Reprinted with permission from Minneapolis School Voices.
Minneapolis Public Schools will use the last portion of its reserve funds over the next school year unless there are significant budget cuts or additional state and federal revenue. That’s according to the district’s latest pro forma, a five-year financial projection the district prepares each year, presented to the school board’s finance committee Tuesday night.
The district projects an $84 million budget deficit in the 2025-26 school year, with the deficit rising to $100 million over the next four years.
Pro forma at the end of next year, the general fund balance is projected to be negative $14.9 million, representing a negative 2.1% of the district’s operating expenses. This means “statutory operating debt” and is slightly above -2.5%, which would lead to mandatory state intervention. If voters approve a $20 million increase in working capital taxes in November, the -2.5% threshold would also be reached in the 2026-27 school year without additional changes.
This dire outlook comes despite the district’s optimistic revenue and expense assumptions compared to previous years. The district expects kindergarten enrollment to increase only once this year, so the drop in enrollment will be one percentage point less each year than last year’s estimate. John Clinton, executive director of finance for Minneapolis Public Schools, told board members when asked about the district’s current enrollment or current kindergarten class size.
The district has seen an increase in the number of new students enrolling from rural areas over the past two school years. Although the district does not track students’ immigration status, last year the district estimated that about 3,700 new students enrolled in the district, most of whom had Spanish as their first language.
School district funding is primarily based on enrollment, so higher enrollment projections result in higher revenue for the district.
New students whose first language is not English receive extensive support from the district to help them learn English. The state requires school districts to provide these services, but the district’s costs are not covered entirely. This year, the district expects to spend $17 million more on support for English language learners than it receives in state aid for services.
In the pro forma, the district assumes overall costs will increase at a 2% annual rate, which is a slower rate of growth than the 4% it assumed in last year’s pro forma. Clinton said the district also expects to hire fewer licensed teachers as enrollment declines.
The district assumes that labor costs will increase by 2.5% annually, the same assumptions made in previous estimates. The latest contracts for teachers and instructional support professionals, the district’s two largest employee groups, include approximately 12% annualized cost increases over the two years of the contract, compared to the anticipated 2.5%. It also costs much more.
The district expects to end the year with a general fund balance of $69 million. This assumes the general fund balance ended last year at $154 million, which is nearly $13 million more than the district expected. In its monthly financial report submitted to the school board in September, the district showed its general fund balance at the end of last year was about $90 million. Clinton told the board that the variation in general fund balance estimates is due to how school districts are funded.
Last spring, the school board reaffirmed its policy governing the district’s protected areas. The policy requires school districts to maintain 8% of operating expenses in reserve. Based on current spending, this policy means the district must have approximately $57 million in unallocated general fund balances.
To meet the projected fund balance at the end of the current fiscal year, the district will limit the use of reserve funds this year to $55 million and use a 4.75% vacancy rate to achieve nearly $24 million in vacancy savings. must be secured. The vacancy savings are funds that are allocated to the school district’s budget, but the district does not think it will be spent because it cannot hire staff to fill the vacancies. At the school level, the majority of currently vacant positions are for staff who work with special education students and students attending Northside schools. The recently reported vacancy rate in the area is 4%.
It remains unclear how the district and school board will balance next year’s budget. Although a pro forma is a financial forecast, it does not include budget recommendations. This forecast sets the standard for the district administration and school board to prepare the budget for the upcoming school year.
