Texas public schools are funded by federal funds, state funds and local school district property taxes. The amount of state and local funds are determined by the Foundation School Program, a state program administered by the Texas Education Agency.
The program is responsible for ensuring that all public school districts receive equal access to funding per student regardless of the district's property wealth. This practice, which was mandated by Senate Bill 7 in 1993, is commonly known as the Robin Hood system. The nickname comes from the practice of taking property tax revenue from richer districts and redistributing it to poorer districts in an attempt to equalize school funding throughout Texas.
The financial condition of a district is determined by the property tax wealth in the area. Districts that surpass a certain amount must redistribute their excess funds by voluntarily consolidating with a poorer district, moving taxable property to or merging with a poorer district, contracting to educate students in another district or sending the money to the state.
The Robin Hood system was primarily a result of a unanimous 1989 Texas Supreme Court ruling in Edgewood ISD vs. Kirby. The Mexican American Legal Defense and Educational Fund, on behalf of the Edgewood Independent School District in San Antonio, filed a lawsuit against then-state Commissioner of Education William Kirby, claiming the state's funding method violated Article 7 of the Texas Constitution, which states that the Legislature must support and maintain an efficient public school system.
The Robin Hood plan has been a heavily debated and criticized practice.
In 2005, the Texas Supreme Court ruled the system unconstitutional on the grounds that it had evolved into a statewide property tax. After a special session in 2006, the Legislature passed a bill that met the court's requirement by reducing property taxes and providing local school districts with "meaningful discretion" in setting tax rates.
The school finance overhaul cut school property taxes by one-third. Some of the lost revenue was replaced through a revamped business tax and higher cigarette taxes.