Nebraska lawmakers are moving toward a compromise on state school aid funding after an impasse threatened to jeopardize the whole budget. Senators now appear ready to spend $930 million on schools instead of $900 million.

Lawmakers advanced a bill (LB545) Thursday that will give 26 larger school districts more money from the state than originally planned. It also slows growth in state aid across all 254 of the state's school districts.

"That's not something we like to do, but something we must do," said Sen. Greg Adams of York, a retired teacher who heads the Legislature's Education Committee. "These are difficult times."

The state is using $234 million in federal stimulus money to increase state aid to K-12 schools by 10 percent next year, followed by an 8 percent increase the following year.

The total budget for schools is close to $900 million.

But the proposal is about $60 million less than what schools expected under the complex state-aid formula that determines schools' financial needs. If lawmakers fail in the compromise, the state will have to come up with that $60 million amid a tight budget.

Earlier this month, lawmakers representing areas with larger schools blocked a school-funding plan that would have forced them to bear the brunt of that $60 million shortfall.

So lawmakers found some of that money -- $30 million -- to cut elsewhere.

Under the compromise advanced Thursday to the second round of debate, school districts will increase retirement contributions by 1 percent instead of the 2 percent that had been planned.

The result will be $30 million more for the state to distribute to schools -- most of which will go to 26 larger districts.

The school employees union agreed to the plan, which also increases members' contributions 1 percent instead of 2 percent, said Karen Kilgarin, spokeswoman for the Nebraska State Education Association.

The 2 percent increase would have been "a significant increase" in teachers' contributions during tough economic times, Kilgarin said. Teachers currently contribute more than 7 percent per paycheck, she said.

The 1 percent increase -- to just over 8 percent -- "is not as big a chunk out of teachers' paychecks," she said.

The state will revisit the contributions in two years. The lesser increase still meets actuarial requirements to keep the fund solvent.

The compromise isn't a done deal. It's still not clear how each school district's state aid numbers will change, because the only person who's able to determine the numbers is on vacation, Adams said.

That outraged some senators, who vented frustration that the state aid formula is so complicated that few lawmakers -- and in fact few people -- understand it.

"I delved into it, and I stand here a man defeated," said Sen. Tony Fulton of Lincoln.

The argument over proposed changes to the formula centered on the state's so-called "averaging adjustment."

Smaller districts tend to spend more per pupil. The state provides averaging dollars as an equalizer to close that gap, and larger schools are the major beneficiary.

The proposal that caused the impasse would have made it more difficult for districts to get the averaging dollars, so some larger school districts weren't happy.

The compromise slows the growth of the averaging adjustment in the long-term, but also satisfies larger districts so they get some money to reduce the per-pupil spending disparity.

Sen. Deb Fischer of Valentine was among senators who pointed out that while smaller school districts have seen cuts in state aid in recent years, the plan that larger districts objected to still gave them an increase in state aid the next two years -- just less than they expected.

She said she doesn't want the state to "squeeze money out of certain districts so that other districts can benefit."