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Pawlenty leaves schools holding the bag

Gov. Tim Pawlenty’s “no new taxes” pledge is a sham. His decision to shift school payments from one year to the next will increase regressive property taxes for most Minnesotans.

Faced with a $6 billion budget shortfall, the governor decided to write each school district IOUs. It works like this: Each school district gets most of its funding from state taxes. Several years ago, the state started sending only 90 percent to districts one year, then 90 percent plus the previous year’s 10 percent the next year, and so on.

Earlier this month, Pawlenty changed it to a 73 percent-27 percent shift, a move he says will save $1.8 billion. This change forces districts to either cut the 27 percent of their budget they won’t receive until next year — 17 percent more than they had budgeted — or borrow the money through bonds and loans.

Schools deciding who is going to suffer
Either way, schools are now deciding who is going to suffer the brunt of Pawlenty’s decision: Students through diminished services or taxpayers through greater property taxes. School officials, as one would imagine, are averse to diminishing student education. Therefore, they’re looking at other forms of income.

Here’s what you might not have known: The state legislature gave school boards the ability to buy bonds without voter approval if the board approves the bonds before Oct. 1. That means the governor effectively fobbed a tax hike onto property taxpayers with school boards left holding the bag.

Consider these recent developments:

The Buffalo-Hanover-Montrose school district will sell $10,850,000 in bonds to cover the cost of “other post-employment benefits,” or what it pays to retirees for insurance and severance benefits.

Currently, the district uses a “pay-as-you-go” system, each year budgeting $700,000 for those benefits. By buying the bonds, that $700,000 is unencumbered in the budget to pay for school uses. It is expected that the property taxes on a $200,000 home would be increased $52 per year.

The Red Wing school district is considering a similar shift.

“With state aid frozen for two years and great uncertainty over the state’s ability to fund education after the freeze, our district is examining ways to stretch our general fund to support current and future educational programming,” Red Wing superintendent Stan Slessor wrote recently.

“Without bonding, the district needs to cut at least $500,000 from its 2010-11 budget and hold that cut over the next four years. This would leave the district with a negative $500,000 balance at the end of the 2013-14 school year.”

He noted that the bond will coincide with the retirement of two previous bonds, which should keep property taxes stable.

Financing in Marshall, New Prague
The Marshall and New Prague school districts will take out general obligation aid anticipation certificates of indebtedness to combat Pawlenty’s shift. Marshall will finance $5 million, New Prague $3 million.

Meanwhile, the Bemidji School Board will borrow $9 million to cover the funding shift.

Bemidji School District superintendent Jim Hess said the money will be used in increments, withdrawn only when needed. The school district will also have to pay interest fees from the borrowed money.

“It feels like a rug was just pulled from underneath us by the governor,” said Chris Leinen, the district’s director of business services.

‘A loan that we didn’t ask for’
“I find it very troublesome,” said Bemidji board member John Pugleasa. “I think it’s important for parents and teachers and taxpayers to understand that a portion of dollars that they work hard to produce is going to go toward paying interest of a loan that we didn’t ask for,” he said.

The officials in Bemidji are correct. The governor’s rigid “no new progressive taxes” mantra has left students and property taxpayers on the hook. We’re paying more and getting less.

Renewed state investment in our students will make Minnesota stronger than we already are. IOUs, payment shifts, and forced property tax increases send us in a spiral toward mediocrity.

John Fitzgerald is a fellow at Minnesota 2020, a progressive, nonpartisan think tank based in St. Paul.

Comments (6)

  1. Submitted by Thomas Swift on 07/24/2009 - 09:56 am.

    “School officials, as one would imagine, are averse to diminishing student education.”

    Ha! Yeah, I guess when 42% of your students are already failing to graduate you might start to get a *little* concerned about tipping past that magic 50% mark.

    Hey, here’s an interesting idea, Jeff.

    What do you suppose it would take for school officials to become a bit less adverse to negotiating with the teachers union on behalf of their students for a change?

    Yeah yeah, I know….dream on.

  2. Submitted by Leslie Hittner - Winona on 07/24/2009 - 12:03 pm.

    I know John does not like public charter schools but I believe it is important to note that charter schools have none of the options he identifies in his article. It is important, therefore, for charter schools to set a much more agressive fund balance goal – to build a war chest of sorts – to allow them to weather such situations without borrowing money.

    That is one of the reasons charter schools on average have higher fund balances than do conventional school districts.

  3. Submitted by Raj Maddali on 07/25/2009 - 07:50 am.

    As a good Republican, Thomas Swift blames the teachers. Hey Thomas, how about blaming the parents once in a while. You know the saying “You can only lead a camel to water”.

    Why blame teachers when you have students and their parents who don’t even finish their homework.

  4. Submitted by Ron Gotzman on 07/25/2009 - 11:59 am.

    Of course, we all know that there will never be enough money to pay for this “trickle down education system.”

    Why not let the children of America have the same education that Mr. Obama had and his children currently have?

    Let us invest in children and families.

  5. Submitted by Thomas Swift on 07/25/2009 - 12:15 pm.

    You are right, Raj. Parents have, or should have, a huge influence on the scholastic achievement their kids make; or fail to make.

    There are a depressingly large number of parents out there that don’t have a clue about what their kids do every day, and worse many that couldn’t care less.

    But parents are not invited to attend the contract negotiations that award the lions share of yearly budgets on the basis of how long a teacher has occupied a desk; irregardless of whether they have actually *taught anyone, anything*.

    Parents are not spending millions of dollars to maintain the status quo of failure.

    There’s plenty of blame to go around, Raj, and performance review reforms are just one piece of a much larger puzzle. But if we are going to ever reform the public system, we must *first* remove the blue collar trade labor union mentality that has strangled the life out of the teaching *profession*.

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