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Chronic budget shortfalls: a look at the last-ditch solutions some Minnesota school districts are relying on

At least 59 districts in Minnesota are grappling with budget shortfalls for the upcoming school year.

Rockford Area Schools Superintendent Paul Durand pointing to the 60 acres of land his district is selling to the City of Corcoran to avoid deep cuts to staff and programming for the upcoming school year.
MinnPost photo by Erin Hinrichs

Looking out toward the eastern edge of the Rockford Area Schools district, Superintendent Paul Durand sees the potential for a bump in his student population as new housing developments continue to bring more young families to Corcoran.

But those future students, along with the state and federal funding that they’d bring to the district with them, won’t come soon enough to save an idyllic plot of land next to the Corcoran City Park that the district has owned for nearly 40 years.

“That was where our future elementary school was to be built,” Duran said, pointing out across the land during a recent visit.

Apart from a large gravel parking lot and some baseball fields, the sprawling 60-acre plot is covered by grass and patches of trees. When the sale finalizes on June 1, it’ll belong to the City of Corcoran, which recently agreed to buy it for $1,430,000 to serve as a potential site for recreational facilities.

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The revenue generated by this sale comes with legal constraints on how it can be spent. But it’ll suffice to stop some of the bleeding from the district’s general fund — enough to stave off 15 staff cuts, for the time being.

In anticipation of yet another projected budget shortfall, Durand says the board had approved a $900,000 cut list if the referendum that was on the ballot this past fall failed. When it ended up failing, however, Durand says he felt pressure after hearing impassioned testimony from students to propose “a side option” to the school board: liquidating district assets.

Without the support of a local voter-approved operating levy, cuts in the district have become the norm. And despite a brief reprieve — thanks to the last-ditch land sale — Durand says they could soon find themselves in a similar position.

In the face of inadequate state and federal funding to cover the rising costs of things like building maintenance and utilities, and mandated special education and English language learner services, districts across the state are increasingly on the hook for coming up with creative solutions to stretch dollars further. In many districts, finances are strained even further by declining enrollment, teacher pay increases and the inability to pass a local operating levy.

According to survey data collected by the Association of Metropolitan School Districts and the Minnesota Rural Education Association, at least 59 districts are grappling with budget shortfalls for the upcoming school year.

State lawmakers are currently debating a number of possible school funding increases, including new school-safety dollars and Gov. Mark Dayton’s one-time emergency school aid proposal to increase per-pupil funding by 2 percent. Republican legislators have been pushing back on his proposal, placing the onus on districts to make the numbers work without a one-time safety net.

Talks of pending high-stakes cuts, along with the urgent need for increased school funding, will carry through from the end of session straight into this fall, when a number of districts will be asking voters to help fill gaps in state and federal funding by supporting a local referendum.

“You’d like to be able to talk about new programs or initiatives you’ll be able to implement if the referendum is successful. Having to say we really need this just to keep our head above water — which is, unfortunately, oftentimes true —  it’s harder to motivate parents and people to get out and vote for the referendum,” said Scott Croonquist, executive director of the Association of Metropolitan School Districts, adding that in some cases the referendum ask is built around new programming, but “if the Legislature doesn’t follow through with increased funding, then boards have to make adjustments the following years.”

To get a better read on the current state of school funding shortfalls, here’s a look at how a number of districts that have struggled to win voter support in recent years have already begun resorting to unconventional measures just to maintain services.

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Charitable donations, shorter weeks

Durand has been lobbying at the state Capitol for a number of fixes to address chronic state funding shortfalls. But it’s the local referendum that he’s most focused on right now, because voters have shot down the levy multiple times. And now he has to convince them that district finances are more dire than they may appear.

“We’re our own worst enemies by finding solutions that are not sustainable year after year after year,” he said, likening the land sale to having “that one rabbit you pulled out of your hat, but there’s not another one up your sleeve.”

Despite poor community-wide support for a referendum, Duran says the district is supported by a number of philanthropic donations. For instance, the Hanover Athletic Association made a donation to fund all middle school sports, which were on the district’s cut list.

A growing reliance on donations, however, makes it incredibly difficult for districts to plan for the upcoming school year and beyond.

“You can’t run K-12 education on a bake sale,” Durand said. “You have to have support from your public.”

On May 14, his district will be bringing in an outside facilitator to run a community conversation to gauge interest in going out for a referendum again this fall. If community members make it clear that there’s still no support for it, then Durand says the board may forgo a final attempt. In that scenario, they’d seriously consider some more extreme alternatives: consolidate with a neighboring district to save on administration costs, shrink the size of the district from three to two buildings by relocating all middle schoolers into the elementary and high school buildings, or move to a four-day school week to save on transportation and utility costs.

In vetting that last option, Durand says he’s been in close contact with Deborah Henton, superintendent of North Branch Area Public Schools. She oversaw the transition to a four-day school week in 2010, when her board approved the move as a last-ditch cost-saving measure.

