The city’s school district is looking to borrow $23.5 million to cover expenses for the remainder of the academic year because of delay in receiving state aid payments.
School board members approved an application to borrow the funds from TD Bank at a 4.5 percent interest rate.
Borrowing measure states the district lacks the cash flow to cover expenses because of delay in the June state school aid payments.
“This is to cover bills and payroll through June until the state allocation comes in,” said school board president Kenneth Simmons.
Delay in the June state aid payment occurs just about every year. Typically, districts have cash flow on hand to cover their expenses.
School district officials have complained about cash flow problems over the past years.
Over the past 15 years, districts have received guidance on short-term borrowing to cover expenses. 20-30 districts take advantage of it each year, said Michael Yaple, a spokesman for the New Jersey Department of Education.
“It’s paid right away. As soon as that money comes in it is paid,” said Simmons.
A state memo sent to local school officials says the districts will get its final payment of the year latest by July 13.
The state will cover the interest incurred by the district.
The borrowing has to be approved by the Passaic County superintendent of schools. The county superintendent reviews the interest costs to ensure the district is getting the “most competitive market rate.” Interest rate that exceeds a competitive market rate may not be approved, says the state memo sent to local district officials.
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