ST. PAUL, Minn. (AP)– A greater number of school districts might have to borrow more money this summer because of delays in state aid payments.
The St. Paul Pioneer Press reported Sunday that because of a combination in the delays and a property tax bookkeeping shift, school districts will have up to $2 billion less in their coffers at the end of this month than they did at the same time last year.
Last year, 130 districts, or nearly 40 percent of those in Minnesota, borrowed money. Financial advisers expect to see more of them doing so now. A possible government shutdown could also affect borrowing decisions.
“We have districts like Rosemount that have never issued aid-anticipation certificates that are needing to do it,” said Joel Sutter, a financial adviser.
This week, districts from Rosemount and Lakeville to Columbia Heights are getting ready to borrow against anticipated state aid, while a deadline looms to join a borrowing pool sponsored by the Minnesota School Boards Association.
“Instead of recurring payments, we have received IOUs, and an IOU doesn’t pay our cash obligations,” said Jeff Solomon, Rosemount-Apple Valley-Eagan’s finance director. “Our revenue looks like it’s even, but it’s really money we’re waiting on.”
The district is the state’s fourth-largest. It’ll borrow $15 million, for the first time in at least 20 years. Though the district maintained a $32 million rainy day fund in the past couple of years, only a fraction of it is available in cash rather than promised aid.
Last year, Forest Lake borrowed $10 million at a cost of about $33,000, thanks to a low interest rate. But finance director Larry Martini said that money still could have paid for a teacher’s salary.
“That’s the tradeoff when the state balances its own cash flow on the backs of school districts,” said Martini, who expects the district will borrow more this year.
Audrey Bomstad at the Minnesota Department of Education’s finance division said borrowing has increased primarily because of recent shifts in how the state distributes aid to districts. Until 2009, districts got 90 percent of their aid in the current school year, and the rest the next fall.
To address deficit problems, the state increased the delayed amount to 27 percent in 2009 and to 30 percent in 2010.
This spring saw another twist. In previous years, districts got half their property tax revenue in late May and counted it on their books as revenue the next fiscal year. Now, the state lets districts treat that tax money as revenue in this fiscal year — and delays an equal amount of state aid until later in the summer.
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