Kevin Allenspach, Kirsti Marohn and David Unze, St. Cloud Times, May 12, 2015
If ever there was a year that state education funding would see a significant increase, St. Cloud-area school leaders thought this would be it.
With a budget surplus of almost $1.9 billion, school officials thought surely state lawmakers would bump up basic education funding at least enough to cover their rising costs.
Apparently, that was overly optimistic. The K-12 education funding bill passed by the Senate includes a 1 percent increase in the per-pupil funding formula in each of the next two years. The House’s bill includes an increase of 0.6 percent each year. Both are below the 2 percent increase districts say they need to keep up with inflation.
That has area school officials preparing for potential cuts despite the state’s improved financial situation.
“I certainly understand that there are competing interests down at the Capitol, but making reductions in schools when there is a surplus is difficult,” said Dan Bittman, superintendent of Sauk Rapids-Rice schools.
School officials across the state feel that schools rescued the state during the recession, when the governor and Legislature temporarily shifted school payments to other areas of the budget, said Jerry Von Korff, chairman of the legislative committee for the St. Cloud school board.
“For a long period of time, we borrowed money in order to save the state from borrowing money,” Von Korff said. “The feeling is now is the time to have a regular budget. I don’t think people are asking for anything extraordinary.”
The House and Senate bills are about $208 million apart, said Tom Melcher, school finance director for the Minnesota Department of Education. The Senate bill contains about $365 million in new funding for K-12 education, compared to $157 million in the House bill, Melcher said.
Both are far less than Gov. Mark Dayton’s proposal, which included $695 million in new funding for education. The largest portion, $343 million, would pay for universal preschool for 4-year-olds. The House and Senate bills do not include that proposal, although they both contain some additional funding for early childhood education.
The governor’s proposal would raise the basic per-pupil funding formula by about 1 percent each year, the same as the Senate’s bill, Melcher said. On Monday, Dayton indicated he is willing to bump it to 2 percent each year.
Just how much costs will go up isn’t yet clear. School districts typically don’t start negotiating contracts with teachers and other unions until the Legislature closes, Melcher said.
However, school officials have already started bracing for the potential impact.
“I think statewide, we’re hearing the same thing,” said Denise Specht, president of Education Minnesota, the statewide teacher’s union. “Just a 1 percent increase is not enough to sustain or keep building on the progress we’ve been making.”
St. Cloud grapples with preliminary budget
The St. Cloud school district has a budget for 2015-16, but it’s stamped with inch-high capital letters: “PRELIMINARY.” While the legislature could take until early next week to determine its funding formula for the next biennium, school officials have to start getting ready for their new year — which begins July 1.
To be ready, the school board likely will vote on the budget of best-guesses May 21.
The preliminary budget assumes no increase in funding from the $65 million in general education aid dollars the district got last year. But that’s not going to keep up with inflation and rising salaries.
According to Kevin Januszewski, executive director of business services, step advancement by teachers would cost the district an additional $1.35 million next year and a 1 percent wage increase would amount to another $700,000.
Von Korff, chair of the school board’s legislative committee, said none of the proposals offset those increases. That leaves the board to decide whether to pay the difference out of its fund balance or make cuts.
“The steps are on the salary schedule but they are subject to negotiations,” Von Korff said. “We could go to the bargaining table and say ‘No steps this year.’ We do that in really tough years.”
But it’s hard to convince anyone of that when the state has a $1.9 billion surplus. The district, meanwhile, has built a healthy general fund balance that will be about $17.5 million at the end of this school year.
Von Korff cautions against using the reserve for permanent spending, saying the cushion is necessary to avoid borrowing for short-term cash flow. He also said the district won’t always have increasing enrollment, as it has for more than the past five years, and it already funds some areas — he pointed to an activities budget of just under $2 million — at a lower rate than similar school systems.
“Our long-term financial plan is that we will maintain this fund balance and, when the state is in crisis, then we’ll go into that to keep going,” Von Korff said. “What’s driving everybody nuts this year is ‘Hey, we just came out of a series of tough years and we would expect the state would be doing more now’ and in fact (legislators) are doing less.”
State funding increased 1.5 percent in 2014 and 2015. It went up 1 percent in 2012 and 2013. The average increase during the last decade was 1.6 percent. Going back to 1990, the average increase has been even higher — almost 1.8 percent annually.
“My dream is the people who make these decisions would focus their dialogue on what it takes to get the job done,” Von Korff said.
Sauk Rapids-Rice: Rely on reserves
The growing Sauk Rapids-Rice school district has benefited from a rise in enrollment, which helps hold revenue steady.
Still, if basic state funding was increased by only 1 percent, the district would need to use its reserves to maintain programs, Bittman said.
“When reserves are used, that means that other programs will not have those dollars,” he said. “We would be maintaining programming, and we would not be able to adjust or make modifications to current programming based on the needs of our students.”
It’s likely that the district would need to consider making reductions for the 2016-17 school year if the funding didn’t change, Bittman said.
If there are reductions, they are likely to involve teachers or staff. About 80 percent of the district’s costs are related to personnel, Bittman said. The remainder are fixed costs such as heating, cooling and lights.
“There’s nothing that we can do about those costs beyond what we are already doing,” he said.
Sartell-St. Stephen: 1 percent not enough
Sartell-St. Stephen school district also is hoping it doesn’t have to tap its reserves, said Superintendent Jeff Schwiebert.
A 1 percent funding increase from the Legislature would be fine if education costs were decreasing or if there was a deflationary cycle, he said. But expected increases in costs of insurance and employee contracts mean that a 1 percent funding increase from the Legislature won’t cover the district’s rising expenses.
“The only way that works is to take money from fund balances and programs,” Schwiebert said.
Like Sauk Rapids-Rice, Sartell-St. Stephen is seeing increased revenue because its enrollment is growing. But those increases aren’t enough, he said.
Rocori hopes to maintain
Rocori was one of the schools eligible last year to impose Local Optional Revenue funding to increase its revenues and address issues such as English language learning programs, enhancement of specialized services such as social workers and counselors and restoring reductions made in previous years, said Superintendent Scott Staska.
The 1 percent funding increase being discussed at the Legislature won’t allow the district to do those things, he said. It would basically allow the district to maintain where it’s at, Staska said.
He anticipates a balanced budget for the next fiscal year without major cuts. But the two fiscal years after that are not so safe.
He anticipates, if the Legislature funds schools at a 1 percent increase, that his district would have to make cuts of $400,000 in fiscal 2017 and $1 million in cuts for fiscal 2018.
That means there is no reason to pursue any immediate adjustments to programs because Rocori will likely have to eliminate those changes within a two-year window, Staska said.
Budget reductions will force Rocori to increase class sizes and eliminate academic options for students, he said.
Local Option Revenue was passed by the Legislature to allow school districts to increase their levies without having to put that increase to a vote of district residents.
The Rocori school board in December approved a 2015 levy of $5,389,643. Local Optional Revenue added $470,000.
Amy Leither, a parent of four children who attend Rocori schools, traveled to St. Paul last week with her 5-year-old to a rally sponsored by Parents United for Public Schools. Her son, Daniel, carried a handmade sign reading, “I am worth it.”
Leither said schools are facing a crisis situation with baby boomers retiring and leaving a shortage of human capital, plus growing demand for technology to help students prepare for the workforce.
Schools also are having to deal with a growing number of state and federal mandates that don’t come with additional funding, Leither said, plus more students with mental, physical and emotional health issues.
“There’s so much more expected of schools now than there was,” she said.