Budget Solution Could Force Schools to Borrow

As part of an agreement to balance Minnesota's budget and end the state government shutdown, Gov. Mark Dayton and Republican leaders on Thursday said they will defer more money owed to schools—a decision education officials said is far from ideal, but better than alternatives.

By deferring school payments, the state will make up $700 million—or half of the budget impasse that divided Dayton and Republican leaders and triggered the now two-week-long shutdown. But with less funding upfront, Minnesota school districts could wind up borrowing more money.

Sandy Salin, director of business services for St. Louis Park Public Schools, said district officials haven't yet crunched all the numbers to determine whether borrowing will be necessary. Salin said she expects those decisions to be made fairly soon.

“Now it’s a matter of analyzing our needs,” said Salin, who declined to offer opinions on the delayed payments plan beyond saying, “I’m not really surprised. I think it was something that was talked about.”

Other school officials were more critical.

“We are sliding down a slope very quickly,” said Scott Croonquist, head of the Association of Metropolitan School Districts. “This is not a structural balance to the budget, this is one-time revenue ... Our preference would have been that it was done more responsibly.”

Sarah Snapp, budget director for Minneapolis Public Schools, called the plan an accounting trick and said it would essentially give local schools “I-owe-yous” on their percentages of state revenues.

“It’s not an ideal situation,” she said.

But some officials said it could have been worse.

“It’s a definite trade off for in the interest of schools—if we avoid cuts to our funding,” Minnetonka Public Schools Superintedent Dr. Dennis Peterson said.

Pushing back school payments is nothing new. Historically, schools received 90 percent of their money upfront. Over the years, the state has shifted more weight to the second payment—first making it 15 percent, then 20 percent and now 30 percent—in order to balance its budget. The latest plan will bump that second payment up to 40 percent.

Initially, Dayton had refused such a shift, instead countering with an offer of a 63-37 split. To find agreement and end the shutdown, Dayton agreed to 60-40, though he also proposed that the state pay for the interest on any loans schools take out to make up for the lost revenue. But Croonquist warned that continued payment shifts will never take care of the actual problem.

“We will be right back here in two years,” he said. “We are not balancing the state budget. That’s the real danger and downside here—the future.”