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Years of Education Funding Shifts Nothing to Be Proud Of

May 18, 2010 By John Fitzgerald, Education Policy Fellow

There's one word to describe the lack of education funding in Minnesota: Corrosive.
On Monday, lawmakers and Gov. Pawlenty agreed to "shift" 70 percent of state aid to schools until next year, meaning districts have less to spend than they thought when they prepared their budgets for the 2010-11 school year.

This "shift" follows years of financial strangulation: Since 2003, state aid for education has dropped an inflation-adjusted 14 percent. Thousands of education jobs have been cut, programs have been lost and Minnesota, once a national leader in education, has become simply mediocre in almost all measurable categories except one - educating minority students - in which we're at the abominable bottom of the nation.

The "shift" is nothing new. Since the beginning of this decade, 90 percent of state aid has been paid to school districts with 10 percent "shifted" to the next fiscal year.

In 2009, in response to financial problems, the legislature and Gov. Pawlenty changed that formula so that schools received 73 percent of their funding, leaving 27 percent for the next year.

But Gov. Pawlenty wasn't done. His no-new-taxes philosophy predictably left Minnesota in a short-term bind for cash in early 2010. To remedy the problem, he halted state aid payments to school districts for three months, directing districts to spend cash reserves to stay afloat and telling those that had no reserves to take out loans and cover the interest payments through local property tax increases.

That takes us to Monday and the final day of the 2010 Legislative Session. The latest shuffle means that schools will receive 70 percent of their funding, instead of 73 percent, with the rest promised next year.

Lawmakers and Gov. Pawlenty call the change a "shift," but it's only a shift when there's political will to eventually pay back the money. With billions of dollars in deficits on Minnesota's horizons, where will the money to repay any "shift" come from?

Mary Cecconi, executive director of lobbying group Parents United, notes that public perception of financial "shifts" is slippery. "When we finally went from an 80-20 shift to a 90-10 shift in the 1990s, the media called it new money for schools. It wasn't new money, it was just getting us back to zero."

Most districts will face short-term cash flow problems thanks to state funding ineptitude. Scott Croonquist, executive director of the Association of Metropolitan School Districts, estimates that most school districts spent their cash reserves to stay afloat when the state raided education coffers this spring.

"The one good thing about all this is interest rates are down," Croonquist said. Interest rates issued to schools are at about 1 percent. Each of Minnesota's 340 districts has a different financial profile so compiling a statewide prediction on interest spent because of the "shift" is difficult, but a figure between $4 million and $8 million statewide is in the ballpark.

Minnesota schools have been financially squeezed for years, and that pressure continues. Minnesotans want a quality education for their children, but many schools will find it nearly impossible to provide that under these circumstances.

Lawmakers have put the onus for strong schools on next year's crop of legislators. They should not be proud of this achievement.

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