Updated at 1:15 p.m.: Revised throughout with more details.

AUSTIN — More than three years after he was indicted, Texas Attorney General Ken Paxton is celebrating a major court decision that will further delay his criminal fraud trials.

The Texas Court of Criminal Appeals ruled Wednesday that prosecutors pursuing charges against Paxton should have been paid a fixed instead of an hourly rate. Their compensation broke local rules and state law, the court said, and a six-figure invoice the prosecutors submitted for their work on the case need not be paid.

The prosecutors have threatened to step down if they lost this fight, forcing new attorneys to be selected to pursue charges against the state’s sitting attorney general. In a statement issued Wednesday afternoon, they said they're reviewing their options.

"While we are disappointed with the majority's ruling and are exploring all legal options available to us, it does not alter the fact that Ken Paxton remains charged with three serious felony offenses," special prosecutor Brian Wice said.

Meanwhile, Paxton spokesman Jordan Berry said Paxton was pleased with the ruling: "While this was a lawsuit brought by Collin County, Attorney General Paxton is extremely grateful for the court's decision."

The court's decision doesn't change the charges in Paxton's indictments, which allege he duped friends to invest in a questionable McKinney technology firm. But it does threaten to derail the prosecution, or at least severely delay it. It also will have ripple effects on how Texas counties pay public defenders.

Paxton's criminal cases have been on hold for over a year since the prosecutors took their demands to be paid to court. In that time, Paxton was narrowly re-elected to a second term and also celebrated the election of his wife, Angela, to the Texas Senate from Collin County.

Case background

A Collin County grand jury indicted Paxton in July 2015 on two first-degree counts of felony securities fraud and one third-degree count of failing to register with the state as an investment adviser representative. He was booked the next month and released on bail.

Cases like this are normally handled by the locally elected prosecutor. But Collin County District Attorney Greg Willis recused himself due to his close friendship with Paxton, so the case was handed to three private `practice attorneys to serve as special prosecutors. The judge who chose these prosecutors said the county would pay them $300 an hour, in excess of the fixed rate usually paid to appointed attorneys.

But the Collin County Commissioners Court, a five-member panel that determines the budget and must pay for the prosecution, wasn't happy with this arrangement. The commissioners agreed to pay the prosecutors' first $254,000 invoice after being ordered by the presiding judge, but refused to pay the second, which totaled more than $205,000 for more than a year's worth of work.

Their refusal was bolstered by Paxton's allies near and far. Some, like local developer Jeffory Blackard, sued the county to demand that it stop payment. Others, like former U.S. Sen. Rick Santorum, went on television and accused the commissioners of "raping" the taxpayers.

Eventually, the dispute over the fees ended up in court.

The prosecutors argued the judge who chose them had the authority to veer from the county's fixed-rate caps in "unusual circumstances." The county disagreed, saying the payments to the prosecutors were excessive and illegal and broke local rules that require special prosecutors to be paid according to the same fee schedule as indigent defense attorneys.

A lower court in Dallas agreed with the county, halting payment and significantly delaying the case. The prosecutors appealed to the Court of Criminal Appeals, which again ruled against them Wednesday.

"We agree. Here, the trial court exceeded its authority by issuing an order for payment of fees that is not in accordance with an approved fee schedule containing reasonable fixed rates or minimum and maximum hourly rates," Judge David Newell wrote for the majority. "And we agree with the court of appeals that the second order for payment should be vacated."

The court was deeply divided. Three of the nine judges dissented and one filed both a concurring and dissenting opinion.

The court "changes the meaning of [the law] by replacing the statutory term 'reasonable fixed rates' with the phrase 'a fixed fee,'" Judge Mary Lou Keel wrote in her dissent. "The trial court had to pay a reasonable attorney's fee to the [prosecutors], and it did so."

What happens now?

Paxton's trials should have been held in Collin County, where he was indicted and the alleged crimes took place. But the case was moved to Harris County in June 2017 and a new presiding judge was chosen after the prosecutors argued they couldn't hold a fair trial in Paxton's backyard.

The new judge, Robert Johnson, will have to determine what to pay the prosecutors (according to Collin County's fee schedule) and will be responsible for choosing new prosecutors if the current trio steps down.

But there are wider implications for Wednesday's ruling.

Criminal justice advocates worry the decision could negatively affect public defenders, too, and could hamper the pursuit of justice for poor clients who can't afford high-priced attorneys.

State law has long required that special prosecutors like the ones on the Paxton case be paid using the same fee schedules as indigent defense attorneys. The fee schedules are set at the county level and must have a clear minimum and a maximum limit, or cap, according to the law.

But the ruling Wednesday means that judges who appoint attorneys to these cases do not have the discretion to break the caps, even in extraordinary circumstances.

"That fee schedule must have either a reasonable fixed rate or minimum and maximum hourly rates that take into consideration reasonable and necessary overhead costs and the availability of qualified attorneys willing to accept the stated rates," the court ruled. "Though the individual judge has discretion to award fees within the adopted schedule, the statute does not allow the judge to award fees outside of that schedule."

Advocates worry that taking away judicial discretion to pay indigent defense attorneys more than the normal rate will make it harder to find qualified lawyers to take on the most complex cases. For example, if a poor Texan is accused of a high-profile murder, a case that could take years and hundreds of man hours, who will take on that client if the county caps the pay at a few thousand dollars?

These concerns were reflected in divided court's dissents.

"The Court's decision today will likely affect an overwhelming number of criminal cases in Texas and will possibly result in even more claims of ineffective assistance of counsel for indigent defendants," Judge Elsa Alcala wrote in her dissent. She warned that the court was creating a "new law" with this ruling that "results in manifest injustice due to its newly created policy."

Keith Self, the county judge who leads the Collin County Commissioners Court, has said the pursuit of justice needs to be weighed against a county's budgetary concerns.

State funding for indigent defense has increased just 15.7 percent in the last eight years, as county costs have gone up nearly 30 percent, putting more of the burden on local taxpayers. Collin County spent more than $9 million on indigent defense in the last two fiscal years, with 80 cents on the dollar going to lawyers.

And this was after the county, prompted by the fight over the Paxton prosecutors' pay, changed its fee schedule to limit costs. In felony cases, court-appointed attorneys now earn $50 to $100 an hour, with no limit.

Self said they struggle with how to pay for the defense of poor residents when judges approve higher rates for their lawyers. He brought up the case of Marc Fratter, who made $460,000 defending indigent clients this past fiscal year.

"We got another lawyer who's been paid a half a million dollars for indigent defense," Self said. "Our issue has been: Can a single judge commit the county to unlimited taxpayer funds?"

Self said he expects state lawmakers will have to weigh in. If they want indigent defense attorneys to be paid fairly without county coffers going dry, they may have to change the law.

"The commissioners court and the appeals court have identified the issue," Self said. "But this will take legislative relief to decide the balance."