State payment delay will have little impact on local districts

Kansas has delayed half the aid payments due to its public school districts for a few days because of concerns about a short-term cash crunch, according to the Associated Press. This will have a mixed impact on local districts.

For USD 234 in Fort Scott, it won't really have too much of an effect, but for USD 235 in Uniontown, it's a bigger deal, officials said.

Elaine Frisbie, deputy state budget director, told the Associated Press that $98 million in funds that would normally have reached school districts Jan. 3 won't get to them until the end of the week. The state paid the other half of the aid on time, AP reported.

Frisbie said the state decided to be cautious after its December tax collections were about $22 million short of expectations. Postponing part of the aid to schools allowed the state to avoid a delay in meeting other financial obligations, such as paying bills from health care providers for services to needy Kansans under the Medicaid program, AP reported.

USD 234 Business Manager Alan Drake said he expects the rest of the payment Jan. 10. He said that short of a delay "won't really affect our cash flow at all." He said this is the first time this school year districts have seen a delay in state payments.

"We're hoping this (will) be a minor delay in the state distribution. But the state department of education gives us adequate notice if there will be any major delays. We appreciate that because it really does help us to do our cash-flow projections," he said.

Frisbie said it's possible that if state revenues continue to fall below expectations, schools will see similar delays in February and March, as the state waits for revenues to catch up with bills that have come due.

Last year, there were several months the state delayed payments to school districts. The past six months or so, Drake said, payments have been coming pretty close to on time.

"I think the state ... revenue situation is getting somewhat better. Cash-flow estimates are coming in as estimated. This is the first time we've had a little bit of a delay. Last year, it was a different matter where it was pretty routine to have a delay of sometimes up to a month which caused us to really watch our cash flow and make sure we had enough for payroll, bills and claims," Drake said.

Drake said USD 234 always projects ahead to meet known expenses. Payroll occurs for the Fort Scott district on the 20th of each month and the money is invested until its needed. "That causes us to be very careful and project ahead," he said.

Monthly payroll is about $1.1 million and the Fort Scott district has 340 employees and 1,958 students. It projects monthly expenses of $100,000-$150,000 per month for various miscellaneous items -- sometimes payment obligations are bigger than others.

Uniontown Superintendent Randy Rockhold said payment delays have been an ongoing issue for "a long time now."

Fiscal years for school districts run July 1-June 30. "... It's not a new issue. It's something we've accommodated. The issue really is as they continue to cut funding and our balances decline, it's going to make it more difficult to have a positive cash flow," Rockhold said. "The big issue is the reduction in funding we've seen. That in itself has really created some financial limitations, especially at a time when we have more and more children with more and more needs."

Uniontown has 470 students, 40 certified and 35 classified employees. Classified staff includes bus drivers, cooks, teacher aides, secretaries and custodians. Uniontown receives about $280,000 a month from the state and a budget of just under $4 million. "The late payments definitely have an impact," Rockhold said. "It really changes the way that you plan and the dynamics of everything every month. Because of lack of funding, our cash balances diminish."

"If we continue to look at the decreased funding per pupil that we've been seeing, we're looking at two years before we see a cash flow problem at the end of the year," he added.

Deputy Education Commissioner Dale Dennis said the delay isn't likely to cause problems for the state's 293 districts because the money will arrive later this week. But he said districts could face difficulties if the delays become longer in future months, AP said.

Dennis noted that in December 2009, Kansas delayed half its scheduled aid payment for several weeks, and the state had to make special arrangements for six or seven districts so that they could continue to meet their payrolls.

Such delays have become a source of aggravation for superintendents and other educators. Mark Desetti, a lobbyist for the Kansas National Education Association teachers union, said districts' payrolls are the majority of their budgets.

"One would hope that it would stop soon," Desetti said of the delays. "At some point, it's conceivable that it's a challenge to meet payroll. That's why school administrators are so anxious about this all the time."

The latest short delay in school aid payments comes as Gov.-elect Sam Brownback and legislators wrestle with the state's ongoing budget problems. The projected gap between projected revenues and current spending commitments is expected to exceed $500 million for the fiscal year that begins July 1.

The projected gap results largely from the expected disappearance of federal economic stimulus funds, which the state has used to prop up aid to schools and social services. Some legislators have discussed allowing districts to tap reserve funds for general operations, to offset the loss of federal stimulus funds. But Mark Tallman, a lobbyist for the Kansas Association of School Boards, said districts are using reserve funds now to tide themselves over temporarily when the state is late in making its aid payments.

"Districts have learned to their frustration that the scheduled payment date is at best a goal," Tallman said.