Finance

Updated 02.12.2025

Three community sessions were held in January and February 2025 to share information about school finance and the 2025-26 budget. Below is a video of the presentation shared at these events:

School Funding Related Terms & Definitions

Average Daily Membership (ADM)

Average Daily Membership (ADM) refers to the average number of students enrolled within a school or district each day over a specific time period. 

Operating Capital Allocations

Money set aside specifically for physical equipment and supplies that typically costs $500 or greater and/or last longer than 3 years such as desks, chairs, cafeteria tables, course-specific machinery, video production equipment, kilns, microscopes, musical instruments, sewing machines, stoves, refrigerators, iPads and other technology.  Additional uses of operating capital dollars can be found in MN Statute 126C.10 Subd. 14 Uses of Total Operating Capital Revenue.

Full Time Equivalent (FTE)  

Full Time Equivalent (FTE) refers to the unit of measurement equivalent to a worker or student, one unit of a work or school day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload; however, 1 FTE does not necessarily equate to 1 person, as some employees work part-time (less than 1 FTE).

Cross Subsidy

A cross subsidy measures the difference between expenditures and corresponding revenues. Put more simply, it is money from the District's General Fund Budget that is needed to cover underfunded Federal and State mandates. 

Unfunded and Underfunded Mandates

Unfunded and underfunded mandates are terms used to describe government requirements that impose additional responsibilities or costs on public schools without providing the necessary funding to support them. For example, a law that requires schools to provide additional services or programs without providing any funding to cover the associated costs would be considered an unfunded mandate. Underfunded mandates refer to government requirements that are accompanied by some funding, but not enough to cover the full cost of the mandate. In both cases schools are forced to redirect funds from other areas or find additional revenue sources to cover the mandated costs, putting a strain on school budgets and limiting the ability of school districts to make decisions that best meet the needs of their students.

Multilingual Learner (ML)

Multilingual learners are those who comes from a multilingual home. They may have learned another language first, or have consistent interactions in another language currently. Some of these students require direct, specialized instruction in academic English. This can be done in a content class trough co-teaching, or in a pull-out small group environment.  

Assigned Fund Balance

Represents amounts constrained by the school district’s intent to be used for a specific purpose.  Intent is expressed by the school board itself, or a body or an official to which the school board has delegated the authority to assign amounts to be used for a specific purpose.

How Schools Are Funded 

School funding is a shared responsibility among local, state and federal funding sources:  

State Funding 

State funding are payments made by the Minnesota Department of Education (MDE) and other state agencies to local education agencies (LEA). This includes general education aid, which is the largest share of the education finance appropriation and is intended to provide the basic financial support for the education program.

Federal Funding 

Federal funding are payments made by the Federal government through MDE to the LEA based on a variety of formulas and competitive grants. The two largest programs are No Child Left Behind Title I Grants and Individuals with Disabilities Act (IDEA) Special Education State Grants.

Local Property Taxes 

Property tax levies are broken down into two major subcategories: Voter Approved and tax imposed. Tax imposed levies are determined as part of the levy cycle each year and are limited by what is in Minnesota statute. Voter approved levies are a local property tax passed by the voters of a school district that generate revenue for the district to fund programs and services that the state or federal government does not fund or fully fund as part of “basic education”.  

Other Local and County Sources 

Local sources include revenue generated from various charges made to students, parents, or guardians for rental or user fees for items such as musical instruments and all other charges permitted by law including transportation and activity or athletics fees.  This also includes revenue for admissions, gate receipts, donations, interest earnings and any other miscellaneous revenues.

Our primary source of funding comes from the State of Minnesota. The legislature sets in statute the state's K-12 basic funding levels, as well as directing what services schools must provide. In determining how much funding we receive, the legislature uses a complex formula that considers the number of students, special needs within our district, property wealth and several other factors. For our school district the state currently funds 76.8% or $70,761,769 of our budget based on our 2022-23 audit.

General education funds pay for operating expenses, including salaries, benefits and supplies. Funds are also distributed to schools and sites. When there is not enough funding from state and federal sources the School Board may ask voters to approve an operating referendum levy.

