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| 2/9/2010 12:49:00 PM | Email this article • Print this article | State funding shift forces GHES to sell future state aid payments
By Chad Koenen
Stuck between a rock and a hard-place, the Glacial Hills Elementary School Board took a step on Tuesday evening to secure its financial future amidst growing concerns of an increase in the state aid holdback.
The action comes after Governor Tim Pawlenty's use of unallotment last summer which increased the amount of state aid holdback from 10 percent to 27 percent. The increased holdback has created a budget crunch for many schools across the state as they cope with less money on a monthly basis and try to get to the scheduled holdback payments in the fall.
With less money on a monthly basis, and in order to continue paying their budgeted monthly bills on a timely basis, the GHES Board approved a measure to sell future state aid payments to a company called Charter School Capital.
"We're fronting you the money," said Clare Mendez, a Charter School Capital representative on Tuesday evening. "We are in the back end hoping the State of Minnesota is good for it."
By purchasing future state aid payments, which she said isn't considered a loan, Mendez said GHES can have financial security now in the face of mounting cuts from the state. If the cloud of uncertainty surrounding state aid payments are not cleared up when it comes time for Charter School Capital to collect the state aid payments, Mendez said school's have the option to get another advance in state aid payments to help further bridge the gap between regular monthly payments and the additional holdback money.
"We are going to buy something that you own, and as long as you keep having students you are going to have receivables that are worth money," said Mendez.
While the school has been fiscally responsible, GHES Director Deb Mathias said the cash flow problem created by the state holding back an additional 17 percent of funding has forced the school's hand in selling future state aid payments.
"We've been fiscally responsible with our money, and if we weren't experiencing this additional holdback of funds we would be able to operate as we are," Mathias said after the meeting.
However, GHES isn't alone in its quest to bridge the gap in state funding until the additional state aid payments are made to school districts. During the presentation on Tuesday evening, one representative of Charter School Capital said 39 charter schools in the state of Minnesota have inquired with Charter School Capital about purchasing future state aid payments.
Unlike conventional school's, Mathias said charter school's cannot own their own building which can often mean a lack of collateral to get a short term loan. In addition, she said charter schools have no taxing authority, "so when our cash flow is down we can't go to the voters for a general referendum to recoup that."
Though the school has an adequate amount of money in various savings accounts, Mathias said the school chose to sell the state aid payments in order to keep the savings in tact. By selling the state aid payments the school can keep their savings account in the event of an unforeseen incident or to fill an immediate gap of state funding.
While the final cost of selling the state aid payments will not be known until they are actually sold, Mathias said the school could take up to a 10-12 percent loss on the state aid payments the school is selling by the time all of the discount and various fees are paid. Despite the cost, the board stated they had no other options at this time and approved selling two spring state aid payments to give the school some stability until it can collect the increased holdback money this fall.
"Basically we are paying for security," said GHES Board Member Laura Wilson. "We know we are going to have the money and that means something, I think, especially when we are dealing with the state."
When the times comes for Charter School Capital to collect the state aid payments this spring, GHES has the option to sell future state aid payments if necessary to further bridge the gap between the lower regular monthly state aid payments and the holdback money.
In other news
• Approved resignation of Sixth Grade Teacher Jason VanEngen effective February 5. Mathias reported VanEngen has accepted a teaching job in a different school district.
• Approved having Mathias teach sixth grade homeroom and math until the end of the school year. The board also instructed Mathias to have Title I Teacher Jim Harrison to teach fourth and fifth grade math to fill the void left by VanEngen.
• Approved ammending the Conflict of Interest Policy to reflect a change in the legislative statue.
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