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Politics & Government

District 197's Borrowing Will Rise Following New Education Bill

Signed into law by Gov. Mark Dayton on July 20, the bill will also end integration aid in the district.

With the dust settled following , School District 197 has a clearer picture of how the state’s new public education funding formula and other measures in the July 20 education spending bill will affect local schools.

The biggest change resulting from the new law is a shift in the state’s overall funding of K-12 public education. While Minnesota previously used a "70/30" formula to fund schools–meaning schools receive 70 percent of the money owed them by the state in the current budget year, with 30 percent of it delayed until the following year–under the new bill, that formula becomes 60/40. The shift will delay $700 million in funding to K-12 schools until the next two-year budget cycle.

Susan Brott, chief marketing and communications officer for District 197 said that the additional shift would mean an extra $3.5 million shortfall for the distrct. School officials had been relying on state education funding remaining flat, but hadn’t necessarily anticipated a further ten percent reduction in how much money the district would receive.

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District 197 will be looking to borrow $14 million this year, up from the $12.7 million it borrowed last year. The district’s 2011-12 budget has already been approved.

In order to make up for additional budget shortfalls created by the delayed aid, the new education bill adds an additional $50 to the per-pupil general education formula in each of the next two fiscal years.

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Uncertainty remains about how much of that increase will be left over after schools pay interest on borrowing, which the July 20 bill almost certainly forces them to increase. Depending on the loan’s rate, the approximately $250,000 District 197 receives each year in additional state money may largely be used to repay interest.

Of particular concern is the recent downgrading of Minnesota’s bond rating, previously reported by the Star Tribune. If other ratings agencies follow suit, the cost of borrowing for Minnesota schools could rise significantly.

A referendum will be put before voters in November asking them to renew and increase an existing operating levy. The school board was set to approve ballot language for the referendum at its . Brott reported the district has estimated the levy’s increase would generate an additional $1.7 million, with the levy increasing an estimated $33 per $100,000 of home value. As a result residents would be assessed $67 per $100,000 of home value to aid district schools.

"We’re always concerned about the budget, and with continued rising costs, the local levy is obviously very important to that," Brott said.

Other Changes

Integration aid in Minnesota schools was also eliminated as part of the new education spending bill. Aimed at encouraging racial integration, especially in and around more urban areas like Minneapolis, St. Paul and Duluth, District 197 schools previously received approximately $500,000 from integration aid annually. District 197 participates in the East Metro Integration District (EMID), which fosters integration between St. Paul and nine suburban school districts. 

While funding for integration will be phased out over the next two years, its loss represents a significant decline in revenue for District 197. Integration aid supports magnet schools and multicultural activities, while also helping to defray the cost of ongoing teacher training.

No Democratic legislators voted to pass the education spending bill. It passed 71-57 in the House and 36-28 in the Senate.

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