State lawmakers expected strong growth during May and June, the last two months of the fiscal year, and adopted spending plans accordingly. Unfortunately, the growth didn't materialize, and the state was hit by an $81 million shortfall in revenues.
"We're not really in the hole," State Comptroller Richard Eckstrom assured. "The state has safeguards in place to keep from overspending."
Nonetheless, the shortfall put a kink in what Eckstrom called a "robust spending plan" approved by the Legislature. The shortfall will prevent the state from putting $50 million into a trust fund for retired state employees' future health benefits, which has been under-funded for years.
It also means government agencies won't receive $15.8 million for small projects that were included in supplemental appropriations approved by lawmakers. Of that $15.8 million, the state Department of Education was supposed to have received $10 million to supplement school district funding.
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Despite reassurances from Eckstrom and other state officials, this is a disturbing scenario. Thanks to the decision by lawmakers last year to remove school operating costs from homeowners' property taxes, school funding must rely entirely on the state sales tax. And any downturn in projected state sales tax revenues will jeopardize funding for school operations.
These changes haven't kicked in yet, but even so, school districts won't be getting $10 million previously budgeted for them. It was supplemental, but it still is money the districts won't get.
The $81 million shortfall illustrates the often fickle nature of state revenues. The impact on education of budget shortfalls in the past was softened by the fact that school districts also could rely on revenues from property taxes.
Schools now find themselves perched on what amounts to a one-legged fiscal stool. We hope this shortfall is not a harbinger of hard times ahead for education.
The surprise $81 million shortfall will mean less money for supplemental spending.