Local schools will borrow funds in wake of cuts

Published 9:51 am Wednesday, May 19, 2010

Gov. Tim Pawlenty and lawmakers agreed this week to balance two-thirds of the $3 billion deficit on the backs of school districts — forcing local schools to seek loans and brace for cuts.

About $2 billion of state aid payments to K-12 school districts will be delayed with the measure that promises the state will pay back schools in the two-year budget cycle which begins in mid-2011.

In the meantime, some area districts have to find a way come up with those funds in order to continue operating.

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Southland Public Schools and LeRoy-Ostrander Public Schools Superintendent Steve Sallee said Wednesday that he has not been able to analyze numbers since the bill passed Monday, but he is confident that one, if not both, of his districts will need to borrow money and prepare for cuts.

“We are more than likely going to have to look for more borrowing,” he said. “We will for sure have to borrow in LeRoy-Ostrander, and that is very likely for Southland, too.”

Sallee said the resulting interest would mean more budget cuts will be slated for the 2011-2012 year.

Though school funding would be due for repayment in 2012, the projected deficit for 2012-13 is near $6 billion without inflation, and many expect the pay date will be pushed back.

Austin Public Schools Superintendent David Krenz said that Austin administration will also perform an analysis to see what the delay means to the district.

“We did already have plans in place for this, so it might not be a big, big deal for us as it is for other districts,” he said.

The delayed payments are a three percent increase compared to what Pawlenty attempted to defer on his own last year.

Charlie Kyte, executive director of the Minnesota Association of School Administrators, said the shift will cost school districts about $20 million in interest.

“We think it’s going to be about 10 years before it’s paid back,” he said.

The budget solution passed 97-32 in the House and 52-14 in the Senate during an 11-hour special session Monday.

The rest of the red ink, $1 million, was made up with one-time cuts, including to city and county aid and to higher education.

— The Associated Press contributed to this report.