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Table of ConTenTs
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 A Statewide Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 I. All Respondents II. No Operating Levy III. No Election in 2010 IV. Won 2010 Election V. Lost 2010 Election VI. Rural schools Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Methodology

Minnesota 2020 - www.mn2020.org

Superintendents have spoken: The funding system for public schools in Minnesota is broken.

exeCuTive summary
Superintendents have spoken, and the overwhelming response is that the funding system for public schools in Minnesota is broken. In a Minnesota 2020 (MN2020) survey, conducted at the end of the 2010-2011 school year, 93 percent of superintendents answered no when asked if the current education funding model is good for schools. While superintendents expressed many concerns over how funds are distributed depending on geographic region, population, and student need, the main issue is shrinking state funding for K-12 education. This is causing school districts to increasingly rely on local levies for adequate school revenue. By Fiscal Year 2013 (the 2012-13 school year), real per-pupil state aid to schools will have declined almost 13 percent over the decade.1 Thats taking into account the legislatures recent $50 per pupil increase to the base funding formula. Nearly every Minnesota school district will be operating with less per-pupil, inflation-adjusted state aid for the 201213 school year than in the 2002-03 school year. The states failure to adequately fund schools has forced superintendents to cut staff, resources, extracurricular activities and other vital educational services. These reductions, however, havent been enough to offset the states education underfunding. To prevent further cuts, school districts statewide have gone to voters asking for levy increases.

is the current funding model good for schools?

93% said no

In FY 2003, the average statewide levy was $491 per-pupil. By FY 2013, the average inflation-adjusted levy is projected to be $1,157 per-pupil, a $666 increase using 2003 dollars.2 That doesnt account for future levies between now and FY 2013, which are sure to come as a result of state education funding shifts to balance the general fund budget.

1 2

Minnesota Department of Education. District Revenue FY 2003 - FY 2013 End-of-Session 2011, August 10, 2011. http://education.state.mn.us/MDE/Accountability_Programs/Program_Finance/Forecasts_Governors_Budget/index.html The Minnesota Department of Education uses the Implicit Price Deflator as an inflation calculation. Its numbers are pegged to 2003 dollars. http://education.state.mn.us/MDE/Accountability_Programs/Program_Finance/Forecasts_Governors_Budget/ index.html

Minnesota 2020 - www.mn2020.org

Despite levy increases, total per-pupil revenue statewide is still below 2003 levels by 3.2 percent. As a result, 80 percent of superintendents responding to MN 2020s April 2011 survey said without changes to this state aid/property tax funding model, educational quality will worsen, with most of the rest saying it will stay the same.

Without change, what will happen to education quality?

stay the same

The unease over inadequate funding is growing among Minnesota superintendents. When asked in the same MN2020 survey back in 2007, 49 percent of superintendents said their districts would not be on solid financial footing the following school year. At the time, schools faced about a 12 percent real per-pupil state aid cut. In the 2011 survey, the number of superintendents unsure of their districts financial footing jumped to 67 percent, as years of cuts had made a deep impact. Compounding a decade of underfunding, have been two biennia of delayed state payments to schools, totaling more than $2 billion. As in the FY 2010-11 biennium, policymakers again delayed payments to schools in order to balance Minnesotas FY 2012-13 budget. Presented with cash flow problems, schools are forced to either burn through reserves, take out loans or go back to voters for levy increases.

80% said Worse

Generally voters have approved levies to fund extras or a districts capital improvements. However, the combination of recent state funding declines and delayed funding are forcing school districts to rely on levies for traditional operating costs to maintain educational quality, reasonable class sizes, and basic school activities. By 2010, at least 90 percent of Minnesota districts had some form of an operating levy. With funding instability coming from St. Paul, schools are extremely limited in how far ahead they can plan, not knowing when or how much revenue they will have, or when the state will finally pay them what theyre owed. When expenses rise, districts have no guarantee that revenues will rise enough to match costs, even with a local levy.

Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

Although some districts have more resources than others, all are feeling the states underfunding crunch in some way. Their responses in our survey speak loud and clear: Without funding, schools will have to do less with less. Governor Pawlenty made an absolute mess out of fair public school funding in Minnesota during his eight year reign. Our education quality will stay the same if we do not face increased costs. It is hard to see our costs not rising. For the sake of Minnesotas future, we need lawmakers who will refuse to shift costs onto schools. We need policymakers who will stand up for students. We need leaders who will recognize that Minnesotas schools are not a burden to be funded, but our most valuable investment in the future.

