Declining enrollment and rising costs have pushed the Minneapolis school district to the brink of insolvency, which could lead to intervention by the Minnesota Department of Education.
If a district’s reserves — which are akin to a savings account — drop into the red too far, the state would determine that the district has fallen into what’s called “statutory operating debt.” At that point, the district must submit a plan to the state showing how it plans to get back on track or risk losing crucial state funding. The loss of state funding would put the district into a fiscal death spiral, since it accounts for more than half of its general fund revenue.
The district’s financial crisis is particularly striking given the relatively healthy local economy and increase in education funding recently passed by the Legislature.
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