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School districts foresee yet another fiscal cliff, despite Dayton’s ed plan

Over the next two years, despite the state’s eye-popping $1.9 billion surplus, Anoka-Hennepin anticipates spending down its painstakingly replenished reserve fund, raising class sizes and in a year laying off 250 teachers, or 10 percent of its teacher corps.

To weather the recession several years ago, the state’s largest school district, Anoka-Hennepin Public Schools, spent down its reserve fund, raised class sizes and laid off hundreds of teachers.

Over the next two years, despite the state’s eye-popping $1.9 billion surplus, the district anticipates spending down its painstakingly replenished reserve fund, raising class sizes and in a year laying off 250 teachers, or 10 percent of its teacher corps. Why? It has to do with a lack of built-in funding increases and other factors, which we’ll get to in a moment.

Fewer teachers means bigger class sizes, and Anoka-Hennepin’s classrooms have been bursting at the seams since the crash of 2008. Upper elementary grades have 35-37 kids per class and high school courses 40-50.

This fall, then, the district is likely to be forced to appeal to local property owners to raise an existing levy, taxing themselves further to keep those swollen classes from getting any bigger.

No, it’s not a fluke.

North St. Paul-Maplewood-Oakdale is looking at laying off 90 teachers and staff members next year. South Washington County must find more than 60 positions to cut by next fall, most of them teachers.

Burnsville-Eagan-Savage will lay off 50, Bloomington almost 30 and Wayzata 25. Minneapolis has already shed 120 jobs from its central office — a move depicted as pushing resources out into schools.

Indeed the only metro-area districts that are not facing cutbacks are those that recently asked voters to raise property taxes to cover past rounds of cuts. Many of those districts now will be unable to fulfill promises to use the money to staff back up.

Tom Heidemann
anoka.k12.mn.us
Tom Heidemann

“What’s being advertised by the governor and the Legislature is a $1 billion increase,” says Anoka-Hennepin Board Chair Tom Heidemann. “But the reality is there is no new money.”

Assuming the governor’s spending plan — far more generous than the targets proposed by the state Senate and House of Representatives — is adopted, the districts that belong to the Association of Metropolitan School Districts will face an $86 million shortfall in the coming school year.

The Senate would spend $350 million and the House $157 million. If either of those targets is adopted as the 2015 legislative session heads into its final weeks, the bloodletting at local districts will be far worse, say Heidemann and Scott Croonquist, AMSD’s executive director.

“The governor’s target for E-12 [education spending] is certainly robust at $695 million and our members commend him for that,” says Croonquist. “But it just has a 1 percent per year fund increase and that is why we face a funding shortfall.”

So just how does $1 billion translate into no new money? Heidemann and Croonquist have been spending every spare moment trying to explain this to families and other stakeholders.

It’s worse than in the recession, says Heidemann. Back then people were willing to blame the economy for the fact that schools were teetering over a funding cliff. Today, Heidemann gets to the part of the explanation that involves the phrase “biennial accounting” and even lawmakers’ eyes glaze over.

Three main issues, beginning with inflation

Boiled down as simply as anything in education finance ever can be, there are three main issues. The first is that the general fund, the main pot of unrestricted money that schools use to pay basic bills, is not indexed to inflation.

Scott Croonquist
amsd.org
Scott Croonquist

The 1 percent per year increase in the governor’s proposed budget does not make up for inflation, this year pegged at about 2 percent, according to Croonquist. His organization is asking for 3 percent because recent years have brought lots of new mandates and increases that haven’t kept up with inflation.

Examples of new mandates that were unfunded or underfunded include implementation of a statewide teacher evaluation and professional development system, an anti-bullying law and the ambitious college- and career-readiness World’s Best Workforce.

Plus, inflation isn’t uniform. Anoka-Hennepin would need 4 percent to keep pace with its current levels of programming — which Heidemann notes makes the district one of the state’s success stories in closing the achievement gap.

Budgeted costs aren’t true costs

The second big reason “new money” still means cuts is that legislative budgets are much harder to read than typical spending plans and often obscure the true cost of new programs. A good example is last year’s marquee education item, all-day kindergarten.

All-day K was factored into the second year of the last two-year spending cycle, the biennium, at $147 million. Which means that in the upcoming biennium, the actual cost of statewide full-day kindergarten is slightly more than twice as much, or $337 million.

The same is true of a bump in special education reimbursement — still nowhere in the ballpark of the actual cost — made in the second year of the last cycle, and other increases. Expenditures subject to this biennial increase will total $844 million, plus the cost of growth in the number of students in Minnesota schools.

“That’s how you get to $1 billion without adding any new money,” says Heidemann.

