On May 16, the finance committee of the Minneapolis Public Schools board of education met for a brief meeting that included an update on the district’s March 2023 financial statements and the district’s insurance coverage for the upcoming fiscal year. The district is on track to meet the board’s policy requirement to maintain a minimum unassigned fund balance for this fiscal year. Michael Cowell, Risk Manager for the district, said the district’s insurance premiums will increase from 14-40% per policy next year because of a combination of claims the district has made this year and market conditions.
In a closed meeting later in the evening, the full board received an update about an offer or counter-offer related to the Gordon, Tuttle and Willard buildings. These buildings were designated as “surplus property” by the board last spring, and were put up for sale. There was no additional public update on this topic.
March 2023 Financial Statements
Each month, the district prepares an unaudited financial statement to communicate with the board and the public the state of district finances. At the end of the third quarter, the financial statements show the district’s general fund has received 58.9% of expected revenue for the year, but has spent 65% of its general fund budget. Joe Olson, the district’s controller, explained that this is expected because the district receives revenue unevenly during the fiscal year. In the next two months he expects the district will receive over $100 million in property tax revenue payments from Hennepin County. The district uses its fund balance to smooth its cash flow in months when expenses exceed revenue.
Pandemic Relief Aid Update
The monthly financial statements now include a page on the district’s pandemic relief aid based on a request from Director Joyner Emerick. The district received three sets of federal pandemic relief, called ESSER funds. ESSER stands for Elementary and Secondary Schools Emergency Relief.
As of the end of March, the district had spent 40% of the $249 million in ESSER funds from the federal government, as shown in Table 1. About half of the funds were spent on staffing in the form of salaries, benefits and extended time. A quarter of the funds have been spent on purchased services. The remaining quarter of expenditures have been spent across the categories of supplies, other and equipment. Details were not shared about what specifically the district has purchased beyond these broad categories. Previous updates have detailed district purchases of air filters, cleaning supplies, technology for students and curriculum supplies used during distance learning.
In the proposed budget for next school year, the district anticipates spending over $90 million of the remaining ESSER funds to cover operating expenses. In addition, the district will use all of the remaining “learning loss” portion of the ESSER funds- around $20 million- on the intervention triad staffing.
Table 1: Pandemic Relief Funds, Expenditures as of March 2023
At the September 14, 2021 regular business meeting, then board chair Kim Ellison, said of the ESSERIII funding, “I think it’s an opportunity for us to show education is underfunded, and when we have the money we can do it right.”
The district has not publicly presented any data showing the impact of any of the specific ESSER fund expenditures on student outcomes.
Food Service Fund Deficit
The food service fund continues to run a deficit. As of March 31, the fund balance was -$5.5 million, slightly less than the $5.6 million deficit at the end of February. The district began the fiscal year with $1.3 million in the food service fund, meaning three quarters of the way through the fiscal year, the food service fund has spent $6.8 million more than it has collected in revenue.
Olson said part of the deficit is due to a delay in receiving reimbursements from the Minnesota Department of Education for meals served. The district currently has sixty days to submit claims for reimbursement, and then it takes additional time for Department of Education to pay the district.
The district anticipates ending this fiscal year with a deficit in the food service fund. That deficit will be covered by ESSERIII pandemic relief aid from the general fund this fiscal year.
Next year, the district is budgeting for a deficit in the food service fund of $4.3 million that will be covered by the general fund. The new State universal free meals law is not expected to reduce the food service fund deficit. At the May 9 board meeting, Thom Roethke, Budget Director, told the board the deficit is because of the scale of the district’s food service operations, which currently includes operating sixty-nine kitchens.
By statute, the district is not allowed to end the fiscal year with a deficit in the food service fund. It must use general funds to cover any deficit in the food service fund.
District Insurance Program Update
The district anticipates that its insurance premiums for fiscal year 2024, which begins July 1, will increase significantly. These insurance policies are not for employee benefits. Rather, the policies include those for property, casualty and cybersecurity. Part of the increase in premiums is due to the claims filed by the district. Although Cowell did not share specifics, board members alluded to the “encryption event” in February, and Cowell also noted the district had made multiple claims related to water damage to district buildings from burst pipes.
Cowell characterized the insurance markets as “hard,” meaning that insurance companies are able to set prices and districts have little flexibility to negotiate. The district switched insurance brokers this past year in hopes of finding lower premiums.
In addition to the liability, property and cybersecurity policies the district has had in previous years, the district is adding a new policy next year to cover “active assailant” claims. The policy would provide the district with up to $1 million in yearly coverage. It includes services such as grief counseling, as well as additional legal costs for the district, and covers any incident within one mile of district property.
On May 15, the Davis Center was damaged by bullets, according to Board Chair Sharon El-Amin, shattering a window in the building cafe while staff ate lunch. This is the latest of several public safety incidents impacting district students and staff in recent years. Last fall, a district employee was assaulted in the parking lot of the Davis Center, prompting the district to undertake additional security measures at some of its buildings. In February 2022, North High School student Deshaun Hill was murdered walking home from school. And, the same day, a bus driver for Las Estrellas elementary dual immersion school– then named Sheridan– was also shot while driving students home from school.
The finance committee meetings are not streamed or recorded for the public. Minneapolis Schools Voices remains committed to covering these meetings as part of our reporting because of the importance of district finances. The board will meet on Tuesday, May 23 for a committee of the whole meeting. The topic for that meeting has not been announced. Committee of the whole meetings are primarily for information-gathering and discussion by the board, and do not include public comments or voting.