State cuts mean short-term loan for Cedar Rapids schools

The Cedar Rapids school district will borrow up to $12 million to pay its bills until property and state tax payments begin coming in this fall.

The short-term loan covers expenses until October when state aid payments and property tax collections begin flowing in.

In the past, the district covered expenses from August to October with its reserve funds. But those reserves were drawn down last school year to cover operating costs after the state-mandated 10 percent across-the-board budget cut last fall.

“We had our state aid cut this last budget year in the neighborhood of more than $8 million,” Superintendent Dave Benson said.

The district's reserve funds “are somewhat depleted now,” he added.

The district ended the 2009-10 school year with 4 percent of its overall budget, about $7 million, in reserve funds. It began that school year with more than $17 million in cash reserves.

The district expects to pay up to $54,475 in interest on the short-term loans. Interest accrues only on the drawn balance, so the actual amount could be less.

Benson said the money will be used as “sparingly as possible” to save interest costs.

Board Vice President John Laverty stressed that the interest costs are the result of state budget cuts, not poor financial planning by the district.

“We use to have to do this, and we worked hard not to be in that position,” board member Keith Westercamp said. “I blame the Legislature for putting us in this position.”

It is not known if other Iowa school districts will be seeking such short-term loans over the next three months. Leslie Finger, director of business services for the Iowa City school district, said that district “does not anticipate doing something of this nature.”

“I hope,” Benson said, “this is just a blip on the screen.”