Duluth Public Schools’ starting point for the preliminary budget for the fiscal year 2021-22 is a $6.4 million deficit in the general fund.

District CFO Cathy Erickson said the preliminary budget is just the difference between expenses and revenues in the general fund compared to the current fiscal year. Though the district is expecting to receive two more rounds of Elementary and Secondary School Emergency Relief (ESSER) funding on top of the $2 million already allocated, the money has not been added into the preliminary budget yet, as there are a lot of unknowns of where it may be needed.

According to the Minnesota Department of Education, Duluth Public Schools is estimated to receive a total of more than $31 million in ESSER funds over the three rounds.

Erickson said if the state Legislature approves increasing the basic allowance formula or hold-harmless for compensatory education funding or increasing the formula for enrollment loss, ESSER funds could be spent on students.

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Compensatory education funding is based on free and reduced lunch counts for this year. Because of reimbursement from the U.S. Department of Agriculture, schools have been able to offer free lunch to all students no matter what their family financial situation is, so fewer people filled out the free or reduced lunch forms.

Erickson said there was also a smaller pool of students pre-pandemic who qualified for free or reduced lunch. So all of these factors have resulted in Duluth Public Schools receiving about $1.3 million less in compensatory education funding next year.

The basic formula allowance funding is determined by enrollment. Over the last few years, the Legislature has approved an increase of 1-2% per year. As of right now, there is no increase set for the fiscal year 2021-22. The House is proposing a 2% increase while the Senate is proposing no increase, with the reasoning that schools can use ESSER funds to help fill in budget shortfalls, Erickson said.

“We have seen an average of 1% to 2% each year, but keep in mind that back in 2008-09, we saw another round of federal dollars called (American Recovery and Reinvestment Act), and what ended up happening to school districts was similar to what the Senate is proposing,” Erickson said. “They gave school districts federal dollars, and then they retained or kept an equal amount of their state aid.”

Due to unknowns with the Legislature and the unknown of what enrollment will look like next year, Erickson said the current preliminary budget is calculated based on no increase in the formula, and the adjusted average daily membership (ADM) from March, which was 7,885. However, Erickson said, based on the slight uptick in enrollment the district has seen recently, they may budget a higher average daily membership for next year.

Erickson said the district has been reaching out to families who chose to home-school this year to give them support and encourage them to re-enroll next fall. Distance learning students are included in the average daily membership, but home-schooled students are not.

The district ended the 2020-21 fiscal year with around $2 million in its general fund balance, which is unrestricted money.

The Duluth School Board will receive another update on the preliminary budget work being done on May 26 at 5 p.m.