State to Pay Half of IOU to Schools Starting Friday

Updated: 12/11/2012 7:55 AM KSTP.com By: Mark Albert

More than half of Minnesota's $2.4 billion IOU to the state's school districts begins to be paid back Friday, after extra revenue in the current fiscal year will allow repayment of a portion of the infamous "school shift" that helped balance the state budget and end the longest shutdown in state government history.

"I think it's good news for a lot of districts that had cash crunches," explained Jim Schowalter, commissioner of the Minnesota Management and Budget department.

Many districts, whose budgets were already set at the time their state payments were initially reduced, were forced to take out short-term loans with varying interest rates. The costs of those interest payments, ultimately borne by taxpayers, will not be reimbursed.

The biannual revenue forecast, released last week, showed an unexpected increase in revenues totaling $1.3 billion for the fiscal year that ends in June. By law, that money must be used to pay down the shift.

So $505.9 million will be added to the regularly scheduled mid-December payment to schools; the remainder of the $1.3 billion will be paid out starting next year. The schools would still be owed roughly $1.1 billion, to be paid back in the 2013 fiscal year, which begins July 1.

"The fact that we have a little bit of a one-time bump that allows us to start repaying some of those obligations, get our fiscal house in order, is good news for Minnesota," said Schowalter during an interview Monday.

When the Legislature convenes in January to determine a new budget, Gov. Mark Dayton pledged Monday in a meeting with reporters to not rely on the same tactic again for the coming biennium.

"I insist that we don't use one-time shifts or borrowing or any gimmicks used in the past to try to disguise these problems, let's get our fiscal in order and we'll go from there," the governor said.

Watch our story above to find out how the shift affected specific districts.