
appeared and urged its special exception.
        14
           The district court also granted the State’s plea to the jurisdiction on ripeness grounds. This
issue will be discussed infra.

                                                   12
necessary element. A special exception is a proper method to determine whether a plaintiff has

pleaded a cause of action. Butler Weldments Corp. v. Liberty Mut. Ins. Co., 3 S.W.3d 654, 658

(Tex. App.—Austin 1999, no pet.). When special exceptions are sustained, the pleader may either

amend the petition or refuse to amend and challenge the ruling on appeal. Id.; Detenbeck v. Koester,

886 S.W.2d 477, 479 (Tex. App.—Houston [1st Dist.] 1994, no writ). Although a trial court should

normally give a party the opportunity to amend the pleading, it need not do so if the pleading defect

is of a type that amendment cannot cure, such as a pleading that asserts an unrecognized cause of

action. Slentz v. American Airlines, Inc., 817 S.W.2d 366, 369 (Tex. App.—Austin 1991, writ

denied); Sepulveda v. Krishnan, 839 S.W.2d 132, 134 (Tex. App.—Corpus Christi 1992), aff’d, 916

S.W.2d 478 (Tex. 1995).

               Here, the trial court did not give West Orange-Cove an opportunity to replead; as it

stated in its final order, however, the court determined that the alleged defect was of a type that

amendment cannot cure. The court also stated that it understood from the hearing that West Orange-

Cove wished to stand on its pleadings. Our review of the record indicates the correctness of the trial

court’s determination that West Orange-Cove either could not, or did not seek to amend its

pleadings. West Orange-Cove responded to Alvarado’s special exceptions by stating that it had

implicitly pleaded that it was forced to tax at or near the cap to provide a general diffusion of

knowledge and that its first amended petition made clear that the districts had alleged that they were

forced to tax at or near the cap “‘to educate students in their districts,’ i.e., to provide a general

diffusion of knowledge.” West Orange-Cove continued, then, to couch its argument in terms of its

ability to educate students rather than its obligation to provide an accredited education. West

Orange-Cove’s arguments at the hearing confirm the trial court’s conclusion. West Orange-Cove’s

                                                 13
position was that it could not, or soon would be unable to, furnish the kind of education it wanted

to provide at the cap. West Orange-Cove simply does not complain that it is unable to meet the state

obligation to provide a general diffusion of knowledge as that term has been defined to mean an

accredited education.

                When a trial court dismisses a case upon special exceptions for failure to state a cause

of action, we review that issue of law using a de novo standard of review. Butler Weldments, 3

S.W.3d at 658; Sanchez v. Huntsville Indep. Sch. Dist., 844 S.W.2d 286, 288 (Tex. App.—Houston

[1st Dist.] 1992, no writ). When reviewing a dismissal based upon special exceptions, we also must

accept as true all material factual allegations and all factual statements reasonably inferred from the

allegations set forth in the respondent’s pleadings. See Sorokolit v. Rhodes, 889 S.W.2d 239, 240

(Tex. 1994). If a pleading does not state a cause of action, the trial court does not err in dismissing

the case. Butler Weldments, 3 S.W.3d at 658.

                As did the supreme court in its review of the school finance system, we begin with the

presumption that the statutory provisions under attack are constitutional; the burden of proof is on

the party challenging this presumption. As Edgewood III indicates, in determining whether a tax is

a state ad valorem tax, one compares the discretion afforded the local taxing authority with the

control exercised by the State. 826 S.W.2d at 500-03. “If the State mandates that a tax be levied,

sets the rate, and prescribes the distribution of the proceeds, the tax is a state tax . . . .” Id. at 500.

The lack of discretion left to local taxing authorities was fatal to the taxing legislation at issue in that

case. Id. at 502-03. The court’s test focuses on the amount of control exercised by the State over

the tax. If the control is complete, the taxing authority has no discretion in levying the tax; rather,

it taxes at the direction of and in the manner prescribed by the State. In contrast, if the taxing

                                                    14
authority has discretion, the State cannot be said to be controlling the levy. See Texas Mun. League

Intergovernmental Risk Pool v. Texas Workers’ Comp. Comm’n & Subsequent Injury Fund, No. 00-

1114, slip op. at 17-18, 2002 Tex. LEXIS 38, at *28 (Tex. Apr. 4, 2002) (“An ad valorem tax is a

prohibited tax under section 1-e when the State directly imposes it, or when a political subdivision

imposes it but the State indirectly controls the tax revenues’ levy, assessment, and disbursement so

that the political subdivision lacks any meaningful discretion over these factors.”).

