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This story would seem farfetched if it wasn't so true, and funny if it wasn't so pathetic.

Back in 1984, Harry Hughes was governor, Don Schaefer was mayor of Baltimore and Charlie Gilchrist was Montgomery County executive. I was Gilchrist's lobbyist in Annapolis.

Five years earlier Schaefer had organized a lawsuit (Somerset v. Hornbeck) against the state demanding more state school aid for low-wealth counties because the tax base disparities between counties meant students weren't getting equal funding.

Gilchrist, no fool, knew that a judgment requiring billions of new state aid to the low-wealth counties would come out of Montgomery's hide. So he hired a prominent attorney who helped defend the lawsuit. My office did the research and support work.

In April 1983, the Maryland Court of Appeals tossed the case, so Schaefer and his fellow plaintiffs decided to get, politically, what they couldn't win, legally — more money.

Gov. Hughes appointed the Civiletti Commission which, of course, recommended more aid to the plaintiffs and, soon, millions of new school aid was pouring into Baltimore city. Then state auditors discovered that, as the new state aid flowed into Baltimore, the city was reducing its own contribution to city schools. That's right, after years of crying about its poor, underfunded school kids the city was using the new state aid to mask its redirecting of city school funds into other, higher priority programs.

Appalled at Baltimore's cynical shell game, Hughes and the Legislature passed a "maintenance of effort" law requiring that local governments, every year, contribute at least the same amount of local dollars, per pupil, as in the prior year. The idea was to protect student funding levels from local government cheaters.

Hold that thought while we do a crash course in Maryland K-12 school finance.

Maryland is divided into 24 school districts — Baltimore city and the 23 counties. Within each school district, K-12 funds come from three sources: federal aid, state aid and the local contribution. Federal aid is 4.7 percent of the whole, state aid is 47.1 percent and local funding makes up 48.2 percent.

But within the counties there's a dramatic difference in who pays for education because Maryland's extremely progressive school finance law uses state aid to boost school funding in low-wealth districts.

For example, last year $15,621 was spent for every Baltimore student and $15,511 was spent for every Montgomery student. But only 17.3 percent of each Baltimore student's funding came from city taxpayers (i.e., the local contribution). Federal aid (9.2 percent) and state aid (73.5 percent) provided the rest. Meanwhile, in Montgomery, federal aid (3.1 percent) and state aid (25.1 percent) left the bulk of each student's funding (71.9 percent) to Montgomery taxpayers.

The 1984 MOE law was designed to keep the locals honest — to prevent them from reducing their local contribution. It never envisioned punishing school districts that, every year, exceeded last year's local contribution.

But the MOE law is full of flaws that have now snagged three non-cheater districts, including Montgomery.

Flaw No. 1: By blindly setting last year's local contribution level as next year's MOE minimum level, the law makes no allowance for districts that, every year, increase their local contribution far beyond their MOE minimum.

For instance, over the past six years Montgomery contributed a total of $420 million above its MOE requirement, ratcheting up its local contribution to $11,249 per pupil. But now, under MOE, it's stuck paying $11,249 per pupil no matter what. (Meanwhile, Baltimore's local contribution over the past six years hasn't increased one cent.)

This year, due to the recession, Montgomery tried to decrease its local contribution by $80 million because other federal and state funds were available to fill the $80 million gap.

But the MOE law says "no," the county contribution must be maintained even when, nonsensically, it means giving the school system $80 million more than it asked for or needs.

Flaw No. 2: MOE waivers are controlled by the education lobby, a conflict of interest.

The MOE law provides that a waiver is available "if a county's fiscal condition significantly impedes the county's ability to fund [MOE]." But such waivers are granted by the State Board of Education which, short of Armageddon, will never let its school clients be defunded.

The governor says we're in the worst economy since the Great Depression, causing the state to reduce its K-12 education funding. (MOE only applies to local school funds, not to the state's contribution.) But this didn't impress the state BOE as it denied Montgomery's waiver request.

Flaw No. 3: Unbelievably, if a county violates the MOE law by reducing its local contribution, the penalty is — I'm not making this up — a reduction in next year's state school aid (a $16 million to $64 million cut for Montgomery).

That's right, the penalty for underfunding is more underfunding. Like I said, all this would be funny if it wasn't so pathetic.

Blair Lee is CEO of the Lee Development Group in Silver Spring and a regular commentator for WBAL radio. His column appears Fridays in The Gazette. His e-mail address is blair@leedg.com.