Budgeting Amidst Uncertainty

The last few months we have been working to develop our school district budget for the 2021-2022 school year. At this time last year, we had to announce a number of lay-offs and budget reductions in order to balance our budget. Our school budgets are very tight each year, and we have little room for error. Yet, this year is unlike any other, filled with uncertainty. There are more unknowns in school funding than we have ever faced due to the pandemic. Still, by June, school districts are required by law to adopt a budget for the coming year.

What we know
We know that if we roll forward our ongoing operating expenses (excluding COVID expenses)
and project a modest increase in state funding, we will face a budget shortfall of approximately
$2.8 Million. Expenses are greater than anticipated revenue, and there are significant
complications from the pandemic that impact our operations that we must consider moving

  1. School funding is largely based on enrollment, and our enrollment is down for many reasons including an increase of families choosing to homeschool due to the pandemic. This is both a state and national trend. We are budgeting for 50 fewer students next year.
  2. Schools have been promised federal funding, as you may have seen on the news. We have been told there is funding coming to address the needs in schools due to the pandemic, but we don’t know how much additional funding or what restrictions may be placed on those funds.
  3. Some of our funding is based on the number of students who qualify for free/reduced-priced lunch (or educational benefits). However, this year all meals have been free, so not all eligible families have completed the forms necessary for the district to have an accurate count. This means a potentially significant reduction in Title I, special education and compensatory funding.
  4. Our state legislature and Governor are responsible for determining the formulas and increases for educational funding, and there is wide disagreement within the legislature. There are proposals to “hold districts harmless” and provide a 2% increase on the funding formula, but it is difficult to predict where they will end up.
  5. The funding we received during the pandemic was one-time funding that we can’t count on for ongoing expenses.

Thankful for Our District Fund Balance
As one of the few districts in Minnesota that does not have a local operating referendum levy, Princeton Schools relies on state funding formulas for revenue, leaving most of our budget beyond our control. The district has done a good job each year of balancing its budget and putting any savings into the District fund balance (or rainy day fund) for uncertain times. And there is no time more uncertain than today. The district has approximately $5.5 Million in its unrestricted, unassigned fund balance.

With the uncertainty ahead, the District administration is recommending that this year only, the Board authorize the use of the fund balance to cover the projected shortfall, which is estimated at $2.8 Million. This is a short-term solution because once that money is spent, it is gone. Similar to a family using their savings account to pay rent or utilities, you can’t do it for very long because the funds will run out. However, if ever there is a need for these emergency funds, it is now.

As we emerge from the pandemic in the coming year, we know that our students, families and community will have growing needs. We need the State’s help to fully recover from the last year in terms of learning, student social-emotional needs, and staff recruitment and retention. The demands on our educational system have never been greater. We are hopeful that our local legislators understand the challenges we face and will advocate for increases in the funding formula so our schools can avoid depleting our fund balance over time

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