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New Fiscal Study Belies Rosy Picture for Schools

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Tulsa, Okla--Education may not be faring as well in the competition for state dollars as fiscal experts previously have believed, a new survey by the National Conference of State Legislatures suggests.

In their survey of state budget actions in 1989--released here last month at the organization's annual convention--ncsl officials conceded that their findings may be inaccurate because mid-year spending adjustments are not taken into account.

The survey, conducted each year since 1982, is taken in July, when most states' fiscal years begin.

A comparison of beginning appropriation levels--reflected in the annual reports--and actual budget figures at the end of each year would reveal that "education has not done as well in the past as we have led people to believe," said Steven D. Gold, the ncsl's fiscal director.

The report noted, for example, that states frequently approve mid-year spending increases for the Medicaid program. Similar add-ons for education programs are less common.

As a result, Mr. Gold said, the reality may be that school funding has not kept pace with percentage increases in general-fund expenditures.

Prior surveys indicating that education spending increases have outpaced those for other services have been seen as a sign of the fiscal health of education and of states' political commitment to schools.

The new survey did not attempt to quantify the discrepancy between real and reported spending levels.

Despite those possible statistical problems, however, the survey made clear that financing public schools remains by far the largest state expenditure, commanding about half of the states' general funds.

And, as has been true in each year of the survey, states reported that education was the lawmakers' main fiscal concern.

As of July, states reported appropriating $93 billion to public schools for fiscal 1990. Last year, states reported appropriating $87 billion.

Of the 48 states responding to the survey this year, 20 reported spending increases for education that exceeded the growth rate of their general funds. Eleven states reported spending increases of more than 10 percent for education.

Three states, on the other hand, reported appropriating less money for schools in fiscal 1990 than in 1989.

Overall, states increased education spending by an average of 7.8 percent this year, the survey indicated, compared with a 7.2 percent increase in general funds. Last year, education spending increased by 7.4 percent, while the growth rate for general funds was 6.6 percent.

The spending levels are for July and do not reflect the mid-year changes that ncsl staff members now think may render the survey results misleading. Mr. Gold said the potential for error in the survey was only recently pointed out.

The report also found that states had healthy fiscal reserves as of July, but could face problems if there is a recession, Mr. Gold said. Thirty states acted this year to increase taxes, mainly on fuels.

The 1,400 lawmakers attending the conference also showed a growing but cautious interest in the restructuring of public schools.

"Restructuring is slowly working its way through the process," said Senator Samuel Nunez, president pro tem of the Louisiana Senate and president of the ncsl

"This isn't going to happen in the governors' offices; it's not going to happen in the White House," he said. "It's going to happen in the legislatures."

One problem with the term restructuring is it "means so many different things to different people," said Dorothy Routh, the Florida education department's director of policy research.

At a seminar, Ms. Routh explained how Florida officials had attempted to define the objectives of restructuring to give the public some idea of the meaning of the term.

Restructuring has not been defined in Minnesota, said Representative Ken Nelson. But an office of education leadership was created essentially to oversee restructuring efforts.

"You're talking about doing things differently," said Representative Nelson, chairman of the House education-finance division. "I don't think it's best to go top down by legislative fiat. Restructuring means trusting your front-line people."

Representative Ernestine Glossbrenner of Texas, chairman of the House education committee, said she senses legislators agree on the need for restructuring. But she expressed concern they will act without looking at the possible effects, particularly in the area of parental choice.

This year, 25 states debated the parental-choice issue, according to Chris Pipho, director of the Education Commission of the States's education-information clearinghouse. Legislatures in three states--Arkansas, Iowa, and Nebraska--adopted statewide open-transfer policies.

"One of the things that attracts people to [choice] is they think if you apply the principles of the marketplace to education, you will have a more efficient system," said Representative Wanda Northcutt of Arkansas, who sponsored the measure in her state.

Also at the conference, Michael Calabrese, director of the afl-cio's pension-investment project, urged legislators to prohibit state pension funds from investing in hostile business takeovers, foreign securities, and junk bonds.

Last year, 11 state retirement funds, include those for teachers, helped finance the leveraged buyout of rjr Nabisco for $25 billion. A New York panel recently recommended that the state's retirement funds be banned from participating in such buyouts.

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