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Budgets Were Tight Before Pawlenty's Education Funding Shift

June 22, 2009 By John Fitzgerald, Education Policy Fellow

Gov. Tim Pawlenty's $1.77 billion K-12 education funding shift is a shift alright, 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." 

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."
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.

 

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