Minn. Senate approves plan to tap reserves to repay schools

/ 27 March 2012 / jennifer

Jennifer Brooks, Star Tribune, March 27, 2012 –

DFLers balked at a bill that would use state budget reserves to repay schools.


The Senate has signed off on a plan to tap state budget reserves to help repay $2.4 billion that the state borrowed from schools as part of its deficit fix.

The bill passed Monday on a 35-29, party-line vote, with Democrats arguing that it’s a bad idea to use the reserves just as the state has started replenishing them. Republicans countered that if money runs short, it’s better for the state to borrow money than the schools.

“We are in much better shape than we were last year, absolutely moving in the right direction,” said Sen. Claire Robling, R-Jordan. “Instead of asking the school districts to borrow more money, we’ll take that risk upon ourselves.”

In recent months, state economic forecasters have projected budget surpluses totaling more than $1 billion. The state diverted $323 million from this year’s surplus to repay the schools, but it still owes $2.4 billion.

The Senate bill would start by repaying schools $430 million in aid that was delayed. It would then dedicate 1 percent of the state’s general fund budget — about $150 million a year — to school payments and would make repaying the schools a priority over refilling the state’s rainy day fund.

Opponents, including Gov. Mark Dayton, call it a short-sighted move, arguing that this year’s budget surplus is likely to be followed by another budget shortfall in the near future.

“This is a bad bill, compounding a bad decision,” said Sen. Dick Cohen, DFL-St. Paul, who warned that devoting 1 percent of the budget to the school repayments would add to the state deficit. “By voting for this bill, not only are you taking money away from the reserves … you also are adding $150 million [a year] to the deficit.”

That “bad decision” Cohen alluded to is last year’s deal between the Republican-led Legislature and the Democratic governor to help balance the budget by delaying $770 million in payments to the public schools. In recent years, the state has borrowed $2.7 billion from the schools, making it difficult for districts to plan and balance their books.

“Bad decisions from last year? Really?” Sen. Paul Gazelka, R-Brainerd, shot back. “We had a $5 billion shortfall and with the tough decisions we made, we have a $1.2 billion surplus. … What we did was nothing short of amazing.”

The House has passed its version of the school repayment bill, and the differences between the bills likely will be reconciled by a conference committee.

Jennifer Brooks • 651-925-5049