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State delays more school aid payments

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ST. PAUL -- Minnesota officials turn to schools as the state's bank this spring.

The state will run out of money in March and April, and the Pawlenty administration says it needs to borrow money from schools to pay the state's bills.

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The state sent school superintendents a notice Tuesday saying it will delay its payments to about two-thirds of the districts. The $423 million delay is needed because the state will not receive enough revenue to cover its obligations, officials said.

The administration promises to repay the money on May 30, when tax revenues are expected to increase enough to cover the state's needs.

The newest delay is on top of $1.8 billion in school payments Gov. Tim Pawlenty this summer ordered to be delayed over the next two years to help balance the ailing state budget.

Some school leaders say they may have to take out short-term loans to cover the spring delays.

Education Commissioner Alice Seagren said the state had no option under law other than to borrow from schools.

"State law requires school district payments to be delayed in order to avoid short-term borrowing," Seagren said Tuesday in a prepared statement.

The amount of each district's payment that is delayed is determined in a large part by the size of financial reserves the school has on hand. Districts with the least money in the bank will receive normal payments, while some districts will get only partial payments and some will get no money at all.

Tuesday's action means 231 districts' payments will be delayed out of 341 districts. Payments will not be delayed to the Bemidji School District.

Besides school payments, the Pawlenty administration will delay $53 million due to the University of Minnesota system and will postpone corporate and sales tax refunds for up to 90 days.

School districts may appeal the delay.

"Districts were really dumbfounded," said Grace Kelliher of the Minnesota School Boards Association.

Several superintendents pointed out that in a sense the state is penalizing districts that have been prudent enough to set aside a healthy fund balance.

"We are a conservative school district that has built a fund balance," said Warren Schmidt, interim superintendent in Breckenridge, which faces a delay of about $305,000, or 40-plus percent of its March and April aid. "Now we're basically going to be punished for that. What's the lesson here?"

Moorhead Assistant Superintendent Wayne Kazmierczak said the action "just seems like another gimmick and not the way for the state to solve its budget issues."

While the law was passed to allow the state to borrow from districts with money in the bank, Kelliher said, in many cases that money is committed.

One in five districts may have to borrow to cover the payment delays, Rep. Mindy Greiling, DFL-Roseville, said.

Since the payments will be made up in May, the delays do not help cut the state budget deficit.

Rep. Dean Urdahl, R-Grove City, said there is not much the state can do other than to delay payments.

"It is a good news, bad news situation," he said, adding that the districts will be repaid soon.

"I don't know what the ramifications will be," he added.

Some Democratic legislators plan to introduce a bill to overturn the law that forces state leaders to delay payments when cash runs low.

"It is wrong to balance the budget on the backs of our students," an agitated Sen. Chuck Wiger, DFL-Maplewood, said.

Sen. Terri Bonoff of Minnetonka and Greiling said it is not likely that they can overturn the law in time to avoid this spring's delays, but an even worse financial situation is expected for next school year, which could mean several months of delays, they said.

"My fear is this sort of delayed payment will happen again next year, and it will be a greater delay," Kazmierczak said.

Mila Koumpilova of The Forum of Fargo-Moorhead contributed to this story. Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.

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