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Changing enrollments bring financial challenges to schools

May 19, 2019

Each year, in pretty much every school district across Minnesota, it begins again. What will the enrollment be for the upcoming school year? How many kindergartners have been registered?

The focus on enrollment is vital to the success — and failure — of any school district in Minnesota.

“The biggest piece of funding is general education aid, and that’s directly related to enrollment,” said Sarah Slaby, director of finance for Winona Area Public Schools. “Operational referendums, that’s related to enrollment, too.”

A history lesson

Nearly five decades ago, the Legislature, under the leadership of then-Gov. Wendell Anderson, passed the Minnesota Fiscal Disparities Act of 1971, otherwise known as the “Minnesota Miracle of 1971,” which changed how education and other local government services were funded in Minnesota, according to a 2007 report from the University of Minnesota Law School authored by Myron Orfield and Nicholas Wallace.

Previously, the state’s education funding came entirely from local property taxes. That system gave Minnesota some of the highest property tax rates in the nation, the report stated.

But when the Legislature passed the new funding formula, the funding of education moved from local property tax levies to an increased state sales tax and income tax. The move helped alleviate some of the disparities in education funding between property-tax rich and property-tax poor districts.

As a result, Slaby said, most general funds for schools now come from the state, with a per pupil unit base of $6,312 for each district. “But that doesn’t give you the whole picture,” she said.

Districts might earn extra money for being small districts, for having a large portion of English language learners, or even for facing a certain amount of declining enrollment.

Most state dollars have a student number attached to them.

But most of the money from the state is geared toward long-term maintenance and the costs of operating a school district. For large construction or renovation projects or, for example, technology investment, a district’s school board needs to reach out to voters.

That was the plan for Zumbrota-Mazeppa this week, as its district voters went to the polls and voted against a $49.95 million construction and renovation bond.

“Everything here was about academics,” said Z-M Superintendent Mike Harvey.

Across Southeast Minnesota, school districts are facing changes that require funding. Some are seeing success at the polls while others, like Z-M, are looking for a Plan B after a first effort has failed.

The Post Bulletin asked several area school districts to share their enrollment trends and what they would like to see from the state to make funding more equitable.

Superintendent Jeff Apse, St. Charles Public Schools

Despite a few years losing enrollment, Apse said St. Charles Public Schools is expecting slow but steady growth during the next few years. What will that mean to the district, financially?

More students bring a demand for additional programming, Apse said, and that means improved facilities to cater to both growth and new programs. Space is already a big issue for St. Charles, with early childhood family education, school readiness and school-age child care programming needing a home in the district.

The district, which shot down construction bond issues in 2016 and 2017, is now back at the drawing board, working to develop its next facilities plan, one that will likely see a place on the ballot within the next year.

Apse said the Legislature’s Ag2School funding relief, which allows for a 40 percent reduction in levy dollars from agricultural land, was a positive move for rural communities. But, he said, more needs to be done to help rural districts, whose voters see bond referendums very differently than voters in urban districts.

“Continuing to work toward equitable facility improvement funding solutions for communities, like ours, that have smaller tax bases and where much of the tax burden falls on the shoulders of one class of property owners, would be much appreciated,” he said.

Superintendent David Krenz, Austin Public Schools

As it does every four years, Austin Public Schools completes a demographic study of the city’s residents and the district’s students. With a slowly increasing enrollment, the district is looking at an increasing number of English language learners and special education students, Krenz said.

“The state could best help us by increasing funding in these areas to pay down the general education cross subsidies that take money away from general programs to meet specialized programming,” he said. “In our case, that’s almost 20 percent of our budget.”

Superintendent Greg Slaathaug, Hayfield Community Schools

After closing its school in Brownsdale in 2016, the Hayfield Community Schools finally is right-sized and holding steady with its enrollment, said Slaathaug.

“We feel we are going to be very steady, right at or slightly below 700,” he said.

The district’s enrollment means class sizes in each grade can change from year to year, and the administration has to utilize teachers who are flexible enough to move from one grade to another.

“We adjust teacher placement each year based on our students’ needs,” he said.

Like many superintendents and school board members, Slaathaug said one way the Legislature could help small districts fund their own needs is to allow them to renew operating levies without repeatedly going back to voters for operational dollars that are funded locally.

Superintendent Belinda Selfors, Stewartville Public Schools

Growing enrollment has meant adding staff during the last five years for Stewartville Public Schools, Selfors said. But having a growing district doesn’t mean there aren’t financial concerns.

“The state funding formula needs to keep pace with inflation, which it has not done for the past 25-plus years,” she said. “The gap between the current state aid we receive and the adjusted basic formula for inflation is over $1,400.”

In today’s dollars, she said, Stewartville schools receive less state aid than the district did in 2003. And while Stewartville is a mixed rural and suburban district, Selfors said her neighbors in smaller communities — she was the superintendent in Hayfield before taking the post in Stewartville — rely on their communities to make up the difference in property taxes or do without essential services and programs that students need.

Superintendent Richard Dahman, Winona Area Public Schools

Declining enrollment is a big part of the problem for Winona Area Public Schools. After closing two elementary schools — and selling three, including a long-closed Central Elementary — the school board is hopeful its days of cutting budgets every spring are done.

Still, like Selfors, Dahman pointed to inflation as a driver of budget cuts. The answer, Dahman said, is to increase the general education basic formula by at least 3 percent and tie future increases to inflation.

“Winona, like districts across Minnesota, also faces increasing special education costs that are growing at a faster rate than special education revenue,” he said. “It would be highly beneficial if the state and federal government increased special education aid to schools.”

Mark Matuska, Kasson-Mantorville Public Schools

As a bedroom community for Rochester, the Kasson-Mantorville School District sees likely enrollment growth tied to Rochester’s Destination Medical Center initiative.

“Currently, we have the facilities to accommodate some growth,” Matuska said. “If growth comes faster than expected, there will need to be some additions to the middle school wings to accommodate additional sections.”

Matuska said the best help the state could offer is a way to increase aid for debt service.

“With the limited industry in our communities, an unfair tax burden is placed on our businesses, homeowners and farmers due to aid formulas that haven’t been updated in decades,” he said. “By state standards, we are considered a property poor school district.”

While Matuska applauded the Legislature’s Ag2Schools tax credit, he said more work needs to be done to fix unfair tax burdens, particularly on homeowners and businesses.

“We are hopeful it will be addressed again this legislative session,” he said.

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