Minneapolis schools face challenging financial future, projections show

Minneapolis Public Schools is again facing a troubling, yet familiar, prediction about the district's finances: The budget will remain burdened by falling enrollment and revenue that can't keep pace with operating costs.

The rollout of the controversial district redesign, combined with concerns over distance learning during the pandemic, have exacerbated the decline in enrollment — a pattern that five-year projections show will continue over the next few years. Assuming the plan is fully implemented, enrollment may start ticking back up by the 2025-2026 school year, district officials said.

"Our analysis finds that, regardless of whether the [redesign] succeeds, the district is burdened by an unsustainable fiscal structure," read the report, which will be presented to the school board Tuesday.

The board will also consider the certification of the 2021 property tax levy at its Tuesday meeting. The recommended levy of $224 million, down about 3.8% from 2020, is the maximum allowed by the state. Amendments to the 2020-2021 budget, mainly to accommodate enrollment changes and COVID-related expenses, will also go before the board next week.

The district lost about 1,700 students this year — 900 more than it predicted — and it's expecting to see another 2,500 leave the district over the next three years. Enrollment numbers help determine school funding from the state. This school year alone, the dip in enrollment cost the district about $7.1 million in revenue.

But bringing in more students wouldn't be enough to solve the district's financial concerns, according to officials.

Pandemic-related costs have also hit the district especially hard this year — to the tune of $59 million, only half of which was offset by state and federal aid — and those costs aren't going away soon. Distance learning required the district to ensure that each student had the technology to learn at home. Upkeep of that technology will come at an annual cost of $8 million to $12 million, according to the projections.

Superintendent Ed Graff said the district, which has faced multimillion-dollar shortfalls for much of the last decade, has proved it can weather "extreme challenges." And he is confident the district will be able to attract new families once its redesign is in place.

"In spite of a pandemic and in spite of enrollment challenges, we have options," he said.

Board Members Nelson Inz and Bob Walser expressed concerns over the projections.

"Year over year, you tell us the same thing — we can either raise money or we can cut costs," Inz said at the finance committee meeting. "I wasn't anticipating a couple of years ago that I'd be hearing this from you again just two years down the road."

Walser said the assumptions made in the projections, namely the success of the district redesign, were "unrealistic" and without evidence.