Despite new money, school districts tightening their belts
ST. PAUL — The Minnesota Legislature just approved $483 million in new funding for public schools, so why are two-thirds of districts in the Twin Cities tightening their budget belts?
Twin Cities schools have a combined $92 million hole in their collective budgets for the coming school year, according to data provided to the Association of Metropolitan School Districts. Roughly half of that red ink is in St. Paul and its suburbs, where 10 districts combined will fall $44 million short of their budgets.
The difference between what districts plan to spend and the revenue they will receive means many will have to cut staff or dip into savings. Those decisions are being made just weeks after lawmakers agreed to an $18.7 billion two-year education funding bill. The total includes an average $245 more for each of the state's 874,827 students over the next two years.
Funding for Minnesota's public schools will be more than $9 billion next year, about 40 percent of the state's general fund expenditures. Under Democratic Gov. Mark Dayton, school spending has grown by about $2 billion a year and when adjusted for inflation is approaching the state's high point of about $10 billion a year from a decade ago.
Still, budget gaps are nothing new in Minnesota schools. When lawmakers last approved an education budget in 2015, districts faced similar budget shortfalls.
Many school advocates see a state funding system that hasn't kept pace with rising costs and has never fully met its obligations to pay for special education and other mandated services.
"I think the fact that we struggle every funding year to get an inflation increase does speak volumes," said Scott Croonquist of the Association of Metropolitan School Districts.
On the other hand, critics and reformers see an entrenched government bureaucracy with little room for innovation. Without changes, they says, state resources will continue to struggle to keep up with growing costs.
"The system as designed is operating as expected," said Mark Haveman of the Minnesota Center for Fiscal Excellence, a tax and public policy think tank. "There is precious little flexibility, and that creates challenges."
Is 2 percent more too little?
School leaders are thankful to be receiving the average $245 more per pupil, about a 2 percent increase each year in the funding that pays for daily school operations.
But Croonquist said the funding has not kept pace with districts' rising costs over the past 15 years; if it had, districts would be receiving $596 more per pupil than under the current budget.
Additionally, the new two-year spending plan includes no new money for special education services, which continue to eat up districts' operating expenses. Minnesota schools already cover a gap of more than $600 million annually between special education services mandated by state and federal rules and the funding those entities provide.
In 2016, special education accounted for 18 percent of Minnesota districts' spending.
"Between those two, it is no surprise" districts have funding deficits, Croonquist said. He added that the cost of other special services for students, such as for those who are learning English, also continues to rise.
School leaders also noted they still are struggling with covering rising pension and health care costs.
Is teacher pay the problem?
Budget hawks and education reform advocates have long argued that innovation, not necessarily more money, is key to improving Minnesota's schools and closing the academic achievement gap between students of color or low income and their white or more affluent peers.
One place many see as ripe for change is teacher compensation. Education is a people-dependent enterprise, with roughly 80 percent of districts' operating costs going for personnel.
Under most teachers union contracts, educators receive regular raises for gaining experience and training through what are typically called "steps and lanes." Additionally, salaries usually rise every two years when a new contract is negotiated that includes a cost-of-living increase.
In a December 2016 policy paper "How Much Is Enough?" the Center for Fiscal Excellence found the state would need to increase per-pupil funding by roughly 4 percent a year to keep pace with growing costs. To better control personnel expenses, the group recommends overhauling the pay structure to focus more on student outcomes and teacher performance.
"This is extremely difficult to do, but I go back to figuring out a way to put more flexibility into compensation systems," said Haveman, who notes that his wife is an educator and that he is not implying teachers are overpaid.
"I've got box seats to this," Haveman says of the struggles of school finance. "I know how hard she works."
The average salary for an educator in Minnesota was $56,910 in 2016, which was below the national average of $58,064, but higher than neighboring states.
Denise Specht, president of Education Minnesota, said teachers work closely with district leaders to try to control costs, and predictable salary schedules help that effort. She added that Minnesota students regularly are among the top in national tests, but teacher pay is closer to the middle of the pack.
"What teachers are paid is a two-way agreement between school leaders and teachers," Specht said. "If we want to attract and retain the best educators, it is going to cost school districts."
Many districts already are struggling to recruit teachers in math, science, special education and related fields. They also have a tough time retaining young educators; roughly a third of new teachers leave the field in their first five years.
School leaders need to wrap up their spending plans for the coming school year by the end of the month. Ten districts in and around St. Paul will use staff cuts or savings, or both, to clear their ledgers of red ink.
Four districts will cut a total of nearly 60 full-time positions while the remaining six districts will tap a combined $18 million in savings to avoid staff or program cuts.
It's not surprising that school leaders are willing to dip into their reserves. Most districts try to keep at least three months' worth of operating costs in reserve; in 2016 Minnesota districts had $1.8 billion in savings accounts, an average of 20 percent of their annual general fund operating expenses.
"School boards and administrators always want to avoid cuts if possible, so spending down some (savings) buys you some time," said Croonquist. "It puts off until next year some tough funding decisions."
But that also means districts will be looking for longer-term solutions to their finances, which could translate into a busy fall referendum season.
Kirk Schneidawind, executive director of the Minnesota School Boards Association, acknowledged many districts may be considering a fall levy request to raise new revenue, but he said they are also being cautious after capital levies failed in 14 of 19 districts so far this year. Those defeats followed record successes at the ballot box in 2016 and 2015.
"There's always going to be challenges for districts," Schneidawind said of the school funding picture. "I wouldn't say this was a great year, but I wouldn't say it was a terrible year either."