On Wednesday, the Hastings school district was supposed to get a check from the state for $9.5 million. Instead, Superintendent Tim Collins got a letter explaining that the money — half of the district’s state aid for this year — was being held back until next May.
It’s the second time this year that Gov. Tim Pawlenty’s administration has responded to a cash crunch by delaying $142 million in payments [PDF] to school districts.
You know the scene in Dr. Seuss’ “How the Grinch Stole Christmas” where the Grinch, having looted most of Whoville’s holiday finery, reaches down a chimney to snatch away the lone ornament he missed?
Collins has to feel a little bit like the littlest Who, left watching and thumbing her lip.
When he took over the 5,800-student district in 2003, it was in statutory operating debt. Collins fixed that, building up a rainy-day fund by making some tough budget decisions and by asking Hastings residents to approve two successive levies. He managed to salt away $16 million, or nearly $2,800 per pupil.
Hastings’ reward for all that fiscal prudence?
The district will have to make do without $19 million in state funds this year — the second-largest hit in the state, behind only Minneapolis.
“To go through that entire process and find out, seven years later when we’re financially stable, that they’re going to come to you and take the money,” Collins said. “I understand the pickle the United States is in, and Minnesota is in. But the system for delaying state aid, I don’t think you can say it’s equitable.”
In January, the state announced it would put off $423 million in payments due in March and April. At the time, state officials tried to calm the roiling waters by pointing out that they were withholding only half of the amount the law empowers them to delay.
The governor blamed a Minnesota law that says the state cannot seek short-term loans until it has delayed funding school districts that have cash reserves. Last spring’s move was the first use of the law, which was deemed controversial when it was passed in 1986.
Public school officials blamed Pawlenty for failing to find other ways to balance the budget. Not only does the delay deprive districts of the interest on the reserves, but once the accounts are empty, they are forced to borrow.
The state calculates the amount of the payments it can delay using a formula that takes into account the size of each district’s reserve fund and its operating levy. Because of this, the districts disproportionately affected are those that have budgeted their way into the black and where voters have tried to close school funding gaps by taxing themselves.
Minneapolis Public Schools have had the most aid delayed. Last spring’s delay cost the district $49 million; this week’s missed payment was $14 million.
“Fortunately, none of this has yet put us in a position of having to do short-term borrowing,” said Peggy Ingison, the district’s chief financial officer. “It’s just another thing that creates financial instability and financial difficulty.
“All of us who receive state aid are in a horrible situation,” she added. “It’s a signal the whole financial structure is just eroded.”