At the end of a productive conversation between board members and district finance leadership about school budgets for next year, Minneapolis Public Schools Board of Education Chair Sharon El-Amin, on behalf of the board, asked Interim Superintendent Rochelle Cox to begin preparing a plan for “school transformation.” School transformation is a phrase board members have used in recent meetings to denote the closure of school buildings, and reassignment of students, educators and staff to different school locations.

“The time is now to have that conversation around the transformation and what that will look like,” El-Amin said. 

She added that the board would like the necessary information to begin the process of making a plan before the June 13 board meeting to vote on a budget for the 2023-24 school year. She noted the importance of developing a community engagement plan and making any decisions that might impact enrollment choices before the February 2024 choice card deadline.

As El-Amin spoke, Cox appeared to take notes. When El-Amin finished speaking, Cox responded, saying, “Thank you Chair El-Amin. My team and I will take that back and get working on it right away.”

The district has been hinting at the need to reduce the number of school buildings it operates since at least 2017 as part of its annual financial projections, called a pro forma. Using phrases that are the finance equivalent of shouting “iceberg,” the district has warned about a growing gap between expenses and revenues, “increasing deficits,” “unsustainable fiscal structure,” and risk of statutory operating debt.

The district’s most recent pro forma, prepared by Senior Finance Officer Ibraihima Diop, again called the district’s fiscal situation “unsustainable” and predicted “an unprecedented financial crisis in the 2024-2025 school year.” The district operates on a non-calendar fiscal year. The 2024-25 school year corresponds to fiscal year 2025 for the district. The current school year is fiscal year 2023.

The most recent pro forma explains how the district has been using its one-time federal COVID grants to fill in its budget deficits. When those funds are exhausted, the district forecasts a budget deficit of $108 million, which would deplete district reserves and lead to the closest thing Minnesota school districts have to bankruptcy, called statutory operating debt.

Diop explained in the November 2022 pro forma memo that compared to other large, metropolitan school districts in Minnesota, Minneapolis Public Schools operates significantly more school buildings with fewer students per building. In addition, the district is staffed to have a much lower student to teacher ratio than other districts in Minnesota, including St. Paul Public Schools, which serves a similar composition of students. Combined, these structures mean the district has significantly higher costs per student than other districts.

On top of its high cost structure, Minneapolis Public Schools is significantly underfunded by the State of Minnesota. The district projects that, without changes by the State, next year it will spend $78.6 million –about 12% of the district’s operating expenses– on special education and English Learner services that are not covered by State funding. 

Senior Finance Officer Diop and Budget Director Thom Roethke presented an overview of school budgets to the board.

School budget allocations for next school year were the focus of the Minneapolis Public Schools Board of Education Committee of the Whole meeting. Cox described the school budget allocations as the result of a “systematic and formulaic process” that is based on projected enrollment, and in a way that meets State and Federal requirements for the different types of funding the district receives. “That funding is equitably distributed to schools based on student population needs. And, there is a base minimum of funding to run an MPS school, known as predictable staffing,” Cox explained.

Multiple board members complimented Diop and Budget Director Thom Roethke on the clear presentation of school budget data. 

“I feel like we were heard. The information that was given here tonight definitely aligns with what we as a board have been asking for. More numbers, more clarity, more understanding of where the dollars have been going,” El-Amin said.

Director Lori Norvell commented on the presentation, saying, “Deep down, my math teacher core is loving this.”

As discussed in previous board meetings, the district is adding a halftime licensed library media specialist next year to each school building, at a cost of approximately $4.1 million. The district is also spending its one-time COVID pandemic funds designated for “learning loss” on intervention triads at each school. These intervention positions will cost approximately $29 million. Although these positions have been added this year, the Board would have to pass a resolution to make those additions a permanent part of the district's baseline staffing model for each school.

Student Representative Halimah Abdullah asked if the administration has any concerns about the budget for next year. Cox said, “The one worry I have, when we did the intervention triads, I’m worried about staffing them.” Because the funding has been allocated to schools, Cox said the district will be transparent next year if the positions remain unfilled, and the district “needs to pivot” to a different use of those funds. She called the choice to add the intervention triads “an assertive, almost aggressive move” by the district.

As it is currently written, neither the budgets for schools nor district administrative departments currently rely on any increases in State funding. Under current bills in the House and Senate, Minneapolis Public Schools is likely to receive around $30 million in new funding in fiscal year 2024. The exact amount remains uncertain. It is also not clear what the cost of other policy changes by the State will be for the district. Current bills in the House in the Senate could increase district costs for paid due process time for staff who complete paperwork for students who receive special education services, unemployment insurance premium increases to cover summer unemployment for non-salaried district employees, premiums for a new paid family and medical leave program, and the costs of covering jobs for district employees who utilize paid leave.

“We know there are things we would like to do that we weren’t able to do,” Cox said of the budget. She said the administration is currently compiling a list of additional projects to fund, based on the priority-based budgeting process, so the district will be prepared to make adjustments when it knows what additional State funding may bring to the district. Director Abdul Abdi asked for this list to be shared with the board when it is completed.

Norvell and Director Collin Beachy asked about the potential to extend a Memorandum of Agreement between the district and the Minneapolis Federation of Teacher ESP chapter that expires at the end of this year. That provision added five hours per week of paid time this year for any ESP who elected to have it.

“Where did that money come from in the previous budget?” Norvell asked. She also asked where funding to extend that provision could come from this year, and if it is possible to add that without reopening the budget tie-out process.

Cox responded that Senior Human Resources Officer Candra Bennett is gathering data on how many ESPs will not have access to those five hours next year, based on the current budgets schools have submitted. She did not anticipate having to reopen budget tie-out if that change is made. She also noted that the Associate Educator positions that are part of the intervention triads will all be funded at forty hours per week. Roethke said that in the current school year, the additional hours were being paid for with general fund revenue.

Beachy asked when the district will know how much money it will receive from the State, and when can the board “make proposals to spend that new money.”

Diop explained that the district utilizes accrual accounting, but it must have a credible commitment in order to recognize new revenue. He said the district will eventually receive communication from the State about how much funding the district will receive for next year, and the board can take actions after that. By law, the Legislature must complete its work by May 22 unless the Governor calls for a special session.