District to Develop
Budget Proposal to Address Shortfalls
The 2019 Referendum asked voters for an operating levy increase of $550 per student, or approximately $5.6 million per year to continue the strong academic preparation of our students, prevent cuts to programs and services, maintain class sizes and manage growing enrollment in our district. The operating levy was not approved by voters. Without this funding, expenses will continue to outpace revenue and the district now needs to make budget cuts moving forward.
For years, state funding has not kept pace with inflation or increasing operating costs, and does not close the funding gap for our special education services. The district has worked hard over the last decade to implement cost containment measures to minimize classroom impacts. These budget cuts totaled nearly $10 million in the last decade – including $3.5 million in the last three years alone. Over the last two years, the School Board chose to use $5.0 million in unassigned fund balance in addition to those cuts to avoid impacts on school programs and services. It is not sustainable to continue to draw from the fund balance.
With the failure of Question One in the November referendum, the school district is now faced with the task of developing a budget proposal to address upcoming shortfalls. At a minimum, and in order to maintain at least a 5% fund balance, the district needs to make more than $10 million in cuts over the next three years — at least $5 million in the 20-21 school year.
Previous Budget Presentations & Summary Documents (Jan/Feb 2020)
Frequently Asked Questions
Q: What is the annual budget for the school district?
A: In fiscal year 2019-2020, the total budget for all district funds is $172,110,078. This includes: the general fund, school nutrition, community services, construction, debt services, internal services and fiduciary. The general fund is the largest portion of the annual budget at $125,649,242. The general fund accounts for educational activities, district instructional & support programs, district and school administration, operations & maintenance, transportation and other legal expenditures not accounted for elsewhere. The 2019 Referendum asked for an operating levy increase of $550 per student to continue help manage budget shortfalls in the general fund moving forward. The operating levy request was not approved by voters.
Q: Why do we have such an urgent need to make budget cuts?
A: For years, state funding has not kept pace with inflation or increasing costs, and does not close the funding gap for our special education services. School district leaders have done a good job of keeping expenses down while cutting the budget by $3.5 million over the past three years, but given these additional pressures on the district’s operating budget – and without additional revenue from the failed operating levy – more cuts are now necessary to keep our fund balance above 5%.
Q: What measures has the district taken to contain costs in the past?
A: We have worked hard to do responsible budget planning with staff and the School Board. Budget cuts totaling nearly $10 million have been made in the last decade – including $3.5 million in the last three years alone. However, expenses continue to outpace revenue and strain our operating budget. The district spends $7.4 million dollars annually out of the general budget to cover unfunded mandates that are not fully reimbursed from state or federal sources for special education services. This is exacerbated by state funding that has not kept pace with inflation for several years. If state funding had kept pace with inflation since 2003, we would have received more than $6 million in additional funding this year alone. Looking ahead, expenses will exceed revenue by approximately $9 million over the next two years based on current assumptions and projected enrollment growth.
Q: What is a “fund balance” and why can’t the School Board decide to use dollars from the fund balance to help manage the budget shortfalls?
A: A district’s fund balance is an important aspect in considering the district’s financial well being. A healthy unassigned fund balance provides for things such as cash flow, as a cushion against unanticipated expenditures, enrollment changes, funding deficiencies and aid proration at the state level.
In the past and in the current school year, the School Board has used fund balance to offset budget shortfalls as well to reduce cuts in the classroom. In the current school year (FY19-20), over $4.0 million in unassigned fund balance is being used to avoid budget cuts, bringing the unreserved fund balance down to $6.0 million or 4.81%, which is below the threshold set by the school board. Use of fund balance is not a sustainable means to fund schools. If new revenue is not generated, the school district must reduce costs.
Q: When is the next possible opportunity for the school district to ask for another Referendum?
A: It is up to the school board to determine when is the best time to go back to the polls.
Q: The Proposed Cost Containment document published in the Spring of 2019 included a total budget shortfall of $4.5M. Why has the amount increased by $500,000?
A: Government agencies review their budget forecasts as new information is received. Changes in enrollment, funding sources, inflationary costs, employment contract settlements, and mandates from the State of MN are factors which cause the school district to update their budget forecast. With updated factors and final results in our audit report, the updated forecast for fiscal year 2020-21 requires a cost containment plan of $5.0M to keep the district’s unassigned fund balance above 5.0%.
