Osakis schools facing delayed funding again

For the second year in a row, the state may delay state aid payments to schools, forcing a financially stable school district like Osakis to deal with a half-million dollar state-induced shortfall.

The delay is an accounting maneuver that forces school districts to use reserves or take out short-term loans to cover what the state will pay later.

And it’s completely legal.

State statute requires that payment delays be limited to districts with an operating fund balance in excess of $700 per pupil unit.

According to the 2009 fiscal year numbers, Osakis had 721 pupil units and an unappropriated fund balance of $2,235,864. That calculates to a fund balance of about $3,102 per pupil unit, well above the statute limits.

Starting September 15, the state’s plan would withhold a payment of $117,981 to Osakis School District, another $109,377 September 30 and additional bi-monthly payments through December 15 totaling $538,834.

Osakis Superintendent Gregg Allen said the estimated delays shouldn’t hurt the district too much since it has some CDs coming due it can use to meet payroll during the first half of the school year. He noted he plans to meet with First National Bank of Osakis to set up a back-up plan.

Last year the bank agreed to give the district a line of credit to cover payroll. Instead of facing penalties for cashing in CDs early, the district paid about $2,000 in interest.

According to the Minnesota Department of Education, the payment delays will affect 140 Minnesota school districts.

Statute 127A.46

According to state statute, if the commissioner of management and budget determines that changes to the payment schedule for schools would reduce the need for state short-term borrowing, then he or she shall modify payments to districts. This is a statute that was adopted in the mid-1980s, but never used until last year.

The statute was amended in 2010 to reduce the impact on school districts and to make it discretionary for the state to implement the statute. The amended statute still allows the state to delay payments to districts when the state is projecting a cash shortfall.

-----

The Osakis Review and the Echo Press are owned by Forum Communications Company.

Tags: daily updates, local news, news, osakis, schools, funding, education