The new property tax reform law has education leaders worried about whether they'll have enough money to run their districts, but lawmakers promise that it won't be a problem.

While the law provides relief for most homeowners, it changes one of the revenue sources that fund school districts' operating budgets. That change is causing concern for school officials.

School districts will now receive money from the statewide sales tax, which will increase from 5 cents to 6 cents, instead of from homeowners' property tax bills.

In theory it would be an equal swap. But school leaders fear that if the state enters a recession and fewer sales tax dollars are generated, there won't be enough money to pay operating expenses.

During an S.C. ETV forum last week, Rep. Bill Cotty, R-Richland, tried to convince school finance directors that the state would come through and meet its funding obligation. If sales tax revenue declines during a recession, Cotty said, the state could dip into its general fund to pay school costs.

"In my opinion, this is going to work," Cotty said. "If the state tries to give school districts a Mickey Mouse runaround, I believe you'll see successful lawsuits."

Marty Connelly, finance director for Dorchester District 4, said the group of school officials who watched the discussion still had doubts.

"No one objects to property tax relief and to seeing taxpayers' bills reduced," Connelly said. "But our main concern is if there's going to be stable source of funding to replace it."

The law also limits school districts' ability to increase spending. Each year school districts will receive increased money from the state based on adding the previous year's inflation to the percentage increase in population of residents within the school district.

Any tax increase above that would be granted only in special circumstances, such as a hurricane or other catastrophe, and would require a two-thirds vote by the school board.

That means that for many school districts, the law would cap budget growth at roughly 5 percent - enough to pay for salary and utility spikes, but not enough to fund new Advanced Placement classes, technology upgrades or elementary school foreign language instruction, said Paul Krohne, executive director of the S.C. School Boards Association.

"The No. 1 concern in the minds of school board members is if this is just another huge step toward the loss of local governance of our public school system," Krohne said.

"On one hand, we hear that programs to reduce the dropout rate and fund four levels of chemistry are important. On the other hand, the state is saying that they aren't going to give local communities the ability to fund these programs."

That funding cap might be adequate in some years, and not enough in others, said Don Kennedy, the Charleston County School District's chief financial officer. In Charleston, for example, it would be more than enough to cover the proposed 2.5 increase to the district's operating budget for next year, but would have fallen short of covering the 8.7 increase in the district's operating budget this year.

The new law will consider school districts' operating expenses from the upcoming year as the basis for all future budgets. One school finance director advised districts to look at passing a larger budget for next year while local boards still have that control.

"If you have some flexibility, now is the time to exercise that flexibility," Bob Davis of Richland 2 said.

In Charleston and Berkeley school districts, leaders said they don't envision adding other expenses to next year's budget based on what could happen in the future.

"Padding the budget this year for the simple reason of achieving a higher foundation in the future would be a transparent move," said Kathleen Bounds, chairwoman of Berkeley's school board.

In addition to funding concerns, school finance officials are having a tough time understanding the law's many detailed provisions.

One confusing clause, for example, attempts to level the playing field between wealthy and poor districts by setting aside at least $2.5 million for every county that does not have property tax revenue exceeding that amount.

Figures showed that the Colleton County school district could gain more than $2 million, but district officials said they aren't sure if Colleton qualifies.

Confusion aside, some officials in multi-district counties argue that the provision is unfair. While the tax revenue for their county exceeds $2.5 million, the revenue from inside their district's boundaries falls short of that.

Though Spartanburg 4 makes up only $1 million of its county's total property revenue, the district would not get any extra money.

Spartanburg 4 Superintendent Rallie Liston said his schools won't see the same increases that other small districts will.

"Poorer districts in richer counties were left out," Liston said.

Krohne, of the state school boards' association, said it will take some time to answer all of the school funding-related questions raised by the new law.

"We are just beginning to explore the complex issue of how this is going to work," he said.

Reach Mindy B. Hagen at 937-5433 or mhagen@postandcourier.com. Reach Diette Courrégé at 937-5546 or dcourrege@postandcourier.com.