going to get started uh this evening. Thank you all uh for coming out tonight. Uh my name is Dan Edwards. I'm the executive director of academic services and I am joining my colleague Tammy Frederickson uh this evening. Uh Dr. Thomas and uh Chair White are unable to be here tonight because they are at another district event. Uh so we are going to uh kick off tonight and uh bring to you some information that was recently shared at the school board meeting. Uh bringing together two pieces of two major uh bits of information that were shared at the most recent study session this past Monday night. Um and we have a combined presentation that's been put together. And then as we typically do at these town halls, we'll open up uh for question and answer at the end. and uh engage with you. So, thank you for coming out uh and engaging with us as a school district. Uh we've done this is the third town hall of the year, I believe, of this year. Second. Second. Okay. All right. I'm getting last year and this year confused. All right. So, uh an opportunity to engage with the community. Obviously, we have multiple opportunities to do so on a variety of topics. Uh and these are the most uh pertinent topics. Uh often they're budget related. And so Tammy uh Frederickson, our executive director of business services, will uh take the lead on taking us through that. So take it away. Thank you, Dr. Edwards. Um the meeting tonight will talk about the budget development and then um obviously the big topic for uh not next year but the year after will be school closure. Um as Dr. Edwards said, this is the second uh town hall we've had. The first one we went into a lot of detail about how schools are funded and um that is available online. I'm not going to go into quite the detail that we did the last time. I think people have have heard it uh enough times. If not, it is on our website. Um Where does our money come from? We get about 80% of our revenue from the state of Minnesota. Most of it is in the general formula allowance uh which for 2526 is going to be $7,481 which is a 2.74% increase over what it is this year. We also get some categorical aid that is statutoily driven. Again, a lot of those are based on enrollment numbers. And then we also get some partial reimbursement for our special education students. And then we get local revenue which is in the form of property taxes and a voter approved referendum. And then our federal government also gives us some dollars. Most of those flow through us. We're just um kind of a pass through for a lot of the federal dollars. may include things like state title one which is every student succeeds act and individuals with disabilities act which is our special education um revenue stream. So when we put together a budget um it's basically our planning tool that we use to monitor our revenues and expenses for the school year. Um it's based on our projected revenue obviously that's going to be our starting point. Um again based there most of our revenue is based on enrollment. Uh the expenditures we're going to make sure that those are as closely aligned to our projected revenues. Um and then we also want to make sure that we maintain our fund balance policy with the board which currently is um a minimum of 8% in our unassigned fund balance. So obviously if our revenue is largely based on enrollment, it's going to have a big impact on um our projections for the budget and most of the funding formulas are based on enrollment. They're all statutoily driven. Uh the state has all the calculations figured out for us for the state aids. There's a report that we get from the Department of Education called the levy certification and state aid report and that's always going to be our starting point. We just go through and verify that all of the enrollment numbers are correct and they have the formulas in there so we can build our revenue projections on that. The enrollment is based on the average daily membership and one average daily membership means that a student is enrolled on the first day of school and the last day of school. They would count as one ADM. If they leave in the middle of the year, it would not be counted as a full ADM. But for the funding purposes, we get paid on pupil units. So the way that the state calculates pupil units is if you are in the voluntary pre kindergarten program, one ADM actually counts as a 6 pupil unit for funding. And then grades kindergarten through 6th grade, they count as a 1.0 pupil unit. And then 7th through 12th grade, one ADM is equal to a 1.2 pupil unit. So they add all of those pupil units together, multiply it by whatever the calculation is for that specific formula, and that's going to be our revenue. Minnesota's statute allows for um school choice, otherwise known as open enrollment. Any student who wants to attend another district other than the resident district has the opportunity to do that. We have an enrollment projected projection based on a three-year weighted average. Um we calculate that out and have kind of a running total. Um you can see that in one year if you have the first graders they will transition to the first grade the next year and so forth. So you can kind of see that it stays consistent as we project all the enrollment. So, our enrollment for 2526 that we're projecting for next year is about 8,511. Uh, for this year, we were projecting 8,660 and that's just about where we are. And noted this includes early uh early childhood. Uh, if we take out the early childhood, our projection is this year about 8601. Um, so we are very close to what our projections were for this year. There is a Minnesota statute that school boards are required to approve um an adoption for the budget by June 30th of every year. If they don't have a approved resolution for that budget, they will we the district will get no money starting July 1st until the board gets the resolution. Um, and because we're doing budgets essentially a year in advance and we haven't yet closed the previous year. Obviously, when you're