“The reason we went to the four-day week is because of the lack of funding and the inability to pass an operating referendum up here,” Henton said. “So we were cutting annually and it was getting more and more difficult to limit class sizes.”

Initially, they were able to save teacher positions, thanks to savings on transportation costs, along with lower heating, lighting and water bills and fewer substitute teacher expenses since staff now had a weekday to take care of appointments.

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When Dayton gave districts the ability to approve up to $724 per-pupil dollars in taxpayer-generated school revenue without having to go to the community for approval, Henton says they chose to go that route. In doing so, in 2014, they made good on their promise to the community to go back to a five-day school week.

But they still struggle with the amount they’ve locked in on. Planning for the upcoming school year, the district just cut another $1.6 million from its spending, Henton said. That includes losing 21.5 staff positions. This comes on the back of cuts that she’s had to make nine of her 11 years leading the district.

“It’s a challenge to tell the story, but to not scare people away from your district,” she said, noting losing students hurts districts financially because they take state and federal funding along with them. “But you might not lose them all just in third grade — you lose them all across the system. So it’s not like you can cut just one staff member. It affects the whole district.”

Creative bus purchases, positions left unfilled

Henton’s equivalent in the Ogilvie Public Schools district, Superintendent Kathy Belsheim, has been overseeing a four-day school week for the past nine school years. Here too, financial shortfalls  triggered the move to an alternative calendar. But Belsheim says her parents are largely satisfied with the new schedule, so there’s no pressure to return to a five-day week. Even if there were, she adds, the district couldn’t afford it.

“If we were to decide to go back to a five-day week, it would put a $100,000 to $150,000 strain on our budget,” she said, noting the district runs on an annual budget of about $6 million to serve a roughly 500 students.

The district is located about 30 miles south of Mille Lacs Lake. And it’s facing many of the common budget pinching culprits like a growing gap between state funding and growing operating costs due to inflation, along with special-education costs that are underfunded by the the state and federal governments.

Located in a lower socioeconomic area, the district opted to take out a capital loan in 2009 and vowed not to ask taxpayers for anything more until it’s paid off. That last payment from the district will happen in February 2019, Belsheim said, with taxpayers still contributing toward that payment for the next two years.

“Because of that, we do not have an operating referendum in place,” she said.

Left without this option, she says her board has asked her to make cuts upwards of $250,000 over the last three years. Initially, she was able to ward off staff cuts by simply not filling vacancies left by retirees. And last year she squeezed out a final chunk of cost-savings by replacing a building maintenance and grounds supervisor position with a new shared position to serve the entire district. Looking into the upcoming school year, however, she’ll still have to cut three educational-assistant positions.

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She’s just grateful that her community banded together to help the district overcome an unexpected financial hurdle that could have made matter much worse. At the start of the 2016-2017 school year, a driver rear-ended one of their school buses. That driver didn’t survive. None of the students sustained major injuries, she said, but the impact was severe enough that it totaled the bus.

Because the bus was old, the district was only able to recoup about $2,500 in insurance, she said. And it ended up being an $83,000 purchase to replace the bus. To help cover the emergency purchase, they put it on a five-year lease payment plan and asked the community to help fundraise $17,000 to make their first payment.

With support from parent groups, the local Lions Club and other community members — including a $1,000 donation from their student council — they hit their goal. Then they factored future payments into the school budget.

“If we don’t have those large-ticket items already built into our budget, we have to find a way to make payments or purchases,” Belsheim said. “There was no way we could have predicted an accident that was so severe that the bus was totaled.”

In the Triton Public Schools district, Superintendent Brett Joyce says leadership opted to postpone a new bus purchase last year in order to help balance the district’s budget. But the district ended up needing two new buses for this school year, so they resorted to making lease payments until they can own them both outright.

While the district was able to absorb this major expense without having to fundraise in the way Belsheim did, it’s still putting an added strain on district finances. The $750 per-pupil operating levy it sought in 2017 failed by just 24 votes, placing the district in a position of having to make cuts again for the upcoming school year. Thanks to six retirements, Joyce says he can count on some cost savings by hiring “cheaper, less experienced staff,” but he still had to eliminate one teacher position and three educational-assistant positions.  

Recounting over $600,000 board-approved cuts in recent years, Joyce says he’s exhausted creative cost-saving measures that don’t put educators out of a job. He’s chosen not to hire new coaches or teachers for a number of positions that have become vacant in recent years — including the middle-school play adviser who prepared students for the high school’s strong drama program — reduced a number of administrative positions, and found a way to share costs of an English language teacher with a neighboring district. He’s also discouraged staff from making supply purchases “unless they really need it.” In addition to cuts, Joyce points out he can’t remember the last time his district has increased a line item in its budget.

“Honestly, the next time we have to cut, it’s staff,” he said. “Now it’s teachers and bigger class sizes and a lack of programming. That’s the only thing it can be now. I think we’ve done the best job we could to keep it away from kids.”