State reports Minnesota schools nearly paid back

Superintendents say the money will repay loans taken to offset school deficits

By Tina SnellStaff Writer

On Monday, the state announced that Minnesota schools were repaid an additional $636 million at the end of the 2013 fiscal year. To date, it has been reported that $2.6 billion of the $2.8 billion borrowed by the state has been returned to the schools.

DFL House Speaker Paul Thissen said, “This is good news for Minnesota kids. It is the result of working together to put progress ahead of the gridlock of the past.”

“This is money owed to the schools; it’s not new money,” said Little Falls Supt. Stephen Jones. “We have had to borrow money for the past few years because the state held back millions of dollars from the Little Falls Community Schools. They are now able to pay back most of what they’ve owed us.

“The money we are receiving in this latest round of pay backs will be used to pay interest on the money we borrowed, as well as pay back the loan,” he said. “This money has always been included as general education revenue when preparing the budget. The fact that the state is finally paying back their debt to us doesn’t change the budget numbers.”

With the state economy slowly improving, schools are first in line for any excess tax collections. A law passed last spring gave state finance officials until Monday to determine what, if any, excess money was available after the fiscal year closed June 30.

School leaders are apprehensive about the return of the money they are owed. They are worried that the money owed to them will be perceived as a windfall.

Pierz Supt. George Weber said while this is “good news’ from the perspective of the state, it’s mostly a non-story relative to the services or programs in the schools.

“The money we are talking about is ‘on paper’ in the audits to pay for the services we already provided for last year,” he said. “The state has been holding back the previous year’s money so they can earn interest on it and also so they can claim they balanced their budgets on June 30 of each year.

“All school districts in the state have had to find ways to cash flow our expenditures during these last few years when the state was withholding payments,” Weber said. “All schools ended up losing money in this process because each had to either borrow to make cash flow and thus pay interest payments on those loans, or use our reserves to support the annual cash flow and thus lose interest that we should have earned.

“It is not new money.  It is money we had already spent in our annual budgets from last year. A law requires the state government take any extra dollars it receives in its revenue forecasts each quarter and give that revenue to the schools until they are all made ‘whole’ from the prior year on what we were supposed to get in our annual budgets,” he said.

Staples Motley Supt. Mark Schmitz said the money the schools are receiving come from the IOUs the state gave instead of the payments to run the schools.

“This is money we use for our basic programs,” he said. In the past, we would have to borrow money to run our schools because the state said it didn’t have the money. We now won’t have to borrow to keep our schools open because the state is now paying its bills.”

Swanville Supt. Gene Harthan said, “This is definitely not any new money, and my fear is that the public and legislators will view it as such and feel that education is adequately funded.

“Education has been severely underfunded for the last five or six years. We lived off of our reserves for a couple of years, but have had to borrow money for the last three years to meet our cash flow needs. The money that is coming now is needed just to pay basic expenses, we certainly cannot start anything new or add anything because of it,” he said.

“While we are grateful that the state is doing well enough to make this payment, it is not enough in the long run to solve schools’ financial problems,” Harthan said.

Jon Ellerbusch, superintendent of Royalton Schools, said, “Receiving state dollars on time enables the Royalton School District to make its scheduled payments on time. In past years, when state dollars were not received on time, the district had to borrow more than $2  million each year to make cash flow.

“Because of that, the Royalton School District needed to borrow the following amounts:  $2.065 million (2009), $2.280 million (2010) and $2.330 million (2011),” he said. “The district didn’t need to borrow money for the 2012-13 and 2013-14 school years because the state decreased the money it withheld from schools each year. At the start of fiscal year 2013, the state was still holding back 35.7 percent and paying 64.3 percent. Now in fiscal year 2014, they’re back to around the 10 percent holding back and paying schools 90 percent,” he said.

Minnesota Department of Education Commissioner Brenda Cassellius said, “Paying back the schools, in addition to funding for early childhood and all day kindergarten, investing in third grade literacy and raising standards and improving tests, is part of our overall commitment to creating a strong foundation so all Minnesota students and schools can thrive and succeed.”