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Budget upheaval at Minneapolis Public Schools: What’s going on?

On April 10 the board directed staff to reallocate $6.4 million to secondary schools, at a time when the district is facing a projected $33 million deficit. Now some want the directive  reversed.

Washburn High School ended up restoring a large portion of its budget.
MinnPost photo by Erin Hinrichs

The Minneapolis Public Schools board hasn’t even had an opportunity to review the complete budget proposal that its financial team, with help from Superintendent Ed Graff, meticulously prepared using public input over the last six months. But board members have already taken action on the budget in a pretty dramatic fashion.

At the last regular board meeting, held on April 10, the board directed district staff to restore $6.4 million to middle and high schools. The resolution, presented by Board Member Rebecca Gagnon and supported by four others — Bob Walser, Siad Ali, Kerry Jo Felder and Ira Jourdain — passed in response to testimony from parents and students who were upset about the deep cuts made to their schools’ budgets for the upcoming school year.

But not all board members, or community members, felt the reallocation was warranted. The district is facing a projected $33 million budget deficit for the upcoming school year — a reality that meant all schools were going to feel the impacts through measures like staff layoffs and cuts to programming.

While Gagnon and her supporters quickly hailed the reallocation a win for all middle and high schools — since the reallocation restores $469 per pupil to 16 secondary schools — critics say it reinforces some longstanding inequities between schools within the district.

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Over a third of the $6.4 million was restored to schools in District 6 — the whitest, most affluent subset of schools in the district. For instance, Washburn High School, represented by the the parents who first approached Gagnon with the resolution, ended up restoring a large portion of its budget. And Southwest High School actually saw a slight budget increase.

Representatives from other schools in the district are already asking the board to reverse its decision.

“Our expectation of you as board members is that you work for what is best for the district as a whole. And that when you talk about equity, you actually make tough votes to support it,” wrote the Edison Activity Council in a letter to the board posted to the group’s Facebook page on April 19. “You have disappointed us and hurt our students, our school, our feeder schools and the district as a whole to benefit the special interests of a few.”

At the board finance committee meeting scheduled for Thursday, board members will get their first formal look at the entire budget — including the second round of budget reductions that must be made to the central office, since the resolution specifies that this $6.4 million reallocation cannot impact school budgets or further deplete the district’s fund balance.

Here’s a closer look at how the district wound up with such a large deficit, along with what transpired at the last board meeting and why it matters.

How did the district accumulate a $33 million deficit in the first place?

The district hired Ibrahima Diop to serve as its new chief financial officer a couple of years ago. With more than 20 years of experience in public school management, one of the very first things he did was comb through all of the department’s budgets to track down unjustified expenditures. Offering a small example, he said that once he realized Davis Center staff were using district money to fund their coffee pot supplies he told them to start paying for it on their own.

Of course unregulated coffee funds didn’t run the district into a projected $33 million deficit. That’s a product of not spending within its means. As expenses continued to rise — because of things like underfunded state and federal mandated special education and English language learner services, along with rising utility and transportation costs that have long outpaced state education funding — and enrollment began to drop, the district failed to rein in its spending.

“Our revenue is predicated on our enrollment level. And there was a time when the school district had a much higher enrollment number than we have now,” Diop said. “As enrollment started decreasing, our spending habit did not necessarily follow that trend. It was maintained, or in some cases, actually higher.”

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Last year, the deficit was sitting at about $16.5 million, he said. That ballooned into the projected $33 million the district is now grappling with for the upcoming school year. This new figure includes the pay raise negotiated in the new two-year teacher contract, which will cost the district $2.4 million.  

What steps had the district already taken to change its financial trajectory?

In October, the district announced it was facing a projected $33 million for the 2018-19 school year. That was followed by a public survey, designed to gather community input on budget priorities prior to any pending cuts. The following month, the district announced hiring and travel restrictions that went into effect immediately.

