The Finance Committee of the Minneapolis Public Schools Board of Education received an executive summary of the district’s annual pro forma, a projection of the district’s finances, on Tuesday.

The Finance Committee includes committee chair Abdul Abdi, school board chair Sharon El-Amin, school board members Kim Ellison and Joyner Emerick, Interim Superintendent Rochelle Cox and Senior Officer of Finance and Operations Ibrahima Diop, who were all present at the committee’s monthly meeting on Tuesday evening. Committee and school board member Ira Jourdain was absent.

The memo, written by the district’s Office of Budget and Planning, characterized the district’s finances as “not materially different” from last year, despite the passage of a “historic school aid package” from the State Legislature this spring. The memo goes on to conclude that “unless changes are made to its structure and footprint, MPS faces a financial crisis.”

Consistent with last year’s projections, the district expects to deplete its general fund balance and enter statutory operating debt by the end of the 2025-26 school year. Under Minnesota statute, statutory operating debt occurs when districts must borrow more than 2.5% of their operating expenses from the State to fund their operations. Districts then must submit a plan showing how they will balance their budget to the State in order to continue to receive State aid.

In May 2024, the finance department will include a strategic operation plan proposal with its annual budget. The pro forma memo describes this plan as “identifying what an appropriate school district might look like and planning a course of action to that goal.”

The memo says that although the district must act with “urgency,” current reserves will allow the district to “continue operating as-is” for the remainder of this school year and the next.

After a strategic operating plan has been developed, the memo says the district can begin to “take inventory of its capital assets,” namely its facilities, and develop a capital plan that will supplement the strategic operating plan.

Although the memo does not reference the term “school transformation,” the process it lays out to plan for a financially sustainable district is consistent with the way board members have previously described the term.

The memo does not explicitly call for closing or consolidating schools. However, the November 2022 pro forma made the case that the district has too many small schools, and its ratio of students to licensed educators is significantly lower than comparable districts in Minnesota. Together, this makes the district more expensive to operate. The district’s physical and operational footprint is designed to accommodate approximately 40,000 students. Enrollment peaked most recently in the 2015-16 school year, with just under 36,000 students.

In recent remarks, Interim Superintendent Rochelle Cox said that any proposal to change the number of school sites would need to be approved by the October before it is implemented. Cox reiterated that timeline to the committee, saying that by October 2024 the board would need to approve a plan so that the district had time to make adjustments to the enrollment process, budget and staffing for the 2025-26 school year, which corresponds to fiscal year 2026. One potential complication to that timeline is the November 2024 election for four of the five board seats. Any vote to close or consolidate buildings could become a liability for candidates.

“I don’t think that there’s any need to panic. We’re going to be ok,” Executive Director of Budget and Planning, Thom Roethke, told the committee on Tuesday.

Roethke said the district’s general fund balance, which has increased by around $40 million since fiscal year 2020, provides a “runway” for the district to make changes over the next two years to get to a sustainable financial operation.

MPS Finance Committee meetings are not live streamed. The finance department will present a full pro forma to the board at an upcoming board meeting. The board meets for its monthly working meeting on October 24 at 6 p.m. at Davis Center. Committee of the Whole meetings do not include public comments or voting by the board.