February 6, 2003

SCR-I Stands To Lose $200,000 Because Of State Budget Crisis

A political tug-of-war over the tightening state budget could have dramatic effects on Missouri's educational front, with Scotland County R-I School District taking a big financial hit along with the rest of the state's schools.

Governor Bob Holden is threatening cuts totaling $259 million to elementary and secondary education as well as an additional $91 million cut to colleges and universities across the state if his proposal for the securitization of the state's tobacco settlement funds is not approved by the state legislature by mid-February.

Despite the option of losing funding for education, Republicans are balking at the new plan for selling the state's share of the tobacco settlement as bonds.

"Under the new plan,

Missouri would be liable for backing up these bonds. This would basically require us to put our state buildings up as collateral," state First District State Representative Brian Munzlinger, R-Williamstown. "If the tobacco companies go bankrupt or don't pay the settlement money, we have to pay the bondholders. This is an extremely risky option because the tobacco companies are struggling and reeling after the lawsuits. I am very

concerned that this option could jeopardize our bond rating, which would hurt future funding for vital programs for both young and old."

But without the approval of the controversial plan Governor Holden as well as the office of the State Budget Director, Linda Luebbering, have indicated the state will have a $400 million shortfall in the state budget this fiscal year, which ends June 30.

According to an article published in the Columbia Missourian, Luebbering indicated the shortfall consists of a forecasted $300 million decline in revenue from anticipated levels combined with $70 million increase in supplemental Medicaid payments and $30 million in added court costs.

The threatened cuts to education would hit hard across northeast Missouri as well as the rest of the state. Scotland County R-I would stand to lose $204,852 and Gorin R-III would lose $34,793 in state aid that was budgeted for this year.

"All Missouri elementary and secondary schools have been notified that there is the real likelihood that the June state payment to schools will not be made because of the lack of cooperation between the Governor of Missouri and the General Assembly," stated SCR-I Superintendent LeRoy Huff.

The Department of Elementary and Secondary Education released the dollar figures for all schools, including the $200,000 figure for SCR-I.

"That represents 14 percent of our state budgeted monies for our current fiscal year," stated Huff. "A loss of this magnitude cannot help but have extreme adverse consequences for our children."

Huff added that state funding reductions of this degree will leave schools with only two opportunities:

1. Reduction or elimination of programs, or

2. Provide additional local tax monies to cover the state shortfall.

"Never in the history of my 39 years in public education have schools been in more financial jeopardy than they are today," Huff said. "Now is the time for each citizen of our great state to personally contact the Governor, their state senator and representative to let them know that it will be unacceptable for these parties not to work collectively to solve this problem."

Scotland County R-I would not be the only area district hit hard by the possible cuts. The proposal would take away $972, 574 from Hannibal, and $793,758 from Kirksville, two of the region's larger schools. Clark County, Knox County, Putnam County and Schuyler County would all lose between two and three hundred thousand dollars.

What makes the proposed loses even more difficult to handle is the fact the money was already budgeted for the fiscal year 2002-2003, which is nearly 75 percent completed.

The Scotland County R-I District could sustain the financial hit because of positive balances established by the district but Huff noted that several other districts may not be as fortunate.

"We are very fortunate that the board and administration of this district have worked diligently to maintain a positive financial situation through effective planning," Huff said. "However I am absolutely convinced that these proposed cuts will financially break some schools in the state that have not maintained the necessary reserves."

Missouri is not the only state to use tobacco securitization as a weapon against budget shortfalls. Twelve other states have used this approach and five, including Missouri, are considering this new method. California issued $3 billion in bonds backed by the state earlier this year, but because of the uncertainty of the tobacco money, the state had to offer interest rates of 7.5 percent or greater to entice investors.

The Governor's office has stated that securitization would allow the state access to the immediate portion of the tobacco settlement money for use to address the state's budget shortfall. The sale of $350 million in bonds is proposed to offset the budget crisis.

Even if the plan is approved education leaders are still concerned about future budget issues.

"This crisis in which we find ourselves only threatens to worsen for fiscal year 2003-2004 unless the state's commitment to elementary and secondary education is honored by the members of the general Assembly and Governor Holden," Huff stated. "The education of our children is much too important a priority to be allowed to become a political football played with by members of the General Assembly and the governor's office, each for their own political advantage."

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