(KNSI) — School districts across Minnesota, represented by the Association of Metropolitan School Districts, are grappling with a collective budget shortfall exceeding $280 million.
The shortfall estimates stem from a recent AMSD survey of its 47 K-12 school districts and six intermediate/cooperative districts, which together educate more than half of the state’s public school students. The AMSD says the financial strain is driven by historic inflation, rising operational and labor costs, and the implementation of significant new programs and mandates enacted by state policymakers over the past two years.
Members say while the 2023 education bill ties the state’s school funding formula to inflation protected annual increases between 2% and 3% based on the Consumer Price Index, current funding levels remain insufficient. Minnesota Department of Education Commissioner Willie Jett recently announced that the funding formula will increase by 2.74% for the 2025-26 school year, but AMSD’s survey asked member districts to project their budget gaps under the assumption that no additional funding will be provided in the 2025 legislative session beyond the inflationary adjustment.
St. Cloud Area School District 742 is facing a projected budget shortfall of $500,000 for fiscal year 2026, factoring in the inflationary formula increase.
The survey also examined the potential impact of Governor Tim Walz’s budget recommendations. His proposal includes a 5% reduction in special education transportation funding, adjustments to compensatory revenue, which is state funding meant for higher costs connected to educating kids who are under prepared to learn, and changes to the literacy incentive aid formula. The ASMD fears those measures would provide financial relief for some districts while exacerbating deficits for others. The analysis does not factor in the Governor’s proposal to eliminate the Q Comp program or Alternative Teacher Professional Pay System, which would take effect in fiscal year 2027 and further deepen budget challenges for many districts.
Even under the Governor’s proposed budget, the AMSD says its districts still face a cumulative shortfall exceeding $260 million, with some seeing even larger deficits than initially projected.
Under the Governor’s proposal, 742 is looking at an $860,000 shortfall.
As federal funding cuts loom, AMSD and its member districts are urging the Legislature to fully fund the new mandates introduced in the last biennium, such as summer term unemployment benefits and paid leave, while providing additional resources to prevent program cuts and staff layoffs. Additionally, AMSD is calling on lawmakers to avoid imposing any new mandates in the 2025 session and make sure districts do not face reductions in compensatory revenue due to changes in eligibility criteria.
“The reality is we are facing critical funding challenges and we have already made extensive administrative cuts, program cuts, and staff layoffs,” said Anoka-Hennepin Superintendent Cory McIntyre. “One of the state’s constitutional obligations and responsibilities is to fund public
education. Now, more than ever, we need the state to live up to that promise.”
Without additional support, the financial strain on school districts, the ASMD says, will be significant. State law requires school districts to maintain balanced budgets, leaving locally elected school boards, administrators, and staff to make difficult decisions to close funding gaps.
“We understand the state is also facing budget challenges, yet our school districts need assistance to address rising operational costs and to implement the new programs and requirements that were enacted during the last biennium,” said AMSD Chair Laura Oksnevad.
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