State education spending projections down $326 million in new budget forecast

The state of Minnesota will spend $326 million less than expected on preK-12 education this biennium, a 1.6% decline compared to projections released in spring 2021, Minnesota Management and Budget announced Tuesday.

The update came as part of the annual November budget forecast, which this year projected a record-high $7.7 billion budget surplus. That’s mostly due to increased revenue from rising income, consumer spending and corporate profits, according to MMB — but projections for declining state spending in education due to lower-than-expected enrollment played a role as well.

Education spending — which accounts for nearly 40% of the state budget — is expected to reach $20.6 billion between fiscal years 2022 and 2023, according to MMB. In spring 2021, the office estimated education spending would total more than $20.9 billion during that period.

The shrinking spending projections are the result of new enrollment estimates that show student counts falling by 7,900 students this fiscal year — or 0.9% — and 10,800 students next fiscal year — 1.2%. That’s because Minnesota’s student population is growing at a slower rate than in the past, and the state’s birth rate is declining, according to MMB.

The enrollment projection model was also updated to show the effects of the declining birth rate, which was not reflected quickly enough in previous forecasts and contributed to the shrinking student count in Tuesday’s report, according to MMB.

Scott Croonquist, director of the Association of Metropolitan School Districts, said he was surprised the enrollment declines mentioned in the forecast weren’t linked to the pandemic. Last year, public school enrollment fell as families opted for homeschooling or private schools, and projected education spending declined $118 million as a result.

The state hasn’t released enrollment numbers for the current school year yet, but Croonquist said it seems so far that many districts have gained back at least some of the students they lost earlier in the pandemic. Still, some haven’t fully recovered, he said.

“Things have stabilized,” he said. “Certainly, many districts are in better shape than they were a year ago.”

The forecast also cited declining compensatory aid to school districts as a reason for the lower-than-expected spending projections.

Compensatory aid, a funding stream intended to help students who aren’t meeting state standards, is distributed to schools based on the number of students eligible for free- or reduced-price lunch. Students sign up for free- or reduced-price lunch by submitting paperwork to their school, which hasn’t been necessary during the pandemic — the federal government allowed schools to serve free meals to all students.

That meant many school districts missed out on compensatory funding, even if the number of qualifying students stayed the same. The forecast projects the state will spend about $39 million less than expected on the aid — a decline of about 3.8%.

“(The decline in funding) is driven by fewer applications, not by having fewer students (who qualify),” Croonquist said. “The students are still there, and they still have the same needs. But the families didn’t fill out the forms because they didn’t have to.”

Kirk Schneidawind, director of the Minnesota School Boards Association, said he’d like to see the Legislature put some of the historic surplus toward fixing the compensatory aid formula. A more accurate method for counting students would likely be more expensive, he said.

Schneidawind also hopes lawmakers will use some of the money to address funding gaps for school districts’ special education and English language programs. Districts are required to provide these programs but don’t receive enough state or federal funding to cover them.

“This (surplus) may mean that there’s going to be opportunities to address some of our unfunded and underfunded portions of school districts’ budgets,” Schneidawind said.