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Impact of Tex. Finance Law, Budget Increase Gauged

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The school-finance law approved by Texas lawmakers in an effort to reduce funding gaps between high- and low-wealth school districts could end up hurting poor schools more over all, a new study suggests.

Combined with a modest increase in state school aid, the new law will cause widespread budget cuts and local tax increases that are likely to hit poorer districts harder than their wealthy counterparts, according to the study by the state budget board.

The law, passed last month, requires the state's 101 wealthiest districts to surrender a portion of their local wealth to poorer districts. The rich districts, which constitute a little less than 10 percent of all districts in the state, will experience substantial budget losses.

But a more widespread impact will be felt by poorer districts, which will be affected by both a state-aid increase that will not cover enrollment growth and by provisions of the finance law that lower the amount of state aid guaranteed for tax effort.

The result will be to more heavily penalize poor districts that remain reliant on state aid.

Faring best under the law, the report found, are districts that are above average in wealth and tax rate but are not among the top 101.

The biennial budget approved by lawmakers at about the same time as the finance law will add $1.1 billion in new education funding. But that falls an estimated $500 million short of the amount necessary to maintain current per-pupil spending levels, given rising enrollment.

The finance law will also require a greater local effort in order to win state funds. As a result of changes in the funding formula, a district with a local tax rate of $1.20 per $100 of assessed valuation would receive just under $3,000 in state aid per student this year, as opposed to $3,255 last year. The district would have to raise its tax rate by 12 cents to get the same state aid.

Legal Challenges Under Way

The finance law got its first formal challenge last week, and other potential plaintiffs said they may not be far behind.

The Mexican-American Legal Defense and Educational Fund, the plaintiff in the state's original school-finance case, filed suit again last week. The suit argues that even if poor districts are able to match current spending, the new finance law permits gaps of more than $800 in per-pupil spending.

Without a greater state effort, it is impossible that the finance system will ever be equalized, said Al Kauffman, the lawyer for the group.

"They have dealt with some of the major problems in the system,'' Mr. Kauffman said, "but some of the parts of the formula are now less equitable, and they have not used state money as well as they could have.''

In addition, a group of property-poor districts represented by the Equity Center has been critical of the law and is considering a challenge.

Also taking a long look at the law are wealthy districts, which successfully challenged the legislature's previous attempt to solve the finance problem by requiring a county-based redistribution of local resources.

A group of wealthy districts will meet soon to discuss legal strategy, said Earl Luna, who represented the districts in the previous challenge.

The longer school officials look at the new plan, Mr. Luna said, the more they see it as little more than a political solution that does not help the state's schools.

"They started talking consolidation, which scared everyone to death, and then when they found something else, it sounded good,'' Mr. Luna said. "But now it seems like the question is would we rather put up with something that cripples you rather than killing you.''

"If you worked hard to find a bill that would hurt everybody, this would be it,'' he said.

Meanwhile, the state has seen its first consolidation in the wake of the new law. The small, rich Laureles district in south Texas will merge with the neighboring Rivera district.

Laureles, which sits on the sprawling King Ranch, has seven students and taxable wealth of more than $7.6 million for each child. Rivera has 525 K-12 students and a $106,000 tax base per student.

The consolidated district will have a tax base of $207,000 per child.

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