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Minnesota school-district leaders grapple with new financial uncertainties amid pandemic

The shift to distance learning has prompted districts to invest in technology, prepare and deliver meals to students and incur other COVID-related expenses even as fee-based programs have been canceled.

While educators across Minnesota are focused on finishing out the academic year from home — and on brainstorming ways to honor their graduating students in a safe way — district leaders have another immediate concern to deal with: how to stay afloat  financially. 

The sudden shift to distance learning laid internet and device gaps bare, prompting districts to invest in items such as new Google Chrome books, iPads and mobile hotspots to distribute to students in need. Likewise, they’ve been preparing and delivering free meals to students.

Many districts have also made a commitment to keep as many staff on payroll as possible for the remainder of this school year, even with revenue streams from things like community education programming, early childhood education classes and spring sports — three big fee-based services — shuttered, for the time being. 

Some of these COVID-19-related expenses are being offset by $13 billion in aid for school districts across the nation that’s included in the federal CARES Act. But district leaders in Minnesota say they are hoping for even more aid — at both the state and federal levels — to help them weather financial hardships. 

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Voter-approved referendum asks don’t seem as likely, given the projected economic downturn. And with a projected $2.42 billion state budget deficit, routine increases to the education formula — to help offset inflationary expenses — may not happen this next biennium. 

Kirk Schneidawind
Kirk Schneidawind
These new financial realities have left district leaders scrambling to rework budgets as they close out the current fiscal year, while also bracing for the possibility of even greater financial hardships heading into the upcoming school year. 

“Our districts, where they’re seeing the biggest challenges, is those fee-based programs — the community ed, [Early Childhood Family Education]. And the long-term solution for all of this is going to be really, really challenging,” said Kirk Schneidawind, executive director of the Minnesota School Boards Association. “It highlights how dependent we are on federal and state funding.”

Emergency services not sustainable

From the outset of Minnesota’s response to COVID-19, school leaders have been directed to minimize disruptions to their staff payrolls, and to take on two new critical roles: distributing free meals to all students in need and providing free on-site child care services to essential employees, including health care workers and emergency responders. 

While schools may apply for some reimbursement for school meals distributed, they’re still picking up costs associated with distributing those meals while school buildings are closed to students. And for those who have abided by direction from the state Department of Education to keep all employees on payroll, that also means shifting funds around to temporarily stave off staff cuts – especially in fee-based service areas like child care and community education. 

Superintendent Deb Henton
Superintendent Deb Henton
In North Branch Area Schools, Superintendent Deb Henton says she and her board are looking at transferring money out of their professional development fund “to cover the cost of child care that we’re not recovering from fees.”

Some districts have already moved forward with staff cuts.

“That’s always a possibility,” Henton said of her district. But for the time being, she says they’ll continue to be frugal and to “take advantage of the transfer of funds” that the state has authorized during this time. 

Superintendent David Law, head of Anoka-Hennepin Schools, says unfunded child care and meal expenses — coupled with ongoing payroll commitments to food service and child care staff — have forced his district to draw down these two budget reserves, and dip into other parts of their budget as well. 

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“On its surface, those two are creating a pretty significant hit to our general fund,” he said. 

Budgets are further thrown out of whack by a loss of student fees for springtime sports that would normally help cover coaches’ salaries — another payroll item district leaders have been asked to fulfill. In the state’s largest district, coaches’ salaries total about $1.2 million, he says. In a typical year, they’d offset about $500,000 of that expense with student fees.

Supt. David Law
Anoka-Hennepin School District
Supt. David Law
“In the end, I think we will have drained our general fund millions,” Law said. “I don’t know how much yet. It will be several months into the next year before we truly understand how much we’ve lost.”

In the Mahtomedi Public Schools district, Board Chair Lucy Payne says a large community education fund balance has allowed them to weather the disconnect between payroll demands and the loss of associated service fees. “But we can’t sustain this,” she added. 

She’s concerned about the future of community education programming, especially, because it bridges the school community with the larger community. “When we think about our community education branch of our district, it’s holding our birth through seniors together as a community.”

Tech expenses loom large

Beyond providing essential food and child care services — and keeping staff on payroll — many districts are incurring new tech costs associated with distance learning.

Gary Amoroso
Gary Amoroso
“We have districts that have bought hotspots,” said Gary Amoroso, executive director of the Minnesota Association of School Administrators. “Along with the hotspots, districts have had to buy additional hardware because not all had a 1-to-1 opportunity for every student. And not every student had an available piece of hardware at home.”

Along with these new purchases come routine hardware repair and replacement costs, as well as monthly service bills, he added — all major expenses that many districts are taking on, even though they hadn’t budgeted for them.

These new tech expenses are mentioned in a letter (signed by both the St. Paul and the Minneapolis superintendents) that the Council of the Great City Schools sent to Congress last month, in a request for additional school aid. 

“We really need the federal and state governments to take a look at this digital divide,” Minneapolis Superintendent Ed Graff said.

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His district has about 27,000 devices for 34,000 students — a shortfall in need of an $8-10 million investment to achieve universal access. “We are looking at how we move into this new era of distance learning, as a possible continuation through the summer and potentially into the fall,” he said. “And we’ll be making some additional adjustments with our resources.”

Budgeting for summer, fall

Heading into summer, districts are left wondering whether they can count on any state or federal aid to help offset the costs of continuing free emergency child care services and meal delivery services. In many districts, these employees are only contracted to work through the academic year. 

Board Chair Deb Pauly
Board Chair Deb Pauly
Deb Pauly, board chair for Jordan Public Schools and president of the Minnesota School Boards Association, says this concern is top of mind right now. And it’s just one of many question marks district leaders are grappling with as they look ahead. Adding to the financial pinch, they made the decision last week to drop plans to ask voters to support a new operating levy this fall. 

“Because of the state economy, there’s just no way we’d pass an operating levy,” she said. “School districts, including ours, are very, very worried. And there’s so many unknowns. We can’t even predict what the fall’s going to look like.”

While some district leaders mentioned the potential for cost savings in transportation this spring, Pauly is bracing for the possibility of a two- or three-fold increase in transportation expenses this fall — especially if going back to school while still adhering to strict social distancing measures means bringing students in one wave at a time, so they can limit class sizes to 10 kids instead of 25. 

In terms of class sizes, Schneidawind says district leaders are bracing for another potential factor: drops in student enrollment.

“Dollars are attached to the pupil. So uncertainty around this, going into the fall, is: How many of those families may not feel comfortable sending their kids back to school — or they may find an alternative through online school, or continuing to home-school?” he said. 

District leaders are also anticipating an uptick in students who qualify for free-and-reduced-price meals and other services that are tied to student counts from last October. That means there will be a lag time in the state and federal funding districts receive to help serve low-income students. 

Pauly says another potential delay — as counties consider shifting tax payment deadlines — has many district leaders worried about closing out bills right now. 

“There’s a possibility that counties will be shifting property tax payments and metering them out based on how counties receive property tax payments,” she said. “If that happens,  a lot of districts — including mine — may have to cash flow borrow to make our payments coming due end of the year. And borrowing is not a good thing for a district to have to do.”