Budget Advisory Council Minutes
6:30 p.m., January 13, 2021
Present: Budget Advisory Council members Lisa Carlson, Michael Feldman, Jean Garrick, Stella Johnson, Chris Knight, Gary Krueger, Chad LaBahn, Chas McCready, Stephanie Rudie, Katie Stockman, and Bianca Ward‐ Virnig; Director of Finance and Operations Mark Stotts, and Coordinator of Finance Christopher Onyango‐Robshaw; School Board Audit and Finance Committee members Craig Angrimson. Absent: Budget Advisory Council members Ben Heil, Grace Keliher; School Board Audit and Finance Committee members Cory Johnson and Jackie Magnuson. Guests: Former State Demographer Hazel Reinhardt.
Mark Stotts called the meeting to order at 6:31 p.m.
Public Input – None
The agenda was reviewed and the November 12, 2020 minutes were approved.
Mr. Stotts introduced Hazel Reinhardt a former State Demographer. Ms. Reinhardt has been working with the school district to project the districts enrollments using multiple aspects. Ms. Reinhardt stated that there are many challenges projecting enrollments during a pandemic. Questions that Ms. Reinhardt asks are:
- What would 2020‐21 enrollment have been without the pandemic?
- How many students who chose other educational options will return in the fall of 2021‐22; assuming classes are in‐person?
- Will these students be in the next higher grade?
- How many high school juniors and seniors will prefer virtual learning rather than returning to the classroom?
We are in a period of low fertility meaning that the number of births is decreasing in the United States and in Minnesota. The consensus among demographers is that the pandemic will result in fewer births for several years to come. Another aspect shows that fewer people are moving. Last year in the United States, fewer than 10 percent moved. The population is also aging causing the demand for different housing units. Immigration from abroad has also slowed. The pattern for Minnesota shows that more people leave Minnesota rather than move to Minnesota. Lastly, the uncertainty and timing of the UMore Park development, which is now called Amber Fields.
Ms. Reinhardt has been working on the district’s enrollment projections since October 1, 2020. CBSE enrollment does not appear to have been affected by the pandemic. However, the kindergarten class size has been affected by the pandemic. The 2020‐21 Kindergarten class is 291 students (or 14.2 percent) smaller than the 2019‐20 school year. This school year marks the smallest Kindergarten class since 2010‐11. Looking at the Enrollment Change slide, you can see the biggest decline is in grades K‐5 but there is a growth in grades 9‐12.
Ms. Reinhardt suggested that when the enrollment projections are adjusted, the 2020‐21 projections should be used. In the past ten years, the K‐5 survival rates have been below 1.000. It is likely that without the pandemic the survival rates would have been above 1.000, this is assuming that the K‐5 survival rates would have been like those between fall 2018 and fall 2019. Assuming that 95 percent of “missing” students in 2020‐21 will return and be in Grade 1 in 2021‐22. It doesn’t change the overall total numbers but it is then assumed that 90 percent of the “missing” Grades 1‐5 students would return and be in the next high grade. There were not any adjustments made for grades 6‐9. In the table below are the adjusted 2020‐21 enrollment projections numbers per grade.
In the next ten years, the district is looking at a projected enrollment from about 28,899 to 29,959 which is an increase of 5.2 to 9.1 percent. However, the Kindergarten class is projected to be smaller than previous year’s Grade 12 which is a continuation of the pattern of the past ten years. In the first five projection years (2020‐21 to 2025‐26), K‐5 increases from 729 to 1,020 students, middle school increases anywhere from 172 to 371 students and high school increases anywhere between 143 to 232 students. Looking out ten years (2020‐21 to 2030‐31), the increases for K‐5 are between 639 to 946 (all growth is in the first five years). Middle school increases between 197 to 529 students and high school increases by about 597 to 1,018 students.
For total enrollment projections, there are some questions that they ask.
What could make the projections too high or too low?
