ST. PAUL — A Red Wing lawmaker's proposal to delay paying back $1.4 billion in owed payments to school districts won unanimous support on Tuesday from Republicans and Democrats in a key House Committee.
Rep. Tim Kelly, R-Red Wing, is sponsoring a bill that would delay paying back the money until 2014. Last session, GOP Gov. Tim Pawlenty and the DFL-led Legislature agreed to withhold those dollars as part of last year’s budget deal.
With the state facing a projected $6.2 billion budget deficit, Kelly said it makes sense to hold off on paying that money back for the upcoming two-year budget cycle.
"In speaking to many of the school districts — not only my school district but districts around the state — certainly one opinion was resounding above the rest: We understand the situation we are in. We would much rather have the shift of the dollars than the reductions," Kelly said.
DFL Gov. Mark Dayton’s budget proposal also calls for delaying paying back the money until 2014. Then his plan calls for repaying 10 percent of the shift per year. Kelly’s bill would require that all the money be paid during fiscal years 2014 and 2015. The GOP lawmaker's bill would also prohibit the state from borrowing money from school districts to cover cash flow problems.
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The House Education Finance Committee unanimously approved Kelly’s bill. It now heads to the House Ways and Means Committee before going to the House floor for a vote.
Pine Island Superintendent Chris Bates said deferring repayment of the shift "is certainly kinder" than passing cuts in education funding. But he said cash flow remains a challenge for the school district after it had to borrow $600,000 to cover the funding delay. Until that money is paid back, he said his district will have to keep paying interest on that loan and is losing the interest it would have earned if that money was in the district’s savings account.
"If that (payment delay) happens, that is better than cuts, but when are we going to get this back is another question that looms in the mind," Bates said.
DFL Rep. Mindy Greiling, of Roseville, questioned whether Republicans plan to include deeper cuts in their budget so that this $1.4 billion can be paid off beginning in 2014. Kelly said he plans to work on budgeting for the cuts. Greiling questioned whether or not it will be feasible for the state to pay back all the money at once.
"I think we should pay it back right away, but I just question whether it is actually going to transpire," she said.
