State Taps Schools for Another $142 Million (MN)

September 27, 2010

The state is once again coming up short and going to its usual source for ready cash.

Who keeps lending it money? Minnesota schools.

The state budget office announced earlier this month that it’s tapping K-12 education funding for $142 million. The loans are to be paid back, without interest, in May. It’s the second time this year the state has done such short-term borrowing from schools.

In the more recent round, 134 of Minnesota’s 337 districts — those with the biggest fund reserves — are getting hit up for loans ranging from tens of thousands to millions of dollars. The state does that by delaying aid payments to the schools, which it can do by law when in dire financial straits. That means many districts will have to tap their own reserves or borrow money to pay their bills.

School districts can tack the state action on to the big kahuna of delayed school aid payments — $1.9 billion in funding shifts covering last ye ar and this year that helped the state tackle a huge budget deficit and balance the books.

The shifts have been a big enough headache for schools that they’ve shown up on the radar of all three major-party gubernatorial candidates.

DFLer Mark Dayton said he hopes to pay back most of the shifted amounts over the next two years. Republican Tom Emmer has said he wants to begin repaying them in 2014. Independence Party candidate Tom Horner has said he wants to start repayments, with interest, as soon as 2012.

The major stumbling block is where the money will come from. With the state facing an anticipated $5.8 billion deficit in the coming two-year budget period, it seems unlikely that money will be freed up to pay off the shift any time soon.

"I don’t think anybody can anticipate or predict when it gets paid back," said Education Commissioner Alice Seagren. Seagren noted that the shift doesn’t cut school funding, it merely delays it. Plus, school officials say they prefer the payment delays over outright budget cuts.