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HELENA - Discussions turned contentious at times Wednesday as education and government officials dissected a defeated Martz administration proposal to help fund the state's schools.

Senate Bill 323, Gov. Judy Martz's proposal to change school funding methods, was killed last week in the House Appropriations Committee.

However, deep divisions remain about the measure's effect on schools, and Senate President Bob Keenan, R-Bigfork, called Wednesday's meeting to discuss those disagreements and the opposition to the bill.

School officials had lobbied hard against the bill, saying the present funding formula would mean more money for schools than the Martz plan, even though it would mean no increase for any school and losses for some.

Lance Melton, executive director of the Montana School Boards Association, characterized the plan Wednesday as "misleading" because it increased state school money in one area but effectively shorted school districts an additional $2.7 million by taking away some federal money.

The Martz administration plan would have increased per-student state funding by 2 percent this year and 1 percent next year.

The bill would remove a requirement that school districts cover the retirement and unemployment insurance costs for staff paid with federal grants. Instead, the expenses would have to come from the federal money.

Martz administration budget officials defended the plan as good policy because it stops the state from paying for costs associated with federal programs.

The measure also would shield taxpayers from property tax increases, said Chuck Swysgood, the governor's budget director, because districts wouldn't have to increase taxes that fund retirement plans to match increased federal program spending.

But teachers' unions, school board groups and the state Office of Public Instruction said schools would be better off with no new funding plan.

"We just can't support that, not in any fashion," Melton said. "Not today, not tomorrow. We just oppose it."

If the Legislature does not approve a new school funding bill, the state will continue to distribute funds to public schools over the next two years under the formula passed by the 2001 Legislature.

Schools would get no increase in per-student funding, and schools with declining enrollment would get less state money.

"Literally, nothing is better than (Senate Bill) 323," said Dave Puyear with the Montana Rural Education Association.

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