District administrators shared a budget proposal on March 5 that will use $55 million from its rainy day fund, $47 million in budget cuts and $13 million in “vacancy savings,” from positions it assumes will go unfilled next year, to close a $115 million budget gap next year.
The district is not planning to pull from its unassigned general fund balance, which school board policy requires to stay between 8-13% of its general fund expenses. Maintaining the assigned fund balance allows the district to maintain its credit rating, and reduce the cost of borrowing money in the bond market.
The district is using its assigned general fund balance, which can function as a rainy day fund, to “build a bridge” until the district implements a “school transformation” plan that will right-size its facilities to match its enrollment. It is also hoping to pass a $20 million increase in its technology levy this fall, which will bring additional funding in the 2025-26 school year.
“While a combination of increased costs, which outpaced revenue growth, and the loss of the federal COVID extra funding are the main causes of MPS’s [budget] gap next year, the story behind the story is that we remain a district that is stretched too thin, making it challenging to balance the budget that provides our students and schools with the resources they need,” SuperintendentLisa Sayles-Adams told the finance committee on March 5.
Sayles-Adams said the proposed budget includes the cost of its current offers to its unions, including the contract with the district’s teachers. If collective bargaining agreements are settled for higher costs than those currently proposed, the district will need to redo the budget to make additional cuts, which it did in 2022 after the three-week strike by the Minneapolis Federation of Teachers.
The finance committee audience was significantly larger than the handful of public and the media that typically attend. The superintendent’s full cabinet was also at the meeting, compared to the three to five finance department staff members who usually attend.
Given the scale of the budget cuts, the mood in the room was heavy, which school board Director Joyner Emerick acknowledged, saying “This is not the budget any of us want to be interacting with at this point in time. And so I just want to acknowledge the collective grief.”
On March 19, the finance committee will meet again to focus on the budgets for the administrative departments.
The 2024-25 District Budget
The district is proposing a total operating budget of $739 million for the 2024-25 school year, down from the current year operating budget of $755 million. The operating budget includes the district’s general fund, which pays for classroom teachers, support staff, administration, transportation, and all the other expenses typically associated with running a school district. Food service and community education, which operate with separate funding sources and regulations, are also included in the operating budget.
The proposed budget includes additional State funding, expected to total $42 million next year, plus an additional $10 million in revenue the district expects from a slight uptick in enrollment because of an increase in students who are new to the United States. Those increases are not enough to offset the district's climbing costs and the loss of over $95 million in federal pandemic aid that was used to balance the current budget.
The district’s non-operating budget is made up of its capital expenses–primarily building construction, remodeling and maintenance, and debt service, which is the interest it pays to its bondholders. The district issues bonds to pay for capital projects and facilities maintenance. Non-operating budgets cannot, by law, be used to cover operating expenses.
The district anticipates spending $128 million on capital projects and $99 million on debt service next school year. The operating and non-operating budgets will total $977 million, $2 million less than the district budgeted for in the current fiscal year.
Areas of Increased and Continuing Investments
The district is increasing its spending in several areas aligned with its strategic plan. It will add additional support for English Learner students, many of whom are new to the United States. And it’s making additional investments in literacy as part of the READ Act passed by the State legislature last spring.
The district is maintaining funding for the part-time media specialist positions it added to every school last year and will continue to fund Emergency Management Safety and Security positions. The district will also continue its comprehensive support for students who do not have stable housing. The district is reducing the intervention triad program started this school year, but is maintaining some of the positions.
Areas of Reductions and Eliminations at Schools
Nearly two-thirds of the cuts to school budgets comes from the elimination of the 400 intervention triad positions. These positions were allocated to schools last year with $29 million of one-time federal pandemic aid that had to be used by the district to address “learning loss.” The remainder of the cuts total about $15 million.
Title I schools will receive some intervention triad positions next year, but the details of which schools and how much support have not yet been shared with the public. The school board’s committee of the whole meeting on March 26 should include additional information on next school year’s intervention triad program.
The intervention triad positions had been allocated based on students' needs, with most of the positions allocated to schools that serve a larger proportion of students who are experiencing poverty. The cuts to the positions are also greatest at these same schools. Per student, magnet schools and schools in the pathway for Henry High School will have the largest cuts to their budgets next year, losing nearly $4,000 dollars per student, on average.
