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Tex. Legislators Ponder New Plan For School Funds

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Backing off from a drastic school-district-consolidation proposal, Texas lawmakers last week were moving toward a new plan to solve the state's latest school-finance crisis by assigning expensive commercial property to poor districts.

The novel approach would reduce the local wealth of nearly all of the state's highest-spending districts by detaching such properties as power plants and shopping malls and annexing them to nearby poor districts.

While many lawmakers and officials late last week were still becoming familiar with the "business-property transfer'' scheme, it was easily approved by the Senate on Wednesday and was being hailed by some observers as an ingenious solution that avoided the pitfalls of consolidation.

"There are no people or kids or voters involved,'' said Craig Foster, the executive director of the Equity Center, a group that represents mostly poor districts. "This is an elegant solution, both technically and politically.''

The momentum for the plan has not eliminated consolidation as an option, observers said. Nevertheless, House leaders postponed debate on a consolidation bill and scheduled a hearing last Friday on both proposals.

A state district judge has warned he will cut off all state funding to schools on June 1 if the legislature has not passed a plan that fulfills the state supreme court's mandate to reduce funding disparities between rich and poor schools.

Lawmakers had intended to satisfy the court and validate the current school-finance system through a constitutional amendment. But the measure failed badly in a statewide vote May 1, prompting a new round of frantic activity in the nation's longest-running school-finance saga.

Consolidation's 'Bureaucracy'

The state's Democratic leadership began last week by uniting behind a consolidation plan that would group wealthy and poor districts based on economic factors. The plan seeks to reduce wealth per weighted student in high-spending districts to no more than $280,000.

While it would consider geographic factors, the proposal could group districts miles apart. (See Education Week, May 12, 1993.)

As introduced in the House, the consolidation bill would not close any schools, change district boundaries, or affect athletic competition.

Of the state's 1,040 districts, the bill would target 109 of the wealthiest districts for consolidation with 131 poor districts. The consolidated districts would elect nine-member governing boards responsible solely for levying and collecting property taxes and adopting an overall budget.

Local control over curriculum, teacher and student assignments, and hiring would be preserved, according to the bill's sponsors.

Officials said last week that while the consolidation bill remains a viable alternative, it appears to have been eclipsed by the new proposal, which makes less dramatic changes.

"They tried very hard to retain community identity, but there are still a lot of concerns,'' said Nancy Cotton, a spokeswoman for the Texas Association of School Boards, which has been the most vocal opponent of the consolidation plan.

The T.A.S.B. called off a rally against the plan last week and instead held an informational session for about 700 members. Even so, a spontaneous protest by about 500 people occurred outside the state Capitol.

"Schoolpeople are worried about the superboards and who is responsible for what,'' Ms. Cotton said. "We have argued that they are just creating a whole other bureaucracy.''

An Unrecognized Solution

The rapid rise of the business-property proposal began when a lawyer and education consultant involved in the issue began to ponder the many unpopular changes the consolidation plan would cause in their own school district simply to shift a relatively small amount of wealth. They developed the property-transfer idea and took it to state officials, who within a few days had turned it into the Senate bill.

Similar to the way in which cities add and subtract territory, the bill would give the state education department responsibility for balancing wealth by reassigning nonresidential property in high-wealth districts.

"It is a solution that was staring people in the face but nobody recognized,'' a Senate education committee aide said last week. "We were convinced consolidation of school districts was the only answer for the court and the only option for the legislature. Now, I don't think anything can stop this bill from being passed.''

Under the bill, which has passed the scrutiny of a number of state-constitutional lawyers, commercial property would be removed from the tax rolls of 109 wealthy districts and reassigned to poor districts until the wealthy districts fell below the $280,000-per-student level. Residential and agricultural property would be exempted.

Officials said the plan would reduce the wealth levels for all but seven of the 109 districts. Those areas, like the Highland Park district in Dallas, derive their wealth from high-priced residential property. They would be forced to pay both the local and state share of teacher retirement in an effort to reduce their continued tax-base advantage.

The bill would phase in the commercial-property reductions for about 40 districts to make their losses less drastic. For those districts, the transfer would take place over two years.

The bill would shift about $40 billion of the state's $600 billion in commercial property. Senate aides said the plan would not require any new state funding.

Business Uncertainty

Although the plan won applause from many educators and lawmakers, it drew criticism from several business groups, which said business was being made a pawn in the school-finance plan.

The hearing scheduled for late last week was intended both to gauge the political situation in the House and give business officials their first formal chance to comment on the transfer plan.

"What we have is an uncertainty question,'' said Bill Allaway, the executive vice president of the Texas Association of Taxpayers, which represents businesses statewide.

"Under this proposal, a property owner doesn't know from year to year where their business is taxable, which raises questions about whether they can or ever will establish long-term relationships with the place where they do business,'' he said.

Business owners also have raised concerns about treating commercial property differently from residential and agricultural property. In addition, they worry that they are being targeted for tax increases by moving from generally low-tax areas to districts with higher rates.

Many of those same concerns, however, are also present in the consolidation plan.

"They are both drastic,'' Mr. Allaway said. "The question is drastic to whom.''

Avoiding Disruption

Many observers predicted last week that unless some new obstacle appeared, it was becoming more likely that the unique property-transfer strategy would become the state's new finance solution.

"Consolidation pales compared to this plan because this means there is no disruption,'' said Mr. Foster. "If the focus is on local control and district identity, there is no question that the new plan is less intrusive.''

"We think consolidation is gone,'' a Senate aide said. "It has lost a lot of votes in the House since this plan came out.''

Vote-counters last week said support in the House appeared to be split evenly between the consolidation measure and the property-transfer bill. Leaders in the chamber could choose their strategy over the weekend and act this week.

Gov. Ann W. Richards last week was urging only quick action.

"The Governor's only concern is that the legislature get out by May 31 so she can hand-deliver their plan to the judge on June 1,'' said Sonia Hernandez, the director of education policy for Ms. Richards. "Besides that, she has no preference.''

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