Governor to sign school aid bill for this year; hole remains

The state Senate yesterday gave its approval to a bill that closes about $300 million of the school-aid deficit for this year, even though it fails to account for $62 million of the deficit originally projected in January. State budget officials say Governor Granholm will sign the bill. Left unresolved is the question of how the growing school aid deficit, now reckoned to be an additional $150 million below the mark, will be handled.

The bill, Senate Bill 221, made waves last month when it originally passed the Senate. At that time, it included a $34 per pupil cut to school districts, and reductions in the payments to intermediate school districts. The bill was part of a strategy by the Senate's Republican majority to close the current year's budget deficit without raising new revenues. The cuts to districts were removed by the House, which has leaned toward changing or increasing taxes prevent cuts in education and other core services.

The bill gets most of its savings from a one-time accounting change at the state school employees' retirement system; this allows the legislature to "credit" districts for retirement contributions that they will not have to make this year because of the accounting change. (Basically, the contributions districts are required to make to the retirement system, MPSERS, depends heavily on the value placed on the assets currently held by the system. MPSERS has used a trailing five year period to value its assets; since this includes the stock market dive in 2001-02, asset values have been depressed. The legislation calls for MPSERS to value its assets as of last September, making asset values higher and required contributions smaller.) Some school debt is refinances, and some "hard cuts" are made to a number of initiatives which were slated to begin this year.

The bill, if signed by the Governor, is only a partial fix. State economists expect that the deficit in the School Aid Fund will end up being as much as $150 million larger than they projected in January. State Budget Director Bob Emerson has already warned districts that the ballooning deficit may require cuts to districts of as much as $125 per pupil. In his recent letter to school districts, Emerson said that his office would give formal notice to the Legislature of the shortfall (as required by law) on 1 May. The Legislature then has 30 days to act to find other funding or else the cuts will take place automatically.