ROCHESTER — Starting this week, pollsters will be dialing Rochester residents with a question: how much more would you be willing to pay in property taxes to support the needs of Rochester Public Schools?

The survey is research for a referendum the district is planning to put before voters this fall, the latest in a series of efforts to turn the district’s financial prospects around after cutting more than $20 million and facing the reality of having to cut even more.

So, as the school district begins gauging the public’s tax tolerance, it’s worth taking a look at how the district’s financial journey over the past two years has brought it to this point.

The beginning

In January 2022, Superintendent Kent Pekel released a memo to the school board, explaining that the district would have to make cuts of up to $23 million over the following three years.

There were multiple reasons for the deficit: The district had opened or rebuilt four new schools that were more expensive to operate, the student population decreased during the COVID-19 pandemic, the district had hired staff at a disproportionate rate with its students, state funding hadn’t kept up with inflation over the years.

That nexus of factors led to the school board cutting $7 million from the budget for the 2022-23 school year.

The district was originally planning to cut another $7 million during the 2023-24 year, too. However, by January 2023, the district announced it would need to make even steeper cuts. So shortly thereafter, the school board approved the cutting of $14 million for the 2023-24 school year.

In other words, the board cut $21 million out of the budget in two years — just $2 million shy of the amount it projected it would have to cut.

By that time, the district was asking voters to approve a technology levy in the fall of 2023. If the levy was approved, it would have provided $10 million a year for the district to use on technology. In turn, that would have freed up $7 million the district was already spending on existing technology that it could then spend on other needs.

But that levy didn’t pass. And so shortly thereafter, the district announced that it would have to cut $10 million from its budget. To handle that situation, district officials announced they would be making a portfolio of sweeping changes — including the closure of multiple schools.

Mayo Clinic soon stepped in with a $10 million donation. At that time, Pekel emphasized the gift was just a bridge to get the district to where it needed to be. In other words, the district would have to either return to voters with another request or face the prospect of having to make another round of cuts.

If Mayo Clinic hadn’t made its donation and the district did have to make $10 million of cuts, that would have brought the total reduction since 2022 to $31 million — $8 million over the total of $23 million that was first predicted.

A second referendum

Last month, Pekel told the School Board he would recommend putting another referendum before voters. Although he didn’t give a specific recommendation at the time, he indicated the district could ask voters to approve “up to $20 million a year.”

“We will have achieved significant financial stability,” Pekel said at the time about voters approving a request of $20 million a year.

And that is what has brought pollsters to their phones this week, asking Rocherites about their tax tolerance. The district is trying to gauge how much it can realistically ask voters to support during a referendum.

Depending on what voters tell those pollsters, the district may not ask for $20 million a year. Maybe it will ask for $15 million, or $10 million or some other number based on voter feedback.

However, considering the district is estimating that $20 million a year is the amount that would allow it to reach “significant financial stability,” it would be possible to end up with a situation where two realities exist simultaneously: 1) voters approve a levy for a lesser amount 2) the district leadership still has to make cuts since voters did not approve the full amount it needed.

“I’m really hopeful that’s not how it goes, because that’s a terrible feeling to have: we’re asking people to raise their taxes and we’re still cutting the budget at the same time,” RPS Chief Administrative Officer John Carlson said.

During his presentation in March, Pekel told the School Board that if voters do not approve the forthcoming referendum request, the district would have to cut $20 million from its 2025-26 budget.

That would be $20 million of cuts above and beyond the original $21 million of cuts the district had already made since 2022.

The additional costs

If the original deficit was caused by things such as a decline in enrollment and the disproportionate hiring of staff in relation to students, how did the financial situation of the school district balloon so far out of control beyond that point?

In the time since the district started reducing its budget in 2022, it also experienced several significant cost increases. One was with its bus contractor, First Student. In October 2023, RPS announced that the cost of its contract with First Student was increasing 30%, from $10 million a year to $13 million a year.

The district’s employment costs have also seen increases. In 2023, when RPS announced it would have to cut $14 million from the budget instead of the $7 million it originally planned, Pekel said one of the reasons was the higher pay for hourly employees. In the 2023-24 school year, every employee in the district started making a minimum of $19 an hour. That was a significant increase from just a few months before when paraprofessionals made a minimum wage of $15 an hour.

“I have no doubt that settling those contracts at higher rates of increase in wages and benefits than the district has agreed to in many years was the right decision for our students and our system,” Pekel wrote in a memo in January 2023. “We needed to take that step because in Minnesota today we are living and working in the tightest labor market not only in the United States today but in all of U.S. history.”

The district’s employment costs then continued to increase throughout 2023 as administration began negotiating with the district’s teachers union — a group containing more than 1,300 members. Overall, the cost of the new contract represents an increase of approximately 15% for Rochester Public Schools.

Last year, the Minnesota Legislature approved a much-touted “historic increase” to education funding, which included an increase to the funding formula of 4% in fiscal year 2024 and 2% in fiscal year 2025. In Rochester’s case, however, that increase in state funding was consumed by the increase in the teachers’ contract alone.

So, what would happen if voters rejected a second referendum request? In that case, the district would be in the same position it was prior to the donation from the Mayo Clinic: class sizes would be going up and schools would likely be shutting down.

Although it hasn’t released a list yet, RPS is planning on approaching this referendum differently than it did the last. Prior to the 2023 referendum that failed, district officials explained the failure to approve the levy would result in millions of dollars of additional cuts.

However, in the context of a school district with a budget of hundreds of millions of dollars, that abstract description failed to resonate with voters.

This time around, RPS administration is compiling a list of concrete consequences that would happen if voters reject another referendum this fall.

“We are going to make very clear this time those things in advance of the referendum,” Carlson said. “We want it to be together so there’s no confusion about what it means if the vote doesn’t pass this time.”