ELY- ISD 696 Superintendent Anne Oelke revealed here this week that the Ely Public Schools is facing a nearly half million-dollar deficit in its 2024-25 budget. The school district’s 2024-25 fiscal year begins July 1, so the district has a few weeks to address the shortfall.
Even so, “that’s a big number for a small district with a $9 million budget,” Oelke told members of the school board during their March 25 study session.
The district’s finance committee was aware two months ago that the district was facing lower revenues and increased expenses next year. Most of district’s shortfall comes from increases in labor costs and the loss of COVID-19 relief funds. “We can’t cut that much all in one year,” Oelke remarked, “so we need to go to a two-year plan.”
Oelke stated the need for complete transparency about the budget shortfall. She emphasized that the district wants to hear from all its stakeholders for suggestions on reducing the hole in the budget.
Revenues
The finance committee started its work on next year’s budget at the end of January. School revenues are based on enrollment, but the committee couldn’t estimate those until Minnesota updated its funding models, which are enrollment-based. With the new models in hand, the committee now has determined both its general ed and special ed revenue.
“Our projection models from the Minnesota Department of Education do not come out until the first week of March,” Oelke explained. “We had to wait for those models to do our adjusted Average Daily Membership (ADM) projections.” ADM is an adjusted enrollment number which is used by the state to determine funding for each public school in the state.
ADM is usually lower than actual enrollment. For example, Ely’s enrollment for the current school year is 530, but its current ADM is 515 and the current projection for next year cuts that to 506. Though funding for enrollment-based revenues will increase next year, by about $178,000, that’s not as much of an increase as it would have were the district’s ADM to increase or remain at 515. The committee estimated enrollment-based revenues for next year increased by $178,735 compared to this year.
However, whatever general ed increase the district might experience for next year is likely to be offset by reductions in Elementary and Secondary School Emergency Relief (ESSER) Funds. Congress created the ESSER Funds as part of the COVID-19 relief legislation in December 2020 to inject additional money into school budgets. For the current school year, ESSER funds added $270,000, but that revenue will disappear effective with the 24-25 school year.
Expenses
Though the district has not completed its contract negotiations with one of its employee “bargaining units,” the finance committee felt confident enough to estimate an increase of $374,644 in wages and benefits next school year, compared to this year. The committee also estimated that other expenses like propane and office supplies would see a year-over-year increase of $20,000, pushing total projected expenditures about $395,000 over last year.
When the finance committee added it all together, committee members estimated a budget shortfall of $486,000 for next year.
What’s next
Oelke presented two pages of suggestions that staff have contributed to date. She emphasized, “Nothing right now is final, and no recommendations have been made to the board at this time.”
The list contained the predictable reductions in staff hours and positions, cuts in education programs, as well as more innovative options like increasing energy efficiencies, installing solar power, renting out meeting and auditorium space to outside groups, and four-day school weeks. Oelke said the district is open to suggestions from all its stakeholders and the community at large on lowering expenses and increasing revenues.
“We will continue to talk about this for the next four to six weeks,” Oelke said. The time constraint is because the district can’t drag its feet in putting together the budget for next year. In the near term, the finance committee will present recommendations for reductions to the school board in April. The administration will “notify and discuss reductions with identified staff.” The district must determine any faculty cuts before May 15, when teachers receive their class assignments for next year.
After Oelke presented the finance committee projections, the school board was more eager to explore ways to increase revenue, including seeking out grants and legislative initiatives, than it was to make cuts.
“When it comes to cutting positions or jobs, it’s hard because behind every job there’s a person or a family. So, these are very tough decisions,” said school board chairman Ray Marsnik. “We want to make sure that our cuts are made as far away from the students as possible.”
Marsnik, who weathered a previous budget shortfall as a school board member, reminded the rest of the board of state laws regarding school district budgets. “If we go more than three percent (in the red), then we go into statutory operating debt. What happens there is we have to come up with a plan to get out of debt. Then, if we do not come up with a plan, the state will take this district over, and then they’ll be looking at other things like consolidation.” Consolidation, as Marsnik pointed out, is contrary to the school board’s objective to remain a financially viable and independent school district.