In December, the district published a pro forma budget and Graff recommended cutting the last two days of school. The next month, the board voted to place two referendum questions on the November 2018 ballot, totaling $30 million.

In February, the district hosted four community budget discussions to continue vetting cost-saving measures, while also meeting with each of the district’s Parent Advisory Councils, according to district records. Toward the end of the month, the district notified principals of their school budgets, giving them a little over a month to finalize them.

Once parents fully grasped the severity of the pending staff cuts  — an estimated 350 to 400 full-time equivalent jobs — they began showing up at board meetings to protest.

Why did secondary schools become the focus of budgetary discord?

Diop and his team had succeeded in coming up with a structurally balanced budget for the upcoming school year. But these school budget allocations reflected two specific changes that impacted secondary schools most.

First, district staff had decided to cut $6.4 million in time adjustment funding that it had set aside to subsidize its secondary schools just a couple years prior. Initially, some schools had come to the board asking for additional funds in order to expand course offerings by moving from a six-period to a seven-period day. The expansion, they said, was necessary in order for students to meet the curricular requirements of the International Baccalaureate program these schools were offering. In the name of fairness, the district ended up allocating an additional per-pupil amount to all secondary schools.

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Ibrahima Diop
MinnPost photo by Erin Hinrichs
Ibrahima Diop: “As enrollment started decreasing, our spending habit did not necessarily follow that trend. It was maintained, or in some cases, actually higher.”

Second, the district raised the qualifying poverty threshold for Title I funds from 35 percent to 40 percent, in an effort to better target these federal dollars at schools serving higher concentrations of poor students.

“Some districts only give Title I when you reach 50 percent,” Diop said. “We did that to try and address concentrations of poverty at schools, which left only two schools that would be between 35 and 39 percent: Washburn and Southwest.”

While each of these schools still serves a relatively high number of students living in poverty, they also have far more affluent students in their buildings — a mix that brings their poverty levels down below 40 percent. In comparison, nine other secondary schools in the district have a poverty level over 60 percent.

Why have Washburn parents, in particular, galvanized around this issue?

In late February, with their school allocations in hand, principals began consulting with parents, teachers and community members to finalize their budgets. A this point, the realities of impending staff cuts and increased class sizes moved from being an abstract concept to a reality that was about to impact beloved teachers.

Washburn parents were the first to organize and protest the cuts. They felt “doubly impacted”  because not only did it feel like the $6.4 million was “overnight completely wiped out,” but the district had also narrowly disqualified Washburn from receiving Title I funding, says Jeanne Massey, co-chair of the school’s site council.

“It’s like ‘Gee, do you want to just write Washburn off and get rid of it? Or what, exactly, is going on here? ‘Cause you just gutted the school  at a time of growth — and that growth is happening across kids of all income spectrums, let’s be clear,’” Massey said in a phone interview.

The district ended up partially restoring their Title I funding, after it became clear that the Trump administration would not be making some cuts to federal education funding that it had proposed earlier. Dissatisfied, Washburn parents still went straight to the school board demanding more. They first approached Gagnon, who agreed to carry their resolution to restore $6.4 million — framing it as a “bridge budget” that would hold things steady until new referendum dollars became available next year.

“We assume it will pass,” Massey said of the upcoming referendum. “By putting these cuts forward, [Graff] was actually putting that at risk. Because the scale of this meant you’d hurt that many schools and they would turn around and say, ‘Well how do we benefit from this referendum at this point?’ ”

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“The referendum was absolutely a consideration,” Gagnon said in a recent phone interview, adding she had opposed cutting this line item from the district’s budget from the get-go because “it completely reduces electives and opportunities for students.”

When Gagnon first presented the resolution to restore all $6.4 million in time-allocation funding at a board meeting in March — to the surprise of many of her colleagues — Washburn parents, along with parents and students from other schools who had similar concerns, showed up to testify in support.

At the April 10 board meeting, where the board narrowly voted to approve the resolution, directors Jenny Arneson and Kim Ellison strongly opposed it.

