Waddle said sources at the state Legislature told him Arizona will issue IOUs to school districts instead of funding a quarterly payment due in April from the Arizona Department of Education. A payment due for the second quarter might not be funded as well, he said.

“The state has stopped paying us,” Waddle said. “So instead of giving staff IOUs, we’re borrowing money.”

The district’s financial statements for the last three years are under review by Chase Bank, which will decide whether the line of credit can be increased, he said.

“This is a terrible time to be trying to borrow money,” board member Andy Groseta said, expressing concern the district’s outstanding debt obligations could hinder future borrowing.

“It’s a dilemma, but we’re not the only school in this position,” Superintendent Tim Foist responded. “We’ve done so much better at managing our money than so many other schools around the state.”

Despite budget cuts of nearly 30 percent during the last two years, the district has managed to maintain important programs like music and physical education, which are currently being eliminated in other districts, Foist told the board.

“Will the state reimburse us for the interest we’ll have to pay?” board member Jim Ledbetter asked.

That is unlikely, Waddle responded.

A spokeswoman for the Arizona Treasurer’s Office said the state Legislature is debating whether to push those payments into the next fiscal year, an accounting maneuver it used to cover payments due to state schools in fiscal year 2008-09 using funds allocated in 2009-10.

Under that scenario, the Legislature would fund the payments due for the first half of 2010 in September. MUHSD would pay down the county line of credit when those funds are received, Waddle said.

Foist said the scenario could be much worse if voters fail to approve Proposition 100, which calls for a 1 cent increase in the state sales tax.

Greg Ruland can be reached at 634-8551 or e-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it