80% of superintendents said without changes to this state aid/property tax funding model, educational quality will worsen.

Minnesota 2020 - www.mn2020.org

findings

Inflation-adjusted, state aid to schools is on a decade-long decline. By the 2012-13 school year, real per-pupil state aid will have declined by nearly 12.8 percent over the decade. Only 37 percent of superintendents responding to MN2020s survey expect their district to be on solid financial ground in upcoming school years. 93 percent of superintendents surveyed feel the current education funding model is broken. 80% of superintendent surveyed said that educational quality will get worse if the legislature and governor do not change the current state aid/property tax funding model. Fewer and fewer districts are able to fund their schools without levies. At least 90 percent of Minnesota school districts have an operating levy in place. Of respondents not under an operating levy, 30 percent said they expect to run one in the next year. Districts where the 2010 levy election failed will have to make more significant reductions in the next year, laying off an average of eight teachers.

12.8%

37% 93%

9 9

80%

90% 30% 8

9 9

Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

reCommendaTions

9 9 9 9 9

Significantly increase the base school funding to levels that will adequately fund education. Payback school funding shifts; stop using education money to balance the states general fund budget. Seek a balanced approach to state budget shortfalls that pairs cuts to non-educational services with progressive revenue increases. Re-work the state school funding formula to more adequately address funding disparities. More adequately fund special education and other state and federally mandated services.

minnesota 2020 recommends:

Significantly increase the base school funding to levels that will adequately fund education.
Minnesota 2020 - www.mn2020.org

inTroduCTion
In April 2011, MN2020 surveyed Minnesotas superintendents to determine schools overall funding status in light of the near decadeslong state funding decline. The surveyed also sought to identify the role property tax levies played in recovering lost state dollars and superintendents overall ability to provide an adequate education in a time of declining investments. MN2020 conducted the same survey in 2007. In 2007, school districts faced a roughly 12 percent real per-pupil state funding decline. Many responses in both surveys had a similar negative outlook. Some superintendents are less hopeful now that inflation-adjusted funding levels will ever recover to FY 2003 levels and have adjusted to what they call a new normal in funding.

Many responding superintendents exhausted all short-term measures with minimal classroom impact, such as cutting administrative staff, extracurricular activities and after school programs, and making bussing routes more efficient. One rural superintendent reports cutting entire programs, including all industrial technology classes. That administrator responded: The current level of funding is destroying education. Property tax levies have kept their districts from making even more drastic cuts, responding superintendents say; however, theres only so much they can levy and now face legal and voter limitations. When asked how the current state aid/property tax funding system is affecting education quality, half of responding superintendents say its getting worse, with only 3 percent feeling it will improve. However, when asked if the system isnt improved in the next two years, 80 percent say it will worsen, with only 1 percent optimistic for advances in education quality.

The 2007 report, A Chilling Call to St Paul, can be found at http://bit.ly/chillingcall

Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

a sTaTeWide PersPeCTive
Weve reduced for so long that there is now no way to keep cuts out of the classroom, said Robert Slotterback, superintendent of Richfield Public Schools in a follow-up phone interview. Next years cuts may directly impact class size.

richfield has made reductions for eight of the past ten years.

Richfield, a 5,000-student district that shares its northern border with Minneapolis, has made reductions for eight of the past ten years. It headed into the 2011-2012 school year facing a $1 million dollar shortfallwith another two million dollar shortfall projected for the 2012-2013 year. Its budget is roughly $50 million yearly, with almost 25% of its operating revenue now coming from local property taxpayers.

In south central Minnesota, the Fairmont school district faces a $1.5 million shortfall that will cause significant reductions, directly impacting students, according to Superintendent Joseph Brown. Fairmont had to cut 40 positionsa major shift in a district that serves about 1,700 students. It was everything: teachers, staff, cooks evenyou name it, Brown says.

fairmont now to what districts can do without state support. Its a stressful time for lives by the motto administrators, staff, teachers, childrentheres not a lot of security out its up to us. there, Brown said.
On top of state aid cuts, all districts will have 40 percent of their state aid payments delayed, causing a cash flow issue in many districts. As of late July, northeastern Minnesotas Cook County Schools were still calculating their increased borrowing needs. Cook County Superintendent Beth Schwarz commented that not only would districts have to figure in the cost of paying more interest, but now they will be forced to spend down cash reserves that would have otherwise have been earning interest. In other words, the states payment shift will cause districts to owe more and earn less in interest. Former Prior Lakes superintendent Tom Westerhaus commented In my 10+ years of working with schools, it always feels like every year you are being asked to do more with less. He went on to say that levies are no way to fund schools because it requires district officials, especially superintendents, to become enmeshed in local politics in order to get the community support necessary for a successful election.

