Lack of Funds Could Close Many School Districts : Education: Finance experts warn that the crisis will worsen unless states increase funding and find more equitable ways to distribute it.

Classes in the city schools were supposed to start Sept. 8.

But 411,000 children spent last week on playgrounds, at home, in libraries and in YMCAs while the school board, the governor, the mayor, state lawmakers and city teachers tried to figure out how to balance the school district’s budget, plagued by a $298-million deficit.

Linda Guerrero, for one, was not happy about summer’s extension. “I’m bored,” said the prospective sixth-grader, who was hanging from the monkey bars at a park next to her deserted North Side school. Her mother, too, wants classes to begin, she said, “because the house will be cleaner and we will learn.”

The Chicago Sun-Times has been publishing essays by children who bemoan being left on the city’s mean streets and wonder if their chances for college admission have been hurt.

This school district may be the biggest to shut down for lack of money--as opposed to the asbestos crisis that has kept New York City schools closed--but it is certainly not the first. And school finance experts warn that it won’t be the last unless states come up with more money for education and more equitable ways to distribute it.

“The dam is going to break, and you’re starting to see the trickles,” said Deborah Verstegen, a University of Virginia professor of education finance and policy.

Schools in Kalkaska, Mich., closed their doors months early last March when voters rejected a property tax increase.

In Greene County, Ala., the declining fortunes of a greyhound racing track that had helped pay for new teachers and library books led school to open a week late last month.

School officials from rural Mt. Morris, Ill., have notified the state that they may have to close their system’s doors in January, Illinois school Supt. Robert Leininger said.

And the school district for North Chicago, a suburb in Lake County, voted to disband altogether last year. Five surrounding school systems, alarmed that they might have to take on the expense of educating North Chicago’s 4,000 students, challenged the dissolution plan.

The district was saved by a one-time infusion of $800,000 in state aid, along with a telethon on the local cable channel that netted $120,000. But North Chicago school officials already are fretting over next year.

Deep cuts already have been made in the past three years, said Business Manager Martin McConahay. The teaching staff was reduced by 10% and class sizes ballooned. It is not unusual to find 42 students in a high school biology class or 50 in a gym class.

Maintenance, custodial and secretarial workers are supplied by a private contractor now.

“I’m trying to dig up volleyball uniforms for the next game,” McConahay said with a sigh. “We have the shirts, but we do need the pants. We used the volleyball pants for baseball last spring, and they got kind of beat up.”

The school board, McConahay said, has “reserved the right” to file again with the state for dissolution.

What many of these districts have in common is a poor property tax base--either because the residents themselves are poverty-stricken, because of voter revolts over rising tax bills or because, as in the case of North Chicago’s Great Lakes Naval Training Station, a large swath of territory is exempt from tax rolls.

It is to property taxes that many districts turned when states would not ante up the money they needed.

“When state budgets get in trouble, then education gets in trouble,” said G. Alan Hickrod, director of the Center for the Study of Educational Finance at Illinois State University. “And state budgets are in trouble.”

Los Angeles school officials can testify to that. As California government coffers were depleted by the poor economy, state lawmakers cut education funding. Property taxes were constrained by Proposition 13. In the past four years, the Los Angeles Unified School District was forced to slash more than $1.2 billion of its $3.9-billion budget.

Last winter, the Los Angeles system teetered on the brink of insolvency when a judge temporarily refused to allow school officials to impose employee pay cuts. This year, the district’s financial health is so precarious, Supt. Sid Thompson said recently, that it could be pushed into bankruptcy “with a featherweight.”

In Illinois, the state now contributes 33% of school district budgets, down from 48% a decade ago.

The state’s financial “watch list,” which had fewer than a dozen entries 10 years ago, now notes that 110 of 940 school districts are on the road to fiscal disaster. “And that list is going to grow,” Leininger said.

Oddly, Chicago is not on the list. The city’s problems stem from a state requirement that the district not spend more in any one year than it takes in--a requirement that would have shut down more than half of the state’s school systems this year, Leininger said.

But even when the Legislature held a special session to allow Chicago to open schools that were running at a deficit, the district still was ordered not to hire any new employees, which could leave 7,000 positions--more than half of them teaching positions--vacant. The board decided to continue the closure.

Over the last 30 years, spending for education per pupil actually has gone up 206%, even adjusting for inflation, said Allan Odden, who heads the finance center for an education research group sponsored by five universities--Rutgers, Harvard, Stanford, Wisconsin and Michigan.

But, Verstegen countered, “we were stuffing pockets that were already full. The rich districts were the ones that got most of that.”

Lawsuits are challenging the fairness of school financing systems in 26 states, according to the Education Commission of the States, based in Denver.

In Michigan, the Legislature reacted by banning the property tax as a method for funding schools, wiping out $5.6 billion in school money. Now the lawmakers will have to construct a new financing mechanism from scratch, and they are under heavy pressure to do so in time to pay for the next academic year.

Some observers believe that the state will institute an income tax. Several plans are being drafted. There is talk of school-choice programs and of a statewide property tax.

“I would bet heavy money that all the money will not be replaced,” Odden said. “It’s very unlikely that Michigan (schools) will have as much money next year as this year.”

A similar repeal of school property taxes is under consideration by the South Carolina Legislature, although, unlike Michigan’s situation, the change would affect only residential property. The South Carolina bill cuts $180 million annually from school budgets, starting in July. There is no plan for replacement of the money.

Times staff writers Stephanie Chavez, Doug Conner, Lianne Hart, Ann Rovin, Tracy Shryer and Anna M. Virtue contributed to this story.