Minnesota banks could benefit from a government shutdown
If the Minnesota Legislature doesn't resolve the state budget by July 1, a government shutdown wouldn't be bad news for everyone.
At least one union is asking bank CEOs to cut a deal with the school districts.
In order to stay open, school districts without enough reserve funds to pay employees could be forced to turn to lending institutions for help, meaning Minnesota banks stand to benefit financially through interest and fees.
This symptom of a potential shutdown has at least one union fuming.
"It's bullshit - excuse my language - to say we can't afford to invest in our schools, but we can afford to pay interest to banks," says Leif Grina, representative for SEIU Local 248.
Last week, Carol Nieters, executive director of Local 248, sent a letter to the CEOs of U.S. Bank and Well's Fargo, asking that the banks cut a deal with school districts in the event of a shutdown.
"We believe it is appropriate to ask the financial community in our state to accept its share of responsibility for the budget impasse and to step up to help as it was helped," writes Nieters. "...We respectfully request that if a shut down occurs then school districts in Minnesota will be guaranteed interest free financing until the budget impasse is resolved."
Grina says the union hasn't heard a response from the letter.
If districts do turn to banks, there are restrictions on how schools can borrow, says Patty Heminover, vice president of Spingsted, a public-sector financial advisory firm.
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"School districts don't have the authority to walk into a bank and say 'I want to borrow $50,000 and I'll pay it back within a year from now'," says Heminover.
The districts could establish lines of credit with the banks based on expenditures from the year prior, which would have to be repaid within 45 days, she says.
In terms of how much districts would pay in interest rates and fees, it varies from bank to bank, says Heminover. "But overall, I think banks are being really supportive in trying to keep the costs down for school districts, because they too know the predicament they're in."