General Budget Questions

General Budget Questions

General Budget Questions

I thought Superintendent Graff said this deficit was getting cleared up last year. Why are we facing this again?

We made difficult one-time cuts last year, but didn’t change ongoing costs, so last year’s $16.5 million deficit will likely continue this year. The inflationary costs of annual salary increases will be an estimated $10 million. And then the increases in benefits are estimated to come in at around $7 million. Other inflationary costs are not yet included, so a $33 million deficit is projected not definite. It could go up or down.

How can I see the budget for my child's school?

Go to the MPS Budget Dashboard for easy access to school and department revenues and expenses. 

How are we supposed to know the budget (where the money goes) if you don’t even know?

MPS has introduced a very helpful tool, the MPS Budget Dashboard. This allows anyone to identify specific areas of the budget, departments and schools that they’d like to examine more deeply.

Do we have to pay back the deficit?

A budget deficit means that MPS expenses are greater than incoming revenues. We don’t “pay back” a deficit. The only way to eliminate a deficit is to either increase revenues or decrease spending. MPS is working to do both.

MPS does need to replenish its Fund Balance (our district savings account), which has been emptied after seven years of accessing it to cover our budget shortfalls. Board of Education policy requires that our Fund Balance carry at least 8% of our operating costs, or around $50 million. It currently stands at $42 million and is estimated to be less than $30 million at the end of this school year if expenses are not reduced.

What is a fund balance?

Just as a family may have an emergency savings account, a school district has a fund balance to manage risk and to respond to unforeseen circumstances without having to borrow money. We assess risk to determine how large a fund balance MPS needs. MPS policy requires that we keep a fund balance of 8% of the total budget.

Where do our reserve funds come from?

Reserves are money available when revenues exceed expenses.

What did we spend our reserve funds on over these past seven years?

In some cases, funds were spent on important one-time investments, such as MPS’s new literacy curriculum. In other cases, funds were used to meet deficits caused by a structurally imbalanced budget.

Why is MPS telling everyone about its budget deficit?

The money MPS receives is from the taxpayers. They deserve to know how their money is being spent. Additionally, when our community understands our financial situation, they are in a better position to help improve the situation.

What options does the district have for raising revenue?

We have three means of doing so: 1) advocate at the legislature for increased revenue, especially for full funding of Special Education and English Language services; 2) go to the taxpayers for a levy and/or referendum; 3) increase student enrollment, which will increase funding resources received from the government.

Is MPS going to ask for more money from taxpayers through a referendum? If so, when?

Yes, the MPS Board of Education has indicated its support for a referendum in November 2018. Maximizing the amount we can levy would increase our budget by about $18 million, and a capital technology levy would allow us to move approximately $12 million out of our General Fund to pay for current technology costs. 

How do property taxes fund schools?

Property taxes include taxes to support the school district, the city and the county. School levies are based on a number of factors that include property values, the number of students enrolled in the school district, the state’s match for the levy and the total amount of state aid.

There are two types of levies:

●     A referendum, or voter-approved levy

●     A levy set by the Board of Education within limits established by the state

I think supporting our students and teachers is more important than balancing the budget. We’ve had a deficit for a number of years, so why does it matter now?

MPS’s reserves for the past seven years have been healthy enough to overcome deficits, and because we knew we had this money available, significant funding changes were not made at that time. Over the course of those seven years, our reserves have decreased from more than $122 million to about $42 million now. $42 million may sound like a lot of money, but that’s just 6.8% of the district’s operating budget and doesn’t account for this year’s estimated $16 million deficit. According to our Board of Education policy, MPS should keep reserves (also known as its Fund Balance) at around 8%. Another year of accessing the Fund Balance would bring it down even further below that 8% minimum. For  this reason, our Fund Balance is no longer an option for balancing our budget.

What happens to MPS students if MPS goes below 8% fund balance? What happens if we go under statutory debt?

If we go under statutory debt, which occurs when you have no fund balance remaining, typically the state will come in and give a three-year improvement plan that is very detailed and then they monitor to see how we are doing to make sure we have rebuilt our fund balance.

Is it true MPS could be taken over by the state?

If we go under statutory debt, which occurs when you have no fund balance remaining, typically the state will come in and give a three-year improvement plan that is very detailed and then they monitor to see how we are doing to make sure we have rebuilt our fund balance.