MARK YUDOF IS THE CHANCELLOR OF the University of Texas, but he also happens to be a thirty-year veteran of the Texas school finance wars. As a young UT law professor, he was co-counsel in a case challenging Texas’s method of funding its public schools that went all the way to the U.S. Supreme Court, where his side lost. So he knows what he’s talking about when he compares the continuing saga of school finance with a Russian novel: “It’s long, tedious, and everybody dies in the end.”

That’s just what the characters in the current school finance drama are afraid of, from Governor Rick Perry to anxious legislators, school superintendents, and taxpayers. As Perry weighs whether to call the Legislature into special session this spring, the story of Texas schools seems once again to be hurtling toward doomsday. The Robin Hood funding scheme, adopted in 1993, which achieved equity between rich and poor school districts by redistributing the former’s tax dollars to the latter, has reached the end of its useful life. Local property taxes have skyrocketed, and lawmakers of both parties have been content to boast about not raising state taxes while forcing local taxpayers to carry more and more of the burden of paying for public schools. As a result, the state’s share of the cost of education has declined from 52 percent in 1980 to 38 percent today. More than half of Texas’s 1,041 school districts are within one cent of the maximum tax rate allowed by state law and have no way to pay their bills except to slash programs and personnel. Dozens of school districts, representing around a quarter of Texas’ students, have turned to the courts for immediate relief in a lawsuit scheduled to go to trial in July.

School districts are not the only ones in mortal danger. Failure to fix the problem could have fatal political consequences for Perry, who has pledged to get rid of Robin Hood, which targets the state’s wealthiest—and often the most staunchly Republican—districts. But finding the right fix brings on other hazards, such as locating a source of money to replace the $1.1 billion the Robin Hood districts are currently contributing to poor districts. Perry’s leadership and vision, which have not previously been his strong suits, will be seriously tested, and the stakes for the governor could not be higher: U.S. senator Kay Bailey Hutchison and Comptroller Carole Keeton Strayhorn are considering Republican primary challenges against him in 2006. Already the issue has sharply defined Perry’s priorities: While he was willing to keep the Legislature in special session for as long as it took to produce a Republican congressional redistricting plan last summer and fall, he has said he will call a special session on school finance if he sees a GOP consensus on the issue—as though it will turn up on its own, perhaps wedged between the cushions of a Capitol office sofa.

School finance also looms as the biggest gut check for the Republican-majority Legislature and its leaders, Lieutenant Governor David Dewhurst and House Speaker Tom Craddick. The issue brings their no-tax ideology into conflict with their obligation to govern. It will also test their ability to work with Democrats. If, as expected, the school finance fix requires amending the state constitution, the necessary two-thirds majorities cannot be achieved without the votes of Democrats, who are still seething over the bruising mid-census congressional redistricting battle. The Republicans who scathingly denounced the Robin Hood scheme to their political advantage during campaign season must now answer a difficult question: What’s the best alternative?

So far the three GOP leaders have been unable to reach an agreement on two fundamental questions. The first is whether to shoot for a “little fix” that would amount to a patch on Robin Hood’s leaky tires or to go for a “big fix” that would not only shift the tax burden for public education from the local level to the state level and from property to other sources but also try to guarantee a better education for Texas students. The second is how to pay for a plan that will cost anywhere from a little-fix $2 billion a year to a great-big-fix $10 billion. The solution will not include an income tax, but it could envision raising the cigarette tax, expanding or increasing the sales tax, legalizing and taxing video lottery terminals at racetracks, or instituting a business activity tax or a statewide tax on business property. Any of the above, with the possible exception of a cigarette tax, would encounter fierce resistance. As Steve Ogden, the new chairman of the powerful Senate Finance Committee and a plainspoken Republican from Bryan puts it, “There are certain groups whose ox is going to get gored.”

Senate leaders are ready to advance a plan adopted by that chamber during the regular session, which slashes property taxes in half and raises and expands the sales tax. Perry, however, has maintained a devout silence on possible ways of raising new revenue to replace the Robin Hood funds. His hard-driving chief of staff, Mike Toomey, has been lobbying lawmakers to adopt a split property-tax roll, with business property taxed by the state and residential property taxed by local districts. This solution, which would require the Legislature and the voters to override a constitutional prohibition against statewide property taxes, has met with a tepid response from lawmakers and violent opposition from business interests. Toomey also wants to require a vote of the people before any local taxing body—not just school districts but also cities, counties, hospital districts, and the like—can raise additional revenue. This too will be hotly contested.

The concern among educational leaders is that the political risks will outweigh the necessity to improve the schools. The education funding crisis offers state leaders the best opportunity since the 1984 reform efforts led by Ross Perot to improve upon the most important function of state government. The 1984 session set Texas schools on the path toward more equity in funding, more accountability for performance, and higher standards. If state leaders can do as well this time around, any additional costs will be easier to sell to the public.

