Saline schools approve resolution for state treasury department loan
Saline Area Schools Board of Education on Tuesday approved a resolution to borrow money from a state program created to help schools during periods of low cash flow.
According to the Michigan Department of Treasury, the State Aid Note Program is a “streamlined loan program to finance short-term operational cash flow needs for traditional public schools.”
The Michigan Finance Authority facilitates the process by “pooling the loans, soliciting bids and obtaining the highest possible short-term rating,” resulting in competitive interest rates, the website says.
Saline Interim Finance Director Janice Warner said there are two loan periods for schools, one in the spring and summer.
She identified Saline’s low points as April, May and June of this year. Last year, SAS borrowed $1.5 million at an interest rate of 1.46 percent. She said the interest rates for 2012 are still out for bid.
Scot Graden
Trustee David Zimmer asked why earlier this month Warner had projected Saline would retain a fund balance of about $1.16 million as of June 30, and now board members hear there is a $1.9-million shortfall and they need to borrow money.
Warner said there is a difference between a school district’s fund balance and its cash on hand.
“The timing of revenue coming in doesn’t always match when expenses need to go out,” she said, explaining it depends on when schools receive their state aid payments and their individual payroll schedules.
She said even when the district was doing well financially with a fund balance amounting to 5 percent of its general fund expenditures, it still had to borrow money, usually a couple million dollars.
“What would need to change so we don’t have to do this practice (of borrowing from the state?)” asked Trustee Todd Carter.
Saline’s 26 pay-periods calendar can be a problem, Graden said. Warner added there are two times annually that the district has three payroll payments a month, which depletes its cash on hand.
Graden said the only real solution would be to hold paychecks or to have the state and school districts operate on the same calendar. Currently, most school districts operate on a July to June fiscal year, while the state’s fiscal year runs from October to September.
Trustee David Holden said Saline school officials and community members should lobby local legislators to get the state to give schools their funds when they need them.
“Why would they short us and then (create) this program so we have to loan them?” he said. “It almost seems like they’re skimming off the top from us a bit.”
Staff reporter Danielle Arndt covers K-12 education for AnnArbor.com. Follow her on Twitter @DanielleArndt or email her at daniellearndt@annarbor.com.
Comments
Poorman
Sat, Mar 3, 2012 : 1:33 a.m.
Very slipery slope here if we alow public intities to borrow money when they are out of money and increasing wages, this could get way out of control. According to the Saline Reporter, Saline raised payroll expenses by $1 million last year. This was allowed to happen while expenses were already greater than revenue. This drained the fund balance. If we still had a fund balance we would make interest and not pay interest. Borrowing money will increase costs and accelerate a path to bankruptcy. Not responsible. <a href="http://www.heritage.com/articles/2012/02/16/saline_reporter/news/doc4f3d2efc3f6fd305828684.txt" rel='nofollow'>http://www.heritage.com/articles/2012/02/16/saline_reporter/news/doc4f3d2efc3f6fd305828684.txt</a>
SalineMom
Fri, Mar 2, 2012 : 2:58 a.m.
You all need to re-read the article carefully. It is a cash flow issue. The state doesn't always pay on a regular schedule and bills still have to be paid. Any fund balance is purely a "paper number". If people think the fund balance is money in the bank somewhere, then they clearly have not been paying attention to all the budget talks in Saline over the last 4 or more years. Interesting that the "annointed" fiscal saviors of the district, Zimmer and Holden, acted clueless about this cash flow fact. I guess it's not as easy to balance the budget as their campaign literature lead the stake holders to believe.
David Zimmer
Fri, Mar 2, 2012 : 3:15 p.m.
Hi SalineMom. Actually I understand cash flow very well. If you had attended the meeting my question was asked to provide Administration the opportunity to explain this to the public in attendence. The issue of cash flow in the public sector in Michigan is a common problem in all K-12 and University settings due to the different fiscal year schedules. Most districts and Universities have adequate reserves to avoid these "bridge loans", Saline does not. Our problem is because of a almost decade long deficit spending pattern which has eliminated our ability to handle "the float" that many other district in Washtenaw County avoid. If you would like to discuss the state of our School District fiscal situation, give me a call and we can have a constructive conversation about it. I look forward to your call.
SMAIVE
Thu, Mar 1, 2012 : 9:32 p.m.
