District 622 Will Pay $80,000 to Borrow Money, a Result of State 'Shift'

With the state of Minnesota delaying payments to schools to balance its budget, School District 622 is borrowing $17 million in fiscal year 2012 to have adequate cash to pay its bills, according to a report released Wednesday by the Association of Metropolitan School Districts.

And that money won’t come free.

The district will pay $80,000 for the privilege of borrowing the money, according to the report. Of the organization’s 42 member districts, 26 are borrowing to have adequate cash flow, according to a press release from the association.

For several years now, the state has been leaning on school districts’ funds to supplement its budget, said District 622 Business Services Director Dale Sundstrom.

In the 2010-2011 school year, the state put off paying 30 percent of money owed to school districts. This year, the state is holding back—or “shifting”—40 percent of what's owed into the next fiscal year to balance its budget.

State legislators included $50 per pupil extra in their budget to cover borrowing costs, but Sundstrom said that doesn’t help much when the district has to contend with increasing costs that it has limited control over—such as teacher salaries, which are negotiated, and rising costs due to inflation. 

On paper, District 622 has a $23 million fund balance, Sundstrom said, however the state owes the district $29 million. The district will eventually see some of that money, but lately, the state hasn't caught up in paying the full amount owed.

“They’ll probably catch up to $15, $20 million shifted,” he said. “The Legislature’s hope is that in 2014 they can start paying some back.”

Between now and then, District 622 will probably have to borrow money again to pay back its current loan, he said.

“We are able to borrow money, it just costs us money," he said. "Rather than earning interest, we pay interest."

Sen. Chuck Wiger, DFL-Maplewood, denounced the Legislature’s budget deal in a statement Wednesday, saying that taxing the richest Minnesotans would have prevented school districts from having to borrow money.

“It is clear that the special session education budget deal, supported by the GOP majorities in the House and Senate, will damage school district budgets and dramatically affect educational programs in schools all across the metro area,” he said in the statement. “This is not the way to meet educational demands for the children of our state.”

Despite financial difficulties, Sundstrom said he doesn’t expect to recommend that the school district ask for more money from local taxpayers.

“Our taxpayers, they’re having their homes foreclosed on and they’re losing their jobs,” he said. “It’s not the kind of climate where you can just levy the taxpayers either.”