State cash picture gets worse

Talk about it

Minnesota state government is delaying school, university and some refunds payments in order to pay bills.

And the situation will get worse later this year, state budget officials told a legislative committee Monday.

“Our overall balances are getting drawn down,” State Budget Director Jim Showalter said, with the future depending on how quickly the economy recovers and what legislators do to balance the state budget before adjourning for the year May 17.

The slow economy has reduced state revenues, forcing Minnesota Management and Budget to borrow from other state and educational funds. The state’s bank account would have dipped below the $500 million state law requires to be available to pay bills if not for the borrowing from state and local agencies.

Also on Monday, Minnesota Management and Budget issued an update showing that state February and March revenues fell $41 million below expectations, mostly due to shrinking sales taxes.

Earlier estimates showed that the state would bring in $2.186 billion in revenues those two months, but revenues actually totaled $2.145 billion.

State budget officials said that at least part of the shortfall was a simple issue of when the sales tax returns were filed.

Budget officials say they will not need to borrow money from outside sources this fiscal year, which ends June 30, but some legislators fear they will need to next year.

The state is delaying $422 million in March and April payments to school districts and $52 million to the University of Minnesota, with all to be repaid next month. The state also is delaying corporate and sales tax refunds up to 90 days.

However, school districts and the university, as well as the Minnesota State Colleges and Universities system, may discover their state checks are delayed again by summer’s end. Projections show state funds will go into deficit again then.

“It is manageable in fiscal year ‘10, but fiscal year ‘11 is awful,” said Rep. Loren Solberg, DFL-Grand Rapids. “Even if you borrow from MnSCU and the university and the schools, you still don’t solve the problem.”

Showalter said he cannot say exactly how bad the problem will be until the Legislature finishes passing its budget-balancing bills and how the economy looks in a few months.

Charlie Bieleck of Minnesota Management and Budget estimated that the state will be $800 million in the hole in September. School districts’ payments delays may be smaller next year, he added, but it could take longer for the state to pay them back.

“It is a much more persistent cash deficit,” Showalter said of next year. “It certainly looks very, very difficult.”

Solberg, House Ways and Means Committee chairman, said he sees just one solution to the problem: “Pray, I suppose.”

Agree to meet

Legislative leaders and Gov. Tim Pawlenty agreed further meetings are needed to pass education reforms that could lead to up to $175 million more federal funds.

But an hour-long, closed-door Tuesday meeting apparently produced no agreements about what reforms should pass.

Sen. LeRoy Stumpf of Plummer and Rep. Mindy Greiling of Roseville, legislative education finance leaders, said they will host an informal meeting early next week with education committee members, Pawlenty’s education commissioner and representatives of education groups such as the Education Minnesota teachers’ union.

“There still are a lot of rough edges,” Stumpf said.

Stumpf and other legislative leaders said they hope to pass an education reform bill that would not only improve education but could lead to $60 million to $175 million more federal funds in the next four years.

Pawlenty spokesman Brian McClung said the governor continues to want to see the Q Comp performance pay for teachers spread across the state, allow professionals an easier path to become teachers and take other steps that the Obama administration says are needed to get the additional funding.

The goal is to pass reforms by May 1 to give the state Education Department time to file a revised application to Washington.

Tags: two harbors, news, legislature, budget