State must replenish reserves

/ 22 March 2012 / jennifer

St. Cloud Times Editorial, March 22, 2012 –

Repay school districts under long-term plan

Imagine this for a moment:

The past year has been a rough one at home. It started with your job and wages being reduced. On your way to spending down all your family’s savings, you cut all perks, delayed some critical bills until next year, and paid others by using money from your kids’ allowances.

Now, though, things are looking up. Your income is back. While you still face many payments, you are able to restock that savings account to at least cover the next “rainy day.” But suddenly there’s a mysterious clamor to put that money toward repaying your kids’ allowances.

So what’s the top priority? Rebuilding that rainy day or repaying some of those allowances?

That’s an admittedly basic version of what the state of Minnesota is facing now that its revenues have rebounded. The Legislature and governor are the parents and public schools – from which the parents borrowed $2.4 billion the past two budget cycles – represent the kids’ allowances.

As much as it would be nice to pay back the schools immediately, the first priority is making sure the state can weather the next rainy day. Or month.

Depressingly, though, Republicans in the House and Senate are advancing proposals that leave state reserves short in favor of starting to repay schools. While the details are still being addressed, each plan seeks to put $430 million toward that education debt.

Don’t misunderstand. The Legislature and Gov. Mark Dayton definitely should have a long-term plan to repay every penny of that $2.4 billion, plus even interest individual districts have had to pay in borrowing funds to cover holes created by the state’s poor fiscal planning. After all, school districts have been doing the same work, perhaps more, and not getting fully “paid” for it.

The key, though, is repayment should be in the form of a long-term plan.

The short term must take precedence, which means protecting the entire state budget from another revenue nosedive by rebuilding state reserve accounts. This is especially important because state revenues remain heavily dependent on good economic times. In other words, it won’t take much of a bad time to create another shortfall.

As this board understands it, state law essentially requires the state’s first “extra” $1 billion be split with 65 percent saved into a “rainy day” fund and 35 percent put toward cash flow. So if the law is clear – and common sense dictates you protect the entire family first – why are legislators even considering repaying one specific debt at the risk of drowning in a rainy day?

Could the answer have something to do with another day? Say Election Day?