Fairmont now lives by the motto Its up to us. But there are limits

on top of state aid cuts, all districts will have 40% of their state aid payments delayed.

Minnesota 2020 - www.mn2020.org

resulTs
i. all respondents
There needs to be a strong financial and philosophical commitment to education. Schools are being asked for more and more with no resources to accomplish these additional tasks. Change can be good if it is done in a positive and productive manner, not be continually dominate by political agendas. A majority of the respondents said they represented small, rural districts. Out of 202 respondents who answered this question, with one skipping it, 69 percent said they represent rural districts, 22 percent represent suburban districts, 6 percent represent districts in outstate regional centers, and 3.5 percent represent urban districts (Table 1-1). Describing the size of their districts, 44 percent said their district had fewer than 1,000 students, 39 percent said 1,000-5,000 students, 12 percent said 5,000-10,000 students, 4 percent said 10,000-20,000 students, and 2 percent said their district has more than 20,000 students (Table 1-2). The following graph gives a sense of how the survey demographics match up to Minnesota districts overall. Proportions of respondents at each school size are similar between survey respondents and all districts. Information about state public schools comes from the Minnesota Department of Education. Most districts now have to rely on levies to make ends meet. Eighty-four percent of respondents said that their districts are currently on operating levy while 16% replied no.
Table 1-2: disTriCT enrollmenT ComParison Table 1-1: desCribe your disTriCTs loCaTion

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Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

The 84 percent of respondents with a levy were asked if they ran a levy question in 2010 and whether that question passed or failed. (Table 1-3) Of districts that did run a question in 2010, 25 districts won the levy question and 18 districts lost the levy question. There were 126 districts under levy that did not run an election in 2010. These proportions correspond with the data about Minnesota schools overall. In 2010, only 10 percent of Minnesota districts had no operating levy. Sixty-six percent of districts did have an operating levy, but didnt run an election in 2010. Thirteen percent of districts ran a levy election and won, while 11 percent ran a levy election and lost.

Table 1-3: levy sTaTus among survey resPondenTs

ii. no operating levy

We cannot continue to do more or even the same with less! Of the districts responding to MN2020s survey with no current operating levy, 30 percent expect to put a levy question on the ballot within the next three years. An overwhelming 71 percent of those respondents were in rural areas. Sixteen percent identified themselves as suburban, and 7 percent each identified as Table 2-1: outstate regional centers and urban districts (Table 2-1). loCaTion of no-levy disTriCTs By enrollment, the numbers break down as follows: 9 Fewer than 1,000 students 58 percent 9 1,000-5,000 students 39 percent 9 5,000 and 10,000 students 3 percent 9 There were no respondents in other size categories. Nearly half of these districts, 42 percent, face declining enrollment. However, 23 percent reported growing enrollment, with steady enrollment at 35 percent of districts. When asked why their school districts did not have a levy, 69 percent said that their community wouldnt support one. A quarter of districts without levies said they didnt need one because of stable finances, and in six percent of districts school boards would not approve one (Table 2-8).

Minnesota 2020 - www.mn2020.org

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iii. no election in 2010

If local taxpayers dont support school referendum efforts, funding gaps will continue to widen. Consistent with other results, nearly 70 percent of responding rural schools didnt have a 2010 levy election. Almost quarter were in suburbs, with 6.3 percent in outstate regional centers, and about one percent in urban areas. They represent mostly smaller districts: 9 Fewer than 1,000 students 40.5% 9 1,000-5,000 students 38.9% 9 5,000-10,000 students 15.9% 9 10,000-20,000 students 3.4% 9 Over 20,000 students 1.6% Districts without a question this year will have to ask for money again soon. Twenty four respondents replied that they anticipated their school board would place a levy question on the ballot in 2011, but when asked if they anticipate Table 3-1: another levy within the next three years, the number solid finanCial ground in 2011-2012 of respondents jumped to 80. More than 30 percent of superintendents queried in this section, or 35 respondents, replied that they felt their district should have had a levy question on the ballot in 2010. About three-quarters (72.2%) of respondents said their districts were on solid financial footing this year, but that number drops to 35.5 percent when asked about next year. (Table 3-1)

