Money to BEA just State IOU payment
While local school officials are certainly grateful for a recent announcement by state legislators and the governor that they will be receiving more money, they quickly point out one thing.
“It is actually just the money they owe us anyway,” says Blue Earth Area School District finance officer Alan Wilhelmi. “They are just reducing the amount of the I.O.U. to the school districts.”
And, not only that, Wilhelmi says they will be doing it in small increments, not in one lump sum.
Here is how that works.
The state pays the school districts their state aid in twice a month payments over the year.
“We get a payment on roughly the 15th and 30th of every month,” Wilhelmi explains. “They take the total amount that we will get for the fiscal year (July of one year to June of the next) and split it up into 24 payments.”
However, the state does not give the schools the full amount they are owed. They withhold a percentage, and that percentage being withheld can be changed every year, or even during the year.
Currently the state pays the school around 86 percent of what is owed, and keeps the other 14 percent to be paid later. That is what Wilhelmi refers to as an I.O.U.
“They make up that withheld amount by adding to the first four payments of the next fiscal year,” Wilhelmi says. “So in July, August, September and October we get larger payments, to make up for the previous year.”
Of course the regular payments for those months are still being reduced because of the percentage split.
That means that even though the school is being paid back by the state fro the previous year, their payment is still just around 100 percent of what they should be being paid.
“It is confusing,” says BEA superintendent Evan Gough. “And it also can cause us some real budgeting issues. I’m glad we have Allen here to keep track of it all.”
Right now, with the state nearing a 90-10 split, meaning they give the schools 90 percent of what they are owed, it is not so bad. But, the local school officials both say, in the past the state has lowered that split to 70-30 and even 60-40.
“Can you imagine a business trying to survive on just 60 percent of their income?” Wilhelmi asks. “Not many could.”
He points out that a couple of years ago, when the split was around 60-40, the state decided to withhold all the money to school districts with larger fund balances from January to May.
“So, we went from getting just 60 percent of the state funding down to zero for a few months,” Wilhelmi says. “It was all paid back in May. But we had to make contingency plans to cover our expenses.”
Gough says those plans included having the School Board authorize a possible line of credit at local banks.
“Many school districts did have to borrow money to make payroll and pay bills,” Gough says. “Just so that the state didn’t have to borrow the money.”
Wilhelmi adds that while the governor and state legislators have been quick to announce the increased payback on the withheld funds, he has yet to get the official announcement from the State Department of Education.
“I am always curious as to what the next memo (from the state) is going to say,” he adds. “It keeps my job interesting.”