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Education Seen as Key Beneficiary of State Fiscal Gains

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Education reaped the major benefit of states' strengthened financial positions in fiscal 1984, according to the National Council of State Legislatures.

At the end of 1984, 18 states had balances equal to 5 percent or more of their annual spending and only two states--New Hampshire and Vermont--had deficits, according to a new report by the council, "State Budget Actions in 1984," which polled fiscal officers in the 50 states following passage of this year's budgets.

As a result, the report notes, "many states took advantage of their stronger financial position in 1984 to increase spending, satisfying some of the pent-up demands that had been frustrated during the fiscal crises of earlier years."

Education Is Leading Issue

Indeed, 31 states named education as the leading budget issue considered in 1984, according to the report. The authors attribute that finding to the "national spotlight" that has focused on education in the past year and to the schools' typically large share of each state's budget.

Southeastern states in particular placed "a very high priority" on education this year, according to the report: "Nine of the 23 states where appropriations for elementary and secondary schools rose at least 10 percent were in the Southeast."

In South Carolina, Tennessee, and Texas, legislators raised sales taxes this year to boost school aid, and Arkansas enacted a sales-tax increase for this purpose late in 1983.

The report suggests that most states ended fiscal 1984 in a healthier position than the previous year, and should maintain their gains in 1985, but cautions that financial reserves are still precariously low.

The total of the balances held by all states on June 30, the last day of fiscal 1984, was $5.3 billion, up from $2 billion at the end of fiscal 1983, according to the report. And the total of the balances for the current fiscal year is projected at $5.9 billion.

The actual balance for 1984 and the projected balance for 1985 both represent 2.9 percent of general-fund appropriations. Wall Street analysts and state officials consider 5 percent as the "minimum prudent balance," according to the report. Only 16 states project balances of 5 percent or more in fiscal 1985.

Economic Recovery

Steven D. Gold and Corina L. Eckl, the report's authors, considered in their survey general-fund spending in the states--including 24 states' "rainy-day funds"--and revenue. They attribute the fiscal improvement to an "unexpectedly vigorous" economic recovery, large tax increases in 1983, and restraint in spending. But they also point out that the upswing is not universal and that it follows an extended period of severe fiscal stress.

And the authors note that, despite the large appropriations for elementary and secondary education, schools did not fare much better, in most states, than other programs.

"Of 49 states reporting, ... the increase in spending on elementary and secondary education was greater than the increase in total general-fund appropriations in 26 states and was less in 23 states," according to the report. "Clearly, although education did very well in some states, it did not win many budget battles in some other states."

The report also points out that the budget figures should be viewed with caution. "The increase in a single year may be small because there was a particularly large increase in the previous year," it maintains. "Respondents in various states undoubtedly did not define school spending precisely in the same way, so there may be some lack of comparability across states."

Spending Plans

In states that experienced a surplus in the last fiscal year, governors are being urged to devote large portions of the fund balance to schools as they prepare their budgets for the 1985 legislative sessions.

In Utah, which ended fiscal 1984 with a $62.5-million surplus, the Utah Education Association wants the state to spend $8 million to build more schools and reduce the size of classes, according to Anna Marie Dunlap, senior policy advisor for education in the Governor's office.

But the Governor chose not to put the requests on the agenda of a special legislative session Sept. 5 and 6, according to Ms. Dunlap, because school had already started.

The Governor, whose term ends in January, will present to the new governor and the legislature recommendations for education funding, Ms. Dunlap said. The budget could change after the new governor is elected, she noted.

Governor Matheson plans to seek funds to complete the school-improvement initiatives approved by the legislature this year. "We want to pick up the pieces because we only got partial funding on so many things," Ms. Dunlap said.

Though "very encouraged" about education funding, she noted that in a state where enrollments are increasing rapidly, "even a small surplus is just a drop in the bucket."

In Alabama, education is expected to benefit from an anticipated fiscal 1984 surplus of $125 million to $135 million, according to Richard McBride, legislative-services director for the state department of education. The surplus funds, he said, could be used to finance a proposed performance-based merit-pay plan.

In Massachusetts, which has also experienced a surplus--the amount of which is being debated--the legislature will consider this month two tax-cut measures that Gov. Michael S. Dukakis vetoed this summer.

Both measures call for surplus funds to be returned to cities and towns as general-revenue money, according to Susan Lane, a deputy in the Governor's office of educational affairs. They do not guarantee that the funds will be spent on education, she said. For that reason, the Governor and his staff are working to sustain the vetoes.

"Any surplus that we would have would be eaten up in those two proposed [measures]," Ms. Lane said. "We have recommended their veto because the budget that was presented from the legislature was about $132 million in deficit," Ms. Lane continued. "Clearly, our commitment is for education, and any money we have we want to direct to schools."

Copies of the ncsl budget report are available for $15 from ncsl, 1125 17th St., Suite 1500, Denver, Colo. 80202.

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