Bush Picks Alexander as Education Secretary : Cabinet: Selection is made as the President overrules a decision against scholarships reserved for minorities.

WASHINGTON — President Bush picked former Tennessee Gov. Lamar Alexander as his new secretary of education Monday and directed the education department to rescind a controversial decision against scholarships reserved for minorities.

Alexander, the Republican Party’s best-known advocate of education reform, sidestepped direct comment on the controversy. But Department of Education officials scheduled a press conference for this morning for an expected announcement reversing the scholarship decision.

Alexander would replace Lauro F. Cavazos, who resigned under pressure last week. Asked about the controversy in a brief appearance with Bush at the White House, Alexander said: “My general disposition would be that when you’re wandering through constitutional thickets . . . a warm heart and a little common sense sometimes are helpful.”

Afterward, White House spokesman Marlin Fitzwater sought out reporters to tell them that Bush has “asked the Education Department to review its decision” and that the President is “very disturbed” about the department’s position.

Bush “believes these scholarships are important to minorities and to ensuring opportunities for all Americans to get a good education,” Fitzwater said.

Later, Education Department officials acknowledged that they were scheduling today’s press conference in response to a White House order that the policy be rescinded.

Last week, White House officials from Bush on down would say only that they were “looking at” the controversy that began when the Education Department’s civil rights chief, Michael L. Williams, announced his opinion that scholarship programs open only to minorities violate federal law.

Over the weekend, however, White House officials decided they needed to end the controversy quickly, preferably before Wednesday, when House Education and Labor Committee Chairman Rep. Augustus F. Hawkins (D-Los Angeles) has scheduled hearings on the issue.

Although some conservative aides argued for caution, saying Williams may be legally correct, “savvy bureaucrats know when they’re outgunned,” said one White House aide. “There’s a respectable intellectual argument, but basically, it’s off our screen.”

Meanwhile, Education Department officials are preparing a letter to college and university presidents. The letter is expected to advise them that there is no need to make any changes in current scholarship programs, officials said.

Until Williams’ announcement, federal officials consistently had ruled that scholarships reserved for minorities caused no problems under federal anti-discrimination laws as long as the minority scholarships were part of an overall program that allowed students of all races to apply for assistance.

Williams, in a brief press conference last week, said that in his view, racially exclusive scholarship funds violate federal law no matter how small a part of the overall university program they are. But because the department has not issued any new regulations or tested its view in court, Williams’ position does not yet have the force of law.

Alexander, the 50-year-old former Tennessee governor, made education reform the centerpiece of his eight-year tenure. He parents were teachers, and he is currently president of the University of Tennessee, a job he assumed three years ago.

As governor from 1979 to 1986, Alexander launched a major education improvement program centered on a merit pay plan, which paid teachers more money for good performance, as well as an effort to increase the number of math and science teachers and put computers in junior high schools.

By contrast with Cavazos, one of two Latinos in the Cabinet and an administrator who tended to keep out of the spotlight, Alexander is likely to quickly emerge as one of the Bush Cabinet’s most prominent members. During 1988, he was often talked about as a possible Bush running mate, and he has been touted from time to time as a possible future GOP presidential nominee.

During his two terms as governor, he became known as one of a group of activist governors who expanded the role of state governments at a time when the Reagan Administration was seeking to shrink the federal government, and he has consistently been a major GOP spokesman on domestic policy issues.

The appointment drew favorable notices, ranging from the liberal Sen. Edward M. Kennedy (D-Mass.), who chairs the Senate committee that will review Alexander’s nomination next month, to the generally conservative U.S. Chamber of Commerce.

Kennedy lauded the nominee’s “distinguished record in education” and said he looks forward to “working with him to achieve our national education goals.”

Jeffrey H. Joseph, the Chamber of Commerce’s vice president for domestic policy, called Alexander “the prime candidate to advance our education goals at the national, state and local levels.”

About the only negative note came from the National Education Assn., the nation’s largest teachers union, which has traditionally opposed merit pay plans of the sort Alexander pioneered in Tennessee. “We have worked with former Gov. Alexander before and have not always seen eye to eye,” said NEA President Keith Geiger.

But Albert Shanker, president of the rival American Federation of Teachers, said he was “hopeful . . . Alexander will assume a strong leadership role to move a meaningful education program forward.”