                In determining the State’s control over the maintenance and operations property tax,

the relevant inquiry is the relationship between the tax and the districts’ obligations to provide an

accredited education. As the court found in Edgewood IV, the system may encourage districts to tax

at or near the maximum rate. Whether it does so is irrelevant for purposes of determining whether

the system imposes a state tax. But if the districts’ abilities to fulfill a state mandate, here the

obligation to provide the minimum accredited education, forced the districts to tax at the maximum

rate, the system might approach an unacceptable level of state control over the levy. Therefore, the

allegation that a district is forced to tax at the highest allowable rate to provide the bare, accredited

education is a necessary element of a cause of action brought by a district challenging the cap. West

Orange-Cove instead pleaded that it was forced to tax at or near $1.50 to “educate its students.” The

enriched education that West Orange-Cove locally desires to provide its students is not the measure

for determining if the State is imposing an educational mandate that requires the local district to levy

a state-imposed rate of tax. West Orange-Cove’s pleadings simply fail to state a viable cause of

action.

                West Orange-Cove argues that by alleging to “educate its students” it means “to

provide a general diffusion of knowledge.” But in Edgewood IV, the supreme court equated the term

                                                   15
“general diffusion of knowledge” with a minimum accredited education. Ignoring this obstacle, West

Orange-Cove argued at the hearing before the trial court that the term is ambiguous and its meaning

should be litigated. The following exchange at the hearing evidences West Orange-Cove’s position:


       The court: What is a general diffusion of knowledge?

       Plaintiffs’ counsel: We want to take discovery. We don’t want to lose at this first
       level. We want to take discovery. We want to hire experts. We want to look at the
       State’s numbers. The State has already said it’s conclusive. It’s already finished.
       You can’t argue with it. They say that the general cost of diffusion in the state of
       Texas is $4,167. And that is a $600 increase over the $3500 that was in Footnote 10
       seven years ago. We have grave questions. That number is unacceptably low now.
       We want to ask: What goes into that? What has not been included?

                                                 ***


               As the record makes clear, West Orange-Cove wants to use this opportunity, framed

as a tax challenge, to engage the judiciary in a debate over policy choices that are within the province

of the legislative branch. Both the Legislature and the supreme court have equated the term “general

diffusion of knowledge” with accreditation standards. The court, in addition, has insisted that the

judiciary has a limited role in the area of educational policy and should defer to the Legislature on

matters involving educational standards and funding:


        This Court’s role under our Constitution’s separation of powers provision should be
        one of restraint. We do not dictate to the Legislature how to discharge its duty. As
        prominent as this Court’s role has been in recent years on this important issue, it is
        subsidiary to the constitutionally conferred role of the Legislature. The people of
        Texas have themselves set the standard for their schools. Our responsibility is to
        decide whether that standard has been satisfied, not to judge the wisdom of the policy
        choices of the Legislature, or to impose a different policy of our own choosing.




                                                  16
Edgewood IV, 917 S.W.2d at 726. West Orange-Cove’s claim would involve the courts in deciding

what is meant by the term “general diffusion of knowledge” without reference to the accreditation

standards set by the Legislature. That body, however, has conclusively equated the two concepts,

thereby foreclosing the judicial inquiry West Orange-Cove seeks to pursue. Moreover, as the

supreme court has recognized, the meaning of a “general diffusion of knowledge” and the

development of appropriate accreditation standards are policy choices best suited to the legislature.

Id.

                West Orange-Cove’s argument aside, this court is left with its pleading that it must

tax at the cap to “educate its students.” This allegation does not refer to the districts’ state-imposed

obligation to provide an accredited education; as such, the districts’ pleadings fail to state a challenge

to the tax as a state tax. Accordingly, we hold that the trial court properly dismissed the claim for

failure to state a cause of action.


II. Ripeness

                In an abundance of caution, we will also address West Orange-Cove’s second and

third issues regarding ripeness. Ripeness implicates subject-matter jurisdiction and emphasizes the

requirement that one must have a concrete injury to present a justiciable claim. Waco Indep. Sch.

