Senators Question If Delayed Loan Repayment Could Hurt Common School Account

Feb 14, 2017

Credit Tennessee Watson

School business managers asked the legislature to remove a six percent interest on funds borrowed temporarily from the common school account. They also asked that schools be allowed to repay those funds in June instead of December. 

The bill narrowly passed the committee of the whole.

Proponents of the bill argued that penalizing schools doesn’t make sense when cash flow issues are caused by payment schedules decided by the state. The bill sailed through the House, but is now being met with scrutiny in the Senate.

Those questioning the bill are concerned that by removing the six percent interest and extending the repayment deadline, school districts might be incentivized to hold on to the money to build investment gains at the local level, and they say that could impact the fund's earning potential.

Cheyenne Senator Affie Ellis expressed gratitude for the thorough review of the bill. “Maybe it warrants further study into whether June 15 is the right date. School districts have to pay this back regardless so maybe moving the date back to December 15 makes some sense.”

Ellis said during the second reading of the bill she would address questions surrounding the fiscal impact of removing the interest and extending the deadline during the bill’s second reading.