Gov. Rendell wants to slash the number of school districts statewide, eliminating about 400 of the current 501 Pennsylvania public school systems.

The controversial proposal would make a more efficient public education system, he said.

"There is nothing sacrosanct about the need to maintain 500 separate school districts across the state - each with its own staggering, and growing, administrative costs," the governor said in his budget address.

Rendell wants a legislative committee to study consolidation and return recommendations within a year.

The revelation came as Rendell proposed to increase Pennsylvania's public school funding by $265.3 million, a 2.8 increase over last year's budget. That's amid proposed cuts in many other state budget items.

"Even in these difficult times, we must not lose sight of the fact that every additional dollar we allocate to public education will benefit our children even as it helps relieve the burden of local property taxes," Rendell said in his budget address today.

Rendell also hopes to provide $550 million in tuition relief to Pennsylvania students who attend state-system schools or community colleges, an initiative he'd like to fund by legalizing video-poker machines at restaurants, private clubs and corner bars.

For basic education funding - the largest portion of the state education budget - the governor proposes an increase of $300 million.

The total proposed budget for public schools is $9.9 billion, which would make up 37 percent of the proposed $26.6 billion budget - the largest single item.

Special education funding would remain flat; money for charter schools and transportation would increase; most other programs would be cut.

Rendell also proposed relieving the burden of school taxes on local residents by drastically cutting the number of school districts, from 500 to no more than 100. A 12-member commission would develop a consolidation plan within a year, under his proposal, with the legislature voting on which of two proposals to accept. If it turned down both, the Department of Education would decide.

"Full-scale school consolidation provides a very effective way to relieve the local property tax burden all across Pennsylvania," Rendell told the legislature. "There is nothing sacrosanct about the need to maintain 500 separate schools districts across the state - each with its own staggering, and growing, administrative costs."

Last year, Rendell proposed to increase state education funding by $2.6 billion over six years to bring all school district up to the level at which they could provide an adequate education for their students. At the urging of the Rendell administration, the legislature enacted a new funding plan for public schools, based on a state study that established the cost of providing an adequate education for all students. The plan set a goal of ramping up basic education subsidies by enough so that within six years, every school district could provide an adequate education to its students.

Basic education funding was increased by $274 million for this school year, the largest dollar increase since 1991, as the first step toward that objective. The Rendell administration set a goal of increasing the subsidy by $2.6 billion by 2013-14.

The formula established a basic per-student payment, then adjusted it to take into account poverty, the number of limited education students, a district's size and its geographic location. Districts with high tax rates and low wealth received more.

To stay on track for delivering the $2.6 billion increase, Rendell had planned to increase basic education funding in this year's budget by $418 million.

The governor is proposing using the same funding formula this year, but, he said, "sadly, we can no longer afford this level of increase, though the need for this funding is no less compelling than before."

The Pennsylvania School Funding Campaign, a coalition of groups that pushed for state funding increases, said in a statement that it supports the governor's proposal.

"It is an important commitment in light of the current economic climate, cuts in other areas of the state budget, and education cuts in other states," said Ron Cowell, president of the Education Policy and Leadership Center and a member of the School Funding Campaign steering Committee.

Contact staff writer Kristen Graham at 215-854-5146 or kgraham@phillynews.com.