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Budget Letter
Budget Letter
Feb. 23, 2017
 
Budget letter from Minneapolis Public Schools Superintendent Ed Graff to Minneapolis Public Schools Board of Education
 
Dear Directors,

When I started in this role back in July, I made a commitment to you to be transparent, to establish a leadership team that could drive accountability, and to be good fiscal stewards of our school resources. With these promises at the forefront, I am reaching out to you as we head into the district’s official budget season – my first as your leader – for two reasons.

First, I want to share with you a simple reality: for the past five years, MPS has routinely spent significantly more money than it has – resulting in mid-year budget shortfalls that jeopardize the stability of our schools and their management. You may recall seeing the audit of last year’s finances which found a $21 million shortfall mid-way through last year. Unfortunately, this wasn’t an isolated incident. During each of the past five years, auditors uncovered similar mid-year shortfalls totaling anywhere from approximately $326,000 to $38 million.

Second, I want to assure you that I have a vision for how we move forward in a way that preserves our commitment to managing class size and maintains our commitment to equity this coming year. That vision also includes significant community engagement over the next academic year around bigger picture measures that would allow us to get to a structurally balanced budget by the 2019-2020 school year – something we have not had since 2010-2011.

So what does this mean for the coming year?

First, I directed my team to take a dramatically different approach to our budgeting by identifying our budget gap on the front end of the budget cycle, rather than overpromising and scrambling to address a mid-year shortfall when it surfaces. As a result of this approach, we have uncovered a $28 million budget gap for this coming academic year. There are a number of reasons for this gap, but cost drivers include everything from increased special education compliance costs to salary increases agreed to in last year’s contract negotiations to additional transportation costs and inflationary increases.

My plan to address next year’s shortfall includes taking the following steps:

·         A 10 percent reduction to Central Services – including significant restructuring of our Academic services, as well as reductions to Central Office staff and staff funded centrally who may work in schools – minimizing any impact to classrooms as much as possible.
·         A 2.5 percent reduction to school allocations. Principals and site councils will have some discretion for how to allocate the budget dollars they receive, but class size and equity must continue to be prioritized – consistent with our promise to taxpayers made during the last referendum.
·         A one-time use of our reserves, which currently stands at $54 million, to cover the remaining gap. This would bring our reserves to between 5 and 6 percent of our total budget. We would work to rebuild those reserves over the next four years.

Second, in order to get to the larger goal of a structurally balanced budget by the 2019-2020 school year, I am eager to engage in dialogue about what it means to be educated in the Minneapolis Public Schools – and how we can innovate to deliver services differently and drive improved outcomes.

To accomplish this goal, over the next year, I have directed my team to lead districtwide conversations about the underlying delivery models for which we currently budget. We need to evaluate, for example, our facilities’ footprint, transportation costs, the adult to student ratio and staffing mix in our schools – and, ultimately, the programs that are effectively driving achievement and improved academic outcomes for our students. These conversations are urgent and are the only path forward if we are to meet the goals and objectives set in the District’s Strategic Plan “Acceleration 2020.”

I want to assure you that, in spite of these budget challenges, we will continue to prioritize the kinds of investments that will lead to our district’s continued success. We will invest in our values, putting Minneapolis Public Schools on a strong financial foundation while driving improved outcomes for all of our students.

I look forward to officially kicking off this conversation during our next Finance Committee meeting this Thursday and encourage all of you to attend, as you are able. I am attaching the memo I sent to the Committee members today. This will be a crucial budget cycle. Thank you for your confidence in me and my staff. I look forward to your continued support and partnership.

Ed Graff