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Minneapolis schools' budget error worsened deficit and affected layoffs

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School district leaders said they fixed the budgeting error. The
district has faced mounting concerns about poor financial oversight. 

https://arc.stimg.co/startribunemedia/JBPXALN255FSBEXVX542UWTMGM.jpg?&w=1
080 

Superintendent Lisa Sayles-Adams, center, said she could not yet say if
anyone had been held accountable for the errors, citing the state’s
government data practices act. (Carlos Gonzalez/The Minnesota Star
Tribune) 

Minneapolis school district leaders acknowledged Friday budgeting errors
that stretched back years — miscalculated expenses that worsened
district deficits and even led to some school staff layoffs. 

The details, released at a news conference outlining a subsequent fix
this school year, come amid mounting concerns about poor financial
oversight in Minnesota’s third largest district deemed last year by a
consultant to be at a “crisis point.” 

In the last month, it was revealed the district incurred $5.3 million in
IRS penalties and withheld — without public review — nearly $3 million
in payments to a trust fund covering employee health insurance costs. 

School board members learned recently that the district had also erred
in its coding of special-education expenditures, likely costing it tens
of millions of dollars in lost revenue dating at least to 2022-23, said
Liz Keenan, the district’s associate superintendent of special education
and student support services. 

Now that it’s been corrected, the district stands to collect an
additional $10.7 million in state revenue this year and $10.8 million
more in 2026-27 — trimming next year’s projected deficit from $50
million to $37.9 million, or about 5.4% of general fund expenditures. 

The district was expecting to cut 187 positions in its schools as result
of the hefty deficit, but now nearly 110 full-time jobs could be rescued
from cuts when the board takes final action on the budget in June. 

Though welcome news for the coming year, the district acknowledged in a
website post April 28 that it had harmed staff members who lost jobs as
a result of its failure to capture all of the revenue to which it was
entitled during the previous years. 

Asked on Friday whether anyone had been held accountable for the errors,
Superintendent Lisa Sayles-Adams said that she could not say — citing
the state’s government data practices act. 

Board Chair Collin Beachy commended Sayles-Adams for confronting the
special-education finance issue by adding oversight, including hiring
Keenan. 

“This is what accountability looks like,” he said. “It’s not always
pretty, doesn’t always feel good, but it’s necessary and it’s required
of my job — and our students deserve nothing less.” 

Marcia Howard, president of the Minneapolis Federation of Educators,
said she supported the superintendent’s review and accused the previous
administration of operating the district like a business, “which led to
egregious practices,” and convenient claims of massive debt while
bargaining contracts with the union. 

Budget headache worsens for Minneapolis Public Schools as projected
deficit grows “That’s a power position to plead poverty,” she said.
“We’re not a poor district and we’re not a poor state.” 

Financial oversight concerns
Still, the district has repeatedly drawn headlines in the past year
about the lack of financial oversight. 

At the start of January, three division leaders were placed on leave
without public explanation. When details finally were released months
later, they painted a damning picture of the finance operations. 

Medtronic restructures its biggest business as stock price dips
Ibrahima Diop, the former public face of the budget process, and one of
the top finance leaders, who left the district on Jan. 30, had been
reprimanded and subjected to “escalated disciplinary action” by
Sayles-Adams, according to documents also describing the finance
division as being at a “crisis point” with significant turnover and poor
morale. 

Last month, the district reported the trust fund withholdings and said
the $3 million, plus the interest it would have earned, was transferred
back to the trust. But it’s not known for certain what happened to the
funds during the 10 months it was held back. 

An investigative report commissioned by the district to unravel the $3
million mystery also revealed the IRS penalties that amounted to $5.3
million over four years, and added that while it has paid $770,500 to
the federal government to date, it also was working to reduce the
charges. 

The district has contracted with the Center for Effective School
to identify additional issues that will need to be addressed.” 

Special-ed funding error
Special education is the fastest-growing portion of state education
spending for a variety of reasons, including increased demand. 

Minneapolis and districts statewide often cite the failure of the state
and federal governments to fully fund mandated special-education
services, and the subsequent shift of district general fund dollars to
cover the costs, as a major contributor to annual deficits and staff
layoffs. 

Over the past five years, Minneapolis has worked to balance shortfalls
ranging from $1.4 million in 2023-24 — the final year of federal
pandemic funding — to $110 million in 2024-25 and $75 million in
2025-26. 

Initially, the district was eyeing a projected $30.3 million deficit in
2026-27, which grew to $50.5 million. 

But with the newly expected inclusion of $10.8 million in
special-education revenue, the district plans to steer $5.1 million to
secondary schools and $2.3 million to elementary schools with higher
numbers of students of color. That would restore or add 64 full-time
student support staff positions. 

Twelve counselors, social workers and library media specialists also
would be spared from cuts. 

Edison High Principal Eryn Warne said Friday she was able to save three
educational support professionals slated for cuts — staff members who
she said help provide safety, security and social-emotional support for
students in and out of the classroom. 

“We’ll continue to educate the whole child, which is important to us,
all of us in Minneapolis Public Schools,” she said. 

https://www.startribune.com/minneapolis-schools-budget-error-worsened-def
icit-and-affected-layoffs-years-ago/601838453 

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