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Tex. Voters Reject Finance Plan; Consolidation Called Last Resort

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After Texas voters soundly defeated a constitutional amendment aimed at resolving the state's ongoing school-finance crisis, lawmakers last week were moving toward a drastic consolidation plan that could in some cases force the combination of school districts separated by many miles.

In the May 1 special election, more than 60 percent of voters rejected a constitutional change that would have allowed regional sharing of local property taxes, a concept Texas officials have turned to over the past two years to satisfy a court mandate to reduce spending disparities in the state's 1,040 districts.

Skeptical voters also rejected amendments that would have freed districts from unfunded state mandates and targeted $750 million in the state budget for school construction. Those measures lost by smaller margins, however. (See Education Week, April 28, 1993.)

Leaders in the state capital last week focused on finding a new solution to the school-finance situation before June 1, when a state judge has threatened to cut off state school funds if an acceptable finance system has not been approved.

Despite deep concerns on the part of the education community, the imminent prospect of a funding cutoff has left Gov. Ann W. Richards and other top state Democrats intent on an apparently unprecedented attempt to challenge the fundamental concept of a school district as a contiguous geographical area.

"We started off the week with everyone being sort of numb, but it now looks like the legislature is going down the road of massive consolidation of school districts,'' said Nancy Cotton, a spokeswoman for the Texas Association of School Boards.

State leaders huddled after the vote was in and scheduled a joint hearing last week of the House and Senate education committees. At the same time, aides said, the groundwork was being laid to move a consolidation bill to the House floor as early as this week.

'What's Our Option?'

Details of the consolidation plan were being finalized and closely guarded last week. Lawmakers moved a skeleton bill through committee last week, which will be filled in with details when the House begins what is expected to be a highly contentious debate.

"The people have said enough is enough on property-tax increases, and there's not much time left, so a number of people have drawn the conclusion that the only way that remains politically and practically is limited consolidation,'' a Senate education committee aide said.

Under one consolidation scheme outlined last week, about 200 of the state's wealthiest and poorest school districts would be combined into 80 districts, each of which would have resources at about the state average.

The consolidations would not necessarily take into account geographic proximity, aides noted.

By transferring resources from the wealthiest to the poorest systems, the plan would reduce the extremes of funding disparities that have been repeatedly attacked by the courts. At the same time, the plan would leave untouched the great majority of districts, where spending differences are less pronounced.

"There is a lot of nervousness about what is going to happen because there are no good options,'' the Senate aide said. "This will make people angry, but you have to ask on the other side of the coin, what's our option?''

The state supreme court decisions that have overturned the Texas school-finance system three times over the past four years have insisted that the state provide that schools have access to similar revenues if they have similar tax rates.

Under that test, officials said, another alternative considered last week--spending caps on wealthy districts--appeared to lose momentum.

While spending caps would reduce disparities in per-pupil funding, they would also allow districts with valuable property to cut property-tax rates--thus violating the principle that there be equity among taxpayers as well as among students.

"We know consolidation is a tough pill to swallow for schoolpeople, but if you look at the court decisions, it is the only option left,'' said Sonia Hernandez, the director of education policy for Governor Richards.

Preparing a Cutoff

Although the referendum results were viewed as a stinging political setback for Ms. Richards, who was the leading campaigner for the school-finance proposition, she moved quickly last week to take the lead in finding a last-ditch solution.

She convened some of the early strategy sessions following the vote and was to speak at last week's hearing to emphasize her determination to pass a plan by month's end.

"We've done what we can; now we will do what we have to do,'' Ms. Hernandez said. "For the people who did not believe the schools were going to close early, that summer school was in question, year-round programs were in real jeopardy, and there would be a huge negative impact on starting school next year, the message has hit home.''

Early last week, state officials filed a report with District Judge F. Scott McCown showing that a cutoff of state funds between June 1 and Aug. 31 would create a statewide school-funding shortfall of some $110 million. Nearly 170 districts would run out of money by the summer's end, according to budget data compiled by the state comptroller's office and the Texas Education Agency.

Judge McCown scheduled a hearing for late last week to respond to the report, which details an 11-step plan for shutting off state funds.

Education Groups Scramble

As lawmakers began reacting to the deadline pressure, education organizations scrambled to keep up with the legislature's hurried pace.

The T.A.S.B., which supported the school-finance amendment but adamantly opposes forced consolidation, invited local officials to Austin for a rally this week.

"This would not solve the problem,'' Ms. Cotton said. "It just brings the rich school districts down without helping the poor districts.''

The organization, like many school groups, would rather see reform of the tax system. Without a state income tax, Texas is forced to rely on local property taxes or a sales-tax increase to raise significant new revenue.

If time is too short for tax reform--and observers believe it is--consolidation opponents are asking for a second chance to vote on less-drastic solutions. But state leaders, said they would heed the resounding message delivered by the voters on May 1.

"People want the legislature to quit playing games, they want the system streamlined, and they are not afraid of consolidation,'' Ms. Hernandez said.

While many political observers had predicted that a relatively high turnout could have translated to a victory for the finance amendment, others last week said the large margin of disapproval showed that supporters had significantly misjudged public attitudes toward the issue.

"People are not going to tolerate enormous tax increases to level up the system, and they believe there is a lot of inefficiency and waste,'' Ms. Hernandez warned.

"Having so many school districts is extraordinary,'' she added. "We have tried every way to do this in a way that won't disrupt school districts, but they haven't worked.''

"There is no more time for nay-sayers,'' Ms. Hernandez said. "Right now, we need plans.''

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