putting together budgets, you're uh making some assumptions of what your total revenues and expenses were going to be to close out the year, what your current year is going to end up, and therefore projecting what the following year is. Um, you can see the history on here of the formula allowance. um it has not kept up with inflation. There was only one year in 23 24 that they did increase it by 4% but other than that it's been right around 2%. They did change the legislation in the last bianium that they put a cap on the um inflation factor of um three up to 3%. Um, so they this year decided it was 2.74% increase, but they can't it would cap out at 3%. We have to make some budget assumptions because obviously we're building a budget before things are really finalized. We don't really know what our enrollment is going to look like until the fall. So again, we're making some assumptions and some of these um assumptions that we've made for next year's budget is that the general education formula allowance um is set by the legislature. So we can't do anything to change it. Um our staff salary increases are based on the actual negotiated collective bargaining agreements. Um the only one that isn't settled right now is the teachers. Theirs expires this June 30th. So we're uh making an assumption of what an an increase would look like for them. Um we're assuming the weather patterns will be similar. Obviously we have to budget for utilities and some of the facilities planning. So if we're going to have a really really snowy winter, then obviously we would need to plan for um more snow plowing. If it's going to be a cold winter, the temperatures uh we're going to need more heat in the buildings. So, we are making the assumption in the budget that their weather patterns are going to be similar and that we can kind of use the past history for what we project for utilities and some of those facilities uh planning purposes. We're also assuming that the some of the student supports will be consistent in the previous years. So for instance, we're assuming that the schools will have a dean. There'll be social workers, there'll be um support staff in the buildings. Uh we're also assuming that whatever categorical funding we get is going to be used for the required purposes. The in state statute, it will tell you exactly what you can spend those dollars on and we're required to spend those on exactly those things. If you don't spend them on that uh purposes for that year, you're required to put that revenue into a reserved fund. Um any legislative changes the you all probably have heard they're going into special session this year. So if there's any changes that come out of special session, we'll have to look at how they would impact us. um the last uh bianium they were very late in getting some of those mandated um requirements for schools. So we had to kind of make some adjustments at the last minute. Uh we don't really anticipate any funding differences for this year. There may be a couple but so far what we've seen it's not going to have a huge impact. We also have to assume that all our contracts and supplies for budgeted purposes there has to be some increase. There's going to be um obviously cost of living increases. So we're using um assuming a fairly conservative CPI index to increase our contracts and supplies. And then we're also assuming that the enrollment that we projected will be close. If any of those things do not hold true, then we would have to do a budget amendment and have the board reapprove that. So, our projection forecast, we do a 5-year projection. Um, this is just merely to show the trends of what we're anticipating in the next 5 years. This was done last October um for 2425. Um, as you can see, we projected for 2425 that our revenues would be about 121.9 million and expenses of 122.8 and then taking all those factors into projecting for 26. We were assuming 121.1 million for revenue, 124.9 for expenses. Therefore, we needed to reduce our budget by 3.8 billion. As we looked at the actuals for 2425, our expenses actually were more than $122.8. So we have to adjust those forecast. The trend was still the same. We still needed to reduce our budget by $4 million in order to balance it for the 2526. So we did develop a plan to find two 4.1 million in reductions. We presented this to the board a couple months ago and uh this is the plan that was approved. We were increasing our class size targets and discussion caps by two students. So as you do that you the um it builds some efficiencies. There were schools that had significantly lower class sizes than what the targeted discussion caps were. So, as you, you know, readjust um the class sizes to meet those discussion targets, we're able to find some efficiencies, which means you can close some sections. So, we did find um six certified staff at the elementary, three at the middle school, eight at the high school, and then we also reduce 3.5 FTEES for pair of professionals. Um just again finding efficiencies in how the model looks. Um there were some par profofessional hour adjustments. Uh we moved minaps to the high school. Uh they're going to be located in DPOD right downstairs which saved us the lease on the building that we had in Lakeville. Um it will save us some transportation cost. Uh the phone lines that we don't have to pay for at Midcaps. And then um reducing one administrator here at the high school. also eliminated the online program which saved us 2.2 [Music] FTEES. We're making a reduction in iPads. We're taking away the iPads for the kindergarten through first grade. Um we're looking at the desktops for all of the um teachers and staff and reducing them. They'll have Apple TVs instead which are much much cheaper. We're eliminating some software contracts. We have in our calendar this year there are two less days. So um that's going to save us some transportation. Um two less student contact days. So we'll save some staff resources. Um we won't have some costs for those two days. So that again