- The live resident births will be a good predictor
- A recession would slow residential growth which would cause the projections to be too high
- More students open‐enroll out of the district would also cause the projections to be too high
- More kindergarten students than originally projected could cause the projections to be too low
- The Amber Fields (UMore Park) development begins to develop
The projected development (excluding Amber Fields/UMore Park) has projected 884 single‐family detached units in the next three years. This is compared to 1,256 units in the past three years. The projected development between 2020 and 2022 is projecting 884 single‐gamily detached homes, 273 townhomes and 1,027 apartments throughout Apple Valley, Burnsville, Coates, Eagan, Empire Township, Inver Grove Heights, Lakeville, Rosemount and Vermillion Township.
The developer for Amber Fields/UMore Park stated that by 2022 there will be 305 townhomes occupied by residents. By 2023, there will be 223 single‐family units and 240 apartments. Between 2024‐2027 there will be an additional 390 apartments and 257 single‐family units. Between 2027‐2029, there would be 172 more single‐family homes and 285 more townhomes. The total number of units within Amber Fields/UMore Park is 1,952 (including 110 senior apartments) with an estimated 551 students joining the district. Keep in mind that not all 551 student’s way not be in school at the same time. However, since the development has not been fully approved, the timing of the development and number of units could change.
Review of Financial Documents
Mr. Onyango‐Robshaw stated that the document that was presented to the board showed that the district received a clean audit for the 2019‐20 school year. There were no Federal findings or legal compliance issues. It was a very successful year. Overall the fund balance is increasing across each category to $58 million. At the bottom of the handout, shows the variance between what was budgeted and how we performed. The revenue budgeted at 2 percent variance ($7.6 million) and on the expenditure side we were $864,957 or .23 percent off.
General fund – The unassigned operating fund started at $38,648,473 on July 1, 2019 and increased to
$46,197,361 by June 30, 2020. This increased by 12.03 percent. This is a benchmark for the School Board to make operational decisions.
Non‐spendable – These are prepaid items had been purchased prior to the fiscal year, which showed no change.
Restricted – These funds by Stature or State Legislature the funds can be used. July 1 started at
$9,545,162 and on June 30, 2020 it ended at $9,612,255. The Safe Schools levy had a substantial decrease due to last biennium, they allowed a one‐time boost in Safe Schools levy. Our district received
$1 million. Another change was in the Student Activities section. These were originally kept off of the books but due to GASB 84, we now have to on the books as they are restricted.
Assigned – No change from prior year to current.
Food Service – Even though the learning model changed from hybrid to full‐distance learning. The district had to maintain the payroll for food service employees. This fund had projections that were out of balance due to lack of revenue since students were not paying for meals.
Community Ed – This category had similar impact as Food Service. Most activities have fees that are collected however if classes are cancelled then instructors are not paid. They also had to provide refunds for activities/classes that were cancelled.
Capital projects – This category had a big increase due to the turf fields at Eagan‐ and Rosemount High Schools. This is the main reason why the fund balance in this section is going up.
Comparing the unassigned, assigned and restricted fund balances it is showing a 12.04 percent increase which gives us a 2two‐month operational cushion. Good practice is to keep at least two‐months cushion depending on what the legislature does. The enrollment for 2020 has been a tough year throughout the state. We do not know how it is going to impact future years. Open enrollment‐out has been increasing but open enrollment‐in is also increasing the variance about 900 students coming in. The ADM’s going into 2021‐22 will be slightly decreased.
2020‐21 Final Budget
The final budget was be presented and adopted by the board on Monday, January 11, 2021. Overall, the decrease of enrollment is eating a little bit into the final numbers. Overall, the district started the 2019‐20 school year at $149,375,436 and are projecting to be at $147,588,394 by June 30, 2021.
General fund – We are anticipating a flat fund balance by June 30, 2021.
Food Service/ Community Ed – The revenue that is received from the State is not enough to cover their costs for Community Ed.
Building Construction – The district is anticipating the sale of debt certificates to finance the Apple Valley‐ and Eastview High Schools synthetic turf projects.
Debt Service – Not much of change.
Internal Service – Not much of change.
OPEB – Not much of change.
