Minnesota schools fear state will slash funding

A perfect storm of bad financial news could be brewing for Minnesota schools.

With state funding for education already frozen through June 2011, schools must now face the distinct possibility of a cut during the 2010 legislative session to help erase a $1.2 billion state deficit.

Not only that, but there's also a chance it will be years before the state makes the payments to schools that it has delayed to help balance the budget. This school year, the money held back through so-called "funding shifts" amounts to almost one quarter of state education aid. Payment has been shifted to a later date, but given the state's financial pressures, some wonder where the money will come from.

On top of that, hundreds of millions of dollars in federal stimulus aid will dry up after next year. This comes at a time when school boards are negotiating two-year teacher contracts. That's likely to weigh them down with yet-higher expenses. All that ends up creating a school funding picture that some say hasn't been seen in a generation.

"I think this is rising to the occasion of the 1981-1983 crisis," said Charlie Kyte, executive director of the Minnesota Association of School Administrators and a former schools superintendent. Back then, Kyte was superintendent of the small Eden Valley-Watkins School District and experienced firsthand what it meant to have funding cut by the state. "I remember sitting down and literally having to lay off my friends and neighbors," he said.

"This is, by far, the very worst year I have seen," said nine-term Rep. Mindy Greiling, DFL-Roseville, chairwoman of the House K-12 Education Finance Division. "I just can't believe I have to be the finance chair in a year like this."

In the early '80s, a recession resulted in cuts in education aid that forced schools to lay off scores of teachers and shut down schools. Some districts -- including Robbinsdale, Minneapolis, Osseo and Anoka-Hennepin -- have been shutting down schools recently to ease the financial pain. Less state money could mean more of that. Or, said Anoka-Hennepin school board chairman Tom Heidemann, it could result in "a pretty significant restructuring of how we offer programs to kids."

Two views on cuts

Total state K-12 funding, the largest state expenditure, amounts to about $7 billion a year. How large aid cuts would be this year -- if they occur -- remains uncertain.

"I have heard as high as $500 million, which translates into about $500 per pupil," Kyte said. "I have also heard as low as $100 per pupil." Kyte said that means the state's largest district -- Anoka-Hennepin -- could lose as much as $20 million or as little as $4 million. That would be a big blow to a district already trying to make $18 million in cuts from next year's budget. Minneapolis schools chief financial officer Peggy Ingison estimated that a 1 percent cut in basic aid to the district would mean a loss of $2 million.

But not everyone is convinced schools are going to take a hit.

"I'd be very surprised if we cut education," said Rep. Randy Demmer, R-Hayfield, who is on both the House K-12 Education Finance Division and the House education policy committee, and was a school board member for more than 11 years. "I just think there are other areas where we can put things off that would do less long-term harm to the viability of the state than to cut education."

But Gov. Tim Pawlenty, who, unlike the DFL-controlled House and Senate last year, supported funding increases for schools, has signaled his stance might change in light of some of the early reports of teacher contract settlements.

"One thing that we are particularly interested in learning more about are school districts who claim they aren't receiving enough money from the state, but somehow have funding for salary and benefit increases," Pawlenty spokesman Brian McClung said recently. McClung pointed to some settlements costing districts between 5 and 10 percent more over the two-year contract periods. Even some DFLers are showing impatience with teachers who continue to push for salary and benefits increases with the state stuck in such a deep budget hole.

"If we're giving raises to public employees right now, I guess I'd like to ask where the money is coming from to pay for them," said Sen. Kathy Saltzman, DFL-Woodbury, a member of the Senate's K-12 education committee. "Their salaries are being paid by taxpayers who have lost their jobs, are working fewer hours, not receiving raises and getting reductions of benefits."

About delayed payments

When Pawlenty balanced the state's books through "unallotment" last summer, his plan included about $1.7 billion in education funding shifts for the two-year budget period. What effect a ruling this week by a Ramsey County judge challenging Pawlenty's unallotment authority will have is unclear. The ruling dealt specifically with a nutrition program, not schools.

Some educators and legislators think that if the state could hold off on making its deferred payments until its health is restored, that could forestall a cut to basic school funding.

"The schools would rather have a shift than a cut," Greiling said.

There could also be a proposal that the state give school districts more authority to levy property taxes without having to go to voters in referendums.

Not all districts are suffering equally. Those that have managed to pass levy requests for money have been able to hold their heads above water. So have those with big rainy-day funds. But if the state's dire financial picture continues much longer, it's going to be a rare school district that's not in a world of hurt.

"Our school districts have already laid off 900 staff this year," said Scott Croonquist, director of the Association of Metropolitan School Districts. "And that was with zero increases coming from the state. That will only get worse if there are cuts at the state level."

Norman Draper • 612-673-4547