Explaining Fund BalancesA fund balance is a savings account that falls into one of three categories and each category serves a specific purpose with the district. Expenditures paid for through any fund balance should be dedicated to one-time expenditures, as opposed to ongoing costs. Because there is not a dedicated funding stream (a steady source of incoming money), using money from a fund balance for ongoing expenditures creates a gap between the revenue and expenditures that must be filled in the next fiscal year as the original deficit will remain and grow over time. 

The Three Types of Fund Balances: 

• Unassigned Fund Balance – Funds available to meet current and future years expenditures. These are resources in Fund 1 that are not restricted and have not been committed or assigned to any specific purpose. Current policy requires the unassigned fund balance to be between 8-12% of general fund expenditures.
• Reserve Fund Balance – Minnesota State Statute dictates the amount of money kept in the reserve fund balance and the use of that money. 
• Assigned Fund Balance - The assigned fund balance is money which has been set aside for a specific purpose. This money is assigned by the school board, or a body or an official to which the school board has delegated the authority to assign amounts to be used for a specific purpose. The assigned fund balance also includes donations which have been given for a specific purpose. If the Board sets aside money for a specific purpose they can reassign the money by Board action as needed; however, money given as a donation for a specific purpose cannot be reassigned or used for anything else. 

Additional Information, Resources, and Supporting Documents:

• Fiscal Year 2024 Uniform Financial Accounting and Reporting Standards Compliance Report
• Superintendent Berg discusses fund balances at the November 27, 2023 School Board Meeting.

Unassigned and Assigned (unrestricted) Fund Balance Comparison to State Average:

How does enrollment affect school district funding? 

School districts are funded based on complex formulas from state and federal sources based on Average Daily Membership Units (ADMs). Within these formulas there is a weighting of 1.2 placed on secondary learners (grades 7-12) compared to the weighting of 1.0 placed on elementary learners (grades K-6). Therefore, school districts will receive more money for learners in middle and high school than they do for elementary school learners.  

Enrollment in ISD 192 has been slowly declining since the 2015-16 school year in our elementary schools. ISD 192 has seen a decline of approximately 424+ ADMs when compared to 2019 numbers. The decline in enrollment is partly due to a decline in birth rates in our community. Between 2010 and 2022 birth rates in our community declined 28.6%.

How does ISD 192 enrollment compare with other school districts in Minnesota? 

Public school enrollment is down across the state of Minnesota. Public schools have seen a decline in student enrollment for the last two years in a row, dropping from 806,000 students in 2019 to 783,000 students in 2021. 

What is the primary cause of the decline in ISD 192 enrollment?

The decline in enrollment has primarily been driven by a decline in student population - there are fewer young children in our community. The number of potential incoming kindergarten students was at a high of 640 in 2013-14 and has been smaller every year since. 2019-20 was the first year, going back to 2003-04, where our kindergarten class was less than our outgoing senior class. 

How does enrollment affect school staffing? 

Every year the district goes through the process of right sizing our staffing to our projected enrollment. Fewer learners will equate to less teaching staff. Unfortunately, when we are projecting declining enrollment this has a larger impact. For the 2022-23 school year this process resulted in a reduction of 13.5 FTE (Full Time Equivalent) across the district, including general education and 3.5 specialist FTE at the elementary. Please note that 1 FTE does not necessarily equate to 1 person, as some people work part-time (less than 1 FTE).

 

What is a cross subsidy? A cross subsidy measures the difference between expenditures and corresponding revenues. Put more simply, it is money from the District's General Fund Budget that is needed to cover underfunded Federal and State mandates. The Special Education Cross-Subsidy and the Multilingual Learner or ML (formerly English Learner or EL) Cross-Subsidy are two that significantly affect our school district’s budgets.

