SISTERS — The Sisters School Board has decided to use money from a 2005 land sale to cover $1.2 million it owes the state — instead of slashing school programs.

In 2006, the Oregon Department of Education ordered the Sisters district to repay $1.2 million in funds wrongly received by the district between 1999 and 2004 for students attending a Christian school. During that time, the district got extra money when it counted Sonrise Christian School students as part of its home-schooling program. Now, the district plans to send the state about $120,000 per year over 10 years to repay the debt through money from the land sale.

The land sold for about $3.3 million, Sisters School District Business Manager Sandy Tartaglia said. The Oregon Department of Education initially wanted its $1.2 million back in five years, but then agreed to a 10-year plan.

“It’s a shame we have to spend it to pay back ODE,” board member Christine Jones said. “But it’s good we have the resources to do it. … The biggest benefit to paying it back is we will not have to take our scarce general fund dollars away from the current education program.”

In September 2005, the district sold about 30 acres in north Sisters known as the Lundgren Mill to Bend developers for the Three Sisters Business Park, Tartaglia said.

However, the district ended up netting less — roughly $2.56 million — after it used part of the money to repair the roof of Sisters Middle School.

The district has set aside the rest in a rainy-day fund, Superintendent Elaine Drakulich said Wednesday. Right now, the district is not spending any of that money on repairs, nor has it planned improvement projects in the future.

The Oregon Department of Education doles out money to school districts based on how many students they have, and those enrolled as district home-schooled students count in that formula.

The district asked for a 10-year plan because it wanted to divide its payments over a longer period of time, Jones said. The district does not have to pay any interest to the state, but is earning interest on its Lundgren Mill reserve.

“We wanted to have the maximum amount of opportunity to spread out the financial obligation so that we could focus on maintaining our educational programs,” she added.

Board Vice Chairman Glen Lasken said the first payment of about $120,000 will only require dipping into the principal by roughly $35,000. The only other “viable option,” he said, would be dipping into the general fund and cutting into school programs — a move the board sought to avoid.

“That way, we protect the programming,” Lasken said. “We’re not punishing the kids of today.”

The superintendent agreed.

“We’re able to move forward,” Drakulich said. “It’s not paralyzing.”

The district contested the state’s decision, saying in January 2007 in a letter that it should not have to repay about $742,000 of the $1.2 million. However, the Sisters School Board voted in November to stop fighting the department’s decision after spending more than $20,000 in legal fees.

“This was a mistake made a number of years ago, now close to a decade ago,” Drakulich said. “So to punish kids now … was not OK.”