State budget problems keep squeezing Minn. schools

Each summer as she sets up her classroom for the fall, elementary school teacher Kate Schmidt said it seems like she spends more of her own money for school supplies, her classes get larger and she has fewer colleagues.

"I remember people telling me that if you get through your first year of teaching, you're good to go," said the 22-year teaching veteran. "Well, I work much harder now than I ever did as a first-year teacher."

Schmidt, 43, teaches fourth-grade in the Rosemount-Apple Valley-Eagan district in the Twin Cities suburbs which, like most districts, is coping with state funding that has failed to keep up with inflation for nearly a decade. Then in July the Legislature and Gov. Mark Dayton held back another $700 million to solve the latest budget deficit.

The repercussions have rippled through Minnesota schools, from classrooms like Schmidt's to district offices and community ballot boxes. The effects at Rosemount-Apple Valley-Eagan are typical.

The district has about 27,000 students, making it the state's fourth largest. Its enrollment has held steady for the past 10 years. Like about 90 percent of Minnesota districts, local taxpayers have approved additional taxes to support their schools.

Jeff Solomon, district finance director, said that the latest rounds of cost shifting in July forced the district to borrow $15 million to pay its bills. It was the first time in recent memory the district had to do so, he said, and the interest and transaction costs were about $50,000.

"It is equivalent to the cost of a new teacher in our district in salary and benefits," he said.

Solomon said he expected the decision to hold back another $700 million would force the district to borrow $18 million to $20 million more later this year.

"Interest rates could rise and that would make the cost of borrowing go up exponentially," he said.

For decades, the state has held back part of the per-pupil payments it owes schools to accommodate changes in enrollment. If fewer students than predicted showed up, the state would keep the money.

The original holdback was 10 percent, but has grown since 2003 as the state faced large deficits for most of those years and had a constitutional requirement to balance the budget.

As part of the budget deal approved in July to end the nearly three-week shutdown of state government, state leaders decided to push back payment of 40 percent of the per-pupil money for schools into the next fiscal year. The deal included an extra $50 per pupil to help districts cover the costs of borrowing money to fix their cash-flow problems.

Joel Sutter, a financial adviser for the Roseville-based financial firm Ehlers Inc., which helps schools get loans, predicted that over half of the state's districts will borrow money to get through the next school year.

"Districts have less cash now because of the shifting the state has done," he said.

All that shifting comes on top of nearly 10 years of tight education funding. The Minnesota Department of Education has calculated that when adjusted for inflation, state K-12 education funding decreased 5 percent to 14 percent from 2003 to 2011, depending on the adjustment method used. Meanwhile, property tax levies per student more than doubled even after adjusting for inflation.

Overall education spending fell behind the national average. The National Center for Education Statistics reported that from 2003 to 2008 the state's total per pupil spending dropped from 19th in the nation to 22nd in 2007 and 2008, which was slightly below the national average.

At the same time, Minnesota's pupil-to-teacher ratio improved slightly from 2003 to 2008, from 16.3 to 15.7, but remained over the national average of 15.3, according to the center. Both Wisconsin (14.7) and Iowa (13.6) had smaller ratios in 2008 than Minnesota.

The state's recent financial troubles have left districts scrambling. According to the Minnesota State School Boards Association, 133 school districts -- or nearly 40 percent of the 336 independent state districts -- are considering going to voters in the fall for levy referendum renewals or other funds.

"Now that schools are forced to borrow and take out loans, it makes more sense to get additional operating money than to borrow and pay a chunk of it to interest," said Greg Abbott, an association spokesman.

Districts have managed the financial pressures in many ways and most of them can be seen in Rosemount-Apple Valley-Eagan, which has cut millions in spending in recent years. A district spokeswoman said it was difficult to tell how that has affected student achievement.

"Our district has cut $33 million in three years, so there have obviously been programming reductions and increases to class size that make teaching and learning more difficult to accomplish," said Kim Craven, a district spokeswoman.

Solomon said the district was considering asking voters for more money this fall. Two years ago, it asked voters to raise the levy to the maximum allowed by law. It failed and the district made about $8.5 million in cuts -- including 47 jobs.

In 2005, the district had 2,064 full-time employees but only 1,887 last year. The cuts didn't stop there. Last fall, it dropped middle school baseball, softball and football. It started bus service a half-mile farther away from each school, so more students must either walk or pay a fee. Teachers have less access to lamination machines and copiers.

Fees have soared. Middle school sports that weren't eliminated went from $50 to $100 in 2010. Varsity football rose from $120 in 2003 to $185 for this year. It costs $800 for the varsity traveling band at Rosemount High School, up from $475 in 2003.

District figures show fee income more than doubled from $1.56 million 2004 to $3.2 in 2010.

Mark Brossart, who has put two children through the district and a 15-year-old daughter, Emily, who now plays in the Rosemount High School band, said another change is how extracurricular activities have come to depend on booster clubs.

Clubs once paid for the extras, he said, but now, "it is absolutely integral to the success and operation of the activity."

Solomon, the finance director, said those booster clubs contributed $704,919 to school activities in 2005. That number soared 74 percent to $1.29 million in 2010.

Rosemount High School band director Steve Olsen said the program has tried to hold down costs for students, but that means he had to put more time into fundraising.

"I do hear from parents a gentle grousing," he said. "We're constantly asking parents for help with things because we're always doing yet another fundraiser."

He's more worried about the students. The constant sales of gift wrap, cookie dough and coupon books comes on top of homework and practice for the marching band, which won state championships from 2006 to 2010. He said that it might be too much. "It has always been a concern," he said.

Olsen said he knows his own teaching sometimes suffers because of fundraising demands.

"Sometimes, yea, unfortunately, the academic side of things will have to take a back seat just making sure we can pay the bills," Olsen said. "It's really frustrating."

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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