Why Minnesota's school funding shift is helpful

  • Article by: DENNIS L. PETERSON
  • Updated: February 23, 2013 - 6:02 PM

Schools are better off than they would have been without the maneuver.

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Sixth-graders at the Math & Science Academy in Woodbury.

Photo: Elizabeth Flores, Star Tribune

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Commentary

A Feb. 21 commentary (“Governor shortchanges education”) called on both political parties to work together to “pay back the school funding shift.” I am fully aware of the various campaign positions taken regarding the payment shift during the 2012 election cycle, and I have no desire to take a partisan position in my efforts to bring clarity to the issue. My interest is solely in describing the value of the shift to school districts and the importance of delaying its repayment. This can actually get funds to school districts throughout Minnesota that can be used to pay for teachers and programs essential to our future.

I am aware that the use of a payment shift is widely misunderstood and demagogued as an “accounting gimmick” or “trick.” That is very sad, because it has been one of the most important tools used by legislators and governors of both parties to avoid deep cuts in school funding.

It is likely that all school districts in the state would have suffered deep reductions, translating to serious staff and program cuts, without implementation of the payment shift. Nearly every other state was forced to reduce education funding during the past five years. Because our leaders wisely used tools available to them, including the payment shift, Minnesota spared its schools and students that pain.

The payment shift is a simple issue, but has been mischaracterized and misunderstood over the years. Basically, it is possible because the state uses a cash basis of accounting, while school districts use a modified accrual basis. In the cash basis, expenditures (like state aid) are recognized when they are paid. In the modified accrual basis, revenues are recognized when they are earned (like the state aid earned by districts). So, a payment shift occurs when the school districts earn their revenue and account for it in one fiscal year, and the state pays some of the money due to the school districts in the following year. There is no less revenue for the school districts in this situation; it is just a cash-flow issue.

School districts have not had less money during these years than they would have had without the shift; they just received it somewhat later. In fact, I believe we would have all received much less money had the shift not been employed to help the state get through the difficult last five years.

If anyone doubts that, they need to articulate where the state would have cut its budget by the $2.888 billion involved in the payment shift in order to have had a balanced budget.

The payment shift is not “balancing the state’s budget on the backs of schoolchildren.” Schools are receiving their earned funding; it is just delayed by a few months. The amount owed to school districts is not “owed to our children.” It will be paid in due time under any scenario. For those districts that have had to borrow for cash-flow purposes, the minor cost has been offset by the important gain in maintaining the funding already in place.

All Minnesota school districts have suffered during the recession, because they have not received much in funding increases. As our economy begins to rebound, now is the time for the state to provide school districts with more funding that they can actually spend on teachers and programs for students.

Frankly, the 1 percent increase in the formula proposed for next year (with no increase in the formula the following year) is hardly adequate for schools. Paying back the shift will provide nothing more to districts that can be used for teachers and programs.

Now is not the time to pay back the shift. It is time to provide increased funding for schools that can be used to improve student learning.

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Dennis L. Peterson is superintendent of the Minnetonka public schools.

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