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

  • Article by: LORI STURDEVANT , Star Tribune
  • Updated: March 2, 2013 - 5:12 PM

Doing so gets Minnesota’s fiscal house in order for the next economic shock.

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A responsible state wouldn’t wait, House Taxes chair Ann Lenczewski argues.

Photo: Richard Sennott • Star Tribune 2011 ,

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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.

A fiscally responsible, grown-up state wouldn’t wait that long, Lenczewski argues. It would settle up with schools by the end of the next biennial budget period — June 30, 2015 — on a debt that as of Thursday’s state budget forecast stands slightly north of $800 million.

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.”

There’s also a crying need to close the race- and class-based achievement gap, into which this state’s future prosperity is at risk of tumbling.

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.

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