iv. Won 2010 election

Without the operating levy, we would really be sunk. Operating levies are increasingly important to many school budgets. In 2007, responding superintendents who had just passed a levy reported, on average, nine percent of their districts budget came from levies. In the 2011 survey, the average jumped to 11.5 percent. When asked to anticipate the following year, 2011 respondents predicted that an average of 13.2 percent of the operating budget will come from levies. Even levy increases arent enough to outpace declining state funds. When asked if their district was on solid financial ground this year, 65.2% replied yes, in light of the recent levy increase. When asked about next year, three-quarters said their district would not be on solid financial ground, even with the new levy funds. The decrease of funding from the state pulls the rug out from under districts feet.

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Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

The reality of the new normal can be seen comparing these results to the 2007 results. In 2007, districts who won a levy reported more financial stability after the levy election, not less. In 2010, districts felt less stable financially regardless of whether they won a levy or not, mostly likely due to the dramatic state funding cuts. Districts who won their 2010 levy elections were mostly small and rural. Geographically, 72 percent of respondents in this section were rural, 16 percent suburban, 8 percent urban, and 4 percent outstate regional centers.

in 2010, districts felt less stable financially regardless of whether they won a levy or not, mostly likely due to the dramatic state funding cuts.

v. lost 2010 election

We have reduced and cut down to minimal levels of teaching staff and administration. We still offer some electives but are afraid of losing those in the near future. Seventeen respondents reported that they lost their 2010 levy election. Districts that lost levy elections in 2010 now face grim financial problems. Of these schools, an average of 13.4 percent of their operating budget comes from previous levies. This means that almost 13 percent of their budget depends on the wax and wane of popular support not related to the needs of students.

every one of these districts reported that they anticipate another levy question on the next ballot.

Most of these districts will have to lay off teachers to make up for budget shortfalls. As shown in the chart below, the number of teachers to be laid off varies by district. Every one of these districts reported that they anticipate their school board will place another levy question on the next ballot. Although levy questions are difficult and often contentious ways to raise money, schools cant afford to not pursue them.

Understandably, these districts reported their financial outlook was dire, with 64.7 percent saying their district was not on solid financial ground this year, and 76.5 percent with a negative financial outlook for the following year. These districts break down as follows: 9 72% rural 9 7% outstate regional centers, 9 22% suburban. When asked to describe the size of their district, 39% had districts of less than 1,000 students, 56% have 1,000 to 5,000 students, and 6% have between 5,000 and 10,000 students.

Minnesota 2020 - www.mn2020.org

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vi. rural schools

If we do not get an increase in state funding soon, we will be in serious financial trouble. We cannot afford to make cuts without seriously harming our students education, but without funding increases, we will have to. Out of Minnesotas rural school districts 139 responded to our survey. Of those, 61.9% said their enrollment was fewer than 1,000, and the other 38.1% said they had between 1,000 and 5,000 students. Of rural districts responding to the survey, 84.2 percent are currently under levy. Of those schools, 73.5 percent did not run an election in 2010. More than 92 percent of rural districts said that the current funding model is bad for schools, with almost 70 percent responding that the state should fund all K-12 education.

Table 6-1: rural sChools: levy sTaTus

Currently under levy 84.2%

When asked about the effect the current funding model has had on the quality of their schools since 2003, 53.5 percent said that it has made schools worse, 42.5 percent said quality has stayed about the same, and only 3.7 percent said it has improved. When asked what would happen to the quality of education in Minnesota if the governor and state legislators do not change the state aid/property tax model, 80.3 percent said it would make education worse. About 18 percent said it would probably stay the same and 1.6 percent said it would get better. Of the districts that have a levy but didnt run an election in 2010, 24 percent anticipate the school board will run a levy in the next year, but that number jumps up to 68 percent when asked if they anticipate another levy in the next three years. Seventy percent of the districts not asking a levy question this year said their district is currently on solid financial footing, but that number drops almost by halfto 39 percentwhen asked about next years financial stability. Of the districts that ran a 2010 levy election and lost, 100% said they anticipate their school board will put another question on the ballot in 2011. 67% said that their school enrollment was declining. 73% cited declining school-age population as a cause; other major reasons given were aging of the community and open enrollment. These districts will have to cut an average of 2 teachers as a result of the failed levy. 75% said the district will not be on solid financial ground next year. Even rural districts that won a 2010 levy are feeling the crunch from decreased state funding. 63% said their district is on solid financial footing this year, but that number drops to 23% when asked about next year. Put another way, 77% expect unstable financial ground in the year ahead.

