Wealthy school districts have always found it easier to raise money than poor ones. The result has been some shocking differences between have and have-not districts. In Kentucky, for example, per- pupil spending in 1988-89 ranged from as much as $4000 to as little as $2000. Is this kind of inequality constitutional? Last year, the Kentucky Supreme Court decided it wasn't. But the court did not stop at asking for a revision of these funding formulas -- it called for a new education system.

The reform bill that Governor Wallace Wilkinson signed last month follows the court's directive. Unlike most previous school reforms, it doesn't just tinker with the existing system: It offers a blueprint for fundamental change. Furthermore, instead of creating endless rules and regulations that tell people in the schools what to do every minute of the day, the Kentucky reform focuses on student results. And it leaves people at the local level free to look for the best way to get those results. Here are a few of the highlights of the reform.

Goals. The seven goals it proposes are personal and social as well as academic. Communication and math skills head the list. In other academic areas, the goals ask students to apply "core concepts and principles ... to situations they will encounter throughout their lives." In other words, have a command of the facts about history or biology will not be enough. Students also will need to understand the principles behind the facts and be able to use them.

How will the goals be translated into action? That will be up to individual school districts and schools. The law provides for "measurable performance standards" so people will know how well students in their schools are doing. And it calls for the state board of education to circulate a "model curriculum." But this curriculum will be a guide, not a mandate. Decisions about courses, textbooks and supporting materials are left to people at the local level.

Incentives. A number of states penalize school districts that consistently fail to meet state standards. Kentucky is the first to offer financial incentives for schools to improve. The awards, which will be based on improvements in student performance over a certain period of time, will go to the entire staff of a successful school. And the sums of money could be substantial. A working paper for the reform bill suggested a formula that could give a teacher who is making $24,000 a year a bonus of as much as $10,800.

But there could be a problem with the Kentucky incentive plan. The staff will decide as a group on appropriate ways to spend the award money, and individual staff members must be guided by these decisions. The law doesn't spell out what would be appropriate, but the working paper talks about various professional activities like graduate work or dues for professional organizations. Offering financial incentives to increase productivity and bring about change is a terrific idea. But telling the staff of a successful school that they have to plough their cash awards back into professional activities is a little like telling an auto workers that he has to spend his bonus on a new set of tools; it could take the edge off the incentive.

Assessments. One of the most ambitious features of the Kentucky law is the call to develop performance-based assessments. Instead of trying to find out what students know by giving them a battery of standardized, multiple-choice tests -- which is how it's done in most school systems -- Kentucky schools will be asking kids to demonstrate their writing skills or their understanding of a concept in science or math. Such tests should give a firmer basis for assessing student achievement. They could also help drive there forms they are measuring.

Teachers teach what their students are going to get tested on, especially when tests are used to measure the success of the school. And tests that ask kids to show their skill or understanding -- instead of asking them to choose the "correct" answer from a list -- require a better kind of teaching. It's like the difference between teaching a foreign language to someone who's just going to read menus and road signs and teaching it to someone who plans to live and work in the country.

Will Kentucky be able to create a system of performance-based assessments that lives up to these expectations? We don't know yet. The law that calls for it and all the other sweeping changes to the school system is still just a piece of paper. Its success depends on the will and hard work of the people in the local schools and the assistance of the people at the state level. Unfortunately, the reform bill has already blundered in the way it proposes to create a new state department of education. The idea is to turn off the merit system under which education department people have been employed long enough to eliminate an unspecified number of jobs and then turn it back on again. This might be someone's idea of a way to eliminate dead wood, but it starts off the reform by demoralizing everybody involved. And it could lead some of the best people to leave altogether.

School reform in Kentucky faces plenty of pitfalls, but the outlines of the plan are impressive. This is one to watch.