As Minneapolis Schools Voices reported on March 4, the district is planning significant reductions in some areas of school budgets. Those reductions include:
- Scaling back the district-wide intervention triads to focus support at Title I schools
- 50% reduction of district funding for AVID, a middle and high school program that prepares students for college
- Elimination of the 5th grade instrumental music program, which was added as part of the Comprehensive District Design
- Elimination of funding for the halftime instructional coaches, called TOSAs, for elementary teachers in literacy and math
- Elimination of eight High 5 classrooms for preschool students
- Elimination of funding for world language teachers at elementary and middle schools as part of the International Baccalaureate program
- Elimination of school-based positions to support magnet schools, while maintaining some staffing to support magnet schools at the central office
- Elimination of funding for assistant principals at some elementary schools
- Elimination of additional funding to schools where enrollment is less than 250 students, previously called the small schools subsidy
- Increasing class sizes in schools with less than 70% of students who qualify for free and reduced price meal under federal guidelines
- Increasing class sizes in some of its high poverty schools that had previously received funding to further lower class sizes
Next Year’s Reliance on the Assigned Fund Balance is a One-Time Trick
Since 2020, the district has increased its general fund balance by 35%. According to Diop, the increase was purposeful, and a way to shift some of the pandemic aid into its fund balance to ease the impact of the ending of that funding.
“To get ready for that [the end of pandemic aid] we built cash balances in the assigned fund balance,” Diop told the finance committee.
Schools will receive about $1100 per student in funding from the assigned balance. In total, $30 million of the assigned fund balance is being directed to school budgets next year. The district does not typically utilize its fund balance as part of its school allocations.
The assigned fund balance is one-time money. The district will not be able to rely on these funds in future years, and will need to make additional budget reductions without an increase in funding.
“This is kind of using those fund balances to provide a runway to get through fiscal year ‘25 to get us to fiscal year ‘26 when there can be cost savings realized from transformation activities,” Director of Budget and Planning Thom Roethke said. But because the use of the fund balance is a one-time bridge, the changes have to be made in time for the fiscal year ‘26 budget.”
The transformation activities Roethke refers to are the “school transformation” plans that the school board has not reviewed or approved yet, but which are likely to include closing and consolidating schools.
Roethke explained that part of the general fund balance the district will use comes from its class size referendum, which is paid by local property tax payers. The district can only use those funds to pay for classroom teachers. When classroom positions are vacant, the district cannot reallocate the budgeted referendum funds for another purpose, and they accumulate in the fund balance.
There is also $5 million of the assigned general fund balance set aside to purchase new curriculum and textbooks, and additional fund balance from the operating capital fund balance.
“The use of these funds will completely or nearly completely exhaust the fund balances from which they come. So this is a one year bridge,” Roethke said.
Rising Costs are Outpacing Rising Funding
Despite a significant increase in funding from the State last spring, the district’s costs continue to rise faster than its funding. Roethke said the proposed budget assumes the cost of salaries and benefits will increase next year by 2-5%. He also said that costs for transportation services and special education are also increasing.
Although the State legislature closed part of the gap in district funding for special education, it still has $30 million per year in special education costs that are not covered by State or Federal funding, according to Roethke. Instead, the district must use its general education funding from the State that is intended for all students to cover its special education costs. The district uses more than $1000 per year per student to cover the unfunded special education services it provides. This is commonly referred to as the “cross-subsidy.”
The district also has a “cross-subsidy” for English Learner services that it provides. The State legislature increased some of the funding for English Learner students, but continues to limit funding to districts, like Minneapolis, where more than 11.5% of students receive English Learner services. The last year for which an estimate of the English Learner cross-subsidy is available is the 2020-21 school year. The district had significantly fewer English Learner students, but spent $17 million more on English Learner services than the funding provided by the State and federal government.
The district administration requires principals to finalize their school budgets by March 15. The finance committee will meet again on March 19 to hear additional information about the administrative department budgets. There will be an additional finance committee meeting on April 30. The school board is currently scheduled to vote on a final budget on June 18. By State law, the school board must pass a balanced budget by June 30.
Finance committee meetings are not live-streamed or recorded but the public may attend in-person at the John. B. Davis Center, 1250 W Broadway Ave.
