District 197 Borrows to Bridge State Aid Shift
Good interest rates mean the district may be able to improve their bottom line.
The West St. Paul-Mendota Heights-Eagan School Board once again approved borrowing to tide the district over between state aid payments Monday night at Mendota Heights City Hall.
In good news, the amount has declined from $14.5 million last year to $8.5 million this year, according to Finance Director Brian Schultz.
That is due in part to passage of the referendum last fall as well as increasing enrollment.
An accounting “shift” by the Minnesota Legislature—made greater to balance the state’s budget in 2011—means the district now receives 64 percent of its aid in the year it is designated, and the remaining 36 percent in the following year.
To cover operating expenses until that second payment is received, the district, and others across the state, have turned to their version of a payday loan.
To alleviate the costs associated with borrowing, the state put an additional $50 per pupil onto the formula that determines how much a district will receive.
According to Finance Director Brian Schultz, the down economy and low interest rates means that additional per pupil increase will actually generate additional funds for the district’s bottom line.
“Although it’s never comfortable to borrow for cash flow, it’s an awfully good interest rate,” said board chair Mark Spurr.
While the cost of borrowing is estimated to be $30,000-$40,000, the revenue from the additional per pupil formula bump is expected to bring in about $250,000, said Schultz.