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Budgets were tight before Pawlenty’s education funding shift

Gov. Tim Pawlenty’s $1.77 billion K-12 education funding shift is a shift all right — it shifts state aid and heaps it onto the backs of students. Experts calculate that schools will have to pay about $40 per student in interest to cover the state’s funding shift.

Here’s how it works: Under Pawlenty’s plan, schools will get 73 percent of their allocated funding on July 1, 2009, and get the remaining 27 percent on July 1, 2010. To make up the 27 percent they won’t receive on July 1, 2009, school districts will either spend budget reserves or, if their reserves won’t cover the missing amount, take out short-term loans to pay their bills. The additional interest on these loans could add millions of dollars to a district’s debt.

“This will have a horrible effect on districts on the edge that don’t have adequate reserves,” said Lee Warne, executive director of the Minnesota Rural Education Association. “This puts these schools in a cash flow crisis. Paying interest will cost the schools more in the long run than if the state had simply given them the money in the first place.”

Many will need to borrow
Both Scott Croonquist, executive director of the Association of Metropolitan School Districts, and Warne say only a handful of districts have the financial stability to handle this shift. Only those districts that have recently passed property tax levies or that have a growing student population can afford not to borrow money or draw down reserves to a dangerous level to pay for the shift.

Smaller funding shifts — usually of about 10 percent sent to the next fiscal year — are not unknown. Districts were aware of the possibility of an increased shift this year, Warne said, and some built up their reserves, “but some make the strategic decision to spend that money to serve their kids. Now they’re paying for this decision.”

In addition, schools received no increase for inflation from the legislature this year or next. That means districts will have to absorb all inflationary costs, including health care and fuel. “The fact that we’re looking at frozen funding is significant,” Croonquist said. “This will exacerbate layoffs, programs will disappear, activity fees will go up.”

Warne agreed. “Eighty percent to 85 percent of a district’s budget is used to pay employees. The cuts will come in people.”

Schools already taking action
The news was grim even before Pawlenty’s announcement. Schools were cutting budgets and laying off employees across the state:

• The St. Paul School District announced this week it is laying off 267 employees, 143 of them teachers, to overcome a $25 million deficit. “This is appalling. We’ve never cut this many positions before,” board member Anne Carroll told the Pioneer Press.

• Last month, the Duluth School Board approved more than 30 layoffs and terminated 34 positions, affecting both tenured and non-tenured staff. Board member Judy Seliga-Punyko, a former teacher in the district, had tears in her eyes before acting on the vote. “There are a lot of names of people here that I know and they are excellent teachers,” she said. “This is really hard to do,” she told the Duluth News-Tribune.

• The Eastern Carver County (Chaska) School District voted last month to terminate 83 teacher contracts, including about a dozen tenured teachers.

• The Morris Area School Board voted to reduce three teaching positions and eliminate another two part-time jobs.

• The Bemidji School Board faces a deficit of about $2 million. The board is considering $1 million in staff reductions, which is about 18 full-time-equivalent employees, and $1.1 million in spending reductions.

• Rochester public schools sent layoff notices to about 80 teachers in April in what is believed to be one of the largest job cuts of teachers in district history. The first pink slips went out late Wednesday. The cuts — part of $9.3 million in district reductions — were expected to hit about 33 secondary teachers and 45 elementary teachers.

Some may seem grateful that schools weren’t harder hit in Pawlenty’s budget scheme. But the opposite is true. Schools have cut employees, dropped programs, raised activity fees and put off important purchases to the detriment of students for years. This funding shift only makes the problem even more untenable.

It is increasingly clear that if Minnesota wants to deliver a quality education to its children, its education funding levels have to be adequate and predictable. Today’s funding levels are neither.
John Fitzgerald is a fellow at Minnesota 2020, a progressive, nonpartisan think tank based in St. Paul. This article originally appeared on the organization’s website.

Comments (2)

  1. Submitted by Richard Schulze on 06/19/2009 - 09:32 am.

    Personal income tax collections have been falling for several quarters. “PIT” makes up about 42.5% of the total taxes collected in MN. I believe that Minnesota’s “PIT” has declined 20%.

    For states without large cash balances, this can create a cash flow crunch
    or even a cash flow crisis. There is not enough time to enact and implement new legislation cutting spending, laying off workers, raising taxes, or otherwise obtaining resources sufficient to offset the lost revenue before the June 30 end of the fiscal year. As a result, a state
    without sufficient cash on hand to pay bills must resort to stopgap measures to “roll” the problem into the future.

    It is clear that state income tax revenue in April and May has fallen short of what states expected by many billions of dollars. Exactly how that will translate into new budget shortfalls is not clear, but budget gaps are likely to have increased by several multiples of the amount by which tax revenue has fallen
    short. Minnesota is not alone in this area.

    I hope that this was not “off topic” but rather tries to make sense of the payment shifts and the reasoning behind it.

  2. Submitted by Thomas Swift on 06/19/2009 - 09:51 am.

    Out here in the real world, companies facing the necessity of culling their staffs set aside the best and brightest as a matter of course.

    Meanwhile, public schools are forced to manage their workforces by measuring the hours a teacher has occupied a desk, without regards to performance.

    I can understand why a board member that cares about providing his or her student population with the best academic training possible would get teary eyed watching the “cream” float off while the “dregs” nail their shoes to the floor.

    No wonder so many people are choosing other options for their children.

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