REGIONAL — ISD 2142 is firmly on track to fall into statutory operating debt, or SOD, next year under its current budget, a financial turning point that will inevitably lead to deeper district cuts when a plan to recover is developed.
Finance Director Kim Johnson told board members that the district’s budget for the current fiscal year shows the unassigned fund balance falling well past the statutory threshold, even after accounting for planned adjustments.
“Right now, we’re looking at $1.7 million (in the unassigned fund) in the negative. And that would put us in SOD,” Johnson said. “It’s a negative 4.88 percent. You’re in SOD when you’re a negative 2.5 percent. So, we will have exceeded that, and the budget is showing us in SOD at the end of this fiscal year 25-26.”
Johnson said the district would need to reduce the projected deficit by more than half to avoid entering statutory operating debt, a target she suggested would be difficult to reach given where most district spending occurs.
“To stay out of SOD, we have to be under approximately $800,000 negative instead of $1.67 million,” she said. “I don’t think we’re going to get there because most of the district’s costs are in staffing, as it should be. Because that’s what we do. That’s our business.”
Johnson said the administration will continue revising the budget and plans to return to the issue during a board study session.
“We’re going to try everything we possibly can not to get there,” she said.
Falling into statutory operating debt will require the district to develop a plan to be filed with and monitored by the state for resolving the shortfall, a plan likely to involve significant additional cuts. Discussions have also been held about going to voters to get approval for a special operating levy next year to generate more revenue, but no decision has been made at this point.
Johnson also reviewed the district’s proposed pay levy for 2026, noting that while it represents an increase over last year, it remains below levels from two years ago. The total amount for the pay levy will be $6,934,489, representing a property tax increase of 10.7 percent. Local school boards in Minnesota don’t have control over levy rates, which are determined by formulas approved by the Legislature and calculated by the Department of Education.
The district’s financial challenges provided the backdrop for a lengthy and at times tense debate over whether to eliminate the district’s human resources director position as part of cost-cutting efforts.
Board member Jarrett Bundy opposed the move, arguing that removing an independent HR position could leave staff without a safe place to bring forward sensitive concerns.
“They need to have that HR person to talk to to get the proper way to take care of it,” Bundy said. Directing his next comment to Superintendent Reggie Engebritson, he said, “Just because they have an issue with you, they’re not going to come to you.”
Board member Ron Marinaro questioned whether HR responsibilities could realistically be absorbed by other administrators.
“That’s a big job. Do we have people that can do it?” Marinaro asked. “We can’t just hand this to people that aren’t qualified, aren’t trained in it and it doesn’t get handled.”
Board member Mallory Manick also raised concerns about where staff would turn if conflicts involved administrators.
“If there’s no HR director and there’s an issue with a director in this building or the superintendent, do they come to us then and we have to deal with the HR problem?” Manick said.
Engebritson defended the proposal, saying the administration believes it can manage HR duties internally while working to stabilize the district’s finances. While she did not provide the board with a specific breakdown about how the HR director’s duties would be distributed, she assured board members that affected staff have confirmed they could handle the additional duties.
“My recommendation, with support of the finance director, is that this is a position we feel we can cut and we can make it work,” Engebritson said.
After extended discussion, the board voted 4–3 to eliminate the HR director position, with Bundy, Manick, and Marinaro voting against the move.
The board also received updates on the district’s four-day school week and educational planning reports, but the financial outlook, and the prospect of entering statutory operating debt, dominated the meeting.
In other business, the board:
• Hired River Cheney as a paraprofessional at North Woods and also as a half-stipend assistant basketball coach.
• Accepted resignations from North Woods assistant volleyball coach Rebecca Lappi and North Woods paraprofessional Jodi Whiteside.
• Approved the termination of HR director Ebony Johnson after eliminating her position.
• Approved termination of part time Friday school-age care workers Mary Hewitt and Tuuli Koivisto due to the elimination of the program at Northeast Range.