833's state aid delay won't require borrowing

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School District 833 will not have to borrow money to meet expenses due to delays in state aid payments, Superintendent Mark Porter said.

The district has $27 million in unallocated money that will be used to substitute for $18 million in state funds that, by state law, must be paid back by June 30, the end of the fiscal year.

The district will lose about $15,000 in interest that would have been earned, Porter said Jan. 26.

The district used unallocated money to make up for a deficit in last year’s budget and expects to do so again this year, according to projections by District Finance Director Aaron Bushberger.

The state is experiencing a budget crisis, but before it can do short-term borrowing to meet its obligations, it’s required to delay school aid payments, according to state law.

The delayed-payment law hasn’t been used in the more than 40 years since the Legislature passed it.

Gov. Tim Pawlenty said Jan. 26 that he intends to pay the money back by May 20.

The state has 341 school districts and 231 will experience delayed payments that would have been made on March 15, March 30 and April 15.

No charter schools are affected.

The $423 million delay is needed because the state will not receive enough revenue to cover its obligations, officials said.

The Pawlenty administration promises to repay the money on May 30, when tax revenues are expected to increase enough to cover the state's needs.

The newest delay is on top of $1.8 billion in school payments Gov. Tim Pawlenty this summer ordered to be delayed over the next two years to help balance the ailing state budget.

Unlike District 833, some school leaders say they may have to take out short-term loans to cover the spring delays.

Education Commissioner Alice Seagren said the state had no option under law other than to borrow from schools.

The amount of each district's payment that is delayed is determined in a large part by the size of financial reserves the school has on hand. Districts with the least money in the bank will receive normal payments, while some districts will get only partial payments and some will get no money at all.

Besides school payments, the Pawlenty administration will delay $53 million due to the University of Minnesota system and will postpone corporate and sales tax refunds for up to 90 days.

School districts may appeal the delay.

"Districts were really dumbfounded," said Grace Kelliher of the Minnesota School Boards Association.

While the law was passed to allow the state to borrow from districts with money in the bank, Kelliher said, in many cases that money is committed.

One in five districts may have to borrow to cover the payment delays, Rep. Mindy Greiling, DFL-Roseville, said.

Since the payments will be made up in May, the delays do not help cut the state budget deficit.

Some Democratic legislators plan to introduce a bill to overturn the law that forces state leaders to delay payments when cash runs low.

"It is wrong to balance the budget on the backs of our students," an agitated Sen. Chuck Wiger, DFL-Maplewood, said.

Sen. Terri Bonoff of Minnetonka and Greiling said it is not likely that they can overturn the law in time to avoid this spring's delays, but an even worse financial situation is expected for next school year, which could mean several months of delays, they said.

Davis covers state government for Forum Communications, which owns the Woodbury Bulletin.

Tags: school district, education, minnesota