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New Budget Law Seen Forcing CutsIn Education Aid

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Washington--Sharp reductions in federal education spending and pressure for state-tax increases to support services such as public schools loomed last week, as President Reagan signed legislation mandating a balanced federal budget by 1991.

But while lawmakers forged what amounts to a virtual overhaul of the Congressional budget process, the House--despite pressure from President Reagan and the Democratic leadership--voted to block consideration of a total revision of the federal tax code. (See story on page 9.)

The unprecedented budget-balancing law, called the Gramm-Rudman-Hollings amendment, sets a statutory deficit ceiling of $171.9 billion this year and $144 billion in fiscal 1987. It then requires reductions of $36 billion annually to reach a balanced budget in fiscal 1991.

Numerous domestic programs, including education, will be reduced disproportionately, analysts note, because lawmakers exempted about half of the budget--including Social Security, debt service, eight anti-poverty programs, and several others such as veterans' health care--from the law's automatic reductions.

The child-nutrition account and the feeding program for impoverished women, infants, and children (wic) are among the eight exempt from automatic reductions.

Under the law, if the Congress cannot pass a budget that meets the deficit targets, then the President will impose automatic cuts, with half of the reduction coming from defense and half from the non-exempt domestic programs.

'Dramatic' Cuts Seen

"Clearly, Gramm-Rudman will have a dramatic adverse affect on education," commented Denis P. Doyle, education-policy analyst with the American Enterprise Institute.

Mr. Doyle added that the new law will "accelerate the long-term trend to increasing state responsibility" in providing basic services. (See related story on this page.)

Indeed, state governments may be forced to raise taxes in order to make up for the lost federal dollars resulting from Gramm-Rudman-Hollings, said Mark Seklecki, senior staff associate with the National Conference of State Legislatures.

But Secretary of Education William J. Bennett contended in a Nov. 1 letter to the senior Democrat and Republican of the House Education and Labor Committee that because the federal share of national spending on education is under 10 percent, a reduction in his department's budget would "have minimal effects on education nationwide."

A senior Education Department official, speaking on the condition that he not be identified, said the department's fiscal 1987 budget proposal would definitely be lower than one initially submitted to the Office of Management and Budget. The earlier version would have virtually frozen major school programs, he said.

The omb director, James C. Miller 3rd, said this month that the President's fiscal 1987 budget proposal would meet the $144-billion deficit target; the fiscal 1986 deficit is now projected to approach $200- billion.

Because President Reagan is unlikely to propose a tax increase or to trim his Pentagon budget request, said Michael Casserly, legislative associate with the Council of Great City Schools, he will have to seek "enormous" cuts in spending for education and other domestic programs.

Congressional Passage

According to current estimates, the law will force a reduction of about $11.7 billion in fiscal 1986 spending. The Congress has yet to complete action on that budget, although the fiscal year is more than two months old. Between $4 billion and $4.5 billion would have to come from domestic discretionary programs.

This reduction would be imposed by March 1.

The House and Senate passed Gramm-Rudman-Hollings, which is named for its three Senate co-sponsors, as a rider to a bill, HJ Res 372, which lifts the national debt ceiling above $2 trillion. The sponsors are Senator Ernest F. Hollings, Democrat of South Carolina, and Senators Phil Gramm of Texas and Warren Rudman of New Hampshire, both Republicans.

After a two-month-long conference, swift Congressional passage followed a compromise early last week between House-Senate conferees and the White House over provisions dealing with cuts in the Pentagon budget.

The Republican-controlled Senate approved the bill by a 61-to-31 vote; in the Democratic-controlled House, the vote was 271 to 154.

In signing the bill, President Reagan said, "Deficit reduction is no longer simply our hope and our goal--deficit reduction is now the law."

Mr. Reagan acknowledged, however, that the bill raises "serious constitutional questions" because several of its provisions may breach the separation-of-powers doctrine--for example, by authorizing the President to unilaterally cut spending, despite the Congress's explicit authority to raise and spend money.

The issue that had originally deep concern among educators--the bill's impact on "forward-funded" programs such as education, which spend most of their appropriations in the following fiscal year--was settled a few weeks ago.

One Concern Allayed

Education lobbyists had feared that to achieve significant savings in outlays--what is actually spent--in the first year of budget cuts, disproportionate reductions would have to be made in the programs' budget authority--what they are permitted to spend.

But Congressional and Administration budget analysts have allayed that concern, saying that the bill now requires across-the-board cuts in both budget authority and outlays, resulting in the same percentage reduction for forward-funded programs as for others.

Reconciliation Bill

Meanwhile, as the 99th Congress moved to finish all of its necessary business before adjourning its first session, House-Senate conferees were reported unlikely to complete work this year on a separate omnibus deficit-reduction bill requiring mandatory Medicare coverage for school-district and other public employees.

The omnibus debt-reduction legislation remained stalled in a House-Senate conference committee last week, and aides predicted the Congress would not complete final action on it until February or March 1986--if at all.

The House and Senate have passed separate versions of the bill. President Reagan has threatened to veto the final version if it imposes a permanent 16-cent cigarette tax; the levy had been scheduled to revert to 8 cents, but the Congress approved a temporary extension this fall.

The House and Senate bills have different provisions for mandatory Medicare coverage for public employees and also contain different ways to cut $800 million from the Guaranteed Student Loan program over the next three years.

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