Big focus for states: grade schools

America's 50 states are entering 2000 in perhaps their best fiscal condition in decades.

The continued roaring economy has made tax receipts so strong that 20 states now expect they will take in more revenue this year than they initially estimated. Only one - Louisiana - now figures to fall short of its 2000 revenue expectations.

This cash is boosting spending on most states' top priority: grade school education. It's also allowing them to consider cutting their overall tax burden for what would be a record sixth year in a row.

Reflecting the tenor of the times, states are also considering a wide variety of social issues, from new marriage vows in Minnesota to stricter gun control in Colorado.

One possible ice storm on the horizon involves Internet shopping. Many in Washington want to declare Internet sales tax-free. If that happens, brick-and-mortar stores may start screaming about sales taxes - a key revenue source for states. "We're also starting to see an uptick in state health-care costs. That hasn't been a real issue for several years," says one Washington-based state fiscal expert.

By the third week in February, 41 state legislatures will be in session. A review of State of the State speeches delivered so far by governors and proposed legislative agendas reveals some common issues:

*Reduction of budget surpluses, particularly via tax cuts.

*Planning for spending money reaped by the states' settlement of their lawsuits against big tobacco firms.

*Getting more and better teachers into state school systems.

*Protecting students against the perceived threat of violence in schools. Some state legislatures have not been in session since the tragic shooting at Columbine High School in Colorado last year, and this is their first opportunity to respond.

Overall, states see the good times rolling in. All 50 are now running budget surpluses, according to a new survey produced jointly by the National Governors' Association (NGA) and the National Association of State Budget Officers. This flow of cash means state spending will continue to rise, though not quite as quickly as it has in the recent past. State spending will go up 5.3 percent this year, according to the NGA report, down from 1999's increase of 7.7 percent.

Education will be getting a lot of the new money. Spending on schools has gone up just over 7 percent every year for the past five years. While education spending is a relatively small part of the federal government's budget, it is a huge issue for states, accounting for almost half of their general-fund outlays.

Health-care costs have become states' second biggest spending category, accounting for about 25 percent of their budgets.

Tax cutting remains popular below the federal level. States shaved just over $5 billion off tax rolls last year - with Texas, at $1.9 billion, accounting for much of that figure. Gov. George W. Bush (R) has increasingly made tax cuts the theme of his presidential campaign as he struggles to handle a surprisingly stiff challenge from Sen. John McCain of Arizona.

The importance of education at the state level can scarcely be overemphasized. In California, Gov. Gray Davis (D) devoted half of his Jan. 5 State of the State speech to education issues and pledged to spend the bulk of the state's $3 billion surplus on the issue.

Governor Davis called for expanding preschool to include 100,000 4-year-olds, spending $200 million on computers for schools, and funding three new university system research institutes. State Republicans support much of Mr. Davis's agenda, meaning it is likely to become law. "The war for the future ... will be fought school to school, classroom to classroom, desk to desk, one qualified teacher at a time," said Davis.

New York Gov. George Pataki (R) sounded less martial but equally committed to education in his state speech. Governor Pataki proposes providing free college tuition for all students who commit to teaching critical subjects in disadvantaged schools after graduation. He also supports taking life experience, as well as college study, into account in the state teacher-qualification process.

"Right now ... Billy Joel is not 'qualified' to teach piano to kids on Long Island," he said.

In Colorado, lawmakers and Gov. Bill Owens (R) have pledged to make education their top priority. Governor Owens has proposed a $19 million package that includes expanded testing in Grades 3 through 10 and grants for improved public schools.

Even Iowa - long considered to have one of the best statewide public-school systems in the nation - is feeling the pressure to boost spending on schools. Gov. Tom Vilsack (D) has proposed giving teachers a break on their income tax if they move to the state.

But there is another important issue to the states that they can't do anything about, at least directly. That is Internet taxation - or, more specifically, the push in Congress to outlaw the collection of sales taxes on goods sold via the World Wide Web.

States worry that could undermine sales taxes they now collect from stores. Sales and gross-receipt taxes are a crucial source of revenue - about 48 percent of state revenue.

On another issue, Minnesota is considering adopting an optional set of marriage vows for couples who want to express an extra measure of commitment. Among the measures they'd agree to: a two-year waiting period before going through with a divorce.

(c) Copyright 2000. The Christian Science Publishing Society