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Minnesota school funding: What just happened?

When Gov. Dayton proposed $138 million in one-time “emergency” funding, Republicans responded with mostly flexibility instead of the new funds he wanted. He vetoed.

Gov. Mark Dayton speaking to students at Bruce Vento Elementary School on Thursday, May 17.
MinnPost photo by Peter Callaghan

Until he experienced a travel delay out of Washington, D.C., Tuesday evening, Gov. Mark Dayton had planned to pay a visit to Dilworth Elementary School Wednesday afternoon.

This rural Minnesota school belongs to the Dilworth-Glyndon-Felton Public Schools district, located near Fargo, North Dakota. The district is grappling with a $500,000 budget deficit for the upcoming school year, and it’s not alone in its budget woes.

At least 59 districts across the state are facing budget deficits that will translate into effects like teacher and staff layoffs, drawing down district reserves, deferring building maintenance and making program reductions — the things Dayton had said he wanted to help prevent when he proposed $138 million in one-time “emergency” school funding earlier this month.

The bulk of the school funding provisions that made it to Dayton’s desk by the end of this legislative session, however, looked very different from what he had asked his Republican counterparts for. And when faced with the choice — approve the bills and allow schools greater flexibility in how they use mostly existing school funding, or veto them — he chose the latter, calling the $225 million in school funding included in the Republican tax bill “a sham.”

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“It’s not new money,” he said at a press conference Wednesday morning, where he announced his two latest vetoes. “It’s robbing from one pot and putting it in another.”

Dayton has made it clear that he does not intend to call for a special session. So where does that leave districts that were hoping for some additional school funding to come through?

Superintendent Bryan Thygeson says they’re already working on a budget reduction plan that includes things like reducing their teacher force and administration team, and putting off building maintenance projects. While still absorbing the news of Dayton’s vetoes — which were announced the day he’d planned to host Dayton at his elementary school — Thygeson is still holding out hope that this isn’t the final word.

“My hope would be that they’re able to work out something — whether that means they have to call a special session, compromise and reverse course on that. Do what’s necessary to get a bill through,” Thygeson said. “I hope that they can find middle ground. I understand why he vetoed it. I guess I would hope that he’s doing that with a plan. His visit, I’m sure, was to talk about what he was hoping to accomplish.”

According to estimates compiled by the House research department, had Dayton signed both bills, Thygeson’s district would have received nearly $141,000 in one-time aid and a safe-schools increase for the fiscal year 2019. 

“School districts will now get $0 thanks to the Governor’s veto,” wrote Andrew Wagner, deputy director of public affairs for the Minnesota House Republican Caucus, in a statement accompanying the school-by-school estimates, which didn’t include additional school safety funding in the bonding bill that’s still awaiting Dayton’s approval. 

The $138 million ask, and the GOP response

It became clear that K-12 education funding was the lynchpin that, if not up to Dayton’s standards, could undo all else when the governor paid a visit to St. Paul Public Schools’ Bruce Vento Elementary earlier this month. There, he invited students to count down and shout “Veto” as he applied the red stamp to the initial GOP tax conformity bill — a move he’d threatened if Republicans didn’t bring forward a proposal for emergency school aid.

He then embarked on a tour to build support for his ask of $138 million in one-time emergency funding for all districts.

A supporter of the governor’s wish to tap into the state’s budget surplus to infuse all districts with new dollars, Rep. Julie Sandstede, DFL-Hibbing, says that they anticipated that many more districts would be facing budget shortfalls than the 59 identified by the two associations representing metropolitan and rural districts. They just might not know it yet, she explained, because they can’t always predict their special education costs, which are based on enrollment predictions that can fluctuate. And for districts that already had a balanced budget, the freshman legislator who’s also a music teacher says there’s “never a lack of [ideas for] how we can use the money in a purposeful and meaningful way.”

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Looking to pass their tax conformity bill, Republican lawmakers responded to Dayton’s demands by making some changes to their tax bill and folding in their alternative school aid proposal: $50 million in one-time school aid payments of $57.73 per pupil, along with greater flexibility around how districts are allowed to use their staff development and community education reserves.

It was a compromise largely stripped of the urgency that Dayton had been infusing in his talks of the need for increased school funding.

“Fifty-nine are having difficulty balancing their budgets. So it’s not all of them. It’s a small subset of them,” said Rep. Jenifer Loon, R-Eden Prairie, chair of the House education finance committee, in a phone interview early Wednesday morning.

The $50 million would have essentially come from uncollected money that the DNR owes districts. The DNR collects public access fees on school trust lands, explained Loon. But it hasn’t been sharing all of those new revenue streams with districts, as is supposed to be the case.

“We calculated that easily $50 million is owed in a back payment to the school districts, to the beneficiaries,” she said in a phone interview Wednesday morning, before Dayton’s vetoes. The rest of the $225 million, she explained, would have come from freeing up restrictions on how districts can use their staff development and community education funds.

