No austerity for Minneapolis!
A labor organizer reached out recently to talk through something. The Minneapolis Federation of Teachers (MFT) is in the midst of a contract negotiation with Minneapolis Public Schools. The organizer was interested in getting my take on the general picture with school districts right now financially, but also the politics and ideology of budget struggles in Minneapolis and elsewhere.
I could only offer a few points here and there that I gathered from a bond statement, some of which I'm including below for those interested in the Minnesota school budgeting terrain.
After we talked, the MFT published an excellent report taking up and taking on the school district's threats to cut funding. I wanted to feature the key findings from that report here and put it on your radar generally because what's happening in Minneapolis is actually happening to educational institutions all over the country at every level.
There are two problems that administrators and journalists, who frustratingly report administrative press releases as gospel: the end of federal covid funding and declining enrollments. These are, indeed, big problems. But are they as big as the administrations say they are? And can working class coalitions push back to make sure people in power don't just default to austerity? The answer is yes and MFT's report is a case in point.
Here are some keys things they found:
Since 2018, MPS’ financial projections have predicted annual deficits of millions in the general fund, and a declining general fund balance. And yet, actual year-end financial results included general fund surpluses and a growing general fund balance. Instead of the steep declines projected by MPS, the general fund balance has grown by $81 million since 2018, standing at $143 million at the start of this fiscal year.
Since 2018, the district has cut spending on instruction and employee salaries and benefits. While the district reduced spending on instruction, it spent more on administration and district support services. While the district reduced spending on staff salaries and benefits, and purchased services. If the district bought its spending on these lower-priority uses in line with peer districts, MPS would save millions every year - that could be invested in competitive salaries for licensed staff and sustainable hourly wages. The district can change its spending practices to balance its budget and invest more where students need it most: in its educators.
MPS leaders continue to accept and budget for declining enrollment as a foregone conclusion, and they float strategies like shuttering schools rather than addressing the root causes of enrollment decline.
I found the following passage particularly interesting, because it combines fine-grained detail in the Minnesota context with the realities of COVID funding to call bullshit given the district's previous messaging.
While COVID funds will expire, a new “historic school aid package,” is arriving for districts across the state, including Minneapolis. MPS will receive $32 million in 2024 and $42 million in 2025 in new state education funds. The latest proforma financial projections reflect the ending of ESSER revenues in 2025. However, the district’s projected expenditures increase by 4% at the same time, indicating that the district plans all ESSER funded expenditures to continue into future years. This is especially confusing since, in MFT’s previous bargaining session and strike, MPS said it couldn’t spend COVID money on recurring expenses such as the bargaining demands. MPS’ confusing budgeting practices undermine the public’s right to complete and accurate information regarding district finances.
I think this line is a powerful one to take when administrations say the sky is falling. There are options, you're contradicting yourself, and austerity isn't the answer. In any case, here are some interesting things about this terrain I was able to gather.
Questions
In October 2023, the district sent a clear signal: we're going to lay off teachers and close schools. The budget cuts are coming. They kept up the messaging through November, with the budget director saying explicitly that the district "is set to run out of its rainy-day reserves in 2025-26, putting it in statutory operating debt." The sky is falling. It's common to see language like "crisis."
In the press, the district gives a few reasons for this coming crisis. Federal COVID relief money is drying up. The district was able to spend more with these funds coming up, but without them they'll have to cut back. The district is facing declining enrollments, reducing per pupil revenues. The district has too many buildings:too much space for too few kids.
The state has a law that says if a school district has a "net negative unreserved general fund balance calculated as of June 30 each year" that is "2.5% of the most recent fiscal year's [general fund] expenditure," then they're in something "statutory operating debt." Okay, what does that mean?
First, it means there's a threshold of breathing room the district has for being in the red. One cent or one dollar or even a million dollars of expenditure beyond revenue won't mean the district is in trouble. You have to have an unreserved general fund balance at the end of the year that's 2.5% in the red compared to last year's expenditure. To me, that means you can spend up to 2.5% more than came in last year until this statute kicks in.
And what does this statute entail, exactly? It means the district has to submit a special operating plan to the state. The plan proves to the state that it'll dig itself out of the hole. The state has to approve this plan, taking a little freedom away from the district. But that's it. Of course it's not good, but let's be realistic about the consequences. No one's head will be chopped off, no one will die, no one will lose their fortunes.
Plus, the statue doesn't stipulate general expenditure as the category that's in the red. It's the unreserved general fund balance. The reserved general fund balance has all kinds of stuff in it that maybe the district can play around with.
Reservations
In terms of this supposedly disappearing rainy day fund, I have some questions. Districts make decisions about what monies to assign in their reserves. As I've written about before, the politics of district reserves comes down to how the district decides to allot these funds. When they say "oh gosh, listen, we can't spend this money" you have to look at the buckets they've put everything into and then ask, "really, what's this thing you say you have to spend on"?
As of June 2022, in its last financial report, under its nonspendable, restricted fund balances, I'm seeing some numbers I'd ask about. First is a line item called "Assigned for referendum - class size" that has a whopping $43 million, more than half of the total nonspendable/assigned reserves. Why so much there? What is this referendum on class size? I searched and couldn't find anything about it.
While it'd be more political and perhaps rhetorical, I'd ask about a $30.4 million item in the Debt Service Fund--the bucket of money devoted to paying back creditors--for "QSCB/QZAB bonds." These kinds of bonds are pure neoliberalism where local governments give away their own revenues to bend their knees to capitalists of all kinds. This money is listed as "restricted" in the reserves. But why? What was that for? What did the district give up so they could sock away $30 million?
Enrollments, space, and green democracy
One last small thing. In the newspaper article about school building closure, the writer reported that the district has space for 40,000 students but only has 22,000 students aged five or older. That makes it seem like the district only has half the student population it should have. But the bond statement reports these numbers very differently:
In a table reporting student population totals, they say there were 30,109 students this year. That's a few more than 22,000! Rather than half the population, it's 10,000 below the space capacity, yes, but it's not so bad as the article made it seem. Let's be clear about the actual numbers here.
And when it comes to closing buildings or making your facilities appropriate for your population, the district has options both in how it goes about this process and messaging it. Look for instance at how Boston is handling this situation. Yes, population is changing. Yes, buildings are old. But rather than making the buildings into a budgetary gun pointed at greedy teachers' heads, the district is using the infrastructure right-sizing as an opportunity to make their capital programs more participatory and their buildings more green.
Why can't the Minneapolis district do this? Why can't it use the buildings as a democratic and climate-conscious initiative? There are lots of federal programs providing funding to reduce carbon emissions in public schools.