“I voted against it because I think, despite best intentions to shield schools from budget realities, this resolution now creates a budget that’s centered around an inequitable premise that could perpetuate racial disparities in our city,” Arneson said in a recent phone interview.

Ellison said that while the bulk of the emails she’d received had come from Washburn parents, she’d heard from other secondary school parents who were equally concerned about cuts at their schools, yet ended up not benefiting as much from the reallocation.  

“Even that money doesn’t make their schools whole,” she said, adding the board sidestepped all its talk about “the values of our district as a whole and equity.”

“We said that the voices of the parents we heard from was more important than the values we had set as a board. That’s on us.”

Others aimed more criticism at the Washburn parents.

“The combination of unearned power and insufferable privilege is just so strong in the parent community of Southwest Minneapolis. It’s been a longstanding problem going back decades. It’s hard to achieve equity if you don’t have people in other parts of the city standing up for themselves,” said Chris Stewart, a former board member, noting many working-class and parents of color don’t have the same level of political capital.  

All right, so the board voted (5-4) to reallocate $6.4 million in school-level funding. But where will this money come from?

Since Gagnon offered an amendment to her original resolution, specifying that the $6.4 million reallocation could not impact school budgets or further draw from the district’s reserves, the cuts were effectively deflected back to district headquarters, where departments had already been slashed to accommodate a 10 percent cut last year.

Ellison, among others, expressed concern that this additional round of cuts would jeopardize programs and services housed at the Davis Center that disproportionately impact students of color and other traditionally underserved students populations — things like the Office of Black Male Student Achievement and the districts Grow Your Own program, which supports staff of color in acquiring teacher licensure.

Friday afternoon, the district released its recommendation for where the $6.4 million in cuts would come from at the Davis Center. It includes the elimination of the expulsion office and the Office of Innovation, and reductions to the Human Resource department’s talent acquisition team. These recommendations were accompanied by a written statement from Graff.

“My team and I continue to stand behind our initial budget recommendations, which we arrived at using an equity lens and that considered the structural changes necessary to create long-term financial and program stability for the entire district,” Graff wrote, noting the delivery of services to schools “may not be as efficient and effective.”

How does all of this impact the district’s financial health?

Arneson, who will be leading a close review of these new cuts at the upcoming finance committee meeting this Thursday, says she doesn’t think staff are going to be able to “speak to the long-term or short-term impacts on the financial health of the district, or the impact it will fully have on our students,” given the tight deadline they had to work under to accommodate Gagnon’s resolution.

Diop says this directive further delayed his ability to address an even more pressing financial concern: an incredibly low fund balance. Over the course of the past seven years, district reserves have decreased from more than $122 million to about $42 million, as the district continued to dip into its emergency funding to fill gaps between increasing expenses that outpaced revenues.

According to board policy, the district should maintain an emergency fund balance of 8 percent, at a minimum. By the end of this school year, that balance will be at 4.15 percent, Diop says. It was his hope that he’d be able to help the district begin to build this number back up next year. But Gagnon’s resolution made it clear that this wasn’t a shared a priority with the board, at least for the time being.

Some have speculated that the district could be at risk of falling into statutory operating debt. But Tom Melcher, director of school finance at the state Department of Education, says things haven’t yet reached a tipping point.

“There is some concern that the fund balance is declining. And eventually the district will need to adjust its expenditures or revenues to level that out,” he said. “But in the short-term, they’re a long ways from being in statutory operating debt, which requires them to have a negative fund balance of 2.5 percent.”

Familiar with board and district politics, Stewart feels the district’s financial situation is much more precarious.

“This district is teetering on the brink of insolvency and structural operating debt and the inability to serve the needs of all its students if it doesn’t get its house in order,” he said. “And the more the superintendent tries to do that, the more he faces these kind of emotional insurgencies that come onto the board and really put the district in jeopardy. Minneapolis is a first-class city. It’s not a poor city. It’s got a school district that could be so much better governed right now.”