Enrollment is up in Minneapolis, and dipping into reserves is expected to buy time to restructure district's budget, which still tips into the red.
More families are sending their children to Minneapolis public schools. A school is reopening. The teacher ranks are growing.
Yet the money flowing into the district isn't keeping up with its spending, so the board plans to dip into the district's reserves for $18 million to balance next year's $741 million budget. It will be the second year in a row that the district's solid financial condition has allowed it to draw from its reserves, and it might do so again next year.
But school board members, who received the budget Tuesday, admit that the trend can't go on forever.
"That's probably as far as we could go," board Chairman Alberto Monserrate said recently.
Board Member Rebecca Gagnon put an even shorter time limit on the drawdown. "We can't sustain this for next year. But we've cut a lot."
The board is scheduled to adopt a budget on June 26. Drawing the balance down helps to minimize cuts in schools and reduces the risk that the big balance becomes a target for legislators or the district's unions.
The proposed 2012-2013 budget is balanced, but that's only because the budget staff is proposing to use some of the district's surplus. The board previously budgeted drawing $4.4 million from reserves to balance the budget for the current fiscal year, which ends June 30. But in the latest in a series of budgets that over-estimated spending, it now expects to end the fiscal year $10 million in the black.
The ante goes up much more for 2013-2014, when budgeters say a $44 million deficit will require either draining more reserves or making deeper cuts.
"You have a structural imbalance that is not sustainable," Finance Chief Robert Doty told the board Tuesday night.
"I'm really, really worried for the district," board member Hussein Samatar responded.
The balance began building around 2007, a period of transition when the district was adopting new financial software and wound up with more money than finance experts expected.
It continued to grow mainly because the district's budgets consistently overestimated its largest expense -- the cost of teachers. As it turned out, the district held onto more junior teachers than it expected, meaning the average salary and benefits were lower than projected, Monserrate said.
There also was a desire among district leaders to build more of a budget cushion. The school board last year set a target of maintaining a unrestricted surplus of at least 8 percent of its general fund. Superintendent Bernadeia Johnson wants an even higher 13 percent, according to her finance staff.
The reserve meant Minneapolis was one of a handful of metro-area districts that didn't have to borrow money when the state delayed an added 30 percent of its aid until after the end of the school year.
The district expects to end the year with an uncommitted general fund surplus of 17 percent, but if it spends $44 million to plug the 2013-14 deficit, the balance could fall below the board's 8 percent policy. That's barring further cuts. Monserrate said one purpose in dipping into reserves for the next year or two is to give the board more time to carefully consider further cuts.
"I feel confident approving this budget now," he said.
Hanging on to students
Enrollment in the district's core schools is projected to be up 1.8 percent, partly because the district is keeping more of the students who start the school year. Those numbers don't count a small self-governed school the district plans to open on the North Side. Folwell Middle School is reopening as an elementary, part of the rippling effect of rising enrollment in southwest Minneapolis. No tenured teachers were laid off and teacher ranks are projected to expand by 87 positions.
Those extra students bring more money, but there are offsetting concerns. For example, the district is projecting that belt-tightening by state and federal governments will mean a sharp drop in grant income, especially with a federal desegregation grant expiring.
The proposed budget cuts department spending that's not directly serving schools by 6 percent. It saves money by contracting more busing to private companies, especially for scattered homeless students. One big future savings is expected to come from using a structured series of interventions to help struggling students who might otherwise be labeled as needing more costly special education.
On the spending side, the budget plunges ahead with some of Johnson's academic priorities aimed at improving achievement and reducing the racial gap. One is $3.2 million for evaluating teachers, something the state has mandated but on which Minneapolis is ahead of other districts.
Another is $1.5 million for focused instruction, a more structured approach to what's taught, how it's taught, and measuring how well students are picking it up. The third major spending focus is $2 million for information technology, a blend of giving teachers the tools to better track students and getting more out of the district's budgetary software.
Steve Brandt • 612-673-4438