Minneapolis Public Schools face financial crisis, post-pandemic relief funds

INTERVIEWER: Minneapolis Public Schools are in financial crisis and face a $70 million gap in funding once pandemic money runs out. That may lead the Minnesota Department of Education to step in. Well, that's according to new reporting from Deena Winter in the Minnesota Reformer. Deena is on the line. Welcome back, Deena.

DEENA WINTER: Thank you.

INTERVIEWER: Hi.

DEENA WINTER: Thanks for having me.

INTERVIEWER: Yes, thanks for being here. So please give us a picture. How did Minnesota Public Schools get here?

DEENA WINTER: So it's attributed largely, according to MPS, their own budget projections. They attributed to declining enrollment largely. They cite a few factors, but one of the things that they talk about quite a bit in their five-year budget projection is that declining enrollment is a huge problem.

The district was built to serve about 40,000 students, but they currently have about 28,000. And they've had a 17% decline in enrollment since 2017. And they're expected to drop to about 23,000 students by 2027.

So we have a lot of buildings, not so many students, is a big thing that they attribute it to. They've also been relying really heavily on federal pandemic funding for the past three years. But that money is going to run out late next year, so they're going to have a huge budget gap at that point. I mean, they already do.

INTERVIEWER: Do we know why enrollment continues to decline? Are charter schools or private schools creating competition or are there other reasons?

DEENA WINTER: They say that that's a factor, but only about 1/5 of the enrollment loss is due to charter schools' open enrollment. They say in their own forecast that a lot of the problem is that families with children are leaving the city. The district itself said that public school enrollment has fallen by 6% over the last five years.

But they attribute it to the things like the murder of George Floyd and the civil unrest that ensued. And they mention the teachers strike could be a factor in some families' decision to leave. And then they also mention the comprehensive redesign of the school system. Those are some of the things that the district itself has been citing in some of the reports that I read.

INTERVIEWER: That was one of the things I wanted to ask you, was where does last spring's-- wow, is it last spring already? Where does that teachers strike fit in with all this?

DEENA WINTER: [CHUCKLES] I mean, it certainly did not help the situation financially. They definitely increased their budget gap by tens of millions of dollars. And then they've had to make some cuts after they made the deal. So certainly, it cost money, and they don't have a lot of money right now. [LAUGHS] So it didn't help.

INTERVIEWER: Well, Deena, you reported that Minneapolis also spends more per pupil than other large districts. Is there any indication as to why?

DEENA WINTER: Well, the district budget director said that he has attributed it to the fact that Minneapolis has a significantly lower student-to-teacher ratio as compared to other districts, that most other large districts in the state have fewer larger schools. And that's what the budget director for the district has been citing as a big reason.

INTERVIEWER: OK. So at what point will the Department of Education step in? I mean, how bad do things need to get?

DEENA WINTER: Well, I mean, it's-- I'm going to explain it really simply. So basically, if they drop below threshold-- if they drop too far in the red in terms of their reserves, that's when the state considers them to be in what's called statutory operating debt. And at that point, that's when the state steps in, and they have to-- the district has to start submitting a plan to the state to show what it's going to do to get its budget back on track.

And so that is expected to happen after this pandemic funding runs out. And in about a year, they've projected that that's when it's going to be very bad if they don't start making some budget cuts. So they're getting pretty close to that point.

INTERVIEWER: Now, the state legislature passed over $2 billion in education funding this year. So will that money help douse the flames at all?

DEENA WINTER: Well, the state's education bill was supposed to bring in $35 million in new funding for the MPS. So that's good, but it's certainly not enough to solve their budget problems at this point.

INTERVIEWER: OK. I mean, this isn't necessarily new information. I mean, wasn't much of this shortfall information coming out back in November? So I'm curious as to why we haven't been hearing more about it. I know you're doing your part reporting it, but any thoughts?

DEENA WINTER: Yeah, I mean, I actually saw a tweet from a parent who just so happens to work in finance and really understands stuff like this. And she's been sounding the alarm for years [CHUCKLES] that this is a serious situation. And I think she's a little astounded.

She's in my thoughts as to why it doesn't seem like people are paying attention. But it's been out there. This report, this five-year projection I've referred to, was written about in the Star Tribune in November when it came out.

But the part about statutory operating debt and the state maybe having to step in and say, hey, get your stuff together, that I have not really seen reported much at all anywhere. But I'm not contesting, so we will-- you'll let me know if I missed it when you do. [LAUGHS]

INTERVIEWER: Yeah, absolutely. [LAUGHS]

DEENA WINTER: But, yeah, I mean, we did have the strike last year. There was a lot of coverage of that. So, I mean, I don't know if the awareness of what the situation has just really permeated everybody's conversations or anything, but it's been out there. It's been happening. This has been a problem. It didn't just happen overnight, as is often the case.

INTERVIEWER: Yeah. So you reported from a community meeting about all of this. What kinds of solutions were thrown around?

DEENA WINTER: Because the district, for some reason, didn't have time to talk to me about this topic, even though the school board voting on a budget tomorrow, [LAUGHS] I had to go back and watch the old school board meetings and stuff to piece together what's going on and the school board meetings that I watched and saw some community presentations. The school board meeting that I watched where they discussed this problem, they talked about closing schools. And it seems like they pretty much know that that's going to have to happen.

But there are also a lot of them who are new on the school board. So I think it was four or five of them are new. So you've got a pretty new school board to deal with this very big problem. Several of those board members, especially the veterans on the board, talked about how we are going to have to close schools, but they have not decided which schools or anything yet.

And I have been told that teacher layoffs are probably likely too. There's only a couple of things you can do when you have a budget gap. You can raise your revenue or you can cut your expenses.

They're certainly going to up their levy a bit, I'm sure. But it's going to take more than that. And it looks like they're going to have to cut a lot of expenses too.

INTERVIEWER: Well, this is definitely a story that we will have to keep following. Deena, thank you for your reporting.

DEENA WINTER: You bet. Thank you.

INTERVIEWER: Deena Winter is a reporter for the Minnesota Reformer. You can hear her reporting at MinnesotaReformer.com. We asked Minneapolis Public Schools for comment on this story, and they did not respond in time for broadcast.