School superintendents are proposing an overhaul of North Dakota's education finance system to provide extra state aid for districts that can raise less property tax money for their schools.

The plan would consolidate several methods of distributing state aid into a single formula and abolish a property tax mill levy deduction that is considered punitive, Grafton Superintendent Paul Stremick said.

"The new formula would be simpler, more flexible, and would provide overall fairness," Stremick said at a meeting of the state Commission on Education Improvement.

The commission, appointed by Gov. John Hoeven as part of an agreement to delay a lawsuit against the state's education finance system, met for the second time in Bismarck on Wednesday.

Its work will be presented to the 2007 Legislature. It is likely to influence lawmakers' debates over education finance, an issue that affects public schools and property tax bills statewide.

The 13-member group, which has been meeting monthly, intends to meet in West Fargo, Williston and Minot during the next four months, said its chairman, Lt. Gov. Jack Dalrymple.

Three commission members - Stremick, Williston Superintendent Warren Larson and Mark Lemer, the business manager for West Fargo's schools - presented an outline of the overhaul plan Wednesday.

The Grafton and Williston schools are among nine districts that have been pursuing the school finance lawsuit against the state. Larson and Stremick said a number of school administrators outside the commission were consulted in drafting the initial proposal.

It would supply extra state aid, called equalization payments, to schools that have less property tax value per student than North Dakota's statewide average.

For the 2005-06 school year, North Dakota school districts have an average of $16,185 in taxable property value per student, the Department of Public Instruction says.

Schools that fall below that average would get a payment to make up the district's shortfall in property tax resources, Lemer said. The money would ease property wealth differences among districts, he said.

Districts with other income that is not generally shared, such as money from coal mining and oil and gas production, would have that income subtracted from the state's equalization payment.

The payment would replace North Dakota's property tax mill levy deduction, which is the present method for reallocating property tax revenue more evenly across the state. In essence, the change would make reallocation of property taxes a state responsibility, rather than a local one.

Raising the deduction, which is now 38 mills, is considered a way to promote greater equity in North Dakota school finance. But the method is widely reviled because it subtracts from many districts' state aid payments.

"It's viewed as a penalty, because it's a minus on the (existing) formula. We would propose that the mill deduct disappear," Stremick said. "In the new funding formula, there will be no need for a mill deduct."

North Dakota's present school finance formula already provides extra payments for some schools with less property tax value per student. Dalrymple said the school administrators' proposal appears to be more fair, and more flexible.

"This plan would pick up everybody at the state average, and begin to distribute additional funds on a proportionate basis to your relative lack of wealth," Dalrymple said.

The proposal would revamp how payments from a state education trust fund are distributed. Schools are scheduled to get $71.6 million this year and next from the fund, which was established at statehood and gets income from investments, fines, oil and gas leases and rentals of state-owned pasture land.

Each district now gets about $351 annually for each school-age child living within its borders, regardless of whether the child attends public school. Districts are paid for students who are home-schooled, or who attend parochial school.

The superintendents' blueprint would pay trust-fund proceeds to schools in the same manner as other state aid. They would no longer get money for students who do not attend public school. Payments would be adjusted according to each district's individual characteristics, and not paid as a per-student lump sum.

Dalrymple, who is a former chairman of the House Appropriations Committee, said the lawsuit delay to allow the commission to draft a reform plan has ratcheted up the pressure for results.

In casual conversations in the Capitol's corridors, North Dakota Supreme Court justices have told him they are watching the proceedings closely, Dalrymple said.

"Their interest in this whole topic is much greater now than it was before. They feel that if we fail here, they will be, I think, more inclined to get active," Dalrymple said. "So the pressure, I think, is greater … We're getting a chance to do it ourselves. And if we don't, I think we're going to get punished worse."