Perry has embraced some modest reforms aimed at reducing dropout rates, rewarding teachers for improved student performance, and giving school districts incentives to cut costs. All are ideas championed by Kent Grusendorf, the Arlington Republican named by Craddick to chair the House’s interim study on school finance. A self-described investor, the 62-year-old Grusendorf has applied his conservative, market-based philosophy to state government issues since he ran for, and won, a seat on the State Board of Education in 1982. Unlike many Republicans, he sees taxes as a “necessary evil”; he wants to seize the moment and reinvent Texas public education. “How do you get maximum value for every dollar spent? That is going to require tough decisions, and we can’t continue to do business as usual,” says Grusendorf, who says he “has a big shopping list” of reforms. “Efficiency does not mean doing things on the cheap.”

Grusendorf believes that the Legislature was “buying votes as opposed to buying better education” when it adopted across-the-board teacher pay raises in 2001. “The worst teacher on every campus got the exact same raise as the best teacher on every campus,” he says. “We have to look at a better way of spending money.” One better way, he says, would be to award incentives—”in the range of ten thousand to fifteen thousand dollars a year”—to principals and teachers who improve their students’ performance during a school year. He’d free schools “from rules and regulations”—for instance, allow principals to decide whether to comply with the Perot-created 22-to-1 student-teacher ratio for elementary classrooms. “Don’t get me wrong. I’m for small classes, but you need flexibility,” he says. “You also need a strong accountability system so there’s a price to pay if you make a dumb decision.”

Grusendorf’s willingness to seek more money for public schools could put him at odds with Perry, who prefers the less risky path of the little fix. Perry told reporters in January that he favored only enough new state money to allow reductions in local property taxes. A few days later, he said he “might” consider new money for incentive programs, but he is clearly resistant to any big fix. The issue of additional funding above current levels is a key point in the school districts’ lawsuit; the districts claim that state funding is inadequate to provide the quality of education that the state constitution and laws currently mandate. Former Highland Park school board president Mike Boone, who has long advocated a big fix that would help rich and poor schools alike, grouses of Perry’s position, “He’s talking about rearranging the deck chairs on the Titanic.”

Boone points out that, because of Robin Hood, Highland Park has had to obtain a waiver from the 22-to-1 teacher ratio because it cannot afford to hire more teachers, even though it raised $2 million from private sources last year and several years ago began charging a $500 fee for sports participation. He calculates that the district needs about $1,000 more per student to bring it in line with state requirements. “We’re leveling down and reducing the quality of education,” he says. “If Highland Park, one of the wealthiest districts in the state, is down one thousand dollars per student, how bad off are districts with far fewer resources?”

One has to travel only a few blocks to find a district worse off than Highland Park: Dallas. Superintendent Mike Moses, who served as commissioner of education under Governor George W. Bush, produced a $1.2 billion budget last year by cutting administrative costs and 360 teaching positions. “When you do that, do you know what happens to class size?” he asks. “We can’t go back to that well this year.” That leaves arts programs and extracurricular activities as targets, and Dallas’s per pupil spending on those programs is already well below the state average. “If you want the dropout rate to go down, you have to recognize there are kids who stay in school because they are engaged in activities that are wholesome and healthy,” he says. “I don’t know many kids in band, choir, or athletics who drop out.”

Moses urged his board to join the lawsuit challenging the school finance system in part because cost adjustments for students with expensive special needs haven’t been changed in more than eleven years, during which the state has undergone a huge demographic shift: 60 percent of the past decade’s new students qualified for bilingual or special-education services. Of the Dallas Independent School District’s 163,000 students, 93 percent are minorities, 79 percent are economically disadvantaged, and 32 percent are limited in English proficiency.

The district has established a separate student intake center for new immigrants to handle the complexities of integrating the two thousand or so new arrivals each year who represent 27 languages. The day I visited the center, the waiting room was filled with students from all over the globe. As I was interviewing the director, I saw Merlin Melgar, a spunky, clean-cut Honduran boy of fifteen, arrive, brimming with excitement about starting school. His circuitous route to Dallas schools began after his father’s murder two years ago. Relatives fearing for Merlin’s safety saved $2,500 to hire a coyote to spirit him to an uncle who worked as a roofer in Dallas. The trip took an unexpected detour when the van in which he was riding crashed in Kansas City, sending him to the hospital with a serious head injury. Immigration officials put him in a juvenile detention facility for a month before allowing him to go live with his uncle. “If we don’t do something to make sure these kids are successful,” says Moses, “are we really going to allow ourselves to become a state of low-skilled, low-wage workers?”

Meanwhile, back in Austin, the best chance for avoiding the Russian novel syndrome lies with the hope that political courage will trump fear of change. Members of both parties in the House and the Senate told me that they are determined to write a more optimistic ending, even if it means taking responsibility for a tax bill that Perry doesn’t want. Otherwise, expect more of the barren, wintry landscape of Yudof’s experience for Texas’s long-suffering schools.