There’s no way to sugarcoat it. State investment in education is dropping. Adjusted for inflation, per pupil Minnesota school district operating revenue will be five percent less in fiscal year (FY) 2009 than it was in FY 2003.
These findings are based on recently released data from the Minnesota Department of Education (MDE) adjusted for inflation in government purchases.*
In August of 2008, Minnesota 2020 reported that the projected decline in real per pupil school district operating revenue from FY 2003 to FY 2009 was 4.6 percent. Based on updated information, real per pupil operating revenue will fall by 5.2 percent over this period. The 2009 school fiscal year ends on June 30, 2009.
The decline in school district operating revenue is primarily the result of a dramatic cut in state aid, as illustrated below. All amounts reported below are expressed in constant FY 2009 dollars per pupil.
From FY 2003 to FY 2009, state aid to Minnesota school districts fell by $1,312 per pupil (13.9 percent). In response, school districts increased operating levies by $787 per pupil (122 percent). These levy increases translate into property tax increases. Because the real per pupil levy increase is smaller than the aid reduction, total school district operating revenue has fallen by $525 per pupil (5.2 percent) over the last six years.
This graph demonstrates the fiscal trap in which Minnesota school districts are caught. School boards are forced to increase property taxes at the same time that they are reducing their budgets. The trap that property taxpayers are caught in is no less devious; taxpayers pay higher property taxes at the same time that class sizes increase, teachers are laid off, and course offerings are cut. We’re paying more for less.
An examination of the three largest school districts in the metropolitan area (Minneapolis, Saint Paul, and Anoka-Hennepin) and greater Minnesota (Duluth, Rochester, and Elk River) reveals a similar statewide pattern.
The aid loss for the Minneapolis school district from FY 2003 to FY 2009 was $2,210 per pupil (17.1 percent)-considerably greater than the statewide average. Meanwhile, the operating levy increased by $764 per pupil (51.5 percent), while operating revenue declined by $1,446 per pupil (10.0 percent).
Thanks to a referendum in November, Minneapolis school operating revenue is projected to increase significantly in FY 2010; however, even with this boost, real per pupil operating revenue in the district for FY 2010 will remain 3.5 percent below what it was in FY 2003. The projected FY 2010 revenue increase is entirely due to the largess of Minneapolis property taxpayers, not the State of Minnesota; real per pupil state aid to the Minneapolis school district is projected to drop by another 1.6 percent in FY 2010 based on current law.
State aid to Saint Paul Public Schools fell by $1,551 per pupil (13.0 percent) in constant FY 2009 dollars. To deal with the cut, the district increased its operating levy by $804 per pupil (124.6 percent) and cut its operating revenue by $747 per pupil (6.0 percent).
Real per pupil aid reductions and revenue losses in both of the metropolitan core cities exceed the statewide average.
The Anoka-Hennepin school district is the largest school district in the state. From FY 2003 to FY 2009, total state aid to this district fell by $1,127 per pupil (12.5 percent), while the operating levy increased by $1,207 per pupil (207.4 percent). Per pupil operating revenue increased by $79 (0.8 percent).
It is a sad commentary on the state of education finance in Minnesota that residents of the Anoka-Hennepin school district had to increase school operating levies by more than $1,200 per pupil in order to enjoy a revenue increase of less than $80 per pupil. The vast majority of operating levy increase in the Anoka-Hennepin school district went toward replacing state aid cuts, as opposed to providing a real increase in education funding.
Greater Minnesota school districts have faired no better than metro area districts. Duluth Public Schools have seen state operating aid fall by $1,566 per pupil (15.6 percent) over the last six years. This aid cut resulted in an operating levy increase of $694 per pupil (123.8 percent) and an operating revenue loss of $872 per pupil (8.2 percent).
As with Minneapolis and Saint Paul, the decrease in per pupil aid and operating revenue in the Duluth school district was greater than the statewide average.
The Rochester school district is the largest district in greater Minnesota. From FY 2003 to FY 2009, per pupil state aid to the Rochester district fell by $1,579 per pupil (17.4 percent). In response to this loss of state aid, the district increased operating levies by $365 per pupil (27.3 percent) and reduced operating revenue by $1,214 per pupil (11.7 percent).
The per pupil operating levy increase in the Rochester school district was less than half the statewide school district average ($787), although the per pupil reduction in operating revenue was more than double the statewide average ($525).
The Elk River school district spreads across five different counties, with the largest portion lying within Sherburne County. From FY 2003 to FY 2009, state aid to the Elk River school district fell by $1,345 per pupil (15.3 percent). To recover this loss of aid, the district increased operating levies by $825 per pupil (183.1 percent) and cut revenue by $520 per pupil (5.6 percent).
Trends in the ex-urban school district of Elk River show the same pattern as other large Minnesota school districts: higher property taxes and fewer dollars to fund public schools. Pay more, get less.
The patterns seen above are not unique to big districts. Of Minnesota’s 340 school districts, 333 (97.9 percent) have experienced both an increase in per pupil operating levies and a reduction in per pupil state aid. In 279 of these districts (83.8 percent), the levy increase was insufficient to replace the state aid loss, so total per pupil operating revenue declined. Click here (PDF) for a printout listing FY 2003 and FY 2009 operating levy, aid, and revenue for each Minnesota school district.
Under the Governor’s proposed budget, total state aid to Minnesota public schools will decline from the current biennium (FY 2008-09) to the next biennium (FY 2010-11) after adjusting for inflation, thereby continuing the downward trend in real state education funding and the upward trend in school property taxes that we have seen over the last six years. The House and Senate proposals for K-12 funding have yet to be released.
Given the huge state budget deficit, “no new tax” policies will invariably lead to even more cuts in K-12 education funding on top of what has already occurred. More cuts in funding for K-12 education will undermine Minnesota’s workforce development and quality of life, thereby exacerbating the state’s downward economic spiral. To avoid this bleak future, Minnesota must reverse the trend of declining K-12 funding. To accomplish this, new revenues will need to be on the budget table.
* The revenues in this analysis include the following categories: general education, special education, career technical, alternative facilities, deferred maintenance, integration, telecommunications, state-paid lunch assistance, operating capital technology, and miscellaneous levies. These revenues comprise nearly all school district operating revenue. Amounts are adjusted for inflation based on the implicit price deflator for state and local government purchases, which is the preferred measure of inflation for state and local government costs.