Texas Enacts New School-Funding Law Under the Wire

In latest bid to meet court mandate, state gears up to transfer funds to poor districts

A QUARTER-century of legal challenges over the way Texas funds its public schools may have ended yesterday, when Gov. Ann Richards signed a new school finance law that will transfer between $200 and $400 million a year from wealthy districts to poorer ones.

But some observers predict that the new law is no better a solution, and no more invulnerable to legal attack, than three previous plans thrown out by the state supreme court.

Meanwhile, legislators say a jump in failures by high school seniors on a statewide test underscores the need to put the financing issue in the past and move on to reforming what takes place inside the schools.

Last week, some 13,400 seniors - or 7.4 percent of the total - learned they failed at least one part of the reading, writing, and math test known as the Texas Assessment of Academic Skills. The failure rate was only 3.4 percent last year.

A judge allowed seniors who failed to participate in graduation ceremonies, but they must pass the exam to get a diploma.

School funding is at the heart of a debate over education quality in the state, a debate that has only grown more contentious. In signing the funding law, Governor Richards averted a cutoff of $1.5 billion in state funds that would have begun today under a court order dated more than a year ago. A cutoff would have forced public schools to close.

With the deadline looming, the Legislature adopted a plan allowing the roughly 10 percent of wealthiest districts to decide how to lower their taxable property to a level of $280,000 per student - still well above the $100,000 state average.

The wealthy districts can do one of the following:

* Write a check to the state.

* Transfer property into a poor district.

* Merge tax bases with a poor district.

* Consolidate completely with a poor district.

* Or contract to educate students from a poor district.

Wealthy districts can be forced to comply if they do not do so voluntarily.

State courts have said that the law will be presumed legal unless challenged successfully. Detractors say that will happen eventually, and that the only real solution is to throw out the state's "antiquated" tax system and start anew.

Texas is divided into more than 1,000 school districts. They receive some of their money from the state and raise the rest by taxing the value of property inside their boundaries.

Districts that contain industrial facilities, commercial property, or lots of land are able to raise more money per pupil than districts that do not, even when the latter tax themselves at a much higher rate.

Poor districts argued this system discriminated against their students. The Texas Supreme Court agreed in essence, ruling that the system was "inefficient," which put it in violation of the state Constitution.

The Legislature crafted a new method of funding which transferred money from property-rich districts to neighboring poorer ones. But the wealthy districts persuaded the courts to throw this system out early in 1992, on the basis that it violated a Texas constitutional ban on statewide property taxes.

To avoid disrupting Texas schools, the court allowed the system to remain in force until a new one could be adopted, and set today as a deadline.

The Legislature adopted a plan this spring that would have made the system legal by having voters amend the state Constitution to allow the transfer. Instead, they rejected the unpopular system by a two-to-one margin last month, causing the Legislature to formulate the plan that Richards signed yesterday.