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Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

ConClusions
The foundation aid formula needs to be adjusted to provide better equity, accessibility, and stability to the entire funding process. The responsibility for providing the base educational program rests with the state government (by state constitution) and it needs to be consistent across the State of Minnesota. Inadequate funding that arrives late has left Minnesota superintendents with unstable and insufficient financial resource to educate our students. As Minnesota 2020s 2011 superintendents survey shows, frustration and fiscal instability is growing among school community leaders.

In response to double-digit, inflation adjusted declines in state per-pupil funding, school districts have cut staff, extracurricular activities, and educational programs and have modified school transportation routes, shifting more of the cost onto parents. In an effort to keep reductions from slamming the classroom, superintendents have gone to voters for school levy referenda in at least 90 percent of Minnesota districts. Equity for students shouldnt be based on zip code and who can or cant pass a referendum, one rural superintendent responded in the MN2020 questionnaire. Eighty percent, 143 superintendents, answered that without changes to the current state aid/ property tax system, the quality of education will continue to degrade. A superintendent from an outstate regional center clarified the groups response: The quality of education is the same due to the hard work of staff. How long can we ask staff to work harder with frozen salaries and continued negative comments from outside forces? We cut administration, teachers, support staff and still offer a quality education for students, but how long can this last? It has lasted too long already. Every biennium, policymakers say they will hold schools harmless yet, by FY 2013, real per-pupil state aid to schools will have declined by 12.8 percent since FY 2003. The time is overdue for leaders who will not only champion public education, but back up their words by supporting a progressive tax system that ensures the most fortunate Minnesotans pay their fair share.

inadequate funding that arrives late has left minnesota superintendents with unstable and insufficient financial resource to educate our students.

minnesotas public schools, once our state pride, now function under a new normal

Minnesotas public schools, once our state pride, now function under a new normal where education cuts, staff layoffs and higher property taxes are routine. In a time when were asking schools to increase quality and prepare our students for a 21st century workforce, conservative policy dictates that we retreat on our obligation to properly fund this investment.

Minnesota 2020 - www.mn2020.org

15

As those at the top of the education community report in our survey, schools function better when class sizes are smaller, students can get assistance from nurses, social workers, and guidance counselors, and teachers are well-supported. Superintendents are understandably frustrated and discouraged. Rather than having to defend this program or that, they now have to defend the entire purpose of public education itself. Superintendents understand the full picture of public education, from funding mechanisms to classroom practice, and thus are in the best position from which to inform legislators about what schools need. The question now is: Who is listening? Who are the lawmakers willing to act on the expertise of experienced education leaders? Who is willing to stand up for Minnesotas future?

Rather than having to defend this program or that, superintendents now have to defend the entire purpose of public education itself.

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Declining Funding, Degrading Quality: 2011 Survey of Minnesota Superintendents

aPPendix
methodology
In April 2011, Minnesota 2020 sent out a questionnaire to Minnesota school superintendents. This was the same survey MN2020 sent in 2007, with minor date changes. It was created by MN2020 staff using the online service SurveyMonkey. The Minnesota Association of School Administrators (MASA) delivered the survey to approximately 350 superintendents via its email list on behalf of MN2020. All results were reported directly to Minnesota 2020. The email contained a link to the online questionnaire, and could not be accessed any other way. The Survey was sent April 1, 2011 and the final survey was completed May17, 2011. In all, MN2020 received 203 responses to the survey, though it is important to note that not every respondent answered every question, because some sections were not applicable to certain respondents. In exchange for their honest opinion, superintendents were guaranteed anonymity. For this reason, demographic information is limited and self-described. The survey began with a section of general questions, after which respondents were directed to one of four sections: No Operating Levy, No Election in 2010, Lost 2010 Election, and Won 2010 Election. Once directed, respondents were not able to access the other sections of the survey. All questions were single response, with the exception of one free-response question at the end.

Minnesota 2020 - www.mn2020.org

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Minnesota 2020 is a progressive, non-partisan think tank, focused on what really matters.

2324 University Avenue West, Suite 204, Saint Paul, MN 55114 www.mn2020.org