Even though Albert Lea Area Schools will not receive cuts to state aid in the upcoming biennium, it will have to wait to receive a percentage of its state-aid payments.

Under the proposed state budget unallotments and deferrals announced Tuesday by Minnesota Gov. Tim Pawlenty, Albert Lea Area Schools will see an additional $4 million in deferred state aid payments for the 2009-10 school year.

Larry Kellogg, director of finances for the district, said to cover those deferred payments, the district’s leaders are planning to issue $5 million in aid-anticipation certificates.

“What that is, is basically we’re borrowing against future aid payments that we will be getting down the road,” Kellogg said. “The plan right now is to issue these aid-anticipation certificates so that we have the cash flow to now get us through the year.”

The certificates are similar to bonds, in that they are sold on the open market, and investors, individuals or financial institutions can bid on them, he said.

Kellogg noted he was not surprised to hear Pawlenty’s announcement regarding K-12 school funding, based on comments the governor had made previously.

“Unfortunately, it doesn’t fix the problem; it just shuts it off into future years,” Kellogg said.

Albert Lea Superintendent Dave Prescott said district leaders have already been bracing for no increase in state funding for the upcoming year and have cut the budget by about $600,000 in anticipation of not getting a cost of living increase.

“The news for public schools across the state was not good, but it kind of was anticipated because they had talked about that during the session,” Prescott said.

The superintendent said the district is fortunate it has a little bit of a fund balance that will help the cash flow in the near future.

“It’s a difficult time for a lot of folks,” he said. “We’re thankful education didn’t get cut more than it has been cut with this announcement from the governor. We hope things will get better soon.”

Across the state, the governor announced $1.8 billion in deferred payments to K-12 schools in fiscal year 2010, though schools will get their full aid entitlement in the second half of the fiscal year.

The district finance director said the school district usually gets paid twice a month in state-aid funding — once around the middle of the month and once at the end of the month. Over the course of the fiscal year, which begins July 1 and ends June 30 of the following year, it receives $25 million from the state.

He said the state usually already withholds 10 percent of the $25 million to see how much the district ends up spending that year. That money is usually given back in January for the prior fiscal year after the state receives the district’s audit.

The $4 million additional deferred payments equal out to 17 percent of the total state aid funds to Albert Lea Area Schools. Adding that with the already 10 percent expected to be withheld, the school district will see 27 percent in state-aid funds deferred in the upcoming school year, Kellogg said.

That equals out to about $6.5 million.

That same percentage will also be withheld during the 2010-11 school year, he noted. The finance director said he did not know whether the district would issue another $5 million in aid-anticipation certificates to cover that deferred payment.