Dist. v. Gibson, 22 S.W.3d 849, 851 (Tex. 2000); Patterson v. Planned Parenthood, 971 S.W.2d

439, 442 (Tex. 1998). Ripeness concerns when an action may be brought. Patterson, 971 S.W.2d

at 442. In order for a party to present a justiciable controversy, facts must be sufficiently developed

so that an injury has occurred or is likely to occur, rather than being contingent or remote. Id.; Texas

Dep’t of Banking v. Mount Olivet Cemetary Ass’n, 27 S.W.3d 276, 282 (Tex. App.—Austin 2000,


                                                   17
pet. denied). “A case is not ripe when its resolution depends on contingent or hypothetical facts, or

upon events that have not yet come to pass.” Patterson, 971 S.W.2d at 443. A person need not have

incurred actual injury; a declaratory judgment action will lie if the facts present “ripening seeds of a

controversy.” Mount Olivet, 27 S.W.3d at 282 (quoting Texas Dep’t of Pub. Safety v. Moore, 985

S.W.2d 149, 153-54 (Tex. App.—Austin 2000, no pet.)). Such a situation arises “where the claims

of several parties are present and indicative of threatened litigation in the immediate future which

seems unavoidable, even though the differences between the parties as to their legal rights have not

reached the state of an actual controversy.” Id.

                In its plea to the jurisdiction, the State urged the court to dismiss the suit on the

grounds of ripeness. The State argued that the supreme court in Edgewood IV was concerned with

the statewide financing system, hence, the tax might become unconstitutional only if the ceiling

became the floor “as to all districts.” The declaratory action brought by West Orange-Cove, the State

urged, was premature because West Orange-Cove had pleaded only that it and three other districts

were unable to exercise discretion in setting their tax rates and had failed to plead facts that

demonstrated a system-wide lack of discretion. Additionally, the State provided evidence that the

majority of school districts in the state elect tax rates below the cap. Thus, the State reasoned, West

Orange-Cove’s claim that the levy had become an unconstitutional state tax was not yet ripe.

                The district court concluded that the number of districts that were taxing at the cap

was determinative of whether West Orange-Cove’s claims were ripe and that a cause of action would

be ripe only if West Orange-Cove could demonstrate that at least half of all districts had tax rates at

$1.50. The court explained its view that “[f]or the legislative design to be an unconstitutional state

ad valorem tax, the design must require a significant number of districts to tax at the cap, something

                                                   18
approaching or exceeding half the districts.” In its order, the district court stated that eighty-one

percent of districts taxed at rates under $1.50 and only nineteen percent taxed at the cap. The court,

however, also excluded those districts that taxed at $1.50 but provided the voluntary homestead

exemption15 because by electing not to tax one hundred percent of available property, those districts

had demonstrated meaningful discretion in setting local tax rates. In addition, the court explained,

by exempting or sheltering twenty percent of property from taxation, the districts decreased the

amount of available revenue and, in effect, lowered the tax rate. Thus, districts taxing at $1.50 while

providing the homestead exemption were not truly taxing at the $1.50 cap. Once such districts were

excluded, the district court concluded that the number of districts “truly” taxing at the cap, that is,

taxing at the rate of $1.50 without granting the optional exemption, totaled only 12.19 percent of

districts in the state. The court then concluded that because fewer than fifty percent of all districts

taxed at the maximum rate, West Orange-Cove’s pleadings failed to present a ripe claim under

Edgewood IV.

                 West Orange-Cove advances several arguments in support of its position that its

request for a declaratory judgment is ripe. First, it argues that the trial court’s ripeness analysis

focused on the presence of an actual injury without considering injuries “likely to occur” or “ripening

seeds of injury.” See Patterson, 971 S.W.2d at 442; Mount Olivet, 27 S.W.3d at 282. In the

alternative, it contends that in considering whether West Orange-Cove had demonstrated an actual

injury, the trial court erred by determining that a claim would be ripe only if a plaintiff could show

that half of all districts were forced to tax at the cap and by excluding those districts that had granted



        15
             See Tex. Const. art. VIII, § 1-b (“Residence Homestead Exemption”).

                                                   19
the optional homestead exemption. Last, West Orange-Cove argues that even if the court’s analysis

were correct that ripeness for the purposes of West Orange-Cove’s claim required a showing of a

systemic problem, its claim was ripe because the fact that twelve percent of districts, or one district

out of every eight, is taxing at the maximum rate indicates a sufficiently widespread problem with the

tax scheme.

