District 196 to Use Tax Anticipation Certificates, Borrowing Money this Winter

The Rosemount-Apple Valley-Eagan school district will likely use tax anticipation certificates to cover an $18-$20 million shortfall caused by the state budget passed last week.

“It unfortunately puts more variables into our normal decisions we make,” Jeff Solomon, director of finance and operations for the public school district, said of the state budget. “We’ll just have to navigate through it.”

Solomon said Monday night at a school board retreat that a delay in state aid will cost it about $20 million this fiscal year, forcing the public schools to borrow money. He explained Wednesday that the district will most likely use tax anticipation certificates. Investopedia defines those as short-term debt securities that anticipate taxes collected at a later date. Interest rates will depend on the market condition at the time of borrowing, and right now they’re around .5 percent, Solomon said.

The state historically has made two aid payments to school districts -- 90 percent one year, and then 10 percent the following year after final enrollment was tallied. Then that ratio moved to 70/30. Last week, the state decided to delay aid payments further, giving districts 60 percent of funding owed one year, and 40 percent of funding the next. While it helps the state balance its budget, it leaves school districts like 196 scrambling.

Solomon said the district -- which is to cover a shortfall because of state aid delays and a property tax shift -- will have to make a decision about borrowing in January or February.

If the district gets into a further bind in the future because of the state budget, Solomon said it does have a line of credit it can use. Right now that line of credit stands at about $24 million, he said.

“(The state budget) impacts (the district’s budget) dramatically,” Solomon said.