In a ruling likely to have major budget and political implications for New York State, the state's highest court has held that New York City is not adequately teaching its schoolchildren, and that the city and state must do more to ensure a "sound basic education" for those students.

In upholding a lawsuit challenging the financing of the New York City school system, the state Court of Appeals ordered the state to come up with a remedy by July 30 of next year. But the court offered no specific suggestions for a remedy—nor did it say the state (as opposed to the city) would have to pay the cost. "We have neither the authority, nor the ability, nor the will, to micromanage education funding," the majority opinion, written by Chief Judge Judith Kaye, said.

And the court, in a 4-1 ruling modifying lower-court rulings, expressly limited its decision to New York City. The ruling would impact school districts outside New York City only if the Legislature decided to significantly cut school aid to districts outside the city, in order to finance a major increase for the city—or, conversely, raised aid significantly to all districts in order to get more money to New York City.

The court ruled that the city offers a grossly inadequate education to its students, especially for poor and minority students, and that this is an egregious violation of the state Constitution. It ordered the state to calculate the "actual cost" of providing a "sound basic education" in New York City, and to put in place by next June a plan for ensuring that the money is provided.

But the court did not specifically require that any additional funding come from the state treasury. It said that if (as the state had contended in its defense) the city itself is under funding the schools, then the state has and must exercise the power to remedy the situation, because the city is legally a creature of the state.

"How the burden is distributed between the state and city," the court said, is a matter "for the Legislature desiring to enact good laws." Conceivably, the Legislature could order the city to come up with any extra funds itself.

Supreme Court Justice Leland DeGrasse had ruled in January of 2001 that the state should determine the cost of providing a sound basic education in every district in the state, and revise the entire state aid formula accordingly.

One member of today's Court of Appeals majority argued that its ruling should be applied statewide. But the other three, led by Chief Judge Judith Kaye, concluded that the trial record was limited largely to the performance and financing of the schools in New York City, so the decision should be, too.

The majority's opinion acknowledged that other districts could bring similar suits, but warned that "plaintiffs have prevailed here owing to a unique combination of circumstances: New York City schools have the most student need in the State and the highest local costs yet receive some of the lowest per-student funding and have some of the worst results. Plaintiffs in other districts who cannot demonstrate a similar combination may find tougher going in the courts."

Even if other cities or districts were to file lawsuits, any final decisions on them would be years away. In the meantime, the process in Albany will have to focus on dealing with the New York City schools.

As outlined by the high court, the first step is supposed to be for "the state" to calculate "the actual cost of providing a sound, basic education in New York City." Just who is "the state" in this context was not further specified. Presumably this could be the Governor, the Legislature, the Board of Regents, a special commission -- or some combination.

Then, the Legislature and the Governor would have to adopt measures "ensuring ... that every school in New York City would have the resources necessary." And there would have to be "a system of accountability to measure whether the reforms actually provide the opportunity for a sound basic education."

This would appear to mean that some force or forces in Albany have to move quickly to work on the "actual cost" issue. (The plaintiff, the Campaign for Fiscal Equity, already has a study of this topic under way, but using standards quite different from those set out by the Court of Appeals). The financing debate will then be a dominant theme of the 2004 budget and legislative session.

The Campaign for Fiscal Equity (CFE), a New York City-based advocacy group that includes representatives of teacher unions, parents, civic, and minority groups, initiated the case in the 1970s. CFE's first claim argued that New York's funding formula was unfair because it was unequal.

But the state Court of Appeals explicitly rejected that argument in 1995 when it first remanded the case to Supreme Court. In rejecting the "equity" argument, the Court of Appeals said there was a constitutional right to a "sound basic education" but not to "equity."

Justice DeGrasse found for CFE in early 2001, but the state's Appellate Division reversed that decision last June, saying he had given too broad an interpretation to what constituted a "sound basic education."

The Court of Appeals ruling also rejects the use of the state Board of Regents's Learning Standards (the Regents exam-based requirement for high school graduation) as the working definition of a "sound basic education" that must be provided to all children.