GOP, Dayton differ on school IOUs

Published 9:40 am Friday, March 9, 2012

ST. PAUL — Minnesota legislative Republicans and Democratic Gov. Mark Dayton differed Thursday over a plan to dip into state rainy-day funds to more swiftly pay schools for IOUs from past budget fixes.

The disagreement highlights a part of last summer’s deficit solution that is certain to resurface in the fall campaign. More than once in recent years, the state temporarily held back a portion of aid payments to schools to reduce its deficit. It now owes more than $2 billion to schools.

Now that the state’s finances are improving, Republicans say they feel comfortable tapping into a reserve fund so schools don’t have to wait as long for catch-up payments.

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Under existing law, schools are due to see more than $300 million in debt repaid soon because state finance officials are projecting a budget surplus. The GOP bill, which cleared a House committee Thursday, would pare the state’s debt to schools by an additional $430 million.

“A prudent course of action when you have cash on hand is to pay off your debt,” said Rep. Pat Garofalo, R-Farmington.

Dayton and his budget commissioner warned that it would put the state’s finances at risk if the economic recovery falters.

The bill would leave about $577 million in the state’s checking and savings accounts. Dayton said he’s not comfortable drawing the balances down that far because it would be harder to react to a sudden downturn late in the budget cycle.

“Everybody wants to repay the schoolchildren,” Dayton said. “We shouldn’t have borrowed from them in the first place — wouldn’t have under my proposal. Now they’re trying to bail the legislators out before the election on the back of fiscal responsibility for all the citizens of Minnesota.”