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At Issue: Broken or flawed?

Published (3/28/2008)
By Thomas Hammell
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Even though per pupil funding has gone up, school district officials say it does not keep up with inflation. Pictured is teacher Jenny Heyer and her kindergarten class at Island Lake elementary School in Shoreview. (Photo by Tom Olmscheid)

Because a referendum to renew an operating levy failed by just 160 votes, the St. Cloud Area School District has $4.5 million less to work with this year. The district plans to lay off teachers, bus fewer students and reduce the number of special education and health services and paraprofessional support.

“In general we’ll look at every budget related to our operation and try and pare something back,” Superintendent Bruce Watkins said.

Watkins echoes what has become a familiar refrain. “Districts have run out of places to cut corners and they’re down at the Legislature saying ‘Please help us,’” he said.

Along with other school administrators and concerned parents from around the state, Watkins testified earlier this month before the House K-12 Finance Division.

“We’re here because we believe the system is broken and needs your attention,” he said. Budget cuts in the district have created an exodus of students who open enroll in other districts, and take state funding with them.

From last year’s session, school districts saw an increase in their basic per pupil funding unit from $5,074 to $5,124 for the 2008-09 school year, according to a report from the nonpartisan House Research Department.

The mechanics of school funding are complicated, but even with last year’s increase, all it takes is 10 students leaving a district to put the district at least $51,240 behind where they were the year before.

According to a report from the Department of Education, there were 16 school districts and four charter schools in statutory operating debt in Fiscal Year 2006. Three-dozen districts had negative fund balances. In 2005, the Department of Education listed two dozen districts in statutory operating debt.

Darrel Tungseth, a Fergus Falls school board member, said the district is cutting $2.3 million this year, and has cut more than one-third of its budget in recent years.

“The students are suffering, and also it’s very demoralizing to the teachers we have,” he said. Because of open enrollment, the district is competing with its neighbors for students and the per pupil state money they bring. The district has an operating levy of $415 per student, which expires in 2011, and the school cannot cut enough expenses to keep up.

Fergus Falls Superintendent Jerry Ness said the school district had 3,400 students in the 1995-96 school year, compared to 2,500 students today.

A numbers game

Rep. Mindy Greiling (DFL-Roseville), chairwoman of House K-12 Finance Division, said the main issue is that government as a whole is under-funded.

“We’re the canary in the mine for the under-funding, because we’re such a big part of the budget,” she said. According to the Department of Finance, K-12 education represents 39.8 percent of the state’s General Fund spending.

Nonetheless, administrators say that state allocations have not kept up with inflation, and open enrollment rules mean students can leave a struggling district, creating even more financial problems.

While the state might increase an appropriation for school districts, inflation and fluctuating costs might lead a district to reduce what it offers compared to the last year, Watkins said.

“A school district doesn’t have any way of saying, ‘It’s OK that energy (costs) went up, we’ll just generate more,’” Watkins said.

Since 1971, school districts have been able to levy, with voter approval, amounts for costs beyond levies specifically authorized in Minnesota, according to information from the House Fiscal Analysis Department. Before that time, school districts had much more flexibility.

According to House Research, per-pupil funding, adjusted for inflation, has increased over time, but on the other hand, building construction and special education costs have increased at a greater rate.

Small change?

Legislators have drafted bills of all shapes and sizes to deal with the problem.

Rep. Will Morgan (DFL-Burnsville) sponsors HF2978, which would increase general education funding by roughly $100 million for Fiscal Year 2009 and raise the formula allowance by 2 percent each year thereafter. The bill would also increase the special education funding by about $75 million for Fiscal Year 2009 and then allow special education revenue to grow with special education costs.

“When I went back to school in September, I saw firsthand that schools were not back to the level of funding that they had been in 2003 and 2004. Caps on special education money had required schools to use general fund money to provide mandated services.

“When you combine that with the declining enrollment, the Burnsville School District where I teach has just not been able to recover yet from the frozen funding,” he said.

A companion bill, SF2815, sponsored by Sen. Tom Saxhaug (DFL-Grand Rapids), awaits action by the Senate State and Local Government Operations and Oversight Committee.

Rep. Sandra Peterson (DFL-New Hope) sponsors HF3622, which would allow school districts with a fund balance of less than 3 percent to hold a referendum at a time other than in November. Districts would still have to be careful, she said, but this would give them more options. Current law requires district referendums to be held at the time of a general election.

Peterson said both the Robbinsdale and Osseo school districts in her district have made huge cuts, and Osseo leaders recently decided to close two schools. A companion bill, SF3355, sponsored by Sen. Ann Rest (DFL-New Hope), awaits action by the Senate Finance Committee.

Rep. Debra Hilstrom (DFL-Brooklyn Center) sponsors HF3423, which would increase school district revenue and create a way for districts with a net negative unreserved general fund balance greater than 2.5 percent to levy to eliminate the deficit. A companion bill, SF3204, sponsored by Sen. Linda Scheid (DFL-Brooklyn Park), awaits action by the Senate Finance Committee.

“The main thing that’s broken is the over reliance on voter approved property tax referenda,” Greiling said.

Rep. Sondra Erickson (R-Princeton) said the system is flawed, but not broken.

“We have created an inequity, especially between Minneapolis/St. Paul and the rest of us,” she said, and said funding systems need to be simplified so a student is a student.

Erickson said more funding from the state is not the answer because there needs to be some sort of local buy-in.

“We fund our schools quite generously, but we also expect much more of schools because we have so many mandates,” she said. The more programs a school is required to have, the more money it takes.

Erickson said the solution needs to involve not only legislators and school administrators, but also parents and school board members.

And then there may be the most extreme measure proposed.

Rep. Frank Moe (DFL-Bemidji) sponsors HF3107, which would repeal the referendum revenue authority of school districts and require the governor to come up with an alternate funding source by Oct. 1, 2008. There is no Senate companion.

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