Duluth School Board faces budget deadline

By Adelle Whitefoot

The Duluth School Board is expected to approve a “bare-bones” budget this week, ahead of the state’s July 1 deadline. If the board doesn’t, all spending will be halted.

According to superintendent Bill Gronseth, the “bare-bones” budget will show revenue and expenditure numbers with very few details.

“We’ll have an expenditure by category report but not the detailed report,” he said. “We’ll wait until July for that.”

Gronseth said the district does have a full detailed budget, but that budget will not be approved by the board until it’s been verified by an outside financial firm.

“We really want that verified before we put it in place just so we know that we have accurate information that we are sharing,” he said. The Duluth school district put its chief financial officer Doug Hasler on administrative leave last week and announced it would work with an outside financial firm to finalize its annual budget. Gronseth said last week that inconsistencies were discovered between the preliminary budget approved earlier in the spring and its final iteration, but declined to comment on the reason for Hasler’s leave.

If board members approve the bare-bones budget this week, they can approve the detailed budget at a later date as an amendment. The district is looking at a $1.6 million deficit with $2.5 million in new investments, leaving it with a $4.1 million shortfall for next year.

Gronseth said “complex changes” were made to next year’s budget “that affected thousands of lines of data,” including the shifting of some funding streams — such as the one meant to help underperforming students based on school poverty levels, also known as compensatory education funding.

“So I’m glad that we are going to work with a firm to verify those numbers because I really want it to be accurate,” he said.

Finance director for the Minnesota Department of Education Tom Melcher told the News Tribune that it’s not unusual for a school district to work with an outside firm to assist with finalizing its budget, but it is unusual for a district to put its CFO on administrative leave, seek outside help and not have a budget at this point.

“This is a difficult time to be putting your CFO on administrative leave because it’s right during the time when the district is adopting its budget. A superintendent has to have confidence in their CFO, but they also have to have a budget,” he said. “Typically, school districts will have their own business staff do the budget and just use regional accounting centers as an expert to provide some consultation and help them with some of the data transfers.

“But I suppose if a district got into a situation where they had just lost their CFO for whatever reason they might be more inclined to seek those kinds of services.”

If the board does not approve any kind of budget by the end of the week, the district won’t be penalized by MDE or the state because state aid is not decided by the budget. But the district won’t be able to spend any money until a budget is passed.

The July 1 deadline is set by a Minnesota statute.

“I think school districts have some flexibility in terms of the level of detail in the initial budget. But they have to have some board action with a revenue and expenditure budget,” Melcher said.

“So there isn’t any direct involvement of the Department of Education in reviewing the budget or in terms of using it to drive state aid. It’s just an accounting requirement for school districts to have one so they know what their spending plan is and making sure they have enough revenue to cover the projected spending before they start implementing their expenditure plans for the year.”

Melcher said if the district did continue to spend money after the deadline without a budget, it would be open to lawsuits.

Gronseth said he expects the School Board to approve some kind of budget this week.

“If there weren’t a budget in place we couldn’t spend any money starting July 1,” Gronseth said. “Much like other government entities that would shut down, that’s where we would be until we approved one.”