Opinions split about timing of state school aid

By PATRICK HOWARD
Capital News Service
LANSING – Mason County Central Schools’ resolution asking for legislation to rethink the timing of school aid may eliminate its need to borrow money from banks.
According to Superintendent Jeff Mount, proposals like that are “sweeping across the state” and should be addressed immediately.
Mount said timing originally became a problem after the state switched its fiscal year to Oct. 1 through Sept. 30 to save the state money.
He said given public schools’ traditional fiscal year of July 1 through June 30, districts such as his have to borrow money until school-aid funding becomes available in October.
According to Mount, Mason borrows approximately $2.5 million annually at 1-2 percent interest, which he said costs about $80,000 per year.
“It would be better to take that money and put it in the classroom,” Mount said. He said interest payments could instead be used for teacher salaries or classroom essentials.
“I think there are some smart people down in Lansing, I think they can figure this out,” Mount said. “Our kids need the help.”
According to Peter Spadafore, assistant director of government relations at the Michigan Association of School Boards, districts across the state have passed similar resolutions, and their concern is warranted.
However, Spadafore said it is a complex issue that cannot be solved by simply giving money to a quarter of the districts.
“It’s sort of a catch-22,” Spadafore said. “If the state decides to shoulder the interest payments, there will be less money available in the school-aid fund.”
He said the state should make it a priority to assist financially strapped districts, but must do so with caution.
“You can’t just give away money that isn’t there,” he said.
Sen. Darwin Booher, R-Evart, expressed similar sentiments, stressing that school districts with similar funding problems have found ways to adjust.
“When you take money from the general fund and give it to these districts so they can make these interest payments, you are taking away from the schools that already adjusted and don’t have to borrow,” Booher said.
Booher used his Senate district as a microcosm for the statewide situation. He said out of the 34 school districts he represents, only about nine borrow from banks.
Booher said if the state provides the nine districts with money for interest, it’s borrowing it at the expense of the other 25 districts.
He said there is a state savings mechanism – the rainy day fund – that could accommodate problems related to districts’ interest payments.
But he said with a balance of zero expected for the school-aid fund at the end of the 2012-13 fiscal year, the state would be borrowing money to pay for problems that many districts have already adjusted to.
“You care about these financial binds, you really do,” said Booher. “But there are two sides to every issue. Hopefully we can figure something out in this next budget.”
Rep. Ray Franz, R-Onekama, said he would be open to figuring out a way to reimburse districts for interest payments using surplus dollars, suggesting a fund could be started to fix that problem.
However, he said the idea of providing school-aid funds ahead of the state’s October budget is fiscally irresponsible.
“You can’t make payments that haven’t been appropriated in the budget,” Franz said. “That would be against the state constitution.”
Franz also addressed district concerns that the state may be using school-aid surplus dollars for non-education purposes.
“School-aid funds are restrictive,” he said. “We are only permitted to use them for the appropriated purpose.”
Mark Wolf, a senior fiscal analyst for the House Fiscal Agency, said districts had to borrow $1.2 billion from the Department of Treasury’s Finance Authority in 2010.
He did not have specifics indicating how much districts borrow from banks, but said interest totals about $48 million between payments to the Finance Authority and banks.
Bob Dwan, associate director of Michigan School Business Officials, said it’s a matter of how much the schools receive per month.
“Under the current formula, there is no way a district won’t have to borrow,” Dwan said. He suggested a realignment of the fiscal years would solve a bulk of the problems
However, for the short term, he said the state might need to engage in “fiscal maneuvering.
“I think a lot of these districts that are heavily reliant on state funding for schools would like to see most of that cash up front, instead of 11 equal payments throughout the year,” Dwan said. “It’s not about throwing more money at the problem, but about how the state provides the money that’s already there.”
© 2012, Capital News Service, Michigan State University School of Journalism. Nonmembers cannot reproduce CNS articles without written permission.