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Veto of Mont. Tax Measure May Revive School-Finance Suit

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The Montana legislature has upheld Gov. Stan Stephens' veto of a bill that would have maintained an income-tax surcharge to supplement local education revenues.

The result, state observers predict, may be to breathe new life into a legal challenge to the state's school-finance system.

"We expect that [a previous] lawsuit will be revisited as a result of the Governor's action," said Greg Groepper, the state education department's assistant superintendent for operations. "I've already gotten calls from people who've said, 'We're preparing our pleadings."'

Less than two years ago, the legislature devised a new school-finance formula after a state court declared the existing system unconstitutionally inequitable.

The bill vetoed by Mr. Stephens last month would have extended a 5 percent surcharge on state income taxes that was slated to expire. The surcharge was expected to generate $38 million for education over the next biennium.

The measure would have channeled $24 million to the public schools to help reduce reliance on property taxes, with the balance being spent on higher education.

The death of the legislation means that state support for the public schools will remain static over the next two years.

The Republican Governor said he vetoed the plan--which was backed by the Democratic majority in the legislature--because it violated his long-standing position against general tax increases.

The House failed by six votes to overturn the veto.

Employee Walkout

Debate over the education-finance bill was largely overshadowed, however, by a five-day strike by state employees, which ended last week.

Two-thirds of state employees walked off their jobs late last month after Mr. Stephens vetoed a $40-mil8lion across-the-board pay increase.

Although the walkout hit virtually every state service, from police to parks, Mr. Groepper said its effect on education programs was minimal.

"There were a few delayed payments to school districts and some districts had no resources to fall back on," he said. "But it was a short-lived strike."

Mr. Stephens eventually signed a $34-million wage package that will provide an across-the-board wage increase of $1.15 per hour over the next two years. But he refused to compromise on the income-tax surcharge.

When it became clear that the Governor's veto would not be overridden, Democratic lawmakers attacked the action as "anti-education."

Representative Mike Kadas, for example, warned that the veto would "starve [the state] into mediocrity."

Mr. Kadas also raised the possibility that the Governor's action would lead to another school-finance suit.

House Republicans, however, argued that the Democrats should have considered reallocating existing state revenues to the schools, rather than seeking a tax increase.

"We have to live within our means," said Representative John A. Mercer, the Republican leader.

Mr. Groepper said the school-finance picture is bleak on several counts as a result of actions by the legislature, which ended its 1991 session last week.

Lawmakers did not pass a measure that would have increased the state share of the cost of school capital improvements. The lack of money to4maintain facilities and to build new schools was a key element of the earlier challenge to the finance system.

In addition, legislators denied a request for an inflation adjustment for special-education programs.

But Mr. Groepper said the defeat of the income-tax measure will deal the harshest blow to school districts, which will be forced to rely on local revenues to meet any cost increases over the next two years.

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