Schools

Inver Grove Heights School District Won't Have to Borrow Money, Yet

A new, 60/40 state funding shift underscores the need for new funding sources, School Board Chair said.

Despite a new, 60/40 state funding shift that postpones more aid to schools, the Inver Grove Heights School District likely won't have to borrow money to support its cash flow, district officials say.

That is, unless anything changes.

"The possibility is always out there," District 199 School Board Chair Mickey Difronzo said on Friday. "We have a line of credit out there in case we need to [borrow], but we don’t foresee that happening."

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The state divides school payments into two parts—most of the payment during the school year, and the rest, the following year. Historically, schools received 90 percent upfront. Over the years, the state has shifted more weight to the second payment—first making it 15 percent, then 20 percent and now 30 percent—in order to balance its budget.

To balance the budget during this most recent stalemate and shutdown, Republican leaders proposed another further payment shift—from the 70/30 percent formula, as it stands now, to 60/40 percent.

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Initially, Dayton had refused such a shift, instead countering with an offer of a 63/37 percent split. Eventually, Dayton agreed to further school aid shifts, a decision which generated $700 million dollars—or half of the budget impasse that divided Dayton and Republican leaders.

Essentially, the measure allows the state to borrow interest-free from schools—and thereby protect its credit rating—while forcing districts some districts to borrow to cover cash flow.

Two weeks ago, School District Business Manager Bruce Rimstad predicted a new state aid funding shift for schools would mean the district would have to borrow money for the first time in 20 years.

But the 60/40 shift was a lighter blow than the 50/50 shift Rimstad anticipated. As a result, Rimstad said, the district likely won't have to borrow. But there are still several unknown factors out there that could impact the district's financial situation, Rimstad said. For example, the state, which meters out funding twice a month to school districts, could choose to delay those payments.

Nor has the state paid the district for previous years' payment shifts yet, Difronzo said. The state did increase per pupil funding by $50 for districts for each year of the biennium, but if the Inver Grove district is forced to borrow money, that per pupil funding increase would only cover the interest on the loan, Rimstad and Difronzo said.

The 60/40 shift, Difronzo added, underscores the need for new sources of funding for the district. This fall, the district will ask voters in a special election to renew an existing levy and support a tax increase in the form of two additional levy options. If all three levies pass, the measures could generate as much as $4.2 million in tax revenue annually for the district. Over the last 10 years, the district has cut roughly $6.5 million from its budget.

"That’s why we decided to ask for money from the community, because we knew we’d be receiveing less,” Difronzo said.


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