• Special Education Cross-Subsidy - ISD 192 spent $6.8 million from our general fund to offset costs that are supposed to be covered by the state and federal governments for learners receiving support through an Individual Education Plan (IEP) during the 20-21 school year (please note that this number was less than previous years due to temporary changes during the COVID-19 pandemic). This is known as the Special Education Cross-Subsidy. Our special education learner count has not increased significantly, however the needs of the learners we are providing services to has risen significantly. Due to the increased needs of our learners, as part of the 2022-23 budgeting process we added 6 FTE for special education services for an additional cost to the general fund of $351,000.
• Multilingual Learner (ML) Cross-Subsidy - In the 2021-22 school year ISD 192 spent $466,202 from the general fund to offset costs for our English learners which should be covered by the state and federal governments as the services are mandated. This is known as the Multilingual Learner Cross-Subsidy.

What is an unfunded or underfunded mandate? 

Unfunded and underfunded mandates are terms used to describe government requirements that impose additional responsibilities or costs on public schools without providing the necessary funding to support them.

Unfunded mandates refer to government requirements that are not accompanied by any funding. For example, a law that requires schools to provide additional services or programs without providing any funding to cover the associated costs would be considered an unfunded mandate. In such cases, schools are forced to redirect funds from other areas or find additional revenue sources to cover the mandated costs, which can lead to budget deficits.

Underfunded mandates, on the other hand, refer to government requirements that are accompanied by some funding, but not enough to cover the full cost of the mandate. For example, a law that provides partial funding for a new program or service would be considered an underfunded mandate. In such cases, schools may still have to redirect funds from other areas or find additional revenue sources to cover the remaining costs.

Both unfunded and underfunded mandates can put a strain on school budgets, making it difficult to provide high-quality education to students and limiting the ability of school districts to make decisions that best meet the needs of their students.

What happened to the money from the building bond and operating levy passed in 2015? 

We continue to be grateful for the support of our ISD 192 community which voted to pass both an operating levy increase and a building bond in 2015.

• Operating Levy - As promised, the operating levy was used to lower class sizes across the district, maintain educational programs, maximize state aid, and lessen the burden on local property taxes. This has hugely benefited our school community for the past seven years.
• Building Bond - The 2015 building bond has been used to cover the cost of deferred maintenance, complete school safety and security improvements, and add kindergarten classrooms to all ISD 192 elementary buildings. Through careful financial management, these funds have also allowed us to create innovative learning spaces at all of our schools and make many facilities improvements across the district.

Updated 05.19.2023
Is the district projecting a budget deficit for the 2023-2024 school year?  

Yes. ISD 192, along with many metro school districts, is facing a budget deficit for the 2023-2024 school year. We initially projected a budget deficit of $3 million for the 2023-24 school year. However, the Board approved the use of $1 million from the 2015 Assigned Fund Balance to maintain current class size ratios, which reduces the deficit to $2 million.
The budget deficit for 2023-2024 is primarily caused by the following three factors:

• A decline in birth rates in our community of 28% over the last 10 years, resulting in declining student enrollment in ISD 192
•  Lack of adequate funding from the state to keep up with inflationary costs
•  Lack of adequate funding from state and federal sources to cover the cost of special education services provided by the district (often referred to as the “special education cross subsidy”) 

How are budget reduction recommendations identified? 

Reductions are always difficult. Every position and program we have in the district has value and is personal to someone or some group. Our administrative team, finance committee, and School Board have spent a significant amount of time over the last six months considering different ways to approach balancing the budget. The recommendations were made in the context of looking at our system as a whole. If nothing significant changes at the legislative level, budget decisions are only going to get more difficult as we move into next year and begin to look at 2024-25.

What steps have been taken to address a budget deficit in the past?

Every year ISD 192 goes through a careful budgeting process to ensure we are meeting our learners’ needs as fully and economically as possible. As part of the 2021-22 budget process, ISD 192 made reductions of approximately $700,000.

