Minnesota schools that used COVID-19 relief money to prop up their budgets are now facing cuts, despite significant investments from the state legislature.
“Yes, there was a historic level of funding approved for education,” said Scott Croonquist, executive director of the Association of Metropolitan School Districts.
“But at the same time, we’re coming off, obviously, a historic pandemic, which included, as a result, historic inflation,” he said. “And then, in addition to the historic funding, really, there are some historic new expectations and requirements for our school districts coming out of the legislative session.”
Minnesota lawmakers this year committed to large increases in the per-pupil funding formula and dedicated money for required but underfunded special education and English language learner programming. The money coming from state sources is on top of billions of dollars in COVID relief funds that districts received from the federal government.
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Still, many districts are struggling financially.
In Mankato, school leaders laid off 40 personnel. In northern Minnesota, the South Koochiching Rainy River School District is closing one of its two K-12 buildings. The St. Paul school district is making one of the largest K-12 investments in Minnesota history, but has also eliminated 166 staff positions.
In Wayzata, class sizes at some locations are increasing and approximately 40 positions are being eliminated. In Minneapolis, district leaders are warning of an impending financial crisis that will require budget cuts in the tens of millions of dollars.
The southern Minnesota district that serves 8,500 students was among the few in the state that managed to keep their buildings open every day to elementary students during the height of the pandemic in the 2021-2022 academic year.
Still, it’s lost 600 students over the last four years. Mankato schools used federal COVID-19 relief funds to build up its fund balance with plans to deficit spend to keep all its employees this year. But when enrollment losses were larger than expected, it had to cut $9 million from its budget.
“I think [this is happening in] every district that is similar in our size and in nature and has a lot of different options within the community,” said Mankato’s director of business services, Amanda Heilman. “Some parents decided they wanted to homeschool, or they decided to go to the non-public school … It really happened at the peak of COVID.”
To cut costs, district leaders adjusted classroom sizes and held off on purchasing new devices. They kept mental health supports for students and refrained from more drastic classroom cuts, but in the end, eliminated 40 staff positions.
Mankato’s financial reckoning is something many Minnesota districts are experiencing.
“For districts, the inflationary pressure has really taken a toll,” Croonquist said. “Everything from just utility costs to transportation costs. And then, of course, in the biggest area is staffing costs — districts have had to increase wages, really to just to try to attract the staff they need.”
According to testimony from the Minnesota Rural Education Association, the average cost of substitute teachers has risen over 50 percent in the last three years and health insurance renewals are up 20 to 50 percent. This, combined with rising gas prices and other inflation, has led to an 18 percent erosion in the buying power of state aid to districts over the last 20 years.
In Minneapolis, district leaders have not laid off any staff this year. But senior financial officer Ibrahima Diop says with COVID relief funds sunsetting in September of next year, cuts of some sort will have to be made to avoid a financial crisis.
“We’ve been making steps to making sure that we have options,” Diop said. “We’ll be seeing that in the next 3 to 5 years — not next year, not the year after but maybe 3 to 5 years.”
Minneapolis has seen enrollment losses of between 600 to 800 students per year over the last several years due, district leaders say, to a slowdown in birth rates and families leaving due to increased violent crime during the pandemic and rising housing prices throughout the city.
This year enrollment has leveled out. But Minneapolis also faces the same financial issues of inflation and shortfalls in special education and English Language Learner funding as other districts.
“Seeing the crisis coming — this is a nationwide phenomenon. It’s not only something that is faced by Minneapolis Public Schools or St. Paul Public Schools. This is something that is faced by every district in the country … districts that have faced chronic underfunding — decades of chronic underfunding,” Diop said.
Increases in education spending from the last session have had an impact. In Minneapolis, district leaders expect to see a loss of $92 million when COVID relief funds run out by September 2024. But money recently approved by state lawmakers will help reduce that budget gap to between $50-60 million — less than 10 percent of the budget.
“We’re thankful to the governor and the legislature because we see that we have a revenue budget that is much higher than before. And we see that it is not one-time funding, but funding that would be going forward,” Diop said.
The Rosemount-Apple Valley-Eagan district is among those not facing layoffs this year. In May, voters approved a nearly $500 million bond referendum — part of which will go toward building a new elementary and middle school.
They received $25-30 million in COVID relief money — also known as ESSER money — and spent it on health equipment, digital devices and summer school staffing. But they’ve also had stable enrollment.
Christopher Onyango-Robshaw is the district’s finance coordinator. He thinks the reasons many districts are facing financial trouble now has to do with the position they were in before the pandemic.
“The districts who are struggling now, the question is, take COVID out of the picture, and what was on the horizon in 2020 or 2019?” Onyango-Robshaw said. “If a district was struggling in 2019 … if the difficult decisions that needed to be done in 2019, were not done, they need to do those decisions in 2023.”
Onyango-Robshaw said his district was discussing budget reductions going into 2019, but they passed an operating referendum.
“Did we have an issue? Yes. Was that issue resolved? Yes. So heading into the pandemic, not only did we have a stream of revenue from ESSER, there was a different funding stream and adjusted increased funding stream from the referendum,” Onyango Robshaw said.
Now that the expiration date for those COVID funds is on the horizon, Onyango-Robshaw said it will still be difficult when they’re unable to renew that money, but not as difficult as it might have been, had the district not asked voters for money in 2019.
Still, Rosemount-Apple Valley-Eagan, Minneapolis and other districts are facing some unknowns. They, like many districts, are unsure to what extent the legislature’s policy requirements and decision to make hourly school workers eligible for unemployment during the summer will affect their budgets going forward.
“I think the legislators, for the most part, did good,” Onyango-Robshaw said. “There was a reckoning and understanding … that there was an imbalance in the funding … I would say that’s commendable. And I’m grateful for that. They also did a lot of other things and the district does not know how that will unfold.”