A New Window on School Funding Trends (Part II)

 This post is part of a series on why so many school districts are announcing deficits in a year when the state government ran an historic surplus.  In our last post we pointed out that Anoka has announced a $24 million deficit, Minneapolis $90 million, Rochester $9 million and St. Paul $107 million.   Why were districts unable to balance their budgets if their increases were as high as advertised in the media?  Where did the increases get allocated?  And, who will be the victims of the cuts to follow?  Will the increases have an impact on Minnesota's achievement gap?    

 Tracking Inflation Adjusted Funding. When we discuss public education funding policy, It we cannot simply look at the increase in funding unadjusted by inflation .  Using my home school district the chart below illustrates the difference between funding increases unadjusted and adjusted for inflation.  The black line on Chart I below portrays the percentage growth in actual funding dollars per student; in St. Cloud District it shows that from 2003 to 2025, unadjusted for inflation, funding has doubled.  Yes, the 2023-2025 education budget increased the basic funding formula by 6% over two years but that increase doesn't account for inflationary costs. 

Chart I St. Cloud District Inflation Adjusted Revenues Per Student

Adjusted for inflation using the implicit price deflator (IPD) which adjusts for the typical cost of government services, we see that the St. Cloud District's revenues per student, inflation adjusted, has remained constant.  No dollars for improving educational services.   But that measure, the inflation adjusted revenue per student provides a grossly misleading picture of the education funding for all districts, and especially for urban districts like St. Cloud, because of demographic changes.

To understand the real impact of this lack of growth in real dollars, one must recognize that:

• From 2003 to 2025, the demographics of the St. Cloud district have massively changed, so that the number of students with higher educational needs has expanded dramatically.  
• From 2003 to 2025, Minnesota's education standards and requirements have significantly expanded 

This change in demographics would best be illustrated with a chart displaying the change in lower income students, English language learners and students of color.  But unfortunately, MDE has chosen to illustrate these trends with a chart, replicated here, that displays only the change in non-white enrollment and so this is the best chart available, despite its limitations.

Table II--Percentage of Non-White Students 2003-2025 St. Cloud District

 

While inflation adjusted funding in St. Cloud remained constant, its non-white student enrollment rose from 12 percent to 60 percent. At the same time lower income population tripled, and the enrollment of English language learners, predominantly East African immigrants, grew to 20 percent.  Research on the cost of providing these students  with an adequate education suggests that it will cost from two to three times other students, if not more.  And so, if Minnesota were seriously trying to comply with the constitutional requirement to provide each student with an adequate education that meets all state standards, the inflation adjusted funding for St. Cloud should be increasing dramatically.   

But that is only part of the story, and will discuss this further in Part III of the series.  Suffice it to say that the charts above for St. Cloud are replicated in a number of school districts. Minnesota is grossly underfunding districts serving lower income students, students of color, and English language learners, but our leadership at the Capitol refuses to admit it.  

2023-2024 Education Budget Produces Budget Deficits

 Most Twin Cities area School districts show deficits for 2024-2025, declares an MPR news headline.  But its not just metro area urban school districts, Sartell school district announced a $1.25 million deficit for the current year, and neighboring Sauk Rapids-Rice a $2.4 million deficit.  An Association of Metropolitan School Districts reported major deficits totaling $317 hundred million.  Examples of the larger deficits are:

• Anoka $24 million
• Minneapolis $90 million 
• Rochester $9 million 
• St. Paul $107 million
  
  

Other districts, St. Cloud, Lakeville, Osseo, were able to settle their labor contracts and balance their budgets, but overwhelmingly school districts are entering this biennium, one where the legislature had a giant surplus, facing significant and immediate financial challenges.  

Impact on Students of Color, Lower income students and EL's.  But these deficits are the tip of the iceberg.  Although the legislature included modest increases in the funding for lower income students, and English language learners, the grapevine is suggesting that these increased revenues are not translating into improved programs for the students that Minnesota's education system leaves disproportionately behind.  One exception is the new Read Act funding, which if faithfully and systematically implemented may gradually show progress in students literacy.  But when school districts are making cuts, it can be very challenging to implement new reforms, because those reforms require extra spending and extra effort, extra investments in teacher development, curriculum and administrative implementation. 

It is virtually inevitable that campaigns will be mounted to claim that more money doesn't result in better education, that public education is a black hole that takes money and makes it disappear.  The future of public education in Minnesota depends on developing a sound explanation for what is happening in public school district this year.   Here are some conversation starters:

(1)  School Funding Adjusted for Inflation is Not Materially Increasing.  I have access to an MDE spreadsheet that traces per student funding trends for the state and individual school districts from 2003 to 2025.  In District after District funding per student adjusted by the consumer price index (CPI), or the implicit price deflator (IPD) has remained unchanged or nearly so.  The St. Cloud district is a good example: IPD inflation adjusted, the district's funding per student has remained constant.  One can quibble whether the IPD or CPI or some other index can be used, but the difference is immaterial, because of the change in what is being required of St. Cloud and other districts. 

That's no big deal, you say; they are just the same.  What's the problem?  The answer is that the students are not the same, and what the state requires of the district has also dramatically changed.

(2) Demographic Changes--Increased Educational Challenges.  In almost every district where funding inflation adjusted remains constant, one observes a major change in the demographics of students.   Using St. Cloud District as an example, since 2003, the non-white student enrollment has gone from about 12 percent to over 60%.  During that same period the percentage of lower income students has more than tripled, and the enrollment of English language learners has gone from nominal to over 20 percent.  And, during this time period, the state requirements for educating these students has increased markedly, and that's a good thing.   But the net result is that the extra money provided to districts to assist with greater challenges, compensatory funding and ELL funding, is being wiped out by inflation.  The District is receiving the same inflation adjusted funding to do a more costly and demanding job.

(3)  Radical Local Control.   Minnesota's radical local control system radically disadvantages members of the education community with the least power.  When money is tight, the winners are always going be be the most powerful.   But that's a conversation for another day. 

What's the book on the 2023 budget:  it produced substantial and well deserved financial gains for employees; it produced some troublesome budgetary deficits, and it very likely produced little or no improvements for Minnesota's students that Minnesota has historically left behind.  Indeed, it is likely that the victims of the cuts that are about to behind will be those students, and of course, the young teachers who will be laid off when the cuts come.