This week I’m passing along an article published late last week by Michael Beyea Reagan and Jason T. Wozniak, two friends and comrades who do great work on municipal debt. It lays out a key important feature of the school finance landscape today, taking a national and local view of budget deficits and the bond market. When every dollar counts, and most school districts are running deficits, an absurd amount of money goes to Wall Street. I helped to a small degree with some research that went into it, and the piece came out really well. Below are the first few paragraphs.

***

Emergency Loans Are Costing US Schools Millions — and Lining Wall Street Pockets

States’ political failures are causing a massive transfer of wealth from classrooms to the richest banks in the nation.

By 

Michael Beyea Reagan & Jason Wozniak,Truthout

n school districts from Pennsylvania to Illinois, Kentucky to West Virginia, state and local budget delays are putting the pinch on classrooms and costing districts tens of millions of dollars in additional borrowing fees — money going straight to Wall Street.

In effect, political failures like budget delays, faulty tax software programs, or just political impasses are forcing some of the poorest school districts to borrow money unnecessarily. It is a massive transfer of wealth out of our local classrooms directly to the richest banks and individuals in the nation.

The Problem Is Nationwide

In June, the Whitman-Hanson School District south of Boston had to issue $6 million in emergency loans to bridge a summer cash flow shortage. In May in Fayette County, Kentucky, that number was $110 million to bridge their shortfall. In Union Local School District in Belmont, Ohio, schools needed $2.6 million in emergency financing earlier this year. And in Cook County, home to Chicago’s public schools, districts across the county had to borrow tens of millions of dollars because the county had trouble collecting and distributing its property taxes.

In Cook County, the Palatine School District, for example, had to borrow $25 million to make up for the cash flow shortfall. That borrowing cost them $450,000 in interest and fees for Wall Street, and another estimated $700,000 in lost investments. That’s money that could have been spent in the classroom.

“We’ve done everything by the book,” said Mary Gorr, the superintendent for Mount Prospect School District, and we are “being forced to waste this significant amount of money on interest and emergency borrowing.” She told the Chicago Tribune, “[it] feels deeply unfair to our taxpayers and incredibly irresponsible of the county.”