D.C. City Council Chairman Arrington Dixon, responding to an outcry from the city's private schools and universities and the start of an intensive lobbying campaign, has removed from the council's agenda a bill that would impose new regulations and financial obligations on the city's private schools.

The measure, proposed by the city's Educational Institution Licensure Commission, would provide new penalties -- including fines and possible jail terms -- for private school administrators who did not comply with the commission's regulations. Currently, there are no penalties for noncompliance.

In addition, all private schools in the city would have to contribute to a $750,000 fund, which would be used to reimburse students of any private school that failed.

The bill was to have been considered by the council yesterday. But Dixon said he ordered it withdrawn after the council received numerous protests from private schools, including phone calls and a letter-writing campaign begun by the D.C. Chapter of the Council for American Private Education.

Aides to Dixon said the bill would be revised or sent back for further study by the Committee on Government Operations, which approved the bill for consideration by the entire council.

Council member William R. Spaulding (D-Ward 5), a strong supporter of the bill and chairman of the government operations committee, said he thought objections to the bill had been worked out in committee.

"I will have to go back and look at it again," Spaulding said. He said there are about 200 private schools in Washington that would be affected by the measure.

Spokesmen for the city's private schools made it clear yesterday that they objected strenuously to the bill and to the fact that Spaulding's committee had held no public hearing on the measure.

In the past, the licensure commission -- an independent agency whose members are appointed by the mayor -- has devoted most of its efforts to regulating smaller institutions and out-of-town schools that hold classes or seminars here. The new rules would have given it new power, and the schools took it as an attempt by the commission to begin regulating larger institutions.

"It's just another level of expensive oversight and we don't want it," said the Rev. John P. Whalen, executive director of the Consortium of Universities, a group that represents eight private universities and the University of the District of Columbia.

"There isn't a shred of evidence that any nonprofit, nonpublic elementary or secondary school has ever been charged with fraudulent practices," fumed Solon Candage, head of the local chapter of CAPE. "It's totally unnecessary in that respect."

Whalen said the measure would needlessly drain money from the private schools by forcing them to contribute to the $750,000 fund.

"We need that money," Whalen said. "We've never cheated anybody and we don't plan to. Why should we contribute to an account that's going to be used to bail out a fly-by-night organization?"

Patricia Miner, a special assistant to Mayor Marion Barry for education, yesterday agreed that the bill should be held up for further study. She said Barry originally proposed the bill at the behest of the licensure commission, but said the council had added a number of controversial provisions, including the $750,000 fund.

Under current law, the commission is supposed to monitor the business operations of private schools but has little enforcement power to require the schools to adhere to its regulations.

Under the proposed law, the commission would have the power to close schools that violate commission rules. In addition, private school officials would be subject to civil fines of up to $300 or 90-day jail terms for violating the rules of the licensure commission.

Nathan Sims, executive director of the commission, said yesterday the commission needs the bill to enforce its regulations. He said private schools currently are largely governed only by outside accrediting organizations "that often are not the first to know" when problems occur in private schools.

"They private schools are trying to get the District of Columbia to relinquish its governmental authority," Sims said.