I was asked about the board meeting in special session on wednesday for the annual approval of our short term borrowing in the amount not to exceed $2.3 million. There is nothing remarkable about this, we do it every year- this borrowing simply allows the district to keep up with the difference in the timing of payments received from the state and what we pay out, monthly payroll for example.
It does however get right to the financial crisis facing this nation. This is money that comes from the money markets - short term interbank lending that is the grease for the wheels of the american economy. If that market dries up banks might not be able to find funds to loan out for these short term borrowing needs. If that happens companies won't be able to make payroll and won't be able to buy inventory - things can grind to a halt.
We've heard about the mortgage default crisis, but as far as I can see that was only the trigger for the real problem. Those bad mortgage assets make everyone reluctant to loan money- you can't judge the net worth of the borrower who might be holding bad assets.
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Not quite on this same topic, but budget related. Madison is setting up some program/fund to keep more money in their district. Some districts have to give back money to the state if they are a "wealthy" district.
Are we one of these "wealthy" districts, and if so, do we have a similar fund in Monona Grove?
Good question. This issue is that whenever Madison passes a referendum to cover operating expenses that is above the state revenue cap limit then the state reduces the aid payment by a percentage of that amount. The result is that Madison only nets about 70 cents for any amount its revenue exceeds the cap. By shifting certain moneys and expenses into a different fund they can mitigate that effect.
I don't think we are in the same situation, but I will check.
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