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Budget Shifts Hurting Public Colleges, Survey Finds

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SAN DIEGO--Although the fiscal condition of states looks somewhat healthier than it has in recent years, shifting funding priorities have made higher education particularly vulnerable to lawmakers seeking ways to balance their budgets, according to a preliminary report released here last week by the National Conference of State Legislatures.

"Scary'' is how Rep. Art Hamilton of Arizona, the president of the N.C.S.L., described a turn of events in which state spending on corrections and Medicaid has escalated at the expense of education.

Elementary and secondary education has escaped the most severe budget cuts, however, leaving the burden to fall chiefly on public colleges and universities.

In fiscal 1993, for the first time ever, state spending on Medicaid exceeded support for higher education. Moreover, spending on corrections outstripped higher-education spending for the third year in a row.

State officials expect the trend to continue. During the current fiscal year, which began July 1 for most states, state appropriations for Medicaid were 24 percent higher than they were for higher education, the N.C.S.L. report indicates.

State appropriations for corrections increased 10.8 percent over fiscal 1993, while funding for Medicaid increased 7.5 percent.

In the same time period, appropriations for higher education rose 4.8 percent in all the states surveyed except for California. Including California, which has been forced to adopt severe budget cuts to counter massive deficits in the past two years, the higher-education increase nationally was only 2.7 percent.

Moreover, this year's higher-education hike "simply replaces the cuts made for 1993,'' the report notes.

Impact of Equity Lawsuits

Further jeopardizing colleges and universities, experts here predicted, are the spate of lawsuits demanding equity in K-12 school spending that have hit the states in recent years.

Six states have been ordered since 1989 by their highest courts to find a more equitable way of funding education in poorer school districts, and suits are pending in some two dozen other states.

"Around the country right now states are losing these suits and are wondering where they are going to turn,'' said Robert J. Keaton, the president of the National Association of Legislative Fiscal Officers.

Compounding the problem of finding additional revenue to equalize school funding, Mr. Keaton said, was the likelihood of increasing demands by the federal government on state and local governments and taxpayers to reduce the deficit.

At the same time, states' flexibility is limited in many instances, he said. States operate under federal mandates, such as sharing the cost of Medicaid, and frequently under court order, for example in improving their corrections programs.

Consequently, higher education is one of the few areas where states can look for savings. "It's going to be a tough fight for higher education,'' said Mr. Keaton, the chief budget analyst for the Louisiana Senate.

State officials were less pessimistic about elementary and secondary education.

Outside of California, elementary and secondary education fared better than it has in several years. Most states' appropriations for K-12 schools increased by an average of 5.1 percent in fiscal 1994. Once California is included in the equation, however, the spending rise was only 1.7 percent.

While California, Maryland, Montana, and Vermont cut aid to education, Kansas, Minnesota, Wyoming, Colorado, Tennessee, and Mississippi provided double-digit increases to public schools.

Most notable was Kansas, where funding jumped 32.2 percent in order to implement a finance-reform law under which the state took over collection and distribution of property-tax revenues for the schools.

The annual report, "State Budget and Tax Actions 1993,'' outlines several indications of economic recovery in states other than California and some in New England.

Signs of Recovery

Revenue was higher than estimated in fiscal 1993 for 29 of the 39 states responding to the N.C.S.L. survey.

Among the 10 states reporting shortfalls, most had small revenue gaps. In 1992, half the states reported revenue collections below estimates.

All reporting states except California and Vermont balanced their budgets in fiscal 1993. Four states were able to eliminate deficits from 1992.

While some states cut their original budgets to balance them, few hiked taxes substantially. Only five of the 46 states that reported on their tax actions enacted increases exceeding 5 percent. Fourteen states adopted smaller increases.

Despite the apparent economic upturn, state officials tempered their optimism.

"Things ... have gotten marginally better,'' said Mr. Hamilton, the leader of the Democratic minority in the Arizona House.

The lawmaker added, however, that he continued to be bothered by the growing demands placed on states' limited resources.

"Our largest difficulty is that we have a clearly growing need to generate more revenue and a constituency that [rejects] more taxes,'' Mr. Hamilton said.

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