The concept of fiscal neutrality seeks to guarantee that a penny of tax effort in any district in the state, no matter how poor, will yield the same number of dollars per student for education as in any other district. Every district, in effect, would draw on the wealth of the state as a whole, but each district can decide for itself how much to tax and spend for education. However, a higher minimum expenditure per pupil, subsidized by the state, simply is not responsive to fiscal neutrality--unless it approaches the level of the highest-spending school districts. One possibility is to redistrict the state and to create school districts of roughly equal wealth per pupil. This approach threatens the preservation of local control of education. Another remedy, "recapture," is based on redistributing local property taxes. The most viable approach is a hybrid one: enact a law that achieves a high degree of fiscal neutrality while ensuring that the opponents of increased state taxes, redistricting, and recapture do not lose too much in the new reform measure. The Texas legislature recently embraced such a hybrid approach in Senate Bill 351. Examples of responses from Texas school districts and various groups indicate that informed political horse-trading and not rational models have and will continue to carry the day in educational finance. (39 endnotes) (MLF)