Effects of universal pre-K

The third issue, he adds, is that the governor’s proposed budget would direct nearly $350 million to universal pre-K for 2016-2017. “He’s putting money in early childhood and not recognizing what it costs to maintain what we currently have,” says Heidemann. “It doesn’t make sense for me to add 70 classrooms if I have to raise class sizes to 40.”

Universal pre-K, he adds, is another of the items that will add to the sticker shock when “biennial accounting” is factored in. In the spending cycle that starts in two years the cost rises to some $900 million.

About half of the governor’s proposed budget goes to universal pre-K, notes Croonquist. “We are very supportive of that,” he says, “but we think we need to ramp up more slowly as classroom space is available, as licensed teachers are available and as parents want to send their kids.”

Supportive of much of the targeted spending

Likewise, AMSD  members are supportive of much of the rest of the targeted spending in the proposal, which includes another increase in special education reimbursement, free breakfast and an increase in counselors and other school support personnel. It just doesn’t make up for the lower increase on the general fund.

Because funding hasn’t kept up with inflation in more than a decade, Anoka-Hennepin made its first order of post-recession business to rebuild its reserve from 3 percent of its fund balance to 9 percent.

Layoff notices for teachers for next year must go out next week, at least a month before there will be any clarity on how much money the Legislature will appropriate. So the district will dip into the reserve to cover the first year’s shortfall.

After that? Heidemann points out that 55 percent of state and federal funding can be spent at the district’s discretion. The rest is targeted to particular programs or needs. And the biggest discretionary spending item is staff.

“No matter where you look, whether it’s a Democrat or a Republican plan, it’s just screwed up,” says Heidemann. “Fund existing programs — and then let’s talk about adding new programs.”

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Comments (8)

  1. Submitted by Ray Schoch on 04/09/2015 - 01:11 pm.

    Sigh

    It’s the same everywhere, and everywhere, it seems, it’s deja vu all over again. This article could have been written in Missouri in the (pick a decade from 1960s through 2000s), and likely in Colorado as well. The only real difference – and it IS a difference – is the Minnesota fetish for biennial funding. The whole “every-two-years” cycle well deserves being dismissed in favor of annual budgeting and funding. As an aside, we should do the same thing to insisting on every-other-year bonding bills. Write and pass them as needed, not because the calendar says we can, or can’t.

    In the meantime, just as I recall reading 30 years ago in other publications by other writers, the same issues keep recurring. Funding perpetually lags behind inflation – often just enough that, occasionally, and in a good year – a district can get tantalizingly close to being genuinely solvent. Close, but not actually reaching that goal, and usually, that hope of solvency sails over the horizon with the next round of proposals in the legislature.

    There are, of course, sensible approaches that would fix at least the “big three” issues, but those approaches, while unremarkable in principle to a competent CPA, have political costs that – especially in the current “everything costs too much and I don’t want to pay taxes” era of temper tantrums from those on the right – reduce their chances of adoption to near-zero. It’s made worse, occasionally by some spokesperson from the left end of the spectrum pretending in public that a proposed program is free, when, of course, it won’t be or can’t be.

    As Mr. Heidemann points out, “It doesn’t make sense for me to add 70 classrooms if I have to raise class sizes to 40.” What children need, and what parents want for their children, is individual attention. That can’t be provided at no cost, and it’s not something amenable to the usual “treat it like a business” ideological gimmickry.

    The public, and too many who ought to know better in the “more-informed” segment, want teachers of very high quality and effectiveness, so we insist that licensing and other standards be met, just like in other professions, especially those with similar public interfaces. At the same time, the same public wants those capable, licensed, highly-trained people to work for a fraction of what similarly-trained people in other professions are paid.

    Much like the federal budget, in which “entitlements” take up the lion’s share of what might otherwise be “discretionary” spending, school district budgets are dominated by the cost of personnel. When the only tool you have in your kit is a hammer, every problem begins to look like a nail, so when there’s a budget shortfall, and spending has to be cut somewhere, it’s almost never cut in facilities or administration, and almost always cut in instructional and related school support personnel.

    It doesn’t help that layoff notices have to go out this week, as was the case 40 years ago in my former school district, when there won’t be any clarity about how much money is going to be available. This is where teacher evaluation procedures begin to really get a workout, and at least some of it will be unnecessary because, once the final numbers are put on a spreadsheet, at least some of those notified that their positions were being cut are likely to get a second letter asking them to return.

    So, tie school funding from the state (where most of it should come from anyway) to inflation in a realistic way. It won’t be perfect because it will be, probably of necessity, “one-size-fits-most,” but it will be far better than the current method, which apparently ignores inflation altogether – yet another denial of reality. Districts ought to be able to initiate and maintain a reasonable reserve fund.

