Recapture Lawsuit Filed by Midland ISD

Recapture Watch

A Texas School Coalition Publication

Midland ISD Files Lawsuit Challenging State Recapture System

Midland Independent School District has filed a lawsuit against the State of Texas and Commissioner of Education Mike Morath in Travis County District Court, challenging the constitutionality of the state's public school finance system, including recapture. This is a single-district suit, brought by Midland ISD and individual taxpayer plaintiffs.

What the Lawsuit Claims

The petition argues that Midland ISD's Tier One Maintenance & Operations tax — as restructured by House Bill 3 in 2019 — violates two provisions of the Texas Constitution:

Article VIII, Section 1-e, which prohibits state ad valorem property taxes. Plaintiffs argue that because the Commissioner of Education, not Midland ISD's board or voters, calculates the district's mandatory tax rate, and the state controls both the levy and how proceeds are distributed, the tax functions as an unconstitutional state tax rather than a local one.

Article VII, Section 3(e), which requires voter approval for certain school district ad valorem taxes. Plaintiffs argue Midland ISD's rate has never gone to district voters.

2025–26 School Year, Per the Petition

$313 million in Tier One local revenue • ~$83 million (27%) subject to recapture • $241 million Tier One Entitlement retained

Legal Representation

Midland ISD is represented by Kevin O'Hanlon and Kara Belew of O'Hanlon, Demerath & Castillo, an Austin-based firm.

Where Things Stand

This is an original petition — the opening filing in the case. No hearing date has been set, and the State has not yet filed a response. The petition seeks a declaratory judgment that the relevant Texas Education Code provisions (Chapters 48 and 49) are unconstitutional as applied.

READ THE FULL PETITION

We'll continue monitoring this case and will update membership as it develops.

Save the Date: TSC Legislative Planning Workshop for the 90th Session

The Texas School Coalition invites members and sponsors to join us for our Legislative Planning Workshop for the 90th Legislative Session.

When:

Wednesday, September 23 | 11:00 AM – 5:00 PM

Thursday, September 24 | 8:00 AM – 12:00 PM

Where:

DoubleTree by Hilton Hotel – Love Field, Dallas

This workshop is an opportunity for TSC members and sponsors to come together ahead of the 90th Legislative Session to discuss priorities, strategy, and what lies ahead for Texas school finance and recapture policy.

Hotel Accommodations

A room block is available at the DoubleTree by Hilton Hotel – Love Field at a special rate of $170/night.

RESERVE YOUR ROOM

We look forward to seeing you there. If you have questions about the workshop or registration, please don't hesitate to reach out.

Welcome to Our Newest Sponsors

The Texas School Coalition is pleased to welcome two new sponsors to our membership community.

ESG (Energy Systems Group) — Presenting Sponsor

ESG is an energy services and infrastructure company that has worked with K-12 schools, colleges, and government entities since 1994. The company designs energy efficiency, facility modernization, and infrastructure improvement projects — often structured so the resulting energy savings help fund the cost of the upgrades, with the goal of improving school facilities without added burden to local taxpayers.

Hilltop Securities — Bronze Sponsor

Hilltop Securities is a Dallas-based investment bank with a public finance practice dating back to 1946. The firm provides financial advisory and underwriting services to school districts, cities, counties, and other public entities across the country, helping issuers structure and finance bonds for capital projects.

We're grateful for their support and look forward to working with them in the year ahead.

Thank You to Our Sponsors

Presenting Sponsors

Gold Sponsor

Silver Sponsor

Bronze Sponsor

Texas School Coalition

Missy Bender — missy@txsc.org | 512-732-9072

6505 W. Park Blvd., Suite 306 PMB 249, Plano, TX 75093 | txsc.org