Schools districts are feeling the pinch of the global economic meltdown

In "Cities can’t avoid global credit crunch", Samantha Marcus discusses the effect of the current economic crisis on school districts in Wisconsin.

School districts routinely sell short-term bonds to smooth out the peaks and valleys of cash flow to meet payroll and other bills as they await state aid.

Cities and schools will sell long-term notes for facilities and infrastructure, and they borrow long term to spread the cost over a full generation of users.

Municipal bond sales are like loans, but instead local governments borrow money from investors on the open market.

As a result of the budget crunch, cities are not getting bids and sales are being postponed until the market improves or until the market is more liquid.

The hardest hit has fallen on the short-term credit market and school districts have historically relied on short-term borrowing to pay their monthly expenses until they receive their state aid.

Once money is flowing again and banks are willing to lend money to one another, the municipal bond market should be the first to rebound.