    The biennial legislative budget cycle might have made sense when it was adopted decades ago (I’m skeptical, but why not grant the benefit of the doubt for the time being?), but it makes less and less sense with each passing year. The legislature meets every year, the budget should be examined and tweaked every year. That legislative budget should include “true costs,” not estimates from 18 months previously. “Factoring in” a new cost from the last session into the current session may make it more politically palatable in someone’s home district, but it’s fiscal dissembling. We should know what something costs, and if we’ve committed as a state to offering that item or service, then we should also commit to paying for it (that’s my inner Republican speaking).

    Universal pre-K might be the best news in the educational marketplace in a decade, but there, too, we ought to know the true cost, and if we’re going to offer it, we should also make the necessary commitment to pay for it. Here, too, the biennial budget nonsense creates problems.

    Always allowing for error on my part, the two real trouble spots seem to be the failure to tie state funding to inflation, and the continued misplaced tradition of the biennial budget. Fixing those doesn’t create Nirvana, but it would make the life of school district budget officers and board members, not to mention teachers and other staff members, quite a bit less stressful than they are at present. It would also be far easier to present ideas and solutions to the general public.

  2. Submitted by Paul Udstrand on 04/09/2015 - 02:14 pm.

    Again,

    What we see here is that Ventura followed by 8 years of republican magical thinking actually broke the revenue stream systemically. It’s not just a matter of chipping in funds every budget cycle, we have to repair the damage and stabilize the revenue stream.

  3. Submitted by Ron Gotzman on 04/09/2015 - 02:52 pm.

    Have we heard this before?

    You are saying…we still do not have enough money for union centered, trickle down, government education?

  4. Submitted by Tom Anderson on 04/09/2015 - 09:39 pm.

    I agree with Mr. Heidemann

    “Fund existing programs — and then let’s talk about adding new programs.”

    Before we start another program (universal pre-K), why don’t we try (and try to pay for) last year’s programs–all day kindergarten and anti-bullying.

    Obviously we’ll need to raise taxes again on the rich, but with transportation needing billions of dollars just to get to even and education falling farther and farther behind even, it appears that the next budget biennium will need to crack $50 plus billion dollars. This year’s $43 billion budget should sail through by next week in comparison.

  5. Submitted by Dennis Tester on 04/10/2015 - 08:52 am.

    Here’s a plot I’d like to see:

    The amount of money the state has spent, over time, plotted with the number of students enrolled in the public school system. In effect, the growth of cost per student and the percent increase year over year.

    Thanks in advance.

  6. Submitted by Paul Udstrand on 04/10/2015 - 08:53 am.

    False premises keep circulating

    It’s clear that the tax cuts enacted by Ventura and Pawlenty were ill advised and damaged our revenue stream systemically. There were people trying to tell you all this at the time but magical thinking prevailed with it’s promises that tax cuts finance themselves and small government grows economies.

    A huge recession and several shut downs and deficits later we can see that strategy for what it really is. Economic fantasy pretending to be fiscal policy.

    The problem was that the tax cuts were based on the false assumption that government was overspending at the time. Again, we tried to tell people but they decided to roll the dice on magic instead of look at what government actually costs. We should restore our tax rates to the pre-1998 levels, and restructure the revenue stream to make it more stable and equitable. We need to fund existing programs AND create some new programs, and that funding will not just “manifest” itself as a result of “small guvmnt”.

  7. Submitted by Dennis Carlson on 04/10/2015 - 09:23 am.

    Transparency is Lacking

    I agree with Heidemann and Croonquist’s appeal for inflationary funding. What I don’t understand from a Democratic led Governor’s Office and Senate is what they expect at the bargaining table with teachers. Most continuing contracts for teachers have annual increases of 2-3% built in to their steps and lanes. Adding growing insurance costs for both teachers and school districts will bring those annual increases to 3-4% in total – that much is needed to merely honor the existing contracts for two more years. That means there is little or no money left to raise starting salaries or for rewarding outstanding teachers. Reducing steps and lanes in existing contracts is next to impossible and signals a potential strike atmosphere. So, districts cut. Anoka-Hennepin spends around 3% on administration so not much there can be done.

    What’s left is teachers. A 1% increase in revenue would mean most districts would need to cut 2-3% of their operating costs. A district like Anoka-Hennepin with a $400 million instructional budget (General Fund) would cut between $8-$12 million or between 125 and 188 teachers each of the two years. For the biennium that adds up to 250 teachers cut. Simple math.

  8. Submitted by Gary Johnson on 04/12/2015 - 07:47 am.

    Simple Solution to Improving Schools – See Atlantic Monthly:

    http://www.washingtonmonthly.com/college_guide/blog/just_get_rid_of_high_school_sp.php

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