Over the past several weeks, a shadowy state agency has convened under court order to fix a school construction-funding scheme flagrantly biased against California's most overcrowded, poor urban districts. That it took a civil rights lawsuit to force the State Allocation Board to reform is appalling enough. Even more disturbing, the growing conflict between wealthy and inner-city districts may preclude a just remedy.

At the root of the problem is the board's practice of handing out school-construction money, including the $ 3 billion that voters authorized in approving Proposition 1A in 1998, on a first-come, first-served basis. Each of California's 1,000 school districts must complete a detailed application process, including architectural and construction planning and extensive environmental review of proposed sites. Districts that fill out the forms fastest, not those with the greatest demonstrable need for new facilities, overwhelmingly get the money.

Accordingly, inner-city districts, where students are crammed into year-round facilities with broken toilets and playgrounds buried beneath portable classrooms, receive little support. Richer districts serving suburban and exurban regions--communities expanding into largely rural, open spaces--pocket funds for Olympic-sized pools, band-practice rooms and manicured soccer fields.

The Los Angeles Unified School District, for example, contains 12% of the state's K-12 student body. One-third of its mostly inner-city pupils receive substandard, multitrack year-round instruction. Yet, under the SAB's formula, the district would be paid just 1% of all Proposition 1A funds. Facing certain depletion of this money, a coalition of LAUSD students challenged the constitutionality of the board's approach. Last August, a court ruled that, before trial in early 2001, the board had to follow its own priority-points system and address need, not just speed, in its funding decisions. Despite the students' legal victory, behind-the-scenes politics threatens real progress.

California's inequitable school-funding process is another example of what happens when crucial social decisions are made by little-known agencies subject to virtually no scrutiny. The rules and regulations of these insider-dominated bureaucracies can be strikingly inequitable yet almost impossible to change.

The very heart of the SAB's approach reflects this problem. Even if it employs its priority-points system, its formula is inherently skewed in favor of richer communities. As evidence of "need," exurban districts are allowed to inflate their funding-priority scores by counting the number of future "students," often derived from nothing more than a developer's tentative tract map on vacant parcels.

This is a huge blow to urban districts. Compared with the tangible facility shortages plaguing inner-city schools, construction requirements derived from tentative tract maps are highly speculative. Many proposed projects are never built because of changing funding, regulatory or market circumstances. Years can pass before ground is broken, and by the time construction begins, the size and scope of most developments frequently differs from what was first proposed.

Incredibly, the SAB's funding formula weighs an exurban district's "ghost" pupil requirements almost as heavily as an urban district's actual facility shortfalls. In others words, the 77,000 students for which the LAUSD now lacks two-semester classroom capacity compete for construction money with "phantom" children on vacant fields.

Procedural politics explains this result. As a 1998 California Research Bureau study noted, the SAB, like most bureaucratic entities, is profoundly influenced by special-interest pressure. Wealthier school districts have far more resources and direct political connections to lobby for rules that favor them. SAB staff, moreover, has considerable discretion to delay or otherwise compromise any district's funding application. Poorer, disadvantaged communities can ill afford to openly challenge even its most onerous practices.

SAB rules also make no allowance for the fact that the state's environmental review process delays even the most diligent urban district's applications. No district can get in the school-funding queue until the state Department of Education certifies a potential school site. A site can't be certified until all environmental studies are complete. The trouble is, California is among the small minority of states refusing to establish cleanup criteria for previously used urban land.

Almost all potential inner-city school sites are affected by prior industrial, commercial or residential activities. They require extensive environmental assessment. Most urban landowners, however, are loath to permit urban districts to test soil, because they fear the state's unconstrained evaluation procedures. Assuming soil data is ever obtained, a district's application can be further stalled while regulators, environmentalists and community groups haggle over results.

In suburban districts, potential sites are usually located on still-untouched or more lightly utilized land. Exurban developers are typically delighted to cooperate with district officials because new schools add value to their projects. Wealthy districts can often complete all their environmental reviews in the time it takes their urban counterparts just to identify a site.

Why do urban districts suffer such disadvantages? One reason is that some environmental groups oppose clear-cut cleanup standards because they want the broadest possible opportunity to force open-ended review of any project that offends them. Ironically enough, the state's most powerful environmental lobbyists and lawmakers repeatedly failed to prevent adoption of relatively relaxed soil standards for high-profile projects in the Bay Area, where most of them reside. But they have been far more adept at killing every legislative proposal to establish similar urban cleanup criteria, including those applicable to potential school sites, everywhere else.

In the last year, for example, the number of steps required to complete school-site environmental review has greatly increased. But lacking clear environmental standards, urban districts must now pass through an even larger number of ill-defined bureaucratic checkpoints before they are allowed to apply for, let alone receive, SAB funding.

That's why, at a time when the rhetoric of educational opportunity is everywhere, an agency like the SAB can disproportionately fund politically well-connected, wealthier districts at the expense of inner-city communities. In procedural politics, the odds always favor the privileged and powerful.

In response to the court's ruling, for example, the SAB agreed to take need into account when parceling out funds but largely rejected calculation proposals put forth by urban districts in favor of those advanced by exurban and suburban district lobbyists. Late last month, the board barely overcame a concerted effort to force a return to the allocation system used before the court's ruling.

Even if the SAB acts on priority points, exurban districts will be permitted to count "phantom" students. Nor is any means of offsetting the environmental-review delay handicapping urban districts being considered. The board declined to withhold the final $ 450 million of its Proposition 1A funds any later than June 2002, even though the LAUSD, by far the biggest loser under the current regime, pleaded that such funds be reserved for just four additional months to complete pending applications.

The SAB will have to defend its decisions in court next month, then in a trial. It's daunting to think that changing years of unconscionable practice hinges on a few fragile moments in court. In an era when bureaucracies can unaccountably fashion crucial public policies, however, such may be the only chance to insist that principle, not process, reigns supreme.