There were a few questions in regards to the Debt Service OPEB Bonds and Series 2016A Bonds. The OPEB Bonds are at
$2.2 million. It will have to go through the Levy Adjustment process which the funds will end up being returned to the taxpayers. It will show up as a negative adjustment on future levies. The district has plans to spend the Series 2016A Bonds but the district is not sure what fiscal year it will happen in. The developer for Amber Fields also a little over 20 acres that could potentially house a school building. If the development does start and things are moving forward we may acquire that land using the Series 2016A Bonds.
Five‐Year Plan Scenario Review
Mr. Stotts started out asking the BAC members for their assistance in predicating future years. The unassigned fund balance is running between 12‐15 percent. The board policy is 5 percent, which the district has preceded for many years. Enrollments are important because the majority of funding is from the General Education formula. The district’s enrollment numbers are different than Ms. Reinhardt’s. This is due to the district looking at ADM’s rather than headcounts. Mr. Reinhardt’s projections are based on headcounts. The 2020‐21 Legislative session started, it is a funding year. They will determine our funding for the next two years. Mr. Stotts assumed that we will receive 0 percent
increases over the next five‐years. The BAC members agreed with assuming there will be a 0 percent increase. Both the AMSD and MASA are advocating for 2 percent increases per year for the next biennium. Special Education is the only revenue that the district receives that is based on actual costs. This should increase at the same rate as the salaries and benefits. The referendum revenue is adjusted for inflation. All other categorical revenue is to be held constant at the per pupil rates.
Looking at the Expenditure side. The district reduced instructional staffing back to pre‐COVID levels. This school year, we increased staffing for the students who enrolled into the Digital Academy. Going forward if we have a Digital Academy, we will have to have staff members hired, especially at the Elementary level. Assuming that in 2021‐22, we are full in‐ person in the fall. If the learning model changes, it will change all of the projections. The district is currently surveying families to see how many kids still want to opt in the Digital Academy. This could also give the district a good indication for next year. The district would also like to offer the Digital Academy for the next two‐years but we still have to get the approval from MDE. This could also potentially increase enrollments which would increase funding. For salary and benefits, Mr. Stotts kept projection at historical levels. For non‐salary, non‐benefit costs increased at 2 percent per year. Utilities and Transportation costs are increased at historical growth rates. Since the district’s health insurance is self‐ insured, they have been running at 5% increase per year.
Looking at the Five‐Year General Fund Budget Projection handout, the actual percent unassigned in 2019‐20 was 11.6 percent. The Revised Budget for 2020‐21 is currently at 12.5 percent. Next school year, using the assumptions that are listed above our fund balance is projected grow to 13.1 percent. Keep in mind that a budget has not yet been set for the 2021‐22 school year. Going forward to 2022‐23 at 12.8 percent, in 2023‐24 it drops to 12 percent and on 2024‐25 it drops to 10.9 percent. Even with a 0 percent increase, we are still in good shape for the next 4‐5 years.
Turf Project Update
The Rosemount High School turf and track project came out $540,000 under budget. The district is going to transfer those funds to help complete the turf and track project at Apple Valley High School. Eagan High School also came in under budget at $400,000, which will also be transferred to the Apple Valley High School project. The project at Apple Valley High School has been a big challenge. There isn’t much space to begin with and to be able to put in a turf stadium field and practice field, they were going to lose a softball field which causes a big problem for their softball program. It has been reconfigured to fit in the additional softball field but it requires additional work (removing trees, cutting into a hill, etc.). Bids for Apple Valley and Eastview High Schools will be bid in February and financing secured in February/March.
Day at the Capitol
Traditionally the BAC has met with the LAC to come up with Legislative priorities. The joint meeting did not happen this year due to COVID. The LAC went ahead and adopted a legislative platform.
Funding – Increased general education by 2% for the next biennium
Mitigate financial impact by COVID by allowing the districts to use the greater of 2019 or 2020 enrollments.
Implement the measures of the School Finance working group.
It is likely that the visits for the Day at the Capitol will not be happening but could possibly be done via Zoom. The BAC will be kept up‐to‐date.
Next Meeting/ Adjournment
The next BAC meeting is scheduled for March 10, 2021 at 6:30 p.m. The meeting adjourned at 8:09 p.m.