The Bemidji School Board quickly and unanimously approved a plan on Monday to borrow $9 million to cover shifts in state funding to school districts.
Gov. Tim Pawlenty revealed his plan to balance the state budget, made effective July 1, which called for the use of unallotment, or a delay in state aid.
Minnesota constitution requires a balanced budget, but if no overall decision is approved, the governor has the authority to make a new plan. This was the case last month, when the legislative session ended with no overall plan and a $2.7 billion gap in the budget, therefore prompting Pawlenty to take matters into his own hands.
The largest portion of the governor's unallotment plan calls for the delay of $1.8 billion in state payments to K-12 education. This has some school officials stunned.
"It feels like a rug was just pulled from underneath us by the governor," said Chris Leinen, the district's director of business services.
The governor says schools will get all the money due to them in the long run. Still, some school officials are leery.
"It's not a guarantee we will get the money back," said Leinen. "It's not like the legislature passed this. The governor's implanting this shift. Legislature could easily make a new decision," he added.
A small portion of the education aid shift will occur in 2010 and a larger amount in 2011, but the money will have to be taken out at one time.
According to Bemidji School District superintendent Jim Hess, the money will be used in increments, withdrawn only when needed. The School District will also have to pay interest fees from the borrowed money.
"This is part of the problem - not knowing how much you will need to use. You can offset some of your borrowing costs, but there will still be a gap in what you earn and what you have to pay," said Leinen.
The Bemidji School District is in the process of working with a collective cooperative, a group of schools that join a pool together to spread the costs and hopefully a more preferable interest rate. Leinen estimates a lower interest rate of about 2.5 to 3 percent.
"I find it very troublesome," said board member John Pugleasa. "I think it's important for parents and teachers and taxpayers to understand that a portion of dollars that they work hard to produce is going to go towards paying interest of a loan that we didn't ask for," he said.