ALBANY -- Gov. George E. Pataki and legislative leaders failed to meet Friday's deadline set by the state's highest court to come up with a plan to improve how public schools are funded in New York State.

The inaction all but ends the prospect for reforming how billions of dollars are distributed to more than 700 school districts across the state, not only for the coming school year but depending on future court battles, potentially for years to come.

"This is horrendous," said Michael Rebell of the Campaign for Fiscal Equity, which last year won the landmark court case it first brought in 1993 challenging the state's education funding system.

"A clear order of the highest court of the state with a very firm deadline has been missed. It is clear contempt of the court," Rebell added. He saved most of his blame for Pataki, who he said showed "lack of leadership" that "squandered a historic opportunity" for the state's public school students.

In its landmark ruling last year, the Court of Appeals said the state was shortchanging New York City school children and gave the state until Friday to come up with a solution to provide a "sound, basic education."

In the aftermath, the sides agreed that any solution would take into account all districts across the state and that money would not be taken from one district to pay for an aid hike in poorer, high-needs districts.

But after nearly a year of stalled talks, Pataki, who fought the lawsuit for years in the courts, and state lawmakers have been unable to agree on not only how much money to add to schools, but how to pay for the increase and what kind of accountability standards should be imposed on schools.

If there was any urgency to the ruling, it wasn't showing in Albany. Pataki, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno held no talks to resolve the issue this week. Silver and many of his fellow Assembly Democrats were off in Boston at the Democratic National Convention; Pataki could have legally called them back from the convention to deal with the education matter. But the governor, with his own GOP convention plans next month in New York, decided against that.

Optimists say, despite the Friday deadline, there still could be time for officials to cut a deal before the judge overseeing the case, Supreme Court Justice Leland DeGrasse in Manhattan, holds a hearing Tuesday to decide his next steps.

He is likely to appoint a "special master" or a team of masters to advise him on a new funding formula, a process Rebell said should not take more than three months to complete. But that solution will likely spawn its own litigation, dragging the issue out for years.

School officials, accustomed to Albany missing budget deadlines every year, originally had thought Pataki and legislative leaders would take more seriously the court-imposed July 30 education deadline.

"It's extremely disappointing," said Jack Coyle, chairman of the Buffalo Board of Education's finance committee. "I was hoping something would be done. I was hoping they wouldn't punt on this issue."

Coyle, who said the district is facing a deficit of between $20 million and $30 million, was counting on extra aid out of the court case to help the city's students avoid another year of program and other cutbacks. "It's shameful and it comes right back onto the kids," he said.

The only bright prospect, school leaders say, is that the court might impose a plan based on research, not Albany's usual brand of politics, that determines school funding. But the court's case dealt only with New York City, meaning DeGrasse's order will not likely be able to directly steer money to other districts. That's not to say that Pataki and lawmakers couldn't agree on a subsequent funding package for the other districts.

Albany's inability to strike a deal on education may help the governor and lawmakers finally reach agreement on the unresolved state budget. With education accounting for about 15 percent of the state's overall budget, the public school funding debate has blocked action on the state's 2004 fiscal plan, which has been operating on an emergency funding basis since it was due April 1.

As Friday's education deadline approached, lawmakers and negotiators suddenly turned optimistic on the budget; some claimed a handshake deal could come next week, with final enactment during the week of Aug. 9. Of course, any deal in Albany is tenuous at best, and negotiators cautioned the impasse could stretch to the fall.

Schools, as well as cities, counties, hospitals and thousands of other groups that rely on state funding, have a major stake in the budget outcome.

Next up comes Aug. 15. That's the date schools start sending out property tax bills. After that date, any subsequent state aid hike schools might get out of the budget would be barred by law. This year's tax rates wouldn't be reduced, and the extra aid could only be put into reserve or returned to the state.

With no deal and with the Capitol's corridors empty, Friday became a day for this year's favorite pastime in Albany: partisan finger pointing. Pataki noted Silver's power to single-handedly hold up issues in the Assembly. "He's done a great job of doing that," Pataki said.

Silver said "children across our state are paying the price for the governor's failure to lead." Bruno, meanwhile, said it is now time to focus efforts on getting a new state budget, due April 1, adopted.