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Cash Flow Squeeze Prompts School Borrowing In MN

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Nov 23, 2009 6:26 pm US/Central

Cash Flow Squeeze Prompts School Borrowing In MN

ST. PAUL (AP) ― More than one-third of Minnesota school districts have been forced to borrow to pay their short-term bills, mostly due to an accounting shift at the state level.

Minnesota Public Radio News reports that in normal years some school districts borrow money because of low cash flow, but experts say this year is different.

Districts are borrowing because Gov. Tim Pawlenty delayed $1.2 billion in state payments to schools as a part of his plan to balance Minnesota's budget.

MPR News interviewed four brokerage houses that arrange loans for school districts and found that 126 districts have borrowed nearly $300 million since June.

Districts are using short-term borrowing for things like payroll and monthly expenses. The interest payments could be big. In Bemidji, schools expect to pay $70,000 this year.

(© 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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