Twin Cities charter schools feel funding pinch

At Minnesota New Country School in Henderson, teachers might vote to reduce their pay. In a real pinch, they might even vote to reduce their ranks.

Nova Classical Academy in St. Paul is looking for banks that might lend it money to help cover bills -- borrowing that could cost the school $50,000 in interest payments next year.

Minnesota Internship Center, in Minneapolis, has persuaded landlords to let more than a quarter of its rent payments slide until next year.

For Minnesota's 154 charter schools, the upcoming school year is shaping up as a financial pressure cooker. That's because public schools -- both charters and regular schools -- are having much more of their state aid deferred this year than usual.

Delayed payments are an annual part of the school funding landscape; 10 percent was deferred last year, for example. But as part of the state's budget-balancing act this spring, 27 percent of what's allocated for schools this year won't be paid until next year, a scenario that will repeat itself again in 2010. In June, when Gov. Tim Pawlenty announced his unallotment plans to finish erasing the state's $4.5 billion deficit, they included $1.77 billion in K-12 deferrals and adjustments over two years.

The shift has created cash flow problems for all schools, but it's worse for charter operations because, unlike regular public schools, they get no property tax revenues. Nor can they go to voters asking for more money. Charter school officials also complain that it's tougher for them to get loans, and that they don't have access to low-interest loan pools available to regular schools.

"It's a pretty desperate situation for a lot of [charter] schools," said Kevin Byrne, executive director of the Minnesota Internship Center.

State education officials acknowledge that the delayed payments are creating cash flow problems for charter schools, especially the smaller and newer ones. They say they are working with schools, federal education officials and even banks to try to help out.

Deputy Education Commissioner Chas Anderson said financially strapped charter schools can, under certain circumstances, apply to the state education department for a speed-up of their state funding. Also, the department is talking to federal education officials about using start-up funds, used to help new charters get off the ground, as loans to help meet day-to-day expenses.

Charter schools, which are public schools founded to meet a particular student need and are freed of some of the regulations that govern regular public schools, came into existence in Minnesota in 1991 as part of an effort to give students and parents more education choices. They have become an accepted feature of the education landscape and claimed an enrollment of almost 33,000 Minnesota students last year. The bulk of their funding comes in a per-pupil allotment from the state. They also get state aid to help them pay the rent, some federal funding, and whatever grants they can obtain.

No closures to date

So far, after two months of delayed state payments since the July 1 start of the fiscal year, there have been no cases of established charter schools shutting down or new ones deciding not to open. But charter officials say that situation could change as schools scramble to make up the deferred state dollars.

"Based on our projections, sometime in the spring we will be at zero cash," he said. That means his and other charter schools will turn to banks for loans or lines of credit to pay the weekly bills. In previous years, when the delayed payments were smaller, charters would have to borrow or spend down their reserves, though to a much lesser degree than what they are facing this year.

Minnesota New Country Schools, with an annual budget of $1.3 million, is looking at $250,000 to $300,000 in state money being held back this year, said Jim Wartman, a teacher and the school's treasurer. Wartman figured that to make ends meet until the rest of the money comes in, the school's reserve fund might have to be whittled by about $200,000, to $35,000.

Scrimping and scrounging

Charter schools have scrimped and otherwise gotten resourceful. Teachers at North Lakes Academy in Forest Lake drove around during the summer to pick up furniture donated to the school by companies that were going out of business. They also scrounged lunchroom tables. Families of the students are making vinyl covers for the tables.

"These are the things we've done so we can keep our main priorities: small class sizes, qualified teachers and quality materials," said school director Jackie Saunders.

Those cuts could come if schools find that loans and reserve funds aren't enough to keep paying the bills.

Already, the 18 staff members at the 110-student Minnesota New Country School are considering slashing their own pay. Some are worried that the field trips and hands-on experiences for which New Country is known might eventually suffer. Aaron Grimm, a former New Country teacher and parent of a current student there, worries that financial woes might erode those services and derail plans the school had for building improvements.

For now, charter schools are encouraging one another to hold on and get through the tough times as best they can.

"This is definitely the biggest challenge we have faced," said New Country School's Wartman. "We've never operated in the red before, and we're going to try to avoid that. Right now, we're looking at how we're going to make this work."