The Observer was founded by Frankie Randolph and founding editor Ronnie Dugger in Austin in 1954 to address topics ignored by daily newspapers in the state — such as issues affecting working people and concerning class and race. Upon its founding, Dugger declared the paper's manifesto as "We will serve no group or party but will hew hard to the truth as we find it and the right as we see it." The publication continues this mission through today by focusing on covering what the mainstream press does not.
For instance, the Observer broke the story of an allegedly crooked narcotics investigation in Tulia, Texas, that led to front-page coverage in The New York Times and other national news outlets. Tom Coleman, the narcotics investigator in the tiny town, was eventually accused of trumping up drug bust information, mostly aimed at African Americans. Coleman claimed he had made more than 100 undercover drug purchases from 46 different drug dealers (40 of whom were black). About a dozen of the accused were sentenced, some for up to 90 years (based almost entirely on his personal accounts with virtually no corroborating evidence) before authorities stopped to investigate Coleman's practices, largely due to the Observer's reporting. Coleman was found guilty of one charge of perjury, for which he was sentenced to seven years probation.
Fitting with its "muckraking" reputation, the publication's slogan is: "Sharp reporting and commentary from the strangest state in the Union." The Observer often garners more laurels from those who live outside Texas's borders than those within — The New York Review of Books described it as "That outpost of reason in the Southwest." John Kenneth Galbraith said the Observer is a "well-researched journal which more orthodox Texas statesmen feel should not have the protection of the First Amendment."
The Observer operates on a shoestring budget — it accepts few advertisements, supporting itself through subscriptions and occasional benefit banquets.