Republicans in the Minnesota House have passed their plan to dip into the state's rainy day fund to repay some of the money owed to public schools.
The bill, which passed 74-59 Thursday evening, would make a down payment on the K-12 payment deferment made to help erase the last two budget deficits. But Gov. Mark Dayton and other Democrats have called the move irresponsible.
State lawmakers held back $770 million in K-12 education funding last summer as part of the budget agreement that ended a government shutdown. Combined with an earlier budget deferment, it pushed up the total owed to schools to $2.7 billion. State financial projections now show a modest surplus. The deferred amount has dipped to $2.4 billion, and there is some money back in the budget reserves.
Rep. Pat Garofalo, R-Farmington, the chair of the House education finance committee, said using $430 million out of the reserve to further reduce the school shift is appropriate.
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"The state of Minnesota has over $1 billion cash on hand, and we think it's appropriate to use some of that cash to pay back the debt to our schools," Garofalo said. "Just like with families, when you have extra cash on hand, the first thing you do is you pay back your debt."
Lawmakers on both sides of the aisle support paying back schools, but Democrats rejected the GOP approach of tapping the freshly replenished budget reserves. A DFL alternative would have paid off the entire deferment by eliminating some of the existing tax breaks for Minnesota businesses operating in other countries.
State finance officials have also warned that shrinking the reserves could result in some cash flow problems in the months ahead.
Rep. Joe Atkins, DFL-Inver Grove Heights, said the Republican plan still leaves big financial problems for the state and for schools.
"The Enron people are outside. They're putting together an all-star team, and they've already got Tom Petters lined up and Denny Hecker," Atkins said. "And this bill they want to put on part of their all-star team. This is terrible accounting."
Republicans counter that it was DFLers who fudged the numbers. Rep. Keith Downey, R-Edina, said the reserves will still be in far better shape than they were a year ago.
"With this bill, we are leaving six-times more money in our reserves than in the budget that passed last summer that our governor agreed to," Downey said. "How in the world was he going to pay our bills on $94 million, if he can't pay on $577 million? So, this is fuzzy math in the extreme, people."
The future of the legislation is unclear. The Senate has not yet taken up a companion bill, and the governor has publicly criticized the measure as not fiscally responsible.
Dayton, too, is concerned about cash flow problems. He accused Republicans last week of using the issue to try to "remedy themselves" for November.
"It sounds good. Everybody wants to repay the schools. It shouldn't have been borrowed from them in the first place. It wouldn't have under my proposal," Dayton said. "But to try to bail the legislators out before the election on the backs of fiscal responsibility for all the citizens of Minnesota I think is very inappropriate."
The House bill to pay back the schools also includes change to the way school districts handle teacher layoffs, eliminating the traditional practice known as "last in, first out." The measure requires administrators to base layoff decisions in part on teacher performance, not just seniority. The House and Senate passed those changes in separate bills earlier this session, but a conference committee has not yet worked out the differences between the versions.