In the final meeting for five of the nine Minneapolis Public Schools board members on December 13, the board approved numerous financial proposals and a new start time of 8:30 a.m. for all high schools. The synched start time will help make Career and Technical Education programs accessible to all high school students.

At the meeting, the board approved the maximum tax levy amount of $248 million, amended the current district budget to cover the increased costs in food services and transportation, and approved the district’s legislative agenda. The district's external auditors, Bergen KDV, presented their annual audit report to the board. 

The board also heard from Budget Director Thom Roethke about the district’s financial forecast with declining enrollment and a lack of State aid. 

The district will exhaust its budget reserves in 2025 when pandemic relief funds end

At Tuesday night’s meeting, the school board heard a finance department presentation outlining the financial crisis the district faces. 

The district’s pro forma, a financial projection of continuing current district operations into the future, forecasts the district will deplete its financial reserves, called the unassigned general fund balance, in 2025. When the reserves drop below 2.5% of general fund revenues, the district will enter statutory operating debt under Minnesota state law. The information was previously presented to the board’s finance committee on November 29.

The district has forecasted a gap between its costs and revenue since at least 2019, when the pro forma projected financial reserves would be depleted by 2022. Because of the influx of pandemic relief funds, the district has been able to use around $70 million per year of those funds to cover the gap between its revenues and expenses for the past two years, putting off any changes to district operations, like closing schools, which would reduce district costs. 

When pandemic relief funds are exhausted in 2025, the district faces a projected budget deficit of nearly $110 million that year. For comparison, the district expects $539 million in revenue in2025, making the deficit about 20% of its total annual revenue. The deficit is a result of declining revenue mixed with increasing district costs. The deficit will exist even with  an assumed increase in State aid with the new Democrat-controlled legislature.   

“Eventually the bottom will fall out,” said Budget Director Thom Roethke.

Director Jenny Arneson emphasized the importance of the pro forma “so that we can all start in the same place and be clear about our facts.” She added that in the past the board has made intentional choices about the budget, including cuts to district administration last year.

Interim Superintendent Cox emphasized that facing the fiscal crisis will take a combination of state support, changes within the district, and cooperation of all district stakeholders.

Interim Superintendent Rochelle Cox explained at the meeting that continuing the status quo “is not an option.” She added, “The pro forma is not a prediction of what’s inevitable. It shows us that we need to change course accordingly. That’s exactly what we will do together.”

Cox laid out a vision for moving forward, calling for the district to “more closely align how we spend money with the values in our strategic plan.” Those goals include academic achievement, student wellbeing, effective staff, and school and district climate.

District enrollment is expected to continue to fall, while State education funding has not kept up with inflation, and does not cover the full cost of special education and English learner services that the district provides.  

The district has lost nearly 6,000 students in the past four years, with about 1,100 of those students remaining in Minneapolis but choosing to go to charter schools or other districts. Despite some students choosing to leave the district, Roethke said the general decline in enrollment is consistent with other data showing that both the number of children under the age of 6, and those age 6-15, have declined in Minneapolis. 

“We don’t have any reason to believe the demographic changes in the city will change,” Roethke said.

Basic student funding from the State has not kept up with inflation. According to Roethke, Minneapolis’s aid would have been $26 million more this year if State funding had increased at the same rate as inflation. 

“This won’t, and can’t, fix things on its own, but it’s a critical piece,” Cox said. “This legislative session offers hope that at long last our state leaders will deliver on what is owed to our public schools.”

Cox explained that the state underfunds mandated special education and English learner services that MPS provides by nearly $70 million per year.

Enrollment gains alone would not be enough to avert exhausting budget reserves.

At the meeting, Roethke explained that the district would need enrollment to increase to 40,000 students in order to maintain its budget reserves.  

The district currently has about 29,000 students, and  enrollment is projected to fall to 23,000 students by 2028.

Acknowledging that the district is partnering with educators’ unions in a door-knocking campaign to increase enrollment, Cox was careful to note that the district cannot overcome its current financial crisis through enrollment increases alone. She explained the district must reduce the number of buildings it operates to fit the decreasing number of school-age children who live in Minneapolis. This demographic trend is expected to continue.

Director Sharon El-Amin echoed comments from Cox, saying, “How do things align with our strategic plan? What are we ready and willing to do differently? If the [enrollment] numbers do increase, we will still have this deficit. The picture is clear for me that we have some decisions that need to be made.”

“There’s no scenario we can continue to operate with seventy school sites with dwindling population. That’s going to entail closing schools. We’ve tap danced around this issue long enough,” said Director Ira Jourdain. He added, “The state’s not going to bail us out.” 

Compared to other large Minnesota school districts, the Minneapolis Public Schools district has smaller buildings with fewer students per teacher.

The district has a notably low student-to-staff ratio. According to the Minnesota Department of Education, the ratio of students to licensed staff at Minneapolis Public Schools is 9.6 students to 1 staff. Statewide, the average is 12.5 students to 1 staff and at St. Paul Public Schools the ratio is 11.3 students to 1 staff.

Roethke said that other large districts have higher student to staff ratios because they operate school buildings that are, on average, twice as large as MPS schools. For example, MPS elementary schools average 317 students per building. In Rosemount-Apple Valley, elementary schools average 657 students. The same is true for middle and high school buildings.MPS buildings average 867 students, but at Anoka-Hennepin middle and high schools, they average nearly 2,000 students.

Director Nelson Inz challenged the comparison to other districts, saying MPS has lower ratios because it provides services, particularly for special education students, that other districts don’t.

Cox called on local leaders to improve access to affordable housing and improve public safety to make Minneapolis a more attractive place for families with children to live.

“All of these steps must be done in partnership with students, families, staff, and community members, or none of them will work,” Cox said of the changes the district must make.

The board will meet again January 3, 2023 where the newly elected board members will take their seats on the dais at 5 p.m. Following an oath of office ceremony, the board will have its annual organizational meeting to determine roles for board members, including electing a new chair. The next regular business meeting will be January 10 at 5:30 pm. At regular business meetings there is time for public comments, and the board can vote on resolutions.