                The parties frame their arguments on appeal in the context of the trial court’s

reasoning that the number of districts, rather than the amount of state control, determines whether

this suit is ripe. For example, West Orange-Cove has divined significance in the language of the

isolated passage in Edgewood IV, emphasizing the word “some” in the following sentence:

“Eventually, some districts may be forced to tax at the maximum allowable rate just to provide a

general diffusion of knowledge.” 917 S.W.2d at 738 (emphasis added). West Orange-Cove argues

that the word “some” indicates that the tax could become a state ad valorem tax as long as “some”

districts, even a minority, were taxing at the maximum rate. The State disagrees with West Orange-

Cove’s reasoning and argues that the court was concerned with the possibility of all districts being

forced to tax at the maximum rate to provide an accredited education. The State focuses on the next

sentence of the opinion, which reads: “If a cap on tax rates were to become in effect a floor as well

as a ceiling, the conclusion that the Legislature had set a statewide ad valorem tax would appear to

be unavoidable . . . . ” Id. (emphasis added).

                As we explained above, the controlling factor in reviewing a challenge to an alleged

ad valorem tax is the State’s involvement in the levy. Whether the effect of the tax is experienced

“statewide” or by a majority of districts in the state does not determine whether a tax is a state tax.

Seen in this light, the positions taken by the district court in its order dismissing the case on ripeness,

                                                    20
and by the parties in their briefs, are based on a misunderstanding of the determinative factors of a

state ad valorem tax. The instant case is not unripe because fewer than half of all school districts are

taxing at the maximum rate; rather, the claim is unripe because the appellants have failed to

demonstrate that they are forced to set their rates of tax at the maximum allowable rate just to

provide an accredited education. That is, the districts have not pleaded that they have lost all

meaningful discretion in setting the rate of tax as it pertains to their ability to meet a state-imposed

obligation, which is the only relevant concern in this lawsuit.

                Therefore, because the districts have not asserted that the State, by requiring districts

to provide an accredited education, has effectively forced them to tax at the cap, their claim that the

cap is an unconstitutional state-imposed and state-controlled ad valorem tax is not ripe. Because of

our resolution of this issue we need not discuss West Orange-Cove’s arguments complaining of the

analysis employed by the district court in its final order.


III. Judicial Notice

                West Orange-Cove filed a motion requesting that we take judicial notice of certain

information regarding the tax rates currently set by school districts. Specifically, it asks us to take

official notice of the rates of tax set by school districts for the 2001-02 year, as well as figures relating

to homestead elections made by the districts and student enrollment figures. West Orange-Cove

states that the data relied on by the trial court in determining that the case was not ripe, and figures

cited by West Orange-Cove in its brief, were based on tax rates during the previous fiscal year. The

data offered by West Orange-Cove indicates that, if correct, the percentage of districts taxing at the

maximum rate has increased for the 2001-02 fiscal year. West Orange-Cove argues that this Court


                                                    21
should consider the new data in determining whether its claim is now ripe. Our resolution of the

ripeness question, however, makes the additional data of little relevance. That is, because we hold

that the accredited education requirement, a state-imposed mandate, not the number of districts,

determines whether West Orange-Cove’s claim is ripe, any increase in the number of districts taxing

at the cap does not affect our analysis. Moreover, we hold that the information which West Orange-

Cove requests we judicially note does not comply with the requirements of Rule of Evidence 201.

See Tex. R. Evid. 201 (authorizing the taking of judicial notice under appropriate circumstances).

Specifically, we hold that the information is neither “(1) generally known within the territorial

jurisdiction of the trial court [n]or (2) capable of accurate and ready determination by resort to

sources whose accuracy cannot reasonably be questioned.” Tex. R. Evid. 201(b). Accordingly, we

overrule appellants’ motion to take judicial notice.


                                         CONCLUSION

               Having found that the trial court properly dismissed appellants’ claim for failure to

state a claim and on the grounds of ripeness, we affirm the judgment.




                                              Bea Ann Smith, Justice

Before Chief Justice Aboussie, Justices B. A. Smith and Puryear

Affirmed

Filed: April 11, 2002

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