saved us some additional dollars. We have teachers on special assignment who get stipens for doing additional work like being a dean for example and we were reducing those stipens by 50% for next year. We have QC comp which is the state categorical funding for um teacher training. Uh we were exceeding the amount that we actually get for revenue. So we reduced to FTE to meet the actual revenue that we received for QCOM. We eliminated the bid committee um which was saved about $15,000. Then we have some operational chargebacks that we can charge to community ed um because community ed is a separate fund but they utilize the resources like human resources, finance, all of the general fund resources. We can charge back some of those costs to community ed. So we're going to be doing that um in the future. We closed the pool at Twin Oaks. Um we did some reductions for our admin assistance and then we're also looking at optimizing some other resources. For instance, we eliminated the employee assistance program, but we have um vector software that we are now required to use for training on some of our resources. So the different categories that we get for revenues are the general education aid which is the biggest share of the dollars that we get. Uh the categorical aid which again has to be used for the statutoily required um purposes and then property tax levies which include just the property tax levies and the voter approved referendum that are um authorized in law by the legislature. So if we look at our categorical board versus non-categorical, we get about 81.4 million in categorical revenue and about 41.8 million in um categorical. Um so those $41 million have to be spent again for the purposes that um they're designated for. Some of those include things like special education, um professional development, some learning and development. Um non-categorical would be things like utilities, transportation, staff salaries, um our general liability, insurance. Um so about 3/4 of our revenue is non-categorical, which means we have much more flexibility on how how those dollars are used. This is all the categories of state aid that we get that again are based on enrollment. Um, again, this comes from the state. There's a whole report that list out the formulas. If you're interested, I can certainly provide you the link on the Department of Education website. It's a 45page document. Um, you're welcome to peruse it at your leisure, but this is kind of a summary of all the categories that we get. So, that's a $97.8 8 million that we're anticipating from state aid. And then again, this is all the categories of levy that we receive. And then the other revenue are things like um insurance or um in interest income, some of the u activities, the grants, a lot of different miscellaneous that come in not as state aid or levy. So our revenue projection in the state aid 97.8 million the levy 17.8 the other revenue 7.5. So our projected revenue for next year is 123.2 million. And if we look at our expenditures, we have a proposal to allocate about $95.5 million directly to schools, about 17.9 to departments, and then there's also uh just under $10 million of allocations that support schools, which includes transportation, uh utilities at the buildings, health services, a lot of support that um is managed out of the district office, but is directly support to schools. So that would give us expenditure projections of 123.2 million and as you saw that's what our revenue so it is paying balance budget for next year. Then how do we spend the dollars that we do get? Most of it is going to be salaries. um like 82% of the money that we get in the district is just paid paying staff um salaries and benefits. Um then we have 13% for purchase services um 2.2% for supplies and materials, another 2% for capital expenditures and then 2.6 million and other things which is mostly repayment of our debt. The funding formula, as we talked about, is $7,481 per pupil. Um, it's now tied to inflation with a cap of 3%. And we spend about $13,432 per student. It's broken down um on the right hand table. It'll show each of the different um categories that we allocate resources to and then it breaks out how much of that is um state and local funds for the total of $13,431. This table is um on the MDE website. It's under the Minnesota report cards. You can look up any district compare us. The state average is $15,560 per student. So if we look at future um you can see for 2526 we are going to be presenting a balanced budget 123.2 2 million of revenues and expenses. And then um if you look at the uh revenue for the three next future years, uh again, we're using the formulas, we're anticipating a decline in enrollment if we apply all of the categories. Um and then also in 2829, our board the voter approved levy expires. So we have to make some decisions on uh what we're going to do in 2829. And again the expenses are always going to go up when 85% of your expenses are salaries. You have flective bargaining agreements with staff. Your salaries are going going to be increasing and then just some of those cost of living increases for things like supplies and contracts. So if we carry out um our expenditure revenue projections over the next three years, you can see the trend is we'll be $4 million short next year um even after cutting 4 million this year. 2728 will be more like 6 million that we're looking at. 2829 when the voter approved referendum expires. If that isn't renewed or um a new one voted on, then we're looking at $11 million of uh reductions and that would actually put us in statutory operating debt because we don't have that much in our general fund balance. So as we look at how are we going to kind of look at um reducing expenses in 2627 um again we have you can see that we made some pretty deep cuts with that $4.1 million. So one of the things that we're looking at for 2627 is closing a school. And there's been a lot of analysis and looking at um schools. We initially looked at uh Westwood, Greywood, and