Updated: A Deal on School Finance, Dewhurst Says

Update, Friday, 7:02 p.m.: 

Lt. Gov. David Dewhurst said leaders in the House and Senate had agreed on a school finance plan as he left a meeting with education and budget chiefs from both chambers.

As expected, it is the "hybrid of a hybrid" Sen. Florence Shapiro described. All districts would take what will likely be a 6 percent across-the-board reduction in the first year, the approach pushed by the House. In the second year, Shapiro's SB 22 would take effect: 75 percent of the remaining $2 billion reduction in state funding would come from cutting property wealthy, target revenue districts; all districts would bear cuts to make up the that last 25 percent. 

During the 2013 session, Shapiro said lawmakers will adjust the school funding formulas once again based on the money available. The current plan contains a 2018 deadline for the phase out of target revenue, but as Shapiro pointed out, there are three legislative sessions between then and now. 

The full House and Senate will give the plan an up or down vote on Sunday as a part of SB 1811.

Update, Friday, 5:51 p.m.: 

Speaking outside of an ongoing meeting with leaders in both chambers, Gov. Rick Perry told reporters that negotiators had the contours of a school finance deal — but that details were still in the works. 

He said the agreement was "a little rough around the edges," but that he didn't "see any reason that we would have to be in a special session."

Earlier, as Sen. Bob Deuell, R-Greenville exited the meeting, he said the remaining sticking point was whether to apply the plan for the next two years, an approach he said the governor favors, or the next five, which the Senate would prefer. 

As the plan stands now, Deuell said, it would apply proration for the first year of the biennium and Sen. Florence Shapiro's SB 22 for the second.  

Earlier story: 

The House and Senate must agree on how to distribute the $4 billion reduction in state public education funding by 5 p.m. today, say Sen. Florence Shapiro, R-Plano, and Rep. Charlie Geren, R-River Oaks.

"The thing that I'm most concerned about is, if we don't come up with something, what are the schools going to do?" Shapiro asked. "We really are in a very precarious period of time."

After rejecting an initial proposal from the House late last night, the Senate sent a counteroffer back across the dome, which members there are currently considering.

On the House floor, Democrats questioned the leadership about whether a deal had been reached, and said they were worried about whether they would have enough time to examine a plan over the weekend. 

Any rewrite of school funding formulas has to happen in SB 1811, the legislation generating non-tax revenue in the form of deferrals and accelerated tax payments that's essential to balancing the budget.

But negotiators have struggled to reach the school finance deal critical to avoiding a special session. House members favor a short-term solution put forward by Public Education Chairman Rob Eissler, R-The Woodlands, that would keep current law in place and enact the same percentage cut — the most recent figure puts that at 6 percent — to all districts across the board. That would happen through the process known under current law as “proration” and leave any significant policy changes addressing the target revenue system until next session. (The target revenue system is a funding mechanism created by the Legislature in 2006 when it reduced property tax rates. It means that some districts aren’t funded on a cost-based model, but rather what they received per student that year.)

The problem with any one-size-fits-all approach, according to the Equity Center, a research and lobbying organization that advocates on behalf of poorer districts, is that it does the most damage to districts that have the least. A 6 percent reduction could barely make a dent in the budget of a wealthy district while forcing serious restructuring in one that is already cash-strapped.

That’s why the Senate isn’t ready to give up on longer-term adjustments to school funding. Shapiro's proposal distributes the cuts on a sliding scale across districts, making deeper reductions to those that have benefited most from the target revenue system. And it makes a commitment to eliminating it completely by 2017.

Shapiro said Thursday that whatever comes out of the talks will be a "hybrid of the hybrid." A possibility: distributing $2 billion of the cuts through proration the first year, then taking $2 billion from target revenue reserves in the second.

Whether they can reach a compromise palatable to both bodies may depend on how much senators — including Sens. Robert Duncan, R- Lubbock, and Bob Deuell, R-Greenville, two SB 1811 conferees who have repeatedly stated the need to move away from target revenue — are willing to budge.