The Minneapolis Public School board of education finance committee met on April 18 to learn about the budgets for administration departments. At the end of the meeting, the committee voted unanimously to move the draft of the 2024 fiscal year budget resolution to the full board for preliminary review at the May 9 board meeting. The draft resolution can be changed before the final vote to reflect any changes to State funding, or it can be amended by board members. By law, the board must pass a balanced budget resolution before June 15. The board is expected to vote to approve the 2023-24 budget at the June 13 board meeting.
Central Office Budgets for 2023-24
Unlike in previous years, there were no formal presentations to the board from department leaders about their budgets. Rather, the district shared the department budget allocation spreadsheet with board members shortly before the meeting.
Senior Officer Ibraihima Diop explained to the board that this is the first budget the district has developed using a process called priority based budgeting. This process was only used for administrative department budgets this year. It was not used for school budgets.
Present at the meeting were Director Abdul Abdi, the chair of the finance committee, and committee members Sharon El-Amin, Joyner Emerick and Kim Ellison. Director Ira Jourdain was absent from the meeting.
Board members were invited to ask questions of the department leaders present at the finance committee meeting about the department budgets. Those leaders included Diop, Senior Academic Officer Aimee Fearing, Executive Director of Strategic Initiatives Sarah Hunter, Senior Officer of Schools Shawn Harris-Berry, Executive Director of Community Engagement Tyrize Cox, Senior Officer of Information Technology Justin Hennes, and Executive Director of Climate and Equity Derek Francis. Interim Superintendent Rochelle Cox was also in attendance at the meeting.
Fearing shared that although the budgeting process involved some challenging conversations, she thinks there is more the district needs to do to let go of programs or practices that it continues out of habit, rather than because they are effective.
“In past years it was kind of just everything rolled over and you just kind of justified it,” Fearing said.
Interim Superintendent Cox said the priority based budget process was challenging, particularly in terms of categorizing whether something is mandatory or essential or aligned with the strategic plan. Because of the challenges ahead, Cox said, “The budget season for next year probably starts the day after the June board meeting.”
She added “Because we are going to have to cut things. We're not going to be able to afford everything, so those are going to be the hard conversations that we're going to need to have.”
Hennes said that the IT department spent time engaging with schools, particularly media center specialists, around how to support one-to-one technology for students. Based on those conversations, his department proposed adding 30 field technicians next year to assist with device checkout at schools. This request was not funded.
February Financial Statements
The board also heard a presentation on the February financial statements, which showed the fund balance has decreased since the beginning of the fiscal year. This is normal. February is typically the low point for the district fund balances.
At the end of February, the district had received revenue equal to 49.1% of its budgeted revenue, but had paid expenses of 56.8% of its budget. When expenses exceed revenue, temporarily, the district uses its reserves in the form of its fund balances, to pay for expenses until additional revenue is received. The district’s expenses are relatively consistent month to month throughout the school year, but its revenue is uneven.
As an example of the unevenness of district revenue, Finance Director Joe Olson explained to the board that the district will receive around $100 million in property tax payments in the months of May through July. This is about half of the property tax revenue the district receives in a year.
Food Service Fund Deficit and the new State universal meals program
The district’s food service fund currently has a negative fund balance of $5.6 million. Olson explained that the negative food service fund balance is partially the result of slow payments from the Minnesota Department of Education reimbursing the district for its expenses for school meals.
The district expects the food service fund to end the year with a deficit, and will transfer funds from the general fund to cover the deficit, as required by regulations. The expected deficit is the result of higher food costs, as well as the higher cost per student of operating food services as enrollment has declined. The district expects the deficit to continue next year, despite the new State universal meals program.
Abdi asked how the new universal meal program will impact district finances if families no longer need to complete paper forms to qualify for free or reduced price meals. In addition to meals, the forms are used for determining federal aid and State compensatory revenue. Compensatory revenue is a form of State aid based on the number of students who qualify for free and reduced price meals.
More district students qualified for free and reduced price meals this school year than the previous school year. Because of this increase in qualifying students, the district expects compensatory revenue to be $45 million next year, $11 million more than this year.
Budget Director Thom Roethke noted that currently around 80% of district students who qualify for free or reduced price lunch do so through direct certification which doesn’t require families to complete forms. Direct certification matches student data with data from other government programs, such as Medicaid or SNAP food assistance, to determine their eligibility.
Earlier in the legislative session Representative Sandra Feist introduced a bill to address the potential loss of compensatory revenue to districts from universal school meals. It is unclear whether that proposal or an alternative will be approved by the Legislature. Without legislation, there is a possibility Minneapolis Public Schools will receive less compensatory revenue if students who don’t qualify through direct certification do not continue to complete the additional paperwork.
Connecting the current financial statements with the fiscal cliff
Emerick connected the discussion about the district’s current financial statements and the looming financial crisis.
“It's hard to bridge these spreadsheets with that quickly approaching financial reality,” Emerick said. “I'm wondering if y'all could help begin to bridge that for me so that I can understand when I'm looking at these numbers in front of us right now and it seems like we're fine. I know the reality that's coming and it's hard for me to bridge that.”
Diop said that the monthly financial reports simply show what revenue is coming into the district and how it is being spent at the present moment.
“The fiscal cliff,” he said, “consists of saying that we've received $173 million in federal dollars. We've been operating with that to cover the overages that we would get by way of inflation and increase cost and other issues. So these federal dollars would be sunsetting by the end of September of 2024, September 30th, 2024. Then what? What would we do? How would we then cover these expenditures that are growing that are increasing? So that's the fiscal cliff.”
Roethke said that the fiscal cliff can also be seen in the financial statements, which show planned expenditures are higher than planned revenue.
“Our expenditures are consistently running ahead of our revenues and so that's how we're approaching that fiscal cliff. We're planning to lose money,” Roethke said.
According to Roethke, the district typically receives $50-60 million in federal funds each year. The current budget includes $151 million in federal funds, which is a combination of COVID-19 relief funds and the usual federal funds. The ESSER funding expires on September 30, 2024. The federal funds will return to the typical range at that point, leaving the district to figure out how to balance its budget.
At the meeting, Executive Director of Strategic Initiatives Sarah Hunter said that despite conversations about the coming fiscal cliff, she feels hopeful about investments that are being made next year.
Unlike meetings of the full board, finance committee meetings are not streamed or recorded for the public by the district. Minneapolis Schools Voices is committed to continuing to cover these meetings because of the importance of district finances.