Delay in state aid creates record levels of borrowing to run metro-area schools.
Twenty-six metro school districts -- nearly twice as many as last year -- are turning to banks to make ends meet, borrowing a total of $382 million this year.
The borrowing blitz by more than 60 percent of metro-area school districts that took part in a survey released Wednesday is being blamed on an unprecedented delay in state funding. It comes in a year when a near-record number of districts statewide asked taxpayers for more money.
While borrowing is up, layoffs and budget cuts are down, illustrating a shift in how school districts are balancing their budgets.
"This was probably the lesser of two evils," said Scott Croonquist, executive director of the Association of Metropolitan School Districts, whose annual survey asked districts how much they're borrowing for the first time this year. "But it's not a pain-free way; there are consequences."
All told, metro schools laid off more than 600 staff members, withdrew $55 million from reserves and slashed $61 million from budgets this year, the survey found.
"We've seen these kinds of cuts before, but it's the highest amount of borrowing we've seen," said Croonquist, who said the number of school districts borrowing is "probably a record."
While schools are benefiting from low interest rates, the interest and borrowing fees that they now owe -- upwards of $500,000 -- could mean less money for classrooms next year.
In the St. Paul School District, which laid off 81 staffers this year, the interest and fees it cost to borrow $80 million this year could have funded six teachers.
"That's a really big deal; that's six more teachers that could go in the classroom," said Marie Schrul of the district's business office. "It's very frustrating. You do what you can. You know you have to make payroll."
For the first time in more than 15 years, the Wayzata School District borrowed money this year as it waits for the state to pay the $28 million it has coming.
"At this point, it shouldn't have a major impact on our students and families, but in the long term, it gives us less stability," Wayzata business manager Jim Westrum said, adding about the state funding delays: "The Legislature is going to have to come up with a solution."
Funds delayed
While legislators this summer approved increasing state aid by $50 a student, or $100 a student over two years, they also lengthened the delay in disbursement to public school districts, giving them 60 percent of their funding during the school year and holding onto the remaining 40 percent until next school year. In short, districts got more money from the state but less of it upfront.
"I don't like it, but they need to talk to Gov. Dayton," Rep. Pat Garofalo, R-Farmington, chairman of the House Education Finance Committee, said about the change in funding. Republican lawmakers, he said, would have preferred overall state budget cuts to a timing shift for education funding, but it was a compromise with DFLers.
"I will never vote to increase the shift again," he said. "The next time, we cut spending."
In a statement, Rep. Mindy Greiling, the DFL leader of the committee, countered by blaming Republicans for "stealing from our schools and asking our students to foot the bill for our state's financial woes."
Wednesday's report came a month after more than 120 Minnesota school districts asked taxpayers for more money -- the most in a decade. The levies had high voter approval but that doesn't mean the increased borrowing by districts won't continue next year. Croonquist said that as long as the state delays funding, districts will have to borrow. That leaves school business leaders such as Schrul preparing to set aside more money next year to borrow more money.
"There's never that catch-up," she said. "It's just unfortunate it comes at a cost."
Kelly Smith • 612-673-4141
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