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In an effort to convince Ohio residents that education can reverse that state's severe economic slump, the traditional education lobby has joined with legislators and business executives to form a nonprofit group called Challenge Ohio, Inc.

The bipartisan coalition--which includes the state affiliates of the National Education Association and the American Federation of Teachers, as well as groups representing administrators, classified employees, and parents--has raised about $30,000 so far from member organizations and private contributions.

"Several groups had been thinking about moving in this direction for a long time," said William R. Martin, director of communications for the Ohio Education Association. "It crystallized when economic conditions got so bad this spring."

The involvement of business is crucial to the effort, Mr. Martin said, because the group's leaders believe that Ohio's reputation as "the school-closing capital of the United States" has discouraged businesses from locating there.

The group has not yet decided whether it will assume an active role in this November's gubernatorial and legislative elections, but hopes its efforts induce voters to consider education issues in evaluating candidates.

The New Mexico Department of Education may soon go back to court to try again to resolve a long-running disagreement with the Bureau of Indian Affairs over who should pay the cost of American Indian children's school lunches.

The controversy began a decade ago when the bia, by letter, shifted responsibility for the children's school lunches to the Agriculture Department, which began to impose requirements concerning income and family size on Indian families.

A group of American Indians, together with the state department of education, sued the bia in 1976, arguing that the government had a responsibility to provide lunches at no cost for all the American Indian children and that the bia had violated the Administrative Procedures Act, which requires that certain steps--such as publication in the Federal Register--be taken before making a change of this nature.

In 1978, a federal district court in Albuquerque ruled against the plaintiffs. The U.S. Court of Appeals for the 10th Circuit in Denver, however, reversed the trial court's decision on the basis of the second argument, and sent the case back to the district court.

In May, the district court entered an injunction that requires the bia to assume responsibility for the lunches until a valid transfer to the Agriculture Department, or some other arrangement, is made.

"The bia has done nothing in the meantime," said William McEuen, general counsel for the New Mexico education department. The state, meanwhile, is keeping a tab that it expects the federal agency to pay.

After saving $6,000 last year by converting six school buses to operate on propane gasoline, the South Carolina education department is modifying 50 more buses this year.

Although no national statistics are available, such conversions appear to be part of a growing trend, according to the National School Transportation Association. Most school buses in the state of Michigan have been converted, and several large school-bus contractors in Illinois have also switched.

Most savings came from reduced fuel costs, according to state officials. During the 1981-82 school year, propane gas cost 48 cents per gallon, while gasoline cost $1.02 per gallon. Additional savings occurred because with the propane, it was not necessary to change oil or oil filters.

Buses fueled by propane get about 10 fewer miles per gallon than buses that run on gasoline. However, the difference in price makes up for this.

The state will pay about $750 to convert each bus.

Elementary- and secondary-school students in Oregon have scored significantly better in many areas of a statewide test of reading, writing, and computing skills than did their counterparts who took a nearly identical test four years ago.

About 27,000 4th, 7th, and 11th graders took the assessment test last March. Most questions were repeated from the earlier test, according to a spokesman for the state department of education.

In 148 of 348 comparable test items, the 1982 group showed "significant improvement," as judged by a panel of Oregon educators, and declined in only 24 items.

One of the biggest improvements came in the writing skills of 11th graders. In 1978, as part of an increased emphasis on basic skills, the state board required one year of written composition in high school.

The New Hampshire Board of Education has rejected a proposal to reorganize the department of education and lay off employees because the proposed changes would have hampered the department's ability to meet state and federal mandates.

A management review team, appointed by the governor, had recommended earlier this year that the department "rearrange people with the idea of doing away with half of them," according to Robert L. Brunnelle, commissioner of education.

The reorganization, he said, would have saved the state nearly $2 million annually, but it also would have prevented the department from providing services to local school districts.

Mr. Brunnelle said 70 positions would have been eliminated under the reorganization plan, which included a proposal that the state health department administer vocational-rehabilitation programs.

Attorneys representing both parties in the Baileyville, Me., book banning case have reached an agreement that would prevent the school board from removing controversial books from the school library without a formal review.

The agreement follows a federal court ruling earlier this year that the Baileyville school board's decision to ban 365 Days--a personal account by Dr. Ronald J. Glasser of his tour of duty tending soldiers wounded during the Vietnam War--violated the students' rights to due process and freedom of expression.

The class action was filed by the Maine Civil Liberties Union on behalf of Michael Sheck, who was a student at the high school when the book was banned..

Under the terms of the agreement, which must be approved by U.S. District Judge Conrad K. Cyr, the school board must also appoint a "special monitor" to oversee the review process for challenged books.

The Minot, N.D., school board has agreed to put Newsweek magazine back into 10th-grade social-studies classes following a flurry of media attention that occurred after the magazine was replaced by U.S. News & World Report.

The board had voted to stop using Newsweek as a classroom teaching aid earlier this year after a school-board member contended that the magazine was too liberal.

That decision brought a protest from the local education association, hints of support for a lawsuit by the American Civil Liberties Union, and attention from newspapers, wire services, television, and radio.

"There was no ban," said R. Edward Mundy, superintendent of the Minot Public Schools. The board simply decided to replace Newsweek with U.S. News & World Report.

"After the controversy that emerged, they thought it was a good idea to put back Newsweek, to also have U.S. News, and let the teachers evaluate both for a year and decide to use one or both," he said.

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