AUSTIN – Extra pay for Texas teachers. Relief for test-taking third-graders but tougher exams for high schoolers. Security for Dallas schools worried about losing money to property-poor districts.

Those were among the education highlights by legislators who, like kids at the end of school term, began streaming home after finishing their five-month work session Monday.

In all, the Legislature smoothed the transition to electronic textbooks in schools and banned the increasingly popular "minimum" grade policy – in which failing students get no less than a 50, 60 or even a 70 on assignments and tests.

Texas would continue to operate the largest merit pay program for teachers in the nation, but with a different twist. Gone will be the oldest incentive pay plan – which operated in lower-income schools – while a newer plan open to all schools will allow multiple types of bonuses, such as to retain math and science teachers.

The Legislature left a major task – badly needed repairs to the beleaguered school finance system – for its next regular meeting in 2011.

"This was not the session to fix the problems in our school finance system," Senate Education Committee Chairwoman Florence Shapiro, R-Plano, said, referring to the tight budget and sluggish economy. Lawmakers agreed to create a committee to lay the groundwork for a fix in two years.

Advocates for low-wealth school districts said the $1.9 billion in additional state aid for schools over the next two years will help some, but only barely cover the cost of inflation. The average increase for districts is less than 3 percent.

"They just kicked the can down the road for another session," said Dick Lavine of the Center for Public Policy Priorities. "There may have been a small improvement in equity [between high- and low-wealth districts], but they have a long way to go."

Teachers were helped, getting a minimum $800 raise – closer to $950 for Dallas teachers – and freedom from minimum grade policies that forced them to give their worst students up to a 70 on tests and class work they failed.

Third-graders will still take but no longer have to pass the Texas Assessment of Knowledge and Skills to be promoted to grade four – a requirement for the past six years under efforts to curb social promotion.

Most of the complaints from parents and teachers about such tests concerned third-graders, Shapiro said. "We decided to lessen the burden for third-graders, but we will hold their schools and school districts accountable for their test scores."

The state education commissioner could intervene at schools with a large number of failures in third grade under an accountability bill that passed.

Although both the House and Senate also wanted to end a similar requirement for fifth- and eighth-graders – the other two groups of students required to pass the TAKS for promotion – Republican Gov. Rick Perry balked at that. So those students will still have to pass the exam for promotion.

High school students will have it even tougher. They must get a passing average on 12 end-of-course tests – four each in English, math, science and social studies – to get a diploma. Students who show college-level skills on the Algebra II and English III exams – likely to be a small percentage – will automatically qualify for a diploma.

The end-of-course exams will start with ninth-graders entering high school in the fall of 2011.

One major teachers group complained about the failure to de-emphasize high-stakes testing.

"Despite the drumroll for pulling back ... the only students who got a break were third-graders," said Richard Kouri of the Texas State Teachers Association. "The net number of tests will actually increase."

House Public Education Committee Chairman Rob Eissler, R-The Woodlands, defended the legislation, saying those tests – and the accountability standards for schools – will show whether students are ready for college once they graduate from high school.

Eissler said most of the fastest-growing jobs will require either a college degree or some college work.

"Texas schools have become almost obsessed with their annual performance ratings, and if we can move them in the direction of greater college readiness with those ratings, then everybody wins," he said.

The Dallas and Houston school districts were also winners under the funding bill, which raises the threshold on when higher-wealth districts must share their property tax revenues with low-wealth districts under "Robin Hood" provisions of state law.

Districts that have to share will be those with $476,500 in property valuation per student. Dallas now sits at $430,000 per student.

Shapiro said revenue sharing by high-wealth districts will drop about $250 million next year while equity between rich and poor districts will improve.

Sen. Jane Nelson, R-Lewisville, authored the truth-in-grading bill after discovering a large number of districts giving failing students minimum grades of 50 to 70.

"Minimum grade policies reward minimum effort," she said.

A bill by Rep. Dan Branch, R-Dallas, clears the way for schools to buy electronic versions of learning materials – including CDs, online content and downloaded files.

"A traditional textbook is a vehicle for content delivery, but for many students that vehicle is quickly becoming a horse and buggy," he said.

Each classroom would still have to have at least one set of hardback or electronic textbooks in each subject.