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The Albert Lea school district is projecting a $2.645 million shortfall as it finishes the school year and prepares for the next. 

Director of Finance, Operations and Safety Paul Durbahn told the school board Monday that prior to the revised budget, the district’s prediction model showed the district would need to reduce expenditures by $2.06 million for the next school year to maintain the district’s fund balance of 12%, and with the revised 2024-25 budget, the board will need to look for an additional $580,000 in reductions. 

He noted some of the factors impacting the school district into the future include a forecasted enrollment decline and underfunded mandates for the READ Act and unemployment insurance and paid leave programs. There is also uncertainty with compensatory funds, English learner funding and special education funding, as well as rising costs for most services. 

“We have some decisions to make as a school district and some pretty tough times to make ends meet,” Durbahn said, noting that the district is at a time where the board will have to decide whether to continue with reductions to maintain its 12% fund balance. 

He said significant budget adjustments will be necessary to maintain the district’s 12% fund balance annually, and without adjustments, the fund balance would turn to a deficit after two years. 

For the current school year’s budget, expenditures are outpacing revenues by about $661,000.

Compared to the preliminary budget, the district is projecting a total revenue of $59.87 million, or an increase of $1.71 million for its revised budget, including increases in general education aid, compensatory funding, unemployment reimbursement, special education funding and others. 

The district is seeing more general education aid due to a projected end-of-year enrollment increase. Another significant reason for the revenue increase is grant funds, which also require a matching expenditure. 

Durbahn said expenditures are totaling about $60.83 million, an increase of about $2.37 million from the preliminary budget. Some of the increase in expenditures include $96,490 for administration, $1.16 million in elementary/secondary instruction, about $448,000 in instructional support, $526,000 in pupil support and $137,000 in all other categories. 

Salaries and benefits equated to about $1.03 million of the $2.37 million, and capital expenditures equated to about $778,000, he said. 

Durbahn said some of the expenditures included grant-funded staff positions, as well as an increase for substitute teachers and additional licensed and non-licensed staff hires. The capital expenditures were for new elementary furniture that came from Elementary and Secondary School Emergency Relief Funds following the COVID-19 pandemic. 

Regarding enrollment, and in response to a question at a prior board meeting, Durbahn presented numbers about the number of students open enrolling into the district and the number open enrolling out to other districts. 

He said there were 465 students who open-enrolled out in 2023-24, and 205 students open-enrolled into the district. The district pays tuition outside of the district for 85 students who are either a part of the special ed cooperative, in treatment or other similar scenarios. 

Board member Gary Schindler clarified that the district is seeing a net loss of about 250 to 260 students, and Durbahn responded that, yes, the district is seeing more students open-enrolling out of the district than there are students open-enrolling in. 

Board Chairman Dave Klatt asked whether more students were open enrolling out in the younger grades rather than in high school, and board member Davy Villarreal asked to see a breakdown of special education students transferring out. 

Board member Mary Jo Dorman asked whether of the $2.6 million in question, how much of that was for positions added with COVID relief funding. She said when that money was spent, those people were hired with the understanding those positions were only for a set number of years. 

Dorman also questioned the cost of moving the board room from the second floor to Room 109 on the main level at Brookside.

Board member Kim Nelson said last September when the board was given a budget update, the district was projected at 12.2% fund balance. She asked whether the bulk of the increase in expenditures was tied to staffing to which Durbahn said that was the case. 

Interim Superintendent David Krenz talked about districts in the state in similar scenarios, noting that some are even projecting higher shortfalls. 

He said they have also been looking at systems within the district regarding spending to make sure spending is in line with the budget. 

“Somewhere along the line, someone’s not getting asked the question, “Do we have the money in the budget?” he said. “We’ve corrected that. We’ve put in a system now that’s going to take care of that.”

He said the staff understand that more questions need to be asked. 

The board will approve its revised 2024-25 budget at its next meeting in March with the final budget in June.