Part 3 of a 3-part series

Cody Schara, a sophomore at Baraboo High School north of Madison, wishes he'd been born a few years earlier, before his school axed classes and packed 30 students into some classrooms to save money.

"It doesn't seem quite fair," Schara, who plans to become a history teacher, said before heading off for final exams this month.

West of Madison, Katie Dreier, a Wisconsin Heights High School sophomore, worries that pending course cuts will limit opportunities for her and her classmates in colleges and careers. She plans to transfer to a neighboring school district if voters reject a Feb. 20 referendum that asks them to stave off budget shortfalls representing about 10 percent of Wisconsin Heights' budget.

But Norman Frakes, a retiree who formerly headed the Wisconsin Heights district, counters that many residents on fixed incomes won't be able to afford to stay if the referendum is approved. It'd cost him more than $400 a year, an increase of more than 25 percent on the school portion of his property-tax bill.

Such conflicting emotions have long typified the debate over paying for Wisconsin's public schools, the single most expensive and arguably most critical job of state government.

But now there's an elevated sense of urgency.

With measures of idealism, angst, politics and analysis, Wisconsin is moving into the most intense examination in more than a decade of how it pays for its $10 billion system of public schools.

There's fresh impetus for change, as increasing numbers of the state's 425 school districts report deepening financial problems, Democrats revel in retaining control of the governor's office and winning a majority in the Senate, and two major reports provide ideas for reform.

"I see that things are moving," said Jack Norman, research director of Institute for Wisconsin's Future, a nonpartisan group that calls for an overhaul of the state's school-financing system.

Among the promising developments, Norman said, is a joint resolution being circulated in the Legislature calling for creation of a new school-finance system by July 2009.

The measure calls for the system to be based on "the actual cost of what is needed to provide children with a sound education. . .rather than based on arbitrary per-pupil spending levels."

It's an endorsement of the so-called "adequacy" model of funding promoted in a new report from UW-Madison education professor Allan Odden.

Although the resolution is vague, Norman said, "it's a sign that legislators are getting eager to take on this issue. It shows you yes, this is percolating, and I think it's coming up quicker than many people expected."

But big changes in Wisconsin's school-funding system never have come easily - and are unlikely to happen until the state's economy improves, interviews with more than 50 educators, politicians, state officials, students, parents and taxpayers show.

"From my point of view, it's been a battle, session after session, just to maintain the funding levels that we have," said Senate Education Committee Chairman John Lehman, D-Racine.

While parts of the funding system are inadequate, Lehman said, it's tough to convince legislators to spend more when Wisconsin's level of per-pupil spending generally ranks about 12th-highest in the nation and at the top of a five-state region that includes Michigan, Illinois, Minnesota and Iowa.

Wisconsin's two most recent waves of school-funding changes, in the 1970s and 1990s, were preceded by a sense of crisis, consensus for solutions and a source of additional money from a humming economy.

In 2007, though, the state's economy is slow and the upcoming budget needs $1.6 billion in reductions from plans submitted by state agencies. Education groups are talking about unity, but haven't yet reached an accord.

Most school districts are reporting worsening financial problems while others - mostly those with moderate enrollment growth - are leery of abandoning a system that seems to be working well enough for now.

A modest menu of solutions soon will be proposed in a report by a bipartisan Wisconsin Legislative Council panel headed by Sen. Luther Olsen, R-Ripon, a former school board member noted for his grasp of school-finance issues.

Those measures, which are widely viewed as having a high chance of winning legislative approval, would aim to alleviate some of the most acute funding pinches in districts with rapid enrollment declines and frugal spending patterns that left them little flexibility after state financial controls were implemented 14 years ago.

If approved by the Legislature, one proposal would essentially allow school boards to boost their revenue limits by up to 1 percent, which in Madison would be $2.2 million next year. Boards would need to OK such moves by a two-thirds vote, and the spending would be in effect for just one year at a time.

Other measures would raise the minimum level of funding to which districts are entitled and encourage cash-strapped districts to explore consolidations.

Assembly Education Committee Chairman Brett Davis, R-Oregon, a member of Olsen's panel, praised the study group for advancing proposals worthy of debate.

But Davis expressed frustration that the focus so far was on helping districts obtain more money while neglecting to examine what can be done to hold down expenses such as districts' soaring health-care insurance expenses.

"Any legislation that comes out that is one-sided, I don't think is going to pass the Legislature," said Davis, whose party controls the Assembly. "We've got to give school boards and school administrators the tools they need to control those costs."

Davis said he wanted "to make it really clear" that he won't support the proposal granting school districts more flexibility under the revenue caps - a potential new tax of $76 million - unless cost controls are included in the discussion.

Just two states, New York and New Jersey, spend more proportionally on employees' benefits packages. But spending on salaries in Wisconsin schools ranks 22nd, when calculated as the cost per pupil, according to data compiled by the Wisconsin Taxpayers Alliance, a private nonpartisan group.

None of the proposals from Olsen's panel would remake the most controversial parts of the school-finance system.

