ATLANTA -- Alabama Gov. Jim Folsom beat back a spirited challenge from teacher-lobbyist Paul Hubbert to win the Democratic gubernatorial nomination Tuesday.

Hubbert challenged Folsom's handling of schools, economic development, and crim prevention. These issues will probably stay in the spotlight when Folsom faces the winner of a June 28 runoff for the Republican nomination between former Gov. Fob James and state Sen. Ann Bedsole of Mobile.

"This is a victory for the people of Alabama and especially the children of Alabama," Folsom said ina victory speech late Tuesday evening.

With 81% of the vote reported yesterday, Folsom had 54% to Hubbert's 40%. Two other candidates split the remaining vote.

As Folsom heads toward the general election, his $2 billion plan to reform the state's education system -- which includes over $1 billion in school bonds -- hangs in the balance.

Alabama is under the gun to implement a school reform plan following a ruling last April by Montgomery Circuit Court Judge Eugene Reece. Reece found that the state public education system violates Alabama's constitution because it does not provide for adequate and equitably funded schools.

Folsom has responded by developing Alabama First -- a plan that stresses local accountability, improvement of the capital facilities, increaed teacher pay, and the development of technological resources. The governor has said his plan will require sale of $1.2 billion in tax-exempt debt over the next three years, with debt service covered by anticipated growth in the state's tax base.

So far legislators have rebuffed the education initiative, first in the state's regular legislative session, which ended in late April, and then in a special session immediately following the regular session.

Folsom has indicated he may call for another special session to be held in July.

Elbert Peters, Republican state chairman, predicted yesterday in an interview that taxes and government efficiency will figure prominently in the general election campaign.

"People are fed up with Folsom's brand of cronyism and want better government and less taxes," Peters said.

In a separate primary race for treasurer of Alabama on Tuesday, James P. Martin, a former U.S. representative, beat Birmingham lawyer in Jim Anton for the Republican nomination. Martin will be opposed in November by Lucy Alabama Lieut, Gov. Bill Baxley, won over Stephen R. Phelps Sr. and Elizabeth Alexander to gain the Democratic nomination.

Alabama's incumbent Treasurer Georgia Wallace Jr., who completes his second term in January, is prevented by state law from seeking a third term. On Tuesday, Wallace, the son of former Gov. Geroge Wallace, lost a bid for the Democratic nomination for lieutenant governor. Wallace came in third behind Ryan de Graffenreid and Don Siegelman, who will face each other in a June 28 runoff.

In Mississippi, another incumbent treasurer, Marshall Bennett, lost a primary Tuesday. Bennett, who had competed to be the Democrats' nominee for U.S. representative from the state's Fourth Congressional District, was defeated by Mike Parker, the incumbent.

Bennett will continue his second four-year term as treasurer, which began in January 1992.

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