BORROWING NOT UNUSUAL FOR SCHOOLS, SAYS DESE OFFICIAL

Officials with the Department of Elementary and Secondary Education said a move by Cape Girardeau schools administrators last week to obtain credit was not unusual or fiscally irresponsible.

For the first time in its history, the Cape Girardeau Board of Education obtained a revenue anticipation note, or RAN, from NationsBank worth up to $1.2 million to cover district expenditures.

The note acts as a loan to guarantee that all checks written by the district will be honored during the specified time period.

The prime interest rate for the note is about 8 percent, said Dr. Dan Tallent, superintendent of schools. That will amount to just over $2,000 interest each month. The district anticipates borrowing the money for about two months.

The district has about $1 million in cash reserves. That isn't enough to cover payroll and other checks that will be written in November and December. When reserves dip below $300,000, the district plans to borrow the money to pay bills.

Tallent doesn't expect the district will use the entire $1.2 million line of credit.

Vic Slaughter of the DESE school finances office said the district's decision to obtain a note until it can receive local tax proceeds in January is a fairly routine occurrence among hold-harmless school districts. The hold-harmless classification means the districts rely on local tax money for the bulk of their funding rather than monthly supplements received from the state, he said.

The districts are basically borrowing money they expect to receive later in the fiscal year, he said. The money is borrowed for a specific fund and must be repaid within 12 months using money from the same fiscal year from which it was borrowed.

"It's perfectly legal by law and absolutely indicates no wrongdoing on their part," Slaughter said. "In districts where they are dependent almost solely on property taxes -- which most people don't pay until the end of December because that's when they're due -- they may have a perfectly logical need for taking out a RAN note. "

Slaughter said districts most often need notes during fall semester when they typically experience heavier expenses. He said state officials don't even monitor the notes in most cases, except when a district seeks to obtain a note in February or March, when expenses should be covered by the local revenues.