DALLAS - In Texas state court files, the case is known simply as LULAC v. Richards.

But to state university officials, the lawsuit represents a potential revolution in the way Texas spends $3 billion a year on higher education.

Some say the suit, brought in 1989 by the League of United Latin American Citizens, could be to public universities what earlier lawsuit in some 35 states, including Texas, have been to local education.

As in those cases, the issue is whether all of the public has equal access to public education. The league charges that the state's current funding arrangement short-changes students at public universities along the state's border with Mexico.

Now lawyers for both sides are trying to negotiate a settlement put forward by the plaintiffs. The plan would increase graduate and other programs in South Texas over 10-year period, making the region equal with the rest of the state, lawyers for the plaintiffs say.

The push toward negotiations came after state district judge sided with the plaintiffs.

The decision by Judge Benjamin Euresti Jr., handed down in January, found Texas's system of funding higher education to be unconstitutional and ordered the state Legislature to devise a new system by May 1, 1993.

In his 12-page ruling, the Brownsville judge wrote that the state "expends less state resources in the border area ... than its population would warrant."

The case has been appealed, and the Texas Supreme Court is scheduled to hear it on Oct. 13 if a settlement is not reached.

A trail may be being blazed. "There is nothing like this going on anywhere else," said Sheldon E. Steinbach, general counsel to the American Council on Education, a national higher education umbrella group representing about 1,700 colleges and universities. "A successful, publicized suit is likely to attract imitators."

It would not be the first time Texas has started a revolution in education. In the 1970s, the state produced the seminal case of Rodriguez v. San Antonio Independent School District, which was credited with starting two decades of litigation that have revolutionized how states fund local education.

In Texas, the Edgewood v. Kirby lawsuit challenging funding for local schools is forcing state lawmakers to draft a new plan to provide equal funding for all the state's 1,054 districts. The Texas Supreme Court has already struck down three attempts at meeting that goal.

For the plaintiffs in the higher education case, the legal issues are similar.

"Like Edgewood, this requires equal access to public resources," said Norma V. Cantu, a lawyer with the Mexican-American Legal Defense and Educational Fund, which represents plaintiffs in both cases.

But to critics of the case, the judge's ruling establishes a dangerous precedent that promises to divide state funding of public higher education dollars by geographic region. At a time when many states are cutting money to universities, many believe the ruling will result in further division of limited dollars.

In many states, such a change would be a radical departure from the practice of building specialized academic programs at single universities, not at several institutions.

"This is all about geographic equity, although it was brought about on racial grounds," said Kenneth Ashworth, Texas's commissioner of higher education for 16 years. "Our argument is that higher education is different than local education and should be treated differently."

As he sees it, local education demands equal access to funding because from kindergarten through 12th grade students cannot study outside their districts. But universities traditionally build reputations in specialized areas. One may have a renowned business school, while another may offer an acclaimed undergraduate agriculture program.

"I think we've got one doctoral program in linguistics in Texas, and we assume that if anyone wants a doctorate degree, they would go to the school that had the program," Mr. Ashworth said.

"Students can vote with their feet on where the programs are better," he said.

Duplicating programs, he added, would not be practical or cost-effective.

State officials also argue they have been developing programs at campuses in South Texas for the 10 years since the schools became part of the state's two major public university systems - the University of Texas and Texas A&M University.

"You do not create instant universities," Mr. Ashworth said. "Over time, the situation will improve, but to require this kind of instant progress won't work."

For many in the 41-county region involved in the lawsuit, change has been too slow in coming. In the 25 years since the San Antonio campus joined the University of Texas system, for instance, it has not offered a doctoral program until this fall. The Dallas campus, launched at about the same time, has over 100 such degree programs.

"We have given them time," said Ms. Cantu. "The Mexican-American community has been very patient."

She said that long-standing discrimination in funding has made the few public universities along the poorer border region inferior to institutions at College Station, Austin, or Dallas.

Ms. Cantu said the fight for equality resembles the continuing legal fight in the public colleges of Mississippi, where the U.S. Supreme Court recently ruled segregation still exists.

"Texas, like Mississippi, has racially divided institutions," she said.

In pressing their case last fall, lawyers for the Mexican-American citizens group swayed a Brownsville jury with a series of stark facts.

For example, they argued that while South Texas represents about 20% of the state's population, an amount that would make it the nation's 15th largest state, it receives only 10% of the state's resources for higher education. And only three of the state's 600 doctoral programs and one of the state's 20 professional schools are located in the region, they said.

Unlike many families in other parts of the state, parents in the south now have few choices, Ms. Cantu said.

"That parent has one option, and that is to say goodbye to their children and send them outside the border region," she said. "The lower-income people there can less of afford to travel, and the irony is that the system forces them to travel the most."

The plaintiffs hope their proposed 10-year plan will help alleviate those problems. But opponents are wary.

By conservative estimates, the plan would cost $2 billion. But critics, including Mr. Ashworth, say it would take twice that just to get started. He and others argue the state does not need to spend that money.

While the long-term prospects for increased funding are unclear, the state does not even expect to have enough money to continue existing programs when the next two-year budget cycle begins next year.

"We won't know what impact this lawsuit has just yet," said Bill Cryer, a spokesman for Gov. Ann Richards. "But I don't see any additional funds out there right now."

Texas is facing a projected $6 billion shortfall in the general fund for fiscal years 1994 and 1995, and many believe less state money will be available for higher education.

Lawyers for both sides declined to discuss the impact of the settlement proposed by the plaintiffs. However, Ms. Cantu said it would be in the best interest of the university systems to settle, adding, "The systems are at risk of having the courts dictate how they run their budgets."

Officials at Texas A&M and University of Texas declined to speculate on how a settlement or court-ordered change in higher education funding would effect them.

"It would depend on what form any settlement would take," said John Roan, finance manager for the University of Texas system. However, he agreed the state has not been increasing its funding adding, "The state's share is down slightly and has been on a downward trend."

That is not unique to Texas.

"One area that has taken the brunt of cuts is higher education," said George Leung, vice president and managing director of state ratings at Moody"s Investors Service. "It's thought that higher education has the ability to raise revenues on its own."

Because of funding cuts, students at four-year universities have seen an eight-fold increase in tuition since 1984. However, the state's 800,000 tuition-paying students currently pay just $24 per credit hour, according to a recent study by the state comptroller that says only two other states offer cheaper classes.

In Texas, public universities are pinched to raise tuition because their funding is part of the 16% of the state's general fund budget that is discretionary. While most of the budget is spent on mandates or court-ordered programs, two-thirds of the discretionary funding is dedicated to higher education. This puts the funding at risk during tough times.

"We took a hit the last time they passed a budget," said Mr. Ashworth. "We "We will probably take a hit again."

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