Minnesota Senate panel passes plan to pay some of state’s debt to schools

/ 20 March 2012 / jennifer

Megan Boldt, Pioneer Press, March 20, 2012 –

Senate Republicans are advancing a plan to start paying back the $2.4 billion owed to Minnesota public schools. But there’s a catch.

The bill would repay schools about $430 million in delayed payments previously used to balance the budget. It also includes a measure to freeze teacher raises for experience and continuing education if a contract expires while negotiations continue between a district and its union.

The bill passed the Senate Education Committee on a 9-6 vote. It now goes to the Senate Finance Committee.

Sen. Ted Daley, R-Eagan, said the state now can help ease some of the financial burden caused to schools, with some forced to borrow millions of dollars to pay bills and meet payroll.

“I was hoping this day would come, but it’s coming much sooner than I thought,” Daley said of the chance to repay school districts. “If anyone has to borrow money, it should be us here, not the schools.”

A similar bill already has passed the House. The House GOP plan, though, includes ending the practice of laying off teachers based on seniority rather than performance, a measure that already has passed the House and Senate.

Democrats argue that Republicans are putting the state in a precarious position by raiding the state’s reserves to make a small step toward paying back the shifts.

“I applaud you for bringing this issue to the Senate. I just don’t agree with how you do it,” said state Sen. Patricia Torres Ray, DFL-Minneapolis.

And Democratic Gov.

Mark Dayton reiterated his concern the plan would hurt the state’s credit rating.

“We certainly need to pay back the school shift. But I don’t think we should risk the fiscal stability of the state to speed up those payments,” Dayton said. “I think this is more about politics to make Republicans look good come November.”

Republican legislative leaders and Dayton struck a budget deal last session that included delaying an additional $770 million in state aid for schools to help close the state’s budget shortfall. That brought the total amount owed to schools to $2.7 billion.

That amount is now about $2.4 billion after state officials agreed to apply the $323 million surplus shown in the latest state budget forecast to the debt.

The Senate’s plan doesn’t specify where the money would come from to pay back some of the shift. But the House Republican plan cuts the state’s reserves from $657 million to about $227 million. An additional $350 million in cash-flow accounts leaves the state with about $577 million on hand.

Democrats again tried to amend the bill to get rid of a tax preference that allows corporations to shelter earnings offshore.

When they introduced the plan last month, supporters argued it would bring in about $450 million a year and that schools could be paid back in about six years. But the proposal has been scaled back and would generate only about $150 million in revenue to pay back the shift in 2013, and the amount would drop annually in the out years.

“This is the fiscally responsible way to do it because we’re paying back schools the full amount…without raiding reserves,” said Sen. Katie Sieben, DFL-Newport.

But doing away with those tax credits would mean a significant tax increase for businesses, giving them one more disincentive to expand and add jobs in Minnesota, said Jill Larson, a lobbyist for the Minnesota Business Partnership.

That’s why Sen. Benjamin Kruse, R-Brooklyn Park, wouldn’t support it.

“If we chase them out of Minnesota, we’re really going to be in a tough spot,” he said.

Some Democrats and representatives from Education Minnesota also expressed concerns about Olson’s provision that would freeze contracts once they expire until both sides negotiate a new agreement, arguing that it steps on collective bargaining rights.

Currently, when a contract expires, many teachers still get salary increases for experience and educational attainment, called “steps and lanes,” because they are already built into their contracts.

Megan Boldt can be reached at 651-228-5495. Follow her at twitter.com/meganboldt.