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Ind. Lawmakers Seek Accord on School Spending Plans

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Indiana lawmakers last week began trying to work out a compromise between House and Senate spending plans that both eke out small increases for education but use very different strategies to fund them.

At the same time, education groups stepped up their efforts to promote an alternative plan they maintain would provide a more substantial boost for the schools while also distributing the money more equitably.

Although only a few days remained in the legislative session, budget conferees last week still appeared to be far from an agreement on education. Unresolved issues concerning the state's massive Medicaid deficit also threatened to derail decisions on other bills and make it necessary for lawmakers to return for a special session.

The plan passed by the Democrat-controlled House would increase education spending by 3.1 percent in 1994 and 3.3 percent in 1995. The proposal relies heavily on a shift in school funding that would substantially raise property-tax rates in some districts to equalize spending.

While the plan offered by the Republican-majority Senate includes some steps to help districts raise per-pupil spending relative to their property-tax rates, it does not substantially change the current school-funding formula. The Senate proposal relies mostly on state aid to boost spending by 2.8 percent in 1994 and 1.9 percent in 1995.

Increased Costs Hit Districts

Lawmakers and Gov. Evan Bayh--a Democrat who supports the House approach--have pointed out that education is one of the few items in the budget to receive an increase.

But Norma Kacen, the coordinator of governmental relations for the Indiana State Teachers Association, argued that the increases proposed in both versions "do not reflect reality,'' since districts are being asked to assume some unaccustomed costs.

For example, both plans would require districts to fund increases in Social Security contributions previously assumed by the state.

Another measure, setting a cap on transportation, debt-service, and capital-project funds, would also require districts to dip into general-education funds to pay for new buses and facilities and building maintenance and repair, Ms. Kacen said.

Because the House and Senate plans do not factor in such costs, she maintained, they would have an impact "more damaging than a true straight-line budget.''

Observers also say education may be vulnerable to more cuts if the Governor and lawmakers cannot agree on a way to limit Medicaid spending, which is projected to grow by $830 million over the next two years.

But David Dawson, a spokesman for Mr. Bayh, said the Governor "has made it his goal to solve the Medicaid problem without cutting back on education.''

Education groups argue that a 4.2 percent increase in school funding is needed to maintain current services. They are lobbying for a plan offered by Senate Democrats that would restructure the tax system and boost education spending by 5 percent.

The plan would cut property taxes, target income-tax relief at low- and middle-class families, phase out a business-inventory tax, and cut automobile excise taxes while raising corporate-income-tax rates and increasing the tax on cigarettes.

But the plan is unlikely to make headway because Governor Bayh strongly opposes the tax increases.

Observers noted, however, that he recently proposed a 1 percent "assessment'' on hospital revenues as part of a plan to ease the Medicaid crisis.

Equity Issue Looms

"We need to send the message to [the Governor] that tax restructuring is a top priority in order to protect and enhance the schools, state services, and protect the overall status of our communities,'' said a letter to newspaper editors prepared by Hope for Equal Learning Policy, a group advocating funding equity.

Senate Republicans contend that revamping the school-funding formula in the current fiscal climate would place too heavy a burden of property-tax hikes on wealthier districts.

"Since there is so little money, there isn't any room to wiggle,'' said Sen. Morris H. Mills, a Republican who chairs the budget subcommittee of the Senate Finance Committee. "We just have to let people meet payroll and that's it.''

But Beverly Libs, the president of HELP, argued that "the only way politically'' to address the equity issue "is to generate some more money.''

A school-finance lawsuit brought against the state by a coalition of districts was put on hold last fall when Governor Bayh agreed to work toward a funding formula that would reduce spending disparities between rich and poor districts.

Ms. Libs faulted the Governor for a lack of "leadership'' and said that the suit will go back into effect if the coalition's concerns are not addressed.

Mr. Dawson said Mr. Bayh "does support increased equalization to the extent permitted by the new money being put into the formula'' in the House plan.

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