Phillipsburg School District takes out $2.7 million loan to cover delayed state aid payments

PHILLIPSBURG | The school district must borrow $2.7 million to stay afloat financially after the state's announcement last week of a delay in June's school aid payments.

The board of education approved a loan from Team Capital Bank during a special meeting Tuesday night. The money is needed for salaries and other day-to-day operations.

School Business Administrator William Bauer said the New Jersey Department of Education will be responsible for paying back the entirety of the loan, including 4 percent interest.

"There is no cost for us to do this," he said.

The delay is a direct consequence of the ongoing budget crisis in Trenton, Bauer said.

The remaining state aid owed to the district for the 2008-09 school year is about $3.9 million.

"What we're looking for, essentially, is one and half of the two payments we need to get through the month," he said.

Bauer anticipates state reimbursement by early July.

Superintendent Mark B. Miller applauded Bauer for his speed in handling the sudden and restrictive financial orders handed down by the state in recent months.

"Mr. Bauer is very good for the Phillipsburg School District by taking the pressure off the administration and keeping us all well-informed," Miller said.

Unfortunately, Bauer said, there does not seem to be any relief in sight regarding state school funding woes.

Among the items on the state's chopping block is a reduction in debt service aid to districts, according to the New Jersey School Boards Association.

The loss of debt service aid, which helps districts pay off construction bonds, could be problematic, Miller said.

Bauer said if those funds are cut off, the district might need to appeal to Phillipsburg Town Council for a property reassessment to make up for the lost dollars, Bauer said.

Bauer said he expects more financial squeezes this year.

"I wouldn't be surprised if some other form of money that's due to us is delayed or withheld in September," Bauer said.