The property tax increase needed to balance the Davis School District budget for 1988-89 will be substantially lower than originally anticipated.

Last week, the Davis Board of Education endorsed a proposed budget that included a 3.42 mill property tax levy with most of the increase earmarked for bond repayment. A lower assessed valuation for the county was blamed for the proposed tax increase.During the week, however, the district received official valuations that show the county's total valuation will actually increase slightly, from $3.21 billion to $3.22 billion, meaning the district will increase taxes by just .0.84 mills for the coming year. About half that increase will go into the district's maintenance and operations general fund, while the remainder will be used for bond repayments.

The total budget was reduced by about $1.8 million during the week and shows total spending for all funds will be about $140.14 million for the coming school year.

The adopted budget does not address health insurance funding problems affecting the district nor does it provide for a cost-of-living raise for district employees. The district is still involved with contract negotiations with both teachers and classified employees, and any settlement could affect the final version of the budget.

Teachers have said they want more money and are considering job actions, including a possible strike this fall, to underscore their demands. Contract negotiations have essentially been suspended until after a special session of the Legislature next month to see what action the state takes with an $84 million surplus in current state revenues. Teachers want a portion of that money channeled into the education budget specifically for salary increases.

The new Davis budget anticipates an increase in class sizes due to a decision to hire 35 fewer teachers than would be normally employed to meet district growth. The average increase will be about one student per class.

The budget also includes efforts to make many school programs more self-sufficient and less reliant on general-fund money for their operations. Student fees at both the junior and senior high levels have been increased and fees for make-up courses, remediation, community-school and summer-school programs have been adjusted to cover the actual cost of those offerings.

The budget reflects a three-year plan to eliminate a fund deficit in the school foods program. Despite the current deficit, officials believe the plan will not require an increase in lunch fees for the coming year.