Truly Incredible

The State will likely be raiding our School District piggy banks reports the Minneapolis Star Tribune.  Rather than borrow money from a lending institution, low as interest rates are these days, why not borrow it for zero interest from School District cash reserves?  It seems prudent, if it truly is short term such that it's truly repaid in July and that District cash truly is a reserve not needed in the interim.

Critics correctly point out that this is in effect punishing the better managed districts who made the aggressive budget cuts in anticipation of these days.  But look who's among those critics:

State Rep. Mindy Greiling, DFL-Roseville, said school districts that showed fiscal prudence by building reserves will be punished by a state that didn’t exercise the same discipline.

True enough, but it still pegs the chutzpah meter.  Here is one of the arsonists complaining that the flames are getting out of control.  Even if her signature Minnesota Miracle bill were to pass, we'd be in the same situation since the new money was all earmarked for the public schools.  No, it would be worse because her plan puts in a fourth income tax bracket that would make our revenues even more unstable.

No doubt she is thinking of Governor Pawlenty as being the irresponsible party.  Never mind that the DFL frittered away the first two months of the 2009 session to the point where even the Star Tribune called them on it.  The DFL had but one plan, to embarrass the Governor into tax-raising submission as the clock ran out.  As we saw, the clock ran out on the DFL instead.

It should be interesting to see what the DFL game plan is for the 2010 session.

Comments

[Hiram]

The state can't borrow money to pay for operating expenses. That's what's known in the trade as an unbalanced budget. So it has convinced itself, somehow that it can do indirectly, borrow from political subdivisions of the state like school districts, what it can't do directly, borrow in it's own right. Personally, I think that's unconstitutional, but it's an approach to state finance that everyone seems to accept, and for some technical and legal reasons, is hard to challenge in courts.

I have never thought the two month delay in presenting a comprehensive approach to the state budget was procedurally a bad idea, during the last session. The legislature was waiting for the final budget forecast in early March. Nothing could have been done before that which wouldn't have had to be substantially revised after the March forecast, and really, the governor hasn't ever substantively addressed the budget issue. His response was intransigence towards the legislature, followed by a trick legal strategy which is currently unraveling, and which now really does threaten to push the state into economic and financial chaos.

[Hiram]

Mindy is quite correct by the way. The schools aren't the segment of state spending driving the government into the read. There is a lot of room for quibbling about the numbers, but in broad outlines, school funding by the state is basically flat, and if inflation is factored in, is in decline. The unchecked growth in government spending is coming in the other area the state spends money, health and human resources where spending is going up 20% a year. Nobody is giving our teachers 20% a year salary increases.

[The Big Stink]

When it all goes south - when revenues can't possibly support the growth in government, what happens? Do the voters 'double down' and support tax increases? When school referenda are defeated before they begin and the state has no dollars left to send the districts and the unions demand increases in spite of the recession, what happens?

Then tell me why tuition tax credits and vouchers are unfair.

[Hiram]

"When it all goes south - when revenues can't possibly support the growth in government, what happens?"

The growth in what government pays for will be there whether or not government is paying for it or not. What is driving the increase in state budgets is health care costs and that's directly related to the aging of the population. That burden has to be assumed by somebody.

What is also clear is that education costs are not driving government growth or the increase in state budgets. Lately, the state seems to view the education budget as a source of interest free loans, borrowing 1.8 billion dollars from the school districts last year, and possibly an additional 1.2 billion this year.

Fairness aside, if the state is borrowing money from the school districts to pay current operating expenses as it is, where are they going to make up the revenue lost from any tuition tax credits or vouchers they may create? Private and public charter schools are receiving a lot of state money as it is. If there are to be cuts, I fully expect private and charter schools to be cut too.