Report Backs New Funding Rules. Calls for significant changes in allocation of federal money to impoverished schools. EDUCATION

WHILE George Bush's start as a visionary ``education president'' may be a little slow, a number of private groups have been rushing into the breach with visions of their own. Saying that the challenge in American education in the next 10 years is to provide ``an elite education for everyone,'' an influential group of businessmen, educators, and politicians last week called on Mr. Bush and Congress to significantly change the way federal money is allocated to the nation's impoverished urban and rural schools.

The restrictive rules and limits placed on local schools in using federal money - such as the $4.3 billion ``Chapter 1'' program for remedial education for the disadvantaged - have become ``part of the problem'' said the influential National Center on Education and the Economy in a report last week. It recommended that selected local school districts be free to come up with their own, more tailored plans to use federal money - then be held accountable to performance standards.

``Federal programs for the disadvantaged are typically structured in ways that do not reward improvement of student progress,'' says the report, entitled ``To Secure Our Future: The Federal Role in Education.''

Currently, federal funds for bilingual programs, remedial help, special education, and classes for gifted children are enmeshed in a myriad of separate, often conflicting bureaucracies at state and local levels, the report states. Students are randomly labeled ``learning disabled'' or ``disadvantaged'' - putting them in a track from which they often never escape. These students are shuffled from special class to special class. Ironically, when students do improve, vital support is withheld under federal rules.

The National Center - whose members include New York Gov. Mario Cuomo (D) and John Sculley, chairman of Apple Computer, Inc. - suggests federal funds can be combined within three areas: schooling, job training, and various forms of social services, such as juvenile justice, health, and child care. These combined funds could be turned over to local schools which are closest to the action.

In three to five years, the 10 to 15 districts participating would be evaluated - with an eye to making the plan a permanent policy.

``This is a shift from regulation to performance as the basis for making federal decisions,'' says Marc Tucker, National Center president. However, the idea is not another ``block grant'' (used in the past as a way to cut funding) or another form of deregulation, Mr. Tucker says. The difference is that districts must perform to higher standards.

Broad in scope, the report also called for the President to ``set a goal for the nation'' in education, particularly in the area of math and science. It will take a 50 percent improvement in performance by the year 2000 for the United States to match the Japanese and Europeans in functional literacy, general science, and worker training, the report says.

So far, both teacher unions support the plan, as do governors such as Thomas Kean (R) of New Jersey, and business leaders.

The idea fits into the general ``restructuring'' trend in American education - where parents, principals, and teachers have more authority.

``We need to stop handcuffing our teachers,'' said Adam Urbanski, head of the American Federation of Teachers in Rochester, N.Y. ``They know better ways to teach children than by predetermined federal plans.''

Education policy expert Denis Doyle thinks Congress will be slow to assess the National Center idea. He acknowledges, however, a trend in Congress toward accountability in social programs, as found in the bipartisan welfare reform bill for example. ``It will be interesting to see who opposes this one,'' he says.