Loon says that inspiration for the community education fund provision came from Rep. Jim Davnie, a DFL-er representing the Minneapolis Public Schools district, which is facing the largest budget shortfall in the state. Just last week, he introduced two bills that would allow districts to transfer funds from their community education fund to their general fund. One was specific to Minneapolis — seeking to allow the district to pull $2 million from its community education fund to cover budget shortfalls to be used “only for school support services, including mental health services. The other would apply to all districts to be used however they saw fit, pending approval by the state’s education commissioner. The Minneapolis-spedific bill had sponsorship from four other Minneapolis DFL-ers: Reps. Jean Wagenius, Fue Lee, Raymond Dehn and Ilhan Omar. 

Sandstede has called any measures to lift restrictions on how staff development and community education dollars are spent “shortsighted,” noting that many districts have already made arrangements with their local teachers unions to tap into the 2 percent that they’re mandated to set aside for staff development.

Now that Dayton has vetoed what his office had labeled a “fake plan to address school deficits,” schools will largely have to make do with what they already have.

Reached by phone for comment Wednesday afternoon, Joe Gothard, superintendent of the St. Paul Public Schools district, said he views Dayton as a “champion for schools” but was “very disappointed” in how things turned out.

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“I really thought there was an opportunity to collaborate here. For St. Paul Public Schools, it means that we are going to enact a $17.2 million budget reduction. I knew that any funding that would have come out of a bill that was signed would not have made up for that entire deficit,” he said, adding he “thought that this year would give us just a little time, a little bit of money, to restore some services and supports that our students and schools need.”

Supt. Joe Gothard speaking to students at Bruce Vento Elementary School
MinnPost photo by Peter Callaghan
Supt. Joe Gothard speaking to students at Bruce Vento Elementary School prior to Dayton’s veto of the tax measure on May 17.

What about school-safety aid?

In the wake of the Florida school shooting that left 17 dead in February, lawmakers began talking about the need to pull together a safe-schools package. But on Wednesday, Dayton vetoed the massive supplemental budget bill (nearly 1,000 pages), which contained $25 million in funding for things like school building security enhancements and additional mental health professionals in schools.

When asked what he was most disappointed about at the press conference Wednesday morning, Dayton singled out the inability of state leaders to work out a deal on funding for school safety. He then placed the blame squarely on his Republican colleagues, for trying to use the school safety package as a bartering chip. “I implored them to send me a school safety bill as a separate bill,” he said.

In a press conference later that afternoon, Senate Majority Leader Paul Gazelka pushed back on that narrative and made a plea to salvage what little bit of school safety money is still awaiting approval.  

“Safe and secure schools — we all talked about the importance of that. Large funding in two of those bills — gone,” he said. “I hope [Dayton] passes the bonding bill because that has another $25 million for safe schools. I hope he at least passes that.”

The $25 million included in the bonding bill would be distributed to schools via grants —  up to $500,000 per school district, with the total evenly split between metro and rural districts. Schools could use these funds to cover the costs of new or enhanced facility improvements for safety.

A big blow to special-education funding

Despite pleas from education advocates and administrators, Republican lawmakers did not put any new state dollars toward closing the special-education funding gap — the ever-widening gulf between what the state and federal governments contribute and what districts actually pay to cover the services their special-education students require.

And with Dayton’s veto of the supplemental omnibus bill, a significant portion of noncontroversial state special-education funding got wiped out as well. It’s a nonpartisan figure included in the state’s budget forecast that indicates how much special-education costs have increased because of increases in this student population, along with any increases in the cost of associated services.

This is a loss that Fred Nolan, executive director of the Minnesota Rural Education Association, says is “probably more significant than anything else,” because it’s such a large chunk of money that districts had been counting on for the upcoming school years.

In a press conference Wednesday afternoon, House Speaker Kurt Daudt drew attention to this particular loss for schools: “If you look through his list of objections — and it was a very small list; we removed the most objectionable items — there was nothing in that list where you would say, ‘Am I willing to live with a $90 million cut to special education in the K-12 schools? Am I willing to live with that because this is so objectionable?’ No.”

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At this point, it’s looking like the biggest — and perhaps only win — for those lobbying for more K-12 education funding may come in the form of fixes to the state’s pension plan for public employees, which includes teachers. If Dayton signs the state pension bill, Nolan says that’ll fix some longstanding issues that’ll help attract and retain new teachers.

“The Teacher Retirement Association was on track to have a balance of 50 percent funding, which is very dangerous. This fix for TRA sends it back to over 90 percent within three years,” Nolan said, adding that for teachers “that’s a major part of the calculation of staying in the field, going into the field — because you know you’re not going to get wealthy, but if your future is assured then you can do the work you want to do.”