Teachers union surprised bank loan not approved
1/7/2004SWANTON - The $1 million loan Swanton Local Schools expected to get last month to meet payroll this winter was never approved, and teachers union officials are angry about being kept in the dark.
The loan application apparently was based on a hope and an if.
If the state auditor would declare the school district in financial emergency, the system hoped to get $1.07 million from the state s seldom-used catastrophic grant fund.
In early December, a month before asking the state auditor to formally examine the financial forecasts, the district tried to borrow $1 million based on an Ohio Department of Education official s advice that if Swanton were placed in financial emergency, it potentially would be eligible for the $1.07-million catastrophic grant.
But the requisite declaration of financial status and any resulting state aid likely would take months. The school board voted Monday to ask the state auditor to formally examine its financial forecasts.
When school Treasurer Jeff Price tried to borrow $1 million from Farmers & Merchants State Bank, using the hoped-for catastrophic grant as an anticipated asset, he ran into problems.
The bank required the anticipated grant to be listed on a certificate of estimated resources and signed by the Fulton County Budget Commission, Mr. Price said. The budget commission refused. “As a matter of law, their request was premature,” said county Prosecutor William Swigart, who is on the budget commission along with the county s auditor and treasurer.
The budget commission had no assurance that the school district would be declared in financial emergency or that it would get a catastrophic grant, Mr. Swigart said.
Mr. Price said he learned of the budget commission s decision from Mr. Swigart on Dec. 12. Though the school board has met twice since then, the issue has never come up in a meeting. School board members were informed by administrators of the budget commission s decision in individual phone calls.
Board President Bill Green said the issue was never discussed publicly because the board has not given up on the loan.
“We had told everybody we had applied for it, and we had confidence we were going to get it,” he said. “To me, it s still a work in progress.”
Meantime, teachers union officers had assumed the loan had been approved and told their members payroll would be met.
“We have been kept in the dark a little bit; not a little bit - a lot,” said Angel Campesino, president of the Swanton Education Association. He said he was shocked to learn from The Blade yesterday that the loan had not been approved.
Whether the district will be able to meet payroll on time this winter is uncertain. Mr. Price said it would depend on the timing of receipts and expenses.
If many district residents pay their real estate taxes early, that would help. Mr. Price plans to get the school district s share of real estate taxes as soon as county officials process the checks if the district runs short.
Kim Floyd, vice president of the teachers union, said she felt school officials had hidden the outcome of the loan application from employees.
“I m worried about possibly being misled, and that makes me more angry than the payroll,” she said.
School district forecasts project a nearly $1.2 million general operating fund deficit at the end of the district s fiscal year June 30.
The school district is asking voters March 2 to approve a five-year, 1.25 percent income tax request - its fourth new operating levy request in one year. Voters defeated levy requests in May, in August, and in November.
Even if the March levy failed and the state rejected the district s request for the catastrophic grant, Mr. Price said the school district would be able to pay back the loan it is seeking.
To pay back such an operating loan without additional funds, however, the school district apparently would make more cuts.
The school board cut 20.2 teaching positions at the end of the first quarter of the school year after several cuts in other departments.