Q: I understand that the district owns several parcels of land. Can the district choose to sell this property and then use these funds to help with budget shortfalls?
A: The district owns three properties for future use in Chaska and Victoria. MN Statute restricts the use of funds from the sale of property.
- 1.0 acres in Downtown Chaska – it has been for sale for a year, but we have not had any interest in the property
- 5.65 acres in Chaska near the new 212 overpass & Big Woods Blvd. This property was purchased in 2017 with voter approved bond funds from the 2015 referendum. The purpose of this property is for a future elementary.
- 19.75 acres in Victoria which is being considered for a land swap or sale to purchase property for a school district facility for future needs
It would not be prudent for the school district to sell the Victoria and Chaska (Big Woods) properties with future developments anticipated in all four communities within Eastern Carver County Schools district. Even if the district sold these three parcels of land, by state statute these funds cannot be used in the general fund. Therefore, it would not provide relief to reduce the amount of cost containment.
General Fund Unassigned Fund Balance – Historical View
A school district’s fund balance is an important aspect in considering the district’s financial wellbeing. A healthy unassigned fund balance provides for things such as cash flow, as a cushion against unanticipated expenditures, enrollment changes and funding deficiencies. The Eastern Carver County School Board has a fund balance goal of 5-10%.
The chart above displays three very important financial aspects of the district’s General Fund budget.
- The blue bars represent the dollar amount of unassigned fund balance for each of the years noted.
- The orange bar shows the amount of the district’s expenditures for each year.
- The line graph shows the relationship of the unassigned fund balance as a percent of expenditures.
The chart shows that the dollar amount of the unassigned general fund balance has remained relatively flat since FY11-12. The expenses, on the other hand, have increased due growth in the district as well as inflationary costs. The growth in expenditures and a flat fund balance have caused the percent of unassigned fund balance to decrease. This historical view shows the lowest fund balance in FY09-10 (4.87%) and the highest in FY11-12 (11.32%). Since that time, the fund balance has declined to 8.48% in FY18-19.
General Fund Unassigned Fund Balance – Future Trend Without Cost Containment Measures
The Eastern Carver County School Board has a fund balance goal of 5-10%. The historical fund balance percentages for the past six years are shown in blue. The red bars indicate predicted future fund balance percentages without any cost containment efforts.
The district can change this downward trend in two ways:
- Increase revenue – One way that school districts increase revenue is to pass an operating levy. Voters in our community did not approve the $5.6 million operating referendum in November 2019. Also, although the district has no control over growth in the community, if enrollment exceeds expected projections, this would also bring additional revenue to the district.
- Reduce expenses – the district is currently looking at ways to develop a budget proposal to address budget shortfalls. The Board plans to adopt budget reduction measures at its regular meeting on Feb. 24. Budget cuts will be made over the next three years ($5 million for FY20-21, $3.5 million for FY21-22, and $1.7 million for FY22-23).
Budget Reduction Process Timeline
Right now, staff throughout the district are working on generating ideas for cost containment and will leave no stone unturned. It is important to understand that no decisions have been made. The district has no intention of gutting programs but there will be budget cuts that affect programs and services at every level. The cuts the district must make now will impact students, staff, and our community.
This is a difficult and painful process, but the School Board and district staff are committed to doing everything possible to put forward a budget by June 30, 2020, that is both fiscally responsible and continues to support our students and staff to the best of our ability.
District leadership and building teams meet to develop cost containment proposals for consideration by District Budget Committee
January 13, 2020 — School Board Work Session — FY 2020-21 Budget Assumptions shared with Board
January 27 — School Board Regular Meeting — Budget Reduction Recommendations to Board
January 29 — Community Forum: Budget Reductions & Cost Containment (6:30-8 p.m.- Chanhassen High School Theatre)
February 10 — School Board Work Session — Review Proposed Budget Reduction Plan
February 24 — School Board Regular Meeting — Adopt Budget Reduction Measures
June 22 — School Board Regular Meeting — Adopt FY 20-21 Budget