DALLAS -- Today will mark the third time the Texas Supreme Court hears arguments about the state's school finance plan and the first time that fairness will not be the issue.

Instead, the core of the case will be the state constitution's ban on statewide property taxes. A half-dozen lawyers will argue over whether lawmakers imposed such a levy last spring when they resolved a seven-year court battle for fairer school funding by passing the so-called Robin Hood plan.

"The issue of equity is for another day," said Earl Luna, a Dallas lawyer for property-wealthy suburban schools challenging the law. "We will be arguing that the new law violates the constitution."

Today, Mr. Luna will argue that Senate Bill 351 -- the third school finance law in two years -- creates a statewide property tax that illegally forces rich districts to share as much as $400 million a year with other schools.

Travis County District Judge Scott McCown in August rejected that argument and upheld the third school finance law as constitutional. He also plans hearings on arguments that S.B. 351 fails to meet the mandate for equity set by the high court when it struck down the original funding system in October 1989.

Lawyers for the state today will argue that the judge was right to uphold the plain's requirement that property tax revenues be collected and shared within newly created county-level districts.

"It is a local fund assignment," said Kevin O'Hanlon, general counsel for the Texas Education Agency. "It is not fundamentally a state tax."

As Tom Anderson, deputy commissioner at the agency, sees it, "the fundamental issue is that tax wealth is not the wealth of any one district, but belongs to everyone in the state."

A final decision may ultimately depend on how the Supreme Court applies the 1931 decision in Love v. City of Dallas, according to Mr. Luna and other lawyers. In that case, the court said tax dollars from one district could not be spent to educate students in another. Justices said in a February ruling that they would not modify or throw out the six-decade-old decision.

"We believe Love is sound and decline to overrule or modify it," the court said in a 5-to-4 ruling.

Mr. Luna sees that as encouraging. "The Love case says you cannot spend taxes raised in one school district to educate kids who live in another district," he said. "The state says that's not relevant."

Indeed, the state has argued in briefs filed with the Supreme Court that S.B. 351 merely assigns taxing powers to county-level taxing districts. It does not force one district to tax its residents to fund education in a neighboring school, they say.

"That's a very fine line," said Ray Hutchison, senior bond lawyer at Hutchison, Boyle, Brooks & Fisher in Dallas.

For the state's wealthiest districts, the distinction is critical.

Under the new law adopted in mid-April, scores of Texas districts have been forced to raise their tax levies to statewide levels, while watching their actual funding drop because of the sharing forced by S.B. 351.

So far, there is little argument that the new law has closed a wide gap that once existed between tax levies for different schools.

A survey by the Texas comptroller's office has found that the law forced the average property tax to rise from $1.06 per 100 of assessed valuation in 1990 to $1.20 this year. At the same time, tax rates that once ranged from 18 cents to $1.51 are now separated by only a few pennies.

"The law did what the court told us to do," said Mr. Anderson, the state's deputy commissioner for education. "One of the consequences has been an increase in taxes for some."

In such places as the Dallas Independent School District, the new law cost millions of dollars that had to be made up with budget cuts annd higher taxes.

But large districts were not the only ones affected. At the Allamore Community School District, the state's smallest district with an enrollment of two, the new law forced the tax rate to rise 772% from 18 cents pper 100 of assessed valuation to $1.39.

While the West Texas district once had the lowest tax rate in the state, in now has the distinction of having the greatest increase in tax levy.

Others say the high court should strike down the new law because it relies too much on local money. In past years, Texas financed most of the cost of education, but under the new system only 47% of funding comes from the state. The rest is now from local sources.

"There has been a steady decline in the state's share of the cost of education," said David Thompson, a lawyer for a broad coalition that last week filed a brief in the case. "Texas has become a locally funded system with state supplementation."

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