SAN JOSE MERCURY NEWS

SACRAMENTO - Gov. Arnold Schwarzenegger's administration has been working behind the scenes to settle a groundbreaking class-action lawsuit that demands the state improve inferior conditions in schools serving a million poor and minority California students.

The politically volatile case, which the state has spent $20 million to defend so far, is on hold until late this month while lawyers try to reach an out-of-court settlement.

Rae Belisle, the executive director of the State Board of Education, said this week the parties are "as close as we've been" to settling the case.

Neither side would discuss the content of the settlement discussions, but both acknowledged that they are continuing.

Gov. Gray Davis, the self-styled "education governor," had fought the case for nearly four years, but also took an unsuccessful stab at a settlement before he was ousted in the fall. The millions the state has spent on private lawyers make the case among California's most expensive outside legal contracts in recent years.

Filed in May 2000 in San Francisco Superior Court by the American Civil Liberties Union and other advocacy groups, the lawsuit asks for a state monitoring system to ensure every student has the bare necessities to learn: clean classrooms, qualified teachers and sufficient textbooks. The outcome could determine the quality of classrooms and teachers for about one-sixth of California's 6 million schoolchildren, particularly those in poor areas such as East Palo Alto and parts of Oakland and San Francisco.

In legal papers, students describe schools where rats scurry around classrooms, with bathrooms so filthy they're unusable and classes that have no permanent teacher all year.

Even before Davis was recalled, pressure to resolve the suit was mounting, and there are telling signs that the new administration may want to settle:

• The ACLU's lead lawyer attended a trip to tour schools in Edmonton, Alberta, with new Education Secretary Richard Riordan, who has long championed better education in the inner cities. The men have been friends for years, Belisle confirmed.

• In a recall debate, Schwarzenegger referred sympathetically to the issue, deriding schools that have "no toilets there that are flushing, paint is peeling off. If you call this equality in education, I think it is outrageous."

• Riordan advocates simplifying California's school funding and giving extra money to schools that have educational challenges -- such as teaching poor students. Such changes, if adopted, could bring in more money to districts such as East Palo Alto's Ravenswood and Los Angeles Unified, which are cited in the case.

The ACLU's head lawyer, Mark Rosenbaum, refused Friday to discuss settlement talks, which are confidential.

"The expenditure of close to $20 million on lawyers by the Davis administration was obscene," he said. "You don't have to be a mathematician to see how many qualified teachers that would have bought."

Riordan and the governor's office referred all calls to the state board's Belisle. A private lawyer for the state referred questions to the administration.

Belisle said several things occurred since the case was filed in 2000 that may bring the parties closer together: the federal No Child Left Behind Act's requirement for highly qualified teachers in poor schools; changes to California's accountability system; better textbook availability; and a bill that gives rundown bathrooms first priority for maintenance money.

"Everyone is optimistic," she said. "Putting all those things together, you have all the makings for good, positive things to happen."