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NEW YORK — It appears the controversial church-state separation case centered on the New York village of Kiryas Joel is headed back to the U.S. Supreme Court.

The state's highest legal venue, the New York Court of Appeals, on Tuesday handed down a decision seen as a victory by the communal Jewish groups who have fought the establishment of a school district designed to cater specifically to the needs of a religious community.

At the same time, Orthodox proponents — who have regarded challenges to the constitutional legitimacy of the Kiryas Joel School District as discriminatory — are looking to a different, but related case now before the Supreme Court as a way to determine the ultimate outcome of the matter.

Kiryas Joel is an Orange County, N.Y., village whose residents are all Satmar Chassidim.

The roughly 250 profoundly learning and developmentally disabled children from that community had, for years, been provided with state-funded, special educational services by the nearest public school district, Monroe-Woodbury, whose teachers came to the Satmar yeshivas.

That ended in 1985, when a U.S. Supreme Court ruling prevented public school teachers from working in parochial schools. That led many of the disabled students to begin attending public school in the town next door.

But some of their parents said their children were taunted because they spoke Yiddish, wore sidelocks and Chassidic-style clothing.

The concern of the parents led to the enactment of a 1989 state law, which created a special school district for the Satmars' benefit.

The law, in turn, prompted Louis Grumet, director of the New York State School Boards Association, to file a suit challenging it.

Jewish organizations lined up behind each side as that case wended its way through the lower courts and ultimately reached the U.S. Supreme Court in 1994.

The country's top court termed unconstitutional the law setting up the school district and identifying it by name, so the New York State Legislature and then-Gov. Mario Cuomo re-wrote the statute permitting the special school district with what they thought was more neutral language.

In a 1996 decision handed down by the Appellate Division of the New York State Supreme Court, the court termed the 1994 law creating the public school district a "subterfuge" and a "camouflage" because the demographic criteria it required were designed to benefit only Kiryas Joel's Satmar community.

Last year's decision was appealed by the state and by the Satmar community, with the help of Orthodox legal advisers, to the state's highest court, which essentially held up the earlier ruling deeming the statute still unconstitutional.

Though no decision has been formally made, the state is expected to appeal it to the highest court in the land.

"The state shouldn't waste its time with an appeal but should find constitutional ways to educate these kids," said Marc Stern, co-director of the American Jewish Congress' legal department.

Stern said the constitutionally supported separation of religion and politics benefits the Jewish community as a minority group.

"Jews have always been able to participate equally" in the American political system "because religion hasn't mattered in the organization of politics, and the existence of this school district says that religion does matter.

"That concept isn't good for us because we're just 2.5 percent of the American population and shrinking," he said.

Furthermore, Stern said, "Neither of the area's public school districts has sat down to decide what will happen if they lose" the case.

"If the Supreme Court should decide not to hear the case," he said, "these kids will have no place to go."

Representatives of Ortho-dox groups said the ultimate outcome of the case depends on the Supreme Court's decision in the Aguilar vs. Felton case, which prompted the current dispute.

That case, which the Supreme Court may decide in June, involved the participation of public school employees in parochial settings.

If the court rules that it is OK for them to provide students with the remedial or special education to which they are entitled under state law, then it will render the whole Kiryas Joel debate moot, said David Zwiebel, general counsel to Agudath Israel of America, which represents ultra-religious Jews.

"This entire odyssey began" with the court's decision forcing those teachers out of religion-based schools, he said.

"If the court reverses it, it will restore the situation to where it was pre-1984."

This week's ruling, he added, "increases the stakes and importance of the court's consideration" of the Aguilar case.

Nathan Diament, director of the Orthodox Union's Institute for Public Affairs, said his organization, which represents the centrist Orthodox community, was disappointed with Tuesday's ruling.

"Again the Constitution's provisions designed to promote a religiously pluralistic society have been turned on their heads and used to strike down the accommodation of religious citizens," said Diament.