There has been a lot of discussion about the state budget stalemate and the possibility of a delay in the October state aid payment to schools. Comments were made by some of the presenters at the recent MDE/MSBO Workshop, however there is no resolution to the question as the budget negotiations are still in motion. MSBO learned that the Michigan Department of Education (MDE) generally processes the state aid payment to districts ten days in advance of the payment date, which in this case would be October 10. If there is a budget resolution, appropriation, and finalization by October 10, there may be no issue with the payment of state aid. Time will tell as the budget negotiations continue.
What Should You Do Today?
MSBO’s recommendation is to schedule out your cash flows for the next 60-90 days to determine if the delay of an October 20th state aid payment will adversely impact your ability to process and pay expenditures of your district. Payroll, payables, or other obligations should be taken into consideration. You may find that your district’s cash position is such that you have no potential issue.
If you determine the delay of state aid has an adverse impact on your ability to pay your obligations, contact your legal counsel, financial advisor, or auditor. If you find there is a need to implement a contingency plan, they are the professionals that will assist you in this matter.
Remember that the use of cash reserves to meet obligations of the general fund (example – Bond Funds) is not acceptable. If you have consolidated cash accounts, keep in mind the segregation of the funds in your cash flow analysis.
Contingency plans are not new to our business, and being prepared is the best way to maintain stability in your district.