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Tax Defeat in Montana Clouds Funding Outlook for Schools

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Montana voters last week resoundingly defeated a proposed state sales tax, part of which would have been used to relieve school districts of the costs of teacher pensions and student transportation.

The ballot measure to establish a 4 cent sales tax was defeated by a margin of 75 percent to 25 percent.

Lawmakers, incuding Gov. Marc Racicot, a first-term Republican, had hoped the measure would provide some long-term fiscal relief for the financially troubled state.

State education and fiscal officials were split over whether the defeat poses a long-term threat to education funding.

Disagreements about the ballot measure prompted a highly public split between Superintendent of Public Instruction Nancy Keenan, who opposed it, and the head of the state teachers' union.

But most observers agreed the defeat of the sales-tax referendum was likely to add fuel to a statewide anti-tax movement that hopes to attract the signatures of the 6 percent of voters needed to place an income-tax increase approved by the legislature this year on the fall ballot.

"I think that what we're going to see is that petition drive is going to be successful,'' said Mick Robinson, the state director of revenue.

"Therefore, we will be back in special session to balance the budget.'' he added.

'Ugly Choices'

Although Montana already levies a selective sales tax, the ballot initiative known as Referendum 111 would have extended the tax to most goods and services.

Among the effects of the measure would have been to eliminate two local property-tax levies that are used to fund transportation and teacher pensions, instead paying those costs out of state funds.

Greg Groepper, an assistant state superintendent of public instruction who oversees legislative matters, noted that Ms. Keenan and others were skeptical that the proposed measure would have done any more than rearrange the way those costs are covered.

"I don't think any analysis of the bill would tell you there would have been any more money for education than if it didn't pass,'' Mr. Groepper said.

But Eric Feaver, the president of the Montana Education Association, disagreed, noting that the referendum included $15 million for school capital costs.

Mr. Feaver also argued that the defeat "effectively forecloses'' any future attempts to increase sales taxes and provides moral support for income-tax opponents.

The defeat, he added, leaves lawmakers with two "very ugly options.''

If they are forced into special session by repeal of the income-tax measure, legislators will either have to pass a new tax measure--a strategy already opposed by a majority of voters--or cut roughly $72 million from the state's biennial budget.

Schools could be vulnerable to as much as 30 percent of that cut, Mr. Feaver warned.

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