In an unprecedented move, the Minnesota government has proposed
delaying the payment of about $423 million in state aid to 231 school
districts this spring in order to cover its own bills over the same
period.
The state needs to increase its own cash flow during March, April and
May and state statute requires the education payments to be held off so
that the state avoids short-term borrowing. The statute requires the
aid to be repaid by May 30.
Districts that have solid reserve fund balances are impacted by the
measure. But the gap could still leave many seeking short-term loans to
cover their own fund balances.
Rochester public schools are expected to float about $15.8 million to
St. Paul, which measures fifth-largest in the state. Still, according
to district officials, they should be able to avoid any short-term
borrowing. "We will be able to whether the storm this spring and not have to go
out and borrow," Rochester finance director Larry Smith said.
However, things don't seem as rosy in Pine Island, one of the many
schools who will likely need to borrow money for at least a few weeks. Superintendent Chris Bates expects to take out short-term loans in
covering some of the $1 million of state aid that will be delayed to
his school system.
"Is this going to be a big deal? Yeah," Bates said. "The state's in a
mess, let's face it. They are facing decisions and times they have not
faced in a lifetime."
Minnesota has found itself with nearly empty coffers largely due to
shortages within sales and income taxes, which experts say were brought
on by the Great Recession. Still, the plan has been hit hard by some who say it passes the buck to school districts figuratively, but not literally.
While talking to the Rochester Area Chamber of Commerce on Tuesday
morning, state Sen. Ann Lynch said this punishes school districts that
have been fiscally responsible. "The notion, proposal on the table, to steal the reserves from our
schools across the state of Minnesota is not leadership," said Lynch, a
democrat who lives in Rochester.
In asking for a response to Lynch, Governor Tim Pawlenty's press
secretaries directed comment to the Minnesota Department of Education. Education Commissioner Alice Seagren released statement Tuesday
afternoon that said districts who have solid reserve funds have been
targeted for the loans.
"These payment delays are required by state law under these
circumstances," Seagren said. "The state’s cash flow situation reflects
lower than anticipated revenues due to the struggling economy."
The state will delay aid to the impacted schools on March 15, March 30 and April 15. They are expected to pay it back by May 30. Minnesota has never used this funding mechanism before, Minnesota
School Boards Association Governmental Relations Director Grace Keliher
said. It was created in 1986.
The possible amounts delayed changed over the past few days, too.
Rochester's possible amount to be delayed hovered near $27 million at
one point, which is roughly the same amount as the district's entire
reserve.
If the state decided to take that much, Smith said the district would most definitely need to borrow funds.
Austin public schools shouldn't be impacted too greatly by the delay.
Only 3 percent of their aid payments in March and April, or $118,000,
will be delayed.
Rochester could be hit hard next year though, if the state needs to tap
into this law again. If the amount of delayed funding increased — and
with the next state biennium already estimated at a $5.4 billion
deficit, it could — Rochester might find itself passing the hat.
In response to the delayed-aid law, state Sen. Terri Bonoff,
DFL-Roseville and Rep. Mindy Greiling-Roseville proposed abolishing the measure on Tuesday. It's unknown at this point if that idea will gain any traction.
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