Area schools plan to borrow to make up for unallotment

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sug. hed: Area schools plan to borrow to make up for unallotment

By Heather J. Carlson


If Gov. Tim Pawlenty moves ahead with a plan to delay $1.8 billion in education funding, Pine Island Public Schools will be among the districts headed to the bank.

Superintendent Chris Bates said the district expects the delay to mean a $1.5 million hole in its budget. In order to cover the shortfall, the district will have to borrow $800,000 and wipe out its reserves.

"We’re going to have an IOU, and IOUs don’t pay people’s wages, so our challenge will be to keep our cash flow going," Bates said.

Ultimately, Bates expects the district to lose $50,000 when you add up the interest paid for the loan and lost interest on the district’s money in reserves, he said. That is equal to the cost of one teacher.

"About one-sixth of our money, we’re not going to get," Bates said. "It would be like running your house and you don’t get a check for January and July."

Pawlenty announced earlier this month that he planned to delay $1.8 billion in payments to school districts to help balance a $2.7 billion deficit for the upcoming two-year budget. But Democrats have questioned whether schools will ever get the money back, noting that the governor’s unallotment authority only allows him to cut — not appropriate — money. With the state likely facing a budget deficit in the next budget cycle, Democrats say coming up with that money will be even more difficult.

The Republican governor has said the proposal is based on a plan offered by House Democrats to help solve the budget gap, and that schools will get their money.

For now, district staff are busy trying to figure out how to fill the gap for the short-term. Lake City Public Schools Superintendent Clayton Hovda said the district will likely have to borrow $1.7 million to deal with the funding delay. He said he expects the loss to be around $50,000 — similar to Pine Island. That comes after the district has already made more than $200,000 in cuts.


"We’re just keeping our head above water," he said.

But at the moment, it is tough for districts to plan exactly what needs to happen. The governor can’t take action until July 1. Hovda said it is unclear whether the money will be withheld over several months or all at once. And then there is always the fear that districts won’t get the money back later.

"The problem with this shifting is it’s only good for one year," Hovda said. "If the economy doesn’t turn around, I don’t know what they are going to do next year."

Rochester Public Schools might be an exception. The district’s finance director, Larry Smith, has said he does not expect the district to need to borrow money.

The school unallotment also poses a challenge for charter schools. In Rochester, Studio Academy’s reserves are running low at $13,000; the school will likely need to borrow $100,000 for cash flow, said Ronald Salazar, the school’s executive director. But unlike public schools, charter schools aren’t eligible for certain low-interest loans.

Studio Academy has already taken steps to trim its budget by $85,000 by switching to a four-day school week.

"We are going to go through really, really tough times," Salazar said. "In our case, we are hoping we won’t have to make any more cuts. We will make it work one way or another."

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