CHICAGO - Wisconsin Gov. Tommy Thompson on Monday signed into law a plan that requires the state to reduce property taxes by paying two-thirds of school costs by 1996.

Under the law, a bipartisan commission will draft a plan to find its billion so the state can increase its share of school funding to 66.5% from the current 48%.

If the state legislature does not approve a funding plan by Oct. 31, 1995, the law automatically limits a school district's levy to 10 mills starting in 1997. The average current school levy is 17 mills.

In a press release, Thompson said the state is committed to paying for the new plan without raising sales or income taxes.

"You can't call it tax relief if you simply raise taxes somewhere else," Thompson said. Instead, he said, the state must start "doing more with less."

"The Slimfast diet begins today - and yes, we're going to take off the weight," Thompson said.

The first phase of the diet began on Monday when Thompson vetoed $9.5 million from the fiscal 1995 budget adjustment bill approved by the legislature last month. The cuts included $3.3 million for a plan to build more circuit courts and $5.2 million of pay raises for private lawyers who represent children in court. Fiscal 1995 begins July 1.

Thompson said he will turn each state agency and department upside down to find savings for the school funding plan. In addition, the plan will get the extra $450 million to $500 million a year in state revenues that economic growth is expected to produce, Thompson said.

Rating agency officials said that without cuts in other areas, the plan could mean fiscal trouble for the state. The officials also said that school districts or cities that rely on school levies to pay tax increment financing debt could also be hurt if lawmakers fail to approve a funding plan.

Wisconsin is following a trail blazed by Michigan, where voters last month approved a plan to eliminate property taxes for school purposes and increase state funding of schools.

A major difference is that Michigan abolished property taxes for school operating purposes before the plan for replacement funding was approved; lawmakers voted on the matter last summer, and the change took effect this year. The Wisconsin plan does not do away with the role of taxes until fiscal 1996.

Until then, Wisconsin will give schools $171 million of the state's $217 million surplus to curb the need for property tax increases to fund schools. School districts already have an annual revenue increase cap of $190 per pupil or the annual inflation rate, whichever is greater.

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