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HELENA — Leading lawmakers have reached a new, tentative deal to fund public schools that includes inflationary increases of state funds over two years, new oil-and-gas money to help pay the bill, and restrictions on school district reserve funds.

The $1.47 billion proposal, crafted late Wednesday, is likely to be a key part of budget negotiations as the Legislature tries to wrap up its regular session next week.

"I think people are generally satisfied with it," said Sen. Ryan Zinke, R-Whitefish, the sponsor of the bill that would include the deal. "I don't think anyone is jumping up and down, but I do think everyone can live with it."

The proposal will be presented Tuesday to a House-Senate conference committee, which will decide whether to amend the deal into Senate Bill 329. Zinke chairs the committee and is sponsor of the bill.

Elements of the deal include:

-- A 1 percent increase this year in state base aid funding for public schools and a 2.4 percent increase next year. However, one-third of the second year's increase will be a one-time increase if state tax revenue doesn't hit a certain level by that year.

-- Despite the 1 percent increase, state funding for schools actually declines this year, because the starting point is lower than the current-year funding.

-- A cap on the amount of oil-and-gas revenue that flows to petroleum-producing school districts, at 130 percent of their respective general fund budgets. Any revenue in excess of the cap goes to the state, estimated at $24 million the next two years. Eight school districts in northeastern Montana will be affected by the cap.

-- Limits on how much money school districts can hold in certain reserve funds, starting in 2016. The limits will apply primarily to oil-and-gas districts or other districts with big nonlevy revenue.

-- No language on charter schools, which are experimental schools exempt from selected regulations on regular public schools.

Zinke said the deal was brokered by top Republican leaders and members of the House-Senate panel, including himself.

"I didn't get everything I wanted, but we did show that we're committed to education in hard times," he said.

Lance Melton, executive director of the Montana School Boards Association, said schools will have less money under the plan next year, but that it's a good overall deal given that majority Republicans in the House had been pushing hard for even less money.

"Schools are going to have a tough time for the first year," he said. "This is by no means a growth budget. It's a budget that will result in budget cuts. But we're fortunate to be prioritized in this way."

Denise Juneau, the state superintendent of public instruction, said Thursday that she hopes the deal works out, because school districts are setting their budgets and need to know how much state funds they can expect. She said her goal has been to ensure that schools emerge from the Legislature with inflationary increases in state funding.

State funds cover nearly half the money for public schools in Montana; the remainder comes from local property taxes and federal money.

Most school districts would end up getting less state money this year under the deal, and if they want to maintain their current budgets, they would have to ask voters to approve higher local property taxes.

The outcome of the deal and whether it works into the state budget also may be affected by Gov. Brian Schweitzer's amendatory veto of House Bill 2, the major spending bill, expected Saturday.

"I'm hoping that the governor's amendatory veto doesn't represent a radical change," Zinke said. "I think he'll recognize the difficulty of the times. I don't foresee him not being at least fiscally prudent."

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