Revenue caps - the measure most strongly opposed by school districts - limit how much districts can raise from local taxpayers without seeking a referendum.

Qualified economic offers (commonly known as QEOs) require districts to boost teachers' combined salaries and benefits at least 3.8 percent a year to avoid arbitration. Those raises, in turn, set the pace for compensation of schools' other employees, and compensation accounts for 82 cents of every dollar spent on education.

Since they were established 14 years ago, revenue caps generally have grown at a slower rate than have QEOs, forcing districts to inflict ever-deeper cuts to balance their budgets or to seek referendums, which often are divisive and consume huge amounts of time and energy.

Doyle, who declares education his top priority, supports the measures from Olsen's committee.

He favors abolishing the QEOs and giving communities options for developing affordable benefits packages for school employees. He'd like to retain the revenue caps, however, while giving school districts added flexibility for specific expenditures such as school- security costs.

"As difficult as the caps are, you do have to have a mechanism for ensuring that if the state puts in this tremendous amount of money. . .that we actually hold down property taxes by doing it," Doyle said.

A growing number of educators and politicians say that Wisconsin's school-finance system must be replaced with a so-called "adequacy" system - the type envisioned by the resolution now circulating in the Legislature.

The report from Odden, the UW-Madison education finance expert, challenges Wisconsin's approach to paying for schools, calling for the state to base districts' funding on an analysis of how much it should cost to meet the state's own educational standards, given each district's mix of students with special needs, while also boosting achievement levels to prepare students for a competitive global job market.

The price would be substantial if the state adopted Odden's model. Such an approach might cost $800 million to $900 million more per year, although it could be phased in, Odden said. Other experts think the cost might be in the range of $1 billion to $1.5 billion.

Just one other state, Maryland, adopted an adequacy model without being forced by court order.

As they deliberate the future of the state's schools, legislators stay attuned to how their decisions some day might play out in a courtroom.

The state's school funding system narrowly survived, in 4-3 votes, constitutional challenges in the Wisconsin Supreme Court in 1989 and 2000, and experts say a future challenge could contend that the state is failing to fulfill broad adequacy standards outlined in the 2000 case.

Old-fashioned politics also shapes the quest for reform. Unless it came with an infusion of money, Odden's pitch for "adequacy" would mean some districts get less money than they now receive.

Any plan calling for a major shake-up likely is doomed unless it protects districts from slipping, experts and politicians said.

Complicating legislators' roles is the fact that most represent legislative districts that contain multiple school districts, and it may be impossible to get school officials to agree on solutions, said Lehman, who serves on a task force advising Odden.

But, Lehman said, Odden's report deserves "legs" because it gives the state unprecedented insights into what schools need to succeed.

"It's all about the money, and that's why there's not the political will to change school funding," said Rep. Sondy Pope-Roberts, D-Verona, the ranking Democrat on the Assembly Education Committee. "There are going to be some districts that are going to lose."

With co-sponsor Sen. Roger Breske, D-Eland, Pope-Roberts is circulating the resolution calling on the Legislature to reform school finance.

"The problem lies right here under the dome with the legislators who are not doing their job," Pope-Roberts said.

In places like the Madison, Wisconsin Heights and Baraboo school districts, many students are taking a role in their schools' funding struggles.

"I think the most important thing is that we educate the public about the funding," said Baraboo High School junior Meg Cychosz, who comes from a family of educators and hopes to someday work in publishing.

"Because no one understands it. Educators in this district don't even understand the funding because it's so complicated. And that's how the legislators made it, so that people wouldn't understand."

Voters narrowly turned down two school referendums in Baraboo last year. Those battles turned mean, to the dismay of people on both sides of the issue, with some businesses losing customers because of opposing viewpoints and some people being shunned as they're in stores and on sidewalks.

At Wisconsin Heights, which is located between Mazomanie and Black Earth, senior Quinn Seston had a pro-referendum letter published in the local paper, the News-Sickle-Arrow, and he's striving to persuade his parents to support the Feb. 20 referendum. He thinks Mom is in his camp, but Dad is a harder sell.

Many residents, Seston said, suspect that the district is mismanaged.

"I've looked at all the numbers," he said, noting that the district's revenue cap has dived half a million dollars in three years, because of shrinking enrollments. "It's not the district's fault."

Senior Chris Herbst, president of the Baraboo High School student council, said he voted in favor of the referendum that narrowly failed last fall, and he'll support the next one, too. Herbst, who plans to follow his father into the dental field, said he's enjoyed plenty of opportunities, but he's concerned about his brother, a sophomore.

"They're already talking about cutting classes that I took, that he's interested in taking. . . . AP (advanced- placement) classes that I feel I really benefited from and will make my college life easier," Herbst said.

"Locally, we need to consider the referendum because that's our safety valve right now, until there's some education reform in Madison."

Squeezing Schools: A 3-part series

Part 1: Cuts threaten vulnerable students

Part 2: Should Wisconsin throw out its school finance system?

Part 3: Signs of change at the Capitol