The state has always played games with payments. Legislators and treasury officials postpone or short scheduled payments to cover their own shortfalls for a period. It happens in the private sector all the time, GM was well known for paying late. Business often have to use short term credit, it unfortunate our "business savy" new order believes it's ok to do it to the taxpayer. As for payroll, there are Federal laws requiring certain positions be paid with a two week period. Employers often took advantage of employees by holding off payments, forcing a similar hardship. It's not necessarily the higher compensated staff who will take the hit.
Salinetaxpayer1
Wed, Feb 29, 2012 : 9:11 p.m.
Once again, this is why Saline Schools cannot afford to pay these huge school salaries! Borrow borrow borrow! Why do they always have to take the road of least resistance and accumutate more debt! If we don't have it, we need to make cuts and make due. <a href="http://jaymcnally.com/saline-area-schools-employee-wages-for-2010/" rel='nofollow'>http://jaymcnally.com/saline-area-schools-employee-wages-for-2010/</a>
BigSexy76
Wed, Feb 29, 2012 : 7:04 p.m.
We need to demand more transparency in the way the school conducts its business. We need to get answers on how we got into this financial mess in the first place!
taxpayer united
Wed, Feb 29, 2012 : 4:37 p.m.
Well, Well, how the once mighty saline schools has fallen. Now having to borrow money to operate. Saline district taxpayers had better take notice things need to change. Saline Schools continue to operate like usual and refuse to make the cuts and changes necessary to operate above water. Instead its easier to take out loans and pay the interest. Something does not sound right in this thinking. Logic tells you this only gets you deeper into debt. You built new schools like palaces that where not needed. Then brought in school of choice students to fill them. What's next rent a teachers. Sounds like a change is needed and it starts with the superintendent.
towny
Wed, Feb 29, 2012 : 4:09 p.m.
Plain and simple playing with the numbers to suit themselves. Who do these school officials think they are fooling. Trustee's are going along with this just like little trained puppy dogs that they are. Now school districts are taking out loans with interest basically because they can not do there jobs and manage the districts finances. Superintendents, Officials and trustee's should be ashamed.
BigSexy76
Wed, Feb 29, 2012 : 3:23 p.m.
Saline Area Schools needs to reorganize and restructure the way it does business. That begins with the board of education hiring an outside firm to conduct an entire audit on the school's finances and operations. Thats the only way the school system will be able to fix the current fiscal mess it is in
Common Sense
Wed, Feb 29, 2012 : 2:35 p.m.
Sounds like there is extra work with 26 pay periods. Why not consider paying staff one/month like the UM does? They may help resolve the problem. Since this has been going on for the "past four years" per Mr. Graden, then former Gov. Granhollm and all legislators are also part of the problem. I would like to see something written on what the effect of holding paychecks until the money comes to the Saline schools and also see the actual cost of the interest payments over the past four years.
ruminator
Wed, Feb 29, 2012 : 2:16 p.m.
Dear newest school board members. This is your big business friendly Lansing at it's finest. Take money away and then offer to loan it back to you with interest. Seems a little like organized crime? We elected you to represent us in the management of our schools. Now you want us to fight the fight in Lansing?
Lac Court Orilles
Wed, Feb 29, 2012 : 1:54 p.m.
If it weren't for Republican initiatives to divert money from public schools to their buddies for profit charter and for profit cyber schools, Saline Public Schools probably wouldn't have to borrow money.
Diane
Wed, Feb 29, 2012 : 12:50 p.m.
You should not spend what you don't have. Plain & simple. That's what we home owners do.
towny
Wed, Feb 29, 2012 : 3:58 p.m.
Diane don't you mean they spend what we have.
towny
Wed, Feb 29, 2012 : 12:26 p.m.
WOW !. From a plus $1.16 million to a negative $9 million. Sorry, there is no explanation. Just mismanagement. Something wrong with this scenario. People of Saline should be shaking there heads. Run a company in the real world like this and watch what happens. Sounds like heads should roll and it starts at the top. If this does not sound like mismanagement I do not no what does.
sellers
Wed, Feb 29, 2012 : 1:09 p.m.
Budgets are not cash-on-hand. They are projected revenue based on past performance and future trend. When you have a budget is that balanced it's balanced for a period, and during that period if you have debts due you may have to pay out more before you earn what is needed to pay it out by period end. Ideally, yes, you would have a buffer, but guess what, times do not support that. Schools don't have "credit" cards like individuals due, they have to pay salaries and invoices with liquid assets.