Superintendent: Funding Shift Payback is Nice, More Money is Better

The superintendent of said a Republican plan to pay back money borrowed from schools would not ultimately lead to additional money for the district.

Although repayment of the so-called funding shift would help with schools’ cash-flow situation and save interest costs for those that have to borrow, the repayment wouldn’t really give schools any more to spend on educational programs, Superintendent John Schultz said.

“Paying back the shift is not something that’s going to give schools new money,” he said.

Minnesota historically paid schools 90 percent of their state money in one fiscal year and the remaining 10 percent in the next. State lawmakers and former Gov. Tim Pawlenty previously changed that to a 70-30 split to balance the state’s budget—effectively borrowing from schools. During the 2011 special session, Gov. Mark Dayton and Republican legislators dropped it further to a 60-40 split.

As the split has grown wider, more schools have had to use short-term borrowing to get through until the next payment arrives—incurring interest costs along the way.

Minnesota House Speaker Kurt Zellers (R-District 32B) and House Education Finance Committee Chairman Pat Garofalo (R-District 36B) introduced legislation to use $430 million from the state's emergency fund and cash accounts to repay this shift.

The state would still have $577 million in reserve.

But Schultz noted that schools benefit little from repayment of the funding shift because it’s money they would have received anyway. The main benefit comes from avoiding the interest costs incurred from short-term borrowing.

In a March 11 Star Tribune Editorial, Minnetonka Superintendent Dennis Peterson took aim at the $320 million in additional state funds from an unexpected surplus that is already, by law, going toward repaying the funding shift. If it had been used to provide actual revenue increases, the money would have resulted in nearly $400 more per student.

Hopkins benefits less than other districts from funding shift repayments because it hasn’t yet had to use short-term borrowing—although it was only because of the $320 million surplus that , a stroke of fortune that saved about $190,000.

By contrast, February budget documents forecast the district’s savings dropping below the required 6 percent by the 2014-15 school year and into negative territory by 2015-16. Per pupil increases could be enough to keep the district on the right side of those lines.

Schultz said the district can take action to keep fund balances from dropping too low and noted that the Legislature will set its next biennial budget before then. The state has also helped districts by giving them more flexibility on how they spend funds typically locked up for specific uses, such as staff development.

“We transform what we’re doing to meet the revenue that’s coming in,” he said.

Still, Schultz said schools haven’t received sufficient increases. The basic per-student amount has hovered in the $6,000 range since 2008. Last year, legislators agreed to give schools $50 more per student in 2011-2012 and another $50 per student in 2012-2013—a move designed to cover borrowing costs from the delayed state payments. But Schultz said that money doesn’t offer a lot of benefit.

“If you look back in history, we have not received new money,” he said.

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