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Why not let the schools pick which level they want to participate in? This method seems to work at the club level between Classic and Challenge. If you feel you can compete in the top bracket then you choose the top bracket.

This wouldn't work for high school. In club there is an incentive to pick the higher level. You attract better players. Make more money. In high school everyone would be too afraid to compete with Wando and Irmo's talent pools. I think most schools would rather try to win 3a state then play where they belong.