State delays more school aidMinnesota news
The Minnesota Management and Budget department this morning told schools that the state will delay payments to them this spring because of a cash shortage, legislative Democrats say.
By: Don Davis, Minnesota Capitol bureau
ST. PAUL -- The Minnesota Management and Budget Department today is telling schools that the state will delay $423 million of payments to them this spring so the state can pay its bills.
The South Washington County School District will see $16.36 million in delayed state payments, according to state estimates.
The missed payments are to be made up by the end of May, but some school leaders say they may have to take out short-term loans.
The size of delays are based on a formula in state law that makes bigger cuts for districts with larger fund balances. Some districts will continue to get their normal payments they carry a small balance.
Two-hundred, thirty-one districts' payments will be delayed out of 341 districts. Charter schools are not affected.
State attorneys say the law requires the administration to delay school payments before it can borrow from outside sources.
There was no immediate comment from the Pawlenty administration, but school leaders were not happy.
"Districts were really dumbfounded," said Grace Kelliher of the Minnesota School Boards Association.
Kelliher said that school boards are scrambling to decide how to deal with the news.
While the law was passed to allow the state to borrow from districts with money in the bank, Kelliher said that in many cases that money is committed.
For instance, she said, a district may have been saving to buy school buses and if that order was placed recently, the district may find itself without enough operating money when the state cuts its payments. In that case, the district may have to borrow money to pay its own bills.
The delayed payments were to be made on March 15, March 30 and April 15. State law requires the money to be repaid by the fiscal year's end, which is June 30, but Gov. Tim Pawlenty has said he wants to pay districts back by May 30.
Schools that have to take money out of savings because of the payment delays may face penalties and will lose interest income, Kelliher said. The state will not pay interest when it repays districts.
The law requiring the school payment delays has not been used since it was passed nearly 40 years ago.
The latest payment delay comes on top of an overall delay enacted last summer when Pawlenty balanced a $2.7 billion budget deficit. Of his solution, $1.8 billion was school payment delays.
Rep. Dean Urdahl, R-Grove City, said there is not much option other than to delay payments.
"It is a good news, bad news situation," he said, adding that the districts will be repaid soon.
"I don't know what the ramifications will be," he added.
Often, he said, government "takes the easiest path," which appears what is happening in this case.
In a meeting earlier this month, DFL legislators complained about the possibility of delaying more school payments.
"It is not just robbing the school districts, it is slapping them in the face for being fiscally responsible," Rep. Mindy Greiling, DFL-Roseville, said.
Davis reports for Forum Communications Co.