Firefox who which are our three oldest buildings. There was a capacity study done. Um we've looked at the maintenance needs for those three buildings for the next several years. And the recommendation that was made to the board on Monday night was that we would close Westwood as a neighborhood school and then we would have to redo the boundaries um for all of the the rest of the entire district and then the the Lola Davo program that's currently at uh Greenwood would relocate to Westwood which would give them an opportunity to expand their program. There would be more space there. And then um the district service center which is zoned as a commercial building. We could sell that um and then move the staff there into the Greatwood building. Um the sale of the um district service center because we have no debt on it could be used for uh capital purposes in our general fund. And then the community education would remain at Greenwood, but again would provide them with more space so they could expand their program and um have some additional room to grow. So the things that we looked at as we made this recommendation was that we have declining enrollment not just in our district but statewide. Um the state demographers have said that Minnesota is an aging state. Um and we'll continue to look that way for the next several years. We were trying to find most efficient use of all of our facilities um so that we aren't operating more space than we actually need. Uh we're trying to find efficiencies in how we distribute resources uh within the staff. uh finding capacity within some of our existing schools to help expand the programs that we do have um especially Lola Delago. And the enrollment trends don't look like they're going to be changing anytime soon. We still have projected declining enrollment for the next several years. And then transferring um relocating the staff at the district service center to the current space at Greenwood would mean that we have minimal remodeling needs that um if we tried to move staff into other buildings, there's some other remodeling issues that would have to be addressed. And this is the most costefficient way that we determine um woodwork. So, Westwood was chosen um again because it provides the most costefficient way that we could find to maximize all of the resources that we currently have. Um Grawood would be better suited as a district office. It would require less remodeling. Um there's a lot of maintenance needs at the district service center that we won't have to look at in the future and again provide Lola de Lago and the community programs room to grow. Um as we looked at cost savings, we again are assuming that we have the same number of student contact days, the same target and discussion caps for the class sizes. Um, we're using the projected enrollment from the five-year forecast and we included all the staff except for special ed teachers and special ed paras because again those um students have special needs and we'll have to make sure that all of those needs are met. So the projected staffing reductions would range and again this depends on how the reboundering goes and um how the neighborhood schools kind of um form out as the um boundaries are done. Unfortunately kids don't come in nice neat little packages. So we have to make adjustments for um actual enrollments at all of the schools. So, we could be saving anywhere from 22 1/2 to 28 1/2 uh positions and we'll know that once we uh finalize all the um enrollment boundaries which would be done um starting this summer. We would have the biggest moving and expense that we would have is currently at the U district service center. We have all of our IT equipment. Obviously, all of that would have to move to a new site. So, um there's a lot of equipment there that um we anticipate would cost about 475 to 625,000 to move, including some of those phone lines redirected and um moving furniture and uh we anticipate that we can have internal staff do that work, but again, it's going to cost some dollars to move. The projected staff reductions could be anywhere from 1.9 to 2.7. Again, depending on how those boundaries align, what the um enrollment would look like at each of our buildings. We have an estimate from a real estate broker that we could get between 2.6 and 3.5 million for the district um service center if we were to sell it. There's also a lot next right next to it that um is also for sale that may make it more attractive some to some commercial builders. Um that would be a total savings of between $3.8 and $5.7 million. So our next steps are June 9th board meeting. We're going to be asking the school board to approve the budget recommendation for 2526. Um and then July 14th, we're going to be asking them to take action on their recommend on uh what they're going to recommend for the school closure and we're we've made a recommendation to them. If there's questions in the next month, we're certainly addressing those. We'll be doing the enrollment boundary planning um in 2627 this summer and then um there will be no boundary changes for next year for 2526. Everything will stay the same. This is just looking at the 2627 school year and we have to develop a communication plan and how we're going to help families transition to all of the new um schools within their boundaries. We have to notify the Department of Education by October 15th if we plan on closing a building. So, we're going to need to do that. Um, we have a requirement in um contracts that teachers need to be notified by May 1st of what their staffing assignment is. So, we have to kind of backmap that and have all of the um schools and sections for the classrooms set before that. And then the summer of 2026, we'll start moving the program low program into Westwood. And then starting in the fall, we'll be moving the district service center staff into Greenwood. So that is our plan. Um, and we can certainly take any questions. I know I went through that pretty quick, but we certainly entertain any questions.