Staff cuts may be part of a budget-reduction strategy for the Menahga School District, depending upon future student enrollment.

Menahga Superintendent Kevin Wellen discussed the need for cuts in his “state of the district” presentation at the Jan. 19 school board meeting.

“We really haven’t had to do this because we’ve always been either banking money or breaking even as a district, and it hasn’t been an issue,” he said.

He asked school board members to process the information, then be prepared to discuss it again in the future. “This is a several-month process that’ll take time,” Wellen said.

Enrollment projections

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Decreased enrollment – primarily due to 211 students opting to homeschool during the COVID-19 pandemic – resulted in a 15 percent, or $1,113,799, drop in revenue.

Projected enrollment for the 2020-21 school year was 1,045 students, but only 834 are attending. The latter figure equals the district’s enrollment from more than a decade ago, Wellen noted.

If all 211 students return in the fall of 2021-22, enrollment is expected to be 1,045. If half return, enrollment would be 940, the same as the district’s 2013-14 enrollment. If none return, enrollment would be 820.

“This is part of the mystery – who will be back and who won’t?” Wellen said.

To resolve that enigma, the district sent a survey to parents of homeschooled students to find out how many may return to the district next fall.

COVID’s budget impact

Pre-COVID, the district’s budget estimated $12,805,353 in revenue and $13,517,834 in expenses, a deficit of $712,481.

The drop in student enrollment caused a reduction in state aid, hitting the district’s pocketbook.

Meanwhile, expenses rose post-COVID. Expenses will exceed revenues by $2,138,318. “That’s a $1.4 million deficit from what we were expecting,” Wellen said.

The district’s beginning fund balance of $3,273,602 will be reduced by the $2,138,318 loss, leaving a final balance of $1,135,284 in July 2021.

“I want to reinforce, this situation has been handed to us due to circumstances outside of our control,” Wellen said.

Right-sizing and realigning

Forecasting next year’s budget, Wellen estimated $10,400,000 in revenue and $11,420,000 in expenditures. That’s a $1 million deficit, he explained, if none of the 211 homeschooled students return to the district. If half of them return, the district will get roughly $700,000 in revenue from the state.

“If all the kids come back, we don’t need to do a thing. If half of them come back, we’re still going to be overspending at least $300,000 the coming year and another $500,000 the following year,” Wellen said. “So when we’re looking at reductions. That’s why I’m talking about $1 million dollars as starting our conversation, as a minimum, and another $700,000 if we anticipate no (homeschooled) kids coming back.”

The results of the homeschool survey will be very important, he said.

Board member Katie Howard noted there is “a large anti-vaccination community” and if a COVID-19 vaccination were required, “we’d lose a lot more kids.”

Wellen said he doesn’t expect that will be required by the state. “They can’t require a medical treatment as a condition of public education.”

He noted a Wadena County hospital only had 50 percent participation of its own healthcare workers in receiving the COVID-19 vaccine.

“The district, in the memorable past, has not had to do any recent downsizing. We’ve been growing.”

Financially, Wellen said ideal class sizes are 22 for kindergarten through third grade, 25 for fourth through sixth grade and 27 for seventh grade through seniors.

Unless Menahga changes to a three-section school, Wellen said the district will not reach those class sizes.

Wellen said the board could consider promoting open enrollment to bring student numbers up.

He said that postponing one-time purchases only buys the district time.

Minnesota schools spend 85 percent of their revenue on salaries and benefits, he added. The remaining 15 percent are fixed expenses, such as utilities, garbage, cleaning supplies, transportation. “There is very little outside of salary and benefits you can really look at,” Wellen said.

If the district doesn’t make any budget cuts and none of the homeschooled students return, “the district will be broke in a year,” he said. “We’ll be near statutory operating debt. And that means the state says, ‘You can’t operate a school in the red because you don’t have the money and you can’t make it.’ So they will come in and tell you what you can spend money on and what you have to cut. You’re under their guidance. I’ve never been there, and I don’t want to be there. That’s why you look ahead and see what’s coming.”

But, the reverse is true, too, Wellen continued. If the district makes staff cuts and all the homeschooled kids return, they will have lost good teachers and need to refill those positions during a teacher shortage, he added.

Wellen said he continues to advocate at the state government level, but the Legislature likely won’t make a decision until March.

By law, any tenured staff that will be laid off must be notified by April.

In what he called potential Tier 1 reductions, totalling $1,118,000, Wellen suggested cutting 16 positions, including 11 full-time teachers/certified staff (a savings of $660,000), the middle school principal ($135,000), one clerical position ($28,000), one custodian ($50,000), one cook ($40,000) and one program paraprofessional ($20,000).

Delaying the purchase of one bus ($95,000) and computer devices ($90,000) would reduce the budget by $185,000.

Tier 2 budget reductions, totaling $495,000, include reducing two bus routes (a savings of $46,000), the superintendent retiring/part-time ($25,000), cutting one clerical position ($28,000), cutting four certified staff ($240,000), combining the principal/athletic director positions ($46,000), cutting one program paraprofessional ($20,000) and charging for meals ($90,000).

“It comes down to how much do you want to gamble with money we have in the bank?” Wellen said, adding that eliminating staff is a “hard” and “emotional” decision.

The school board scheduled a work session for 6:30 p.m. Monday, Feb. 1 to discuss the budget.