Minnesota school IOU: Why now's the time to repay

For today's state money melodrama, pretend that you're the parent of a financially profligate young adult who ran up a large credit card debt.

(For many of my fellow baby boomers, this assignment isn't terribly challenging.)

You recently rescued your spendthrift offspring from bloated credit card interest rates by loaning him or her a sum sufficient to pay off the card debt, after extracting a promise of orderly repayment.

You then learn via the family grapevine that instead of repaying you, your child is spending again. Rumors about spring break in Florida have reached family headquarters.

In your big scene, you confront your young adult with stern words: "Why don't you grow up and pay off your debt?!"

So said House Taxes chair Ann Lenczewski as she explained why she and her fellow House DFLers are so keen to pay schools the last of the IOUs — known in Capitol parlance as "the shift" — that the state issued between 2009 and 2011.

As the Bloomington DFLer spun this fable, the schools are the disappointed parent and state government the reckless debtor — or, that is, it would be, if it acceded to Gov. Mark Dayton's proposal to delay full repayment of the school shift until 2016-17.

That way, the state's books would be back in normal order, with the school-shift option fully available as the state's backup reserve account when the next economic downturn comes. Like the regular reserve, the school shift needs to be reset to normal to be a useful cushion against economic shocks.

But there's a flaw in the parent-child analogy's application to the school shift. The "parent" school districts aren't hectoring the state for repayment this year. They're doing just the opposite.

School officials are telling legislators that repaying the shift can wait. Repayment would only accelerate the receipt of money already built into their budgets. It won't give them what they crave — new money.

Scott Croonquist of the Association of Metropolitan School Districts explained the need: "We're well behind inflation in the formula," he said. That would be the general education formula, which this year lags its 2003 per-pupil level by 16 percent when adjusted for inflation.

"We have a huge cross subsidy in special ed." That's Capitol speak for an unfunded mandate that costs schools $150 million more this year than it did 10 years ago. "We haven't funded all-day kindergarten, like most states have."

Funding those things trumps paying back the shift, Croonquist and other school lobbyists argue. They further note that under state law, the school shift has first claim on surplus money "discovered" via official forecasts after budgets have been set. By that method, $1.9 billion of the circa 2011 shift has already been repaid.

The school advocates' argument is strong enough to make some twenty-somethings I know wish they could hire lobbyists.

But with a governor and a few hundred holders of state IOUs saying "no rush," who'll play the role of fiscal disciplinarian? Who's watching out for the state's overall fiscal health?

To the surprise of some, that role has been assumed by the new House DFL majority.

Speaker Paul Thissen seldom misses a chance to say that his caucus wants to "get the state budget square before we move forward." He emphasized to reporters after the new forecast was released Thursday that he wants the entire shift off state books by mid-2015.

Before Thursday's forecast, Selcer's bill carried a steep $550 million price tag. It looked likely to stall and/or shrink in the Senate.

But an improving economy allows an additional $290 million in IOU payback this spring. Selcer's bill now costs $260 million — not exactly Capitol peanuts, but likely small enough to fit in a final budget that also includes new money for K-12 education.

Campaign politics figure into House DFL zeal for a shift payback. Selcer said her bill is "part of keeping the promise I made to the voters in my district." House DFLers who made that pledge will face the voters again in 2014; senators won't be on the ballot until 2016.

But, Selcer said, a prompt repayment is also what her constituents told her they wanted. "They said, 'Balance the budget; stop the shifts and gimmicks.' "

In this unfolding fiscal drama, the role of the Prudent Parent can be shared by many players. Any Minnesotan can have a speaking part. No auditions required.