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Farm States Begin To Feel Drought's Fiscal Impact

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The record-breaking drought of 1988 has brought hard times to Pisek, N.D., a small farming town in the northeastern part of the state.

"We have some farmers who are already at risk of losing the farm," says Wes Sigette, superintendent, principal, and part-time teacher for the 75-student Pisek Public Schools. "Everyone you see is probably emotionally distressed. They don't know what they are going to do. They are third- or fourth-generation farmers, and they don't know anything else."

Like Pisek's farms, the tiny school district may also find itself struggling for survival.

Its property-tax rate is already at the state-imposed limit, Mr. Sigette says. And farmers may find it difficult, if not impossible, to pay their taxes because their crops have failed and federal disaster aid may not arrive for months.

Compounding the problem are drought-induced budget cuts at the state level that have reduced state aid by $55 per pupil. That is a significant amount, given the district's $270,000 annual budget, Mr. Sigette points out.

"We're surviving right now, but it's very close," the superintendent says. "We just can't cut back anymore. We're at the bare minimum now."

Fire and No Rain

Concerns about possible revenue shortfalls in the wake of the drought have spread from North Dakota--where state agencies' budgets already have been pared by 2 percent--to neighboring states, some of which suffered not only from a lack of rain, but from fires that charred thousands of acres of forest and scared away tourists and their dollars.

According to the U.S. Department of Agriculture, farmers in 23 states have qualified for emergency loans from the Farmers' Home Administration. Federal officials said the effects of the drought were felt hardest in the Upper Plains states, such as North Dakota and Montana.

The drought could shrink state and local treasuries if farmers' taxable incomes decrease along with land values. Property taxes in many states are due this month, and the collection rates will provide a clearer indication of how seriously farm pocketbooks have been affected, officials say.

To ease farmers' financial woes, the Congress recently passed a $10-billion drought-relief bill that would pay up to $100,000 to the most seriously affected farmers. Applications for the aid, however, are not being taken until this month.

$21-Million Budget Cut

In North Dakota, where farmers lost a substantial portion of their wheat crop, the state's precarious financial situation has been made worse, officials said, by the continuing low price of oil.

In the face of declining oil- sales-tax revenues, Gov. George Sinner recently ordered a $21-million cut in the state budget. That move reduced aid to the state's 300 school districts by $8.5 million, said Joseph Linnertz, a spokesman for the education department.

Mr. Linnertz noted that the budget cut was prompted by lower-than-anticipated revenue collections in the months of April, May, and June, before the lack of rain had taken its toll. State revenues for the third quarter--July, August, and September--should reflect the effects of the drought.

For districts "that live month to month on foundation aid, there will be a significant impact," Mr. Linnertz predicted.

Yellowstone Park Blaze

Other states also are bracing for their third-quarter revenue reports and are trying to estimate the effects of the drought on wheat, corn, and soybean crops still being harvested.

The results for Montana, which does not have a sales tax, may not be known until next year, when income taxes are due.

"It's premature right now for us to be able to assess if the drought has had an impact on state revenues," said Paula Walker, a spokesman for the governor. "We're certainly going to keep a close eye on it.''

Ms. Walker said state officials are also assessing the financial impact of fires that have scorched 400,000 acres of Yellowstone National Park. Motel owners in the eastern part of the state, far away from the fires, have been reporting decreased occupancy rates, she said. Those motels often are used as a stopping point for tourists on their way to the park.

South Dakota, where an estimated 17,000 acres in the Black Hills were burned, was also affected by fires and a lack of rain. Gov. George Mickelson recently issued a statement saying he was "cautiously op4timistic" that budget cuts would not have to be made.

Gretchen Lord Anderson, Mr. Mickelson's spokesman, said state officials were hoping that increases in sales-tax revenues for the first and second quarters would offset any decreases in the third and fourth quarters.

In Minnesota and Iowa, officials say their primary concern is farmers' ability to pay local taxes, although they report that they are still watching state revenues as well.

Dennis Erno, a property-tax specialist for Minnesota's department of revenue, said much depends on when the federal government releases the $10 billion in newly authorized drought-assistance payments.

Farmers, he said, "may be depending heavily on federal drought-assistance payments scheduled to be out in October."

"We're hearing grumblings those payments may not reach farmers until February," he said. "If that is true, we could end up with more delinquencies."

Mr. Erno said it may take until January before officials will know how many farmers are officially delinquent in tax payments.

In Iowa, summer rain storms hopscotched across the state, dumping inches on some crops while leaving parched stalks just a few miles away, officials said.

"For the most part, we have taken a wait-and-see attitude," said Lynn Barney, an education specialist in the state's department of management. The latest revenue figures are up, but they do not reflect the drought period, officials said.

The main drought-inspired controversy in Iowa stemmed not from the lack of rain but rather from comments made by the state's secretary of agriculture, Dale Cochran.

Newspapers quoted him as suggesting that state funds for education are wasted because so many col8lege students leave Iowa after graduation. He reportedly contended that the state would be better off shifting funds from education to agriculture.

Mr. Cochran subsequently told officials from the Iowa State Education Association, which reacted harshly to the stories, that he had been misquoted. The agriculture secretary also drafted an article for the association's newsletter reiterating his support for education.

In Wisconsin, the state school chief, Herbert J. Grover, has blamed the drought for the defeat of several school-bond issues presented to voters recently. He also predicted that some farmers might have trouble paying their local taxes.

The drought, he said, "has caused education to withdraw its head a bit."

"We're feeling it," he added. "People get quite conservative and they come to the place they can exercise their rights. [School-bond issues are] one place they can say no."

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