Here is a list of those reductions: 

MARSS Position	$ 84,000
Piano Accompanist-Middle Schools	$ 11,520
Summer Custodian Helpers	$ 26,000
Technology Capital	$ 90,000
Site Capital/Supplies/042	$294,000
District Staff Development	$100,000
Band Capital	$ 15,000
Adjust Heating/Cooling Set Points	$ 28,000
Increase Participation Fees ($20)	$ 51,200
	$717,120

As part of the 2022-23 budget process, ISD 192 made reductions of approximately $1 Million. 
Return to the staff ratio that is currently in policy.       - $1,053,000
Discontinuing District GEL staffing                               - $195,000
Discontinuing Float subs                                               - $270,000
Required additional special education staff                  + $468,000
                                                                                     = $1,050,000 total reduction

How do reductions to capital allocations impact learners? 

Part of the reductions made for the 21-22 school year that were carried forward to 22-23 include reductions to capital allocations. These allocations are broken down in the chart below by the number of learners/participants that these allocations support.

22-23 Allocation	Learners/Participants	Allocation Per Learner/Participant
Elementary  (5 Schools Combined)	$20,753	2767	$7.50
Middle  (2 Schools Combined)	$13,662	1607	$8.50
FHS	$19,962	2218	$9.00
Band**	$15,000	1167*	$12.85
Co-Curricular (athletics)	$6,654	1264	$5.26
Media	$12,500	6592	$1.90

** Band participant numbers are based on students who will be in grades 5-12 for the 22-23 school year and registered to participate in band.

What budget realignments and reductions have been recommended for the 2023-24 school year?
Budget Realignment Recommendations for the 2023-2024 school year were presented at the March 13, 2023 board work session. The Board is scheduled to take action on the Budget Realignment Recommendations for the 2023-24 budget at the March 27th business meeting, which will allow the district to meet contractual requirements and statute requirements. You can review the 2023-24 Budget Alignment Recommendations as presented at the March 13, 2023 School Board meeting here. 

How will State funding impact the 23-24 Budget and beyond?  

Updated 6/8/2023

Now that the Minnesota Legislature has completed its work, more information is becoming available on how recent legislative action will affect Farmington Area Public Schools and districts throughout the state. The provisions included in the bill that was approved by the Legislature and signed by Governor Walz outlines funding for the next two years and also includes fiscal and policy provisions that will impact districts for several years.

“We do not yet have all the details on how this legislation will affect our district, but based on preliminary numbers our district is projecting a budget deficit of about $2 million for the 2024-2025 school year,” said Farmington Area Schools Superintendent Jason Berg. “We certainly appreciate the work of our legislators and the funding that will be provided, but it is important to remember that this funding did not fully address the financial issues of most Minnesota districts.”

The most significant funding provisions included in the recent Omnibus Education Bill include the following:

• A general education funding formula increase of 4% for 2023-2024 and 2% for 2024- 2025.
• The general education funding formula will be linked to inflation beginning in 2025-2026, which means funding for schools will increase in future years as inflation rises.
• Funding to reduce the “special education cross subsidy,” which means that districts will need to use less general education funding to cover part of required special education costs. The current proposal reduces the cross subsidy for districts to 44% for the next two years. Districts will still need to cover 56% of the costs that should be covered by the state.

As noted in the legislative-related stories we shared throughout the spring, there are also numerous provisions in the bill that increase mandates and expenditures for districts. These unfunded and underfunded mandates could significantly affect the district’s financial projection for 2024-2025 as well as for future years. The three most costly provisions are:

• Unemployment insurance for non-certified hourly employees
• Implementation of the Read Act, an initiative to improve reading achievement
• Paid family leave for district employees

The cost for these provisions is estimated to be about $2 million for our district for the 2023-2024 school year with the likelihood that future costs will increase. Additional mandates, including curriculum requirements, professional development and compliance with new state reporting demands will drive those costs higher.

While more than 70% of the district’s funding comes from the state, district leaders have begun exploring options for increasing revenue in other ways including an increase in our district’s operating levy. The district’s current operating levy generates $623.71 per pupil and will expire after the 2025-2026 school year. 

More information on the impact of the bill for Farmington Area Public Schools and other finance-related issues will be shared in the coming weeks. To learn more about this, school finance, and the budgeting process please explore our Budget Info & FAQ webpage.