The Shakopee School Board held an in-person business meeting March 23 to discuss operating levy possibilities to mitigate its $2.5 million deficit — a move that, if passed, would require a referendum come November and would take effect for the 2021-2022 school year.
Barring any budget adjustments, the school district projects the unassigned fund balance would be at $1 million at the end of next year, which is $7 million lower than what the district should be operating under, according to the district’s policy, which says it should aim for a balance that hovers between 8% and 12% of the annual budget. If no budget adjustments were made after next year, the fund balance would continue to plummet until its balance would be $26 million in the red by the 2024-2025 school year. Even if the district made $6 million in budget adjustments for the 2021-2022 school year, its projected unassigned fund balance would be -$2 million by 2023.
By law, school districts cannot have unassigned fund balances below zero, so the long-term projections would be adjusted before they ever became a reality, Shakopee Superintendent Mike Redmond said.
The unassigned fund balance is the pool of money of most interest to taxpayers, because it’s discretionary. The majority of the unassigned fund balance is allocated towards paying teacher salaries and benefits, as well as other operating costs.
At the March 23 board meeting, Redmond said the original intention was to hold a 40 to 50-minute discussion regarding the options to mitigate the shortfall. But due to recent COVID-19 issues coming to the forefront, Shakopee Finance Director Bill Menozzi offered a shortened presentation, which briefly outlined levy possibilities should the school board decide to mitigate the budget shortfall in that way.
“Nobody’s proposing anything,” Redmond said. “This is continued food for thought.”
Shakopee’s taxpayers will see $4.9 million in property tax relief in taxes payable 2021 due to money falling off the district’s debt relief levy, which are part of 2015 school building bonds structured to drop in 2021. That equates to $224 less in school district property taxes for a homeowner who has a $280,000 property next year, according to the numbers presented.
Because that money is falling off the books, an operating levy would mitigate the actual cost difference taxpayers would see, Menozzi said.
For example, if the school board decided to move forward with a $6.1 million operating levy referendum, a $280,000 home would owe $311 next year toward the operating levy. But because of the estimated $224 in tax relief from the district’s evaporating debt levy, that homeowner would only pay an additional $87 to the school district.
Menozzi said at the meeting that the actual cost difference is what he believes the school board should focus on in further discussions about budget adjustments and an operating levy.
The options presented at the meeting included six different operating levy scenarios which would be discussed by the school board at a later time, Menozzi and Redmond said. At the lower end of the scenarios was a $3.5 million operating levy, which is $400 per pupil. A house worth $280,000 would pay $47 less in property taxes to the district with this scenario.
On the other end of the spectrum, a $11.2 million operating levy would increase that same homeowner’s district property taxes by $332 for taxes payable 2021.
Menozzi said at this point, it’s far too soon to determine which scenario would be most realistic for the school board to move forward with.
“I don’t think we’re even close enough to determine that,” Menozzi said. “We don’t even know whether the board would make the decision to go towards the operating levy… I think that work has to be done first before we can make comments before we can determine the ‘best’ amount.”
Voters willing to pass levy
Shakopee resident Timothy Johnson, who attends most school board meetings with his wife Julie, said he’s not incredibly worried about the budget.
“This isn’t actually a Shakopee problem,” Johnson said. “And I think everybody agrees on the notion that we need to take care of our teachers because they take care of our kids.”
Johnson said he would undoubtedly support an operating levy if the school board moved forward with it preferably the highest amount presented by Menozzi, he said.
Alan Kruse said he’d also support a levy for the purpose of paying Shakopee’s teachers a competitive salary. But he’s frustrated that a possible operating levy, which pays teacher salaries, could be coming in the wake of the Shakopee High School renovations, which he said were overambitious and unnecessary.
“Why didn’t you save money on your building and pay your teachers?” he said of the district’s current situation.
Kruse said he understands that the referendum dollars that came in to build the new high school couldn’t be used to pay teachers, but he said he thinks the district should have built a more modest building so it could have passed a separate operating levy to keep its teachers’ salaries competitive.
“The teachers are our education,” Kruse said. “Not that building.”
But Kruse, although calloused following the debacle with former Superintendent Rod Thompson, now in prison for swindling and embezzling district money, said he and many fellow taxpayers and Shakopee would back the operating levy.
“We’re not against all this stuff,” Kruse said. “We’re just upset with how it’s been handled in the past.”
'State has let us down'
Redmond said at the March 9 school board meeting the state-mandated Special Education and English Learners programs are underfunded and the mandate doesn’t cover the costs, leaving individual districts to foot the rest of the bill. The district pays about $9 million per year from its general fund to cover the cost for these programs.
“If we truly believe in public education, we need to fund it adequately,” Redmond said. “And our state has let us down, and we’re seeing that.”
Shakopee’s district is one of Minnesota’s few districts without a voter-approved operating levy. And since Shakopee runs on an already-tight operating budget, it can barely afford to remain competitive with surrounding districts’ pay stubs.
The 2019-2021 teachers' contract, approved by the Shakopee School Board in a unanimous vote Jan. 6, includes a 1% pay raise and 10% increase in health insurance contributions for teachers during the 2019-2020 school year, and a 3.25% pay raise and 8% increase in insurance contributions the following year. That means the starting salary for a new teacher in Shakopee will go from $39,834 during the 2019-2020 school year to $41,129 for the 2020-2021 school year. Those salaries are a couple years behind the surrounding districts’ settlement contracts.
The Prior Lake-Savage Area School District’s new teachers will see salary raises from $41,753 for this school year to $43,653 next school year. Eastern Carver County teachers were earning a starting salary of $39,479 in 2017-2018 and $41,479 for the 2018-2019 school year. Eden Prairie teachers were earning a starting salary of $39,479 two years ago, and $41,077 last year.
Shakopee’s per-pupil funding is also behind that of most metro districts.
Shakopee receives $11,355 per pupil. The seven-county metro average per-pupil revenue is $13,170, and statewide, the average per-pupil revenue is $12,691.
The last time an operating levy was approved by Shakopee voters was in the fall of 2009. That levy lasted for eight years and was $529.75 per pupil.
Correction: An earlier version of this story misstated the school district's budget deficit. It is $2.5 million. We regret the error.
Clarification: a previous version of this story mentioned an operating levy would mitigate the deficit for the 2020-2021 school year, but a potential operating levy would not actually take effect until the 2021-2022 school year.