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How the Pawlenty shift impacts WDC schools

In response to Governor Pawlenty's budget plan, the Wadena-Deer Creek School System will need to take out record-sized loans to cover the cost of delayed state aid to the school district. Delayed payments in the form of budget shifts from the state have in recent years become a normal part of school finance.

In 2009, the shift was 90/10. This meant that in 2009, for every $100 dollars budgeted by the state for public education, the state sent $90 and kept $10. In effect, the state paid its bills with money withheld from schools, many of whom found themselves having to then borrow money to pay their own bills.

According to the governor's 2009-10 plan to balance the state's budget, the shift to be imposed on Minnesota schools will rise to 73/27. Thusly, during fiscal years 2009-10, out of every $100 budgeted by the state to fund our district, the state will now withhold $27 of those dollars to balance the state's books. The math is pretty straight forward. The amount to be withheld from school districts in fiscal years 2009-10, according to the governor's plan, will nearly triple that of previous years.

School districts, like WDC, who are unable to cover increased shortfalls with reserves will need to take out loans which will need to be paid back with interest. The enhanced withholding of state aid coming in fiscal years 2009-10 will have the effect of creating an additional operating expense for our district.

Last year, WDC needed to take out a $1.225 million loan to cover operating expenses. Interest on that loan totaled $50,385. The governor's enhanced shift for fiscal years 2009-10 will result in the district becoming obliged to take out a loan for an estimated $2.4 million, to cover additional revenue lost as a result of the governor's additionally withheld state aid. Interest on the larger loan will equal the cost of one or more employees. In recent years, our district has cut its operating costs by six figures annually. The budget cut for the coming school year alone totals $790,000. However, even with extraordinary cost-cutting measures having been taken this year and in previous years, the increased withholding of state aid will be hard on our district.

During recent years, the aforementioned 10 percent state aid withheld was eventually allocated to districts. The governor indicates his intention that the 27 percent to be withheld from schools during fiscal years 2009-10 should be forthcoming to schools in the following year. This good intention is, of course, welcome; however, it does little to offset the newly acquired burden to cover increased operating costs to our district in the here and now. Even more foreboding is the scenario where the state's budget crises persist and the governor's 27 percent aid withheld today does not become a reality. What then?