PLSAS’s Financial Crossroads: What’s at Stake This November
Recently I mentioned that there is much at stake on this November’s ballot. As some of the discussion around these questions begins to take shape there is one term that you won’t see on the ballot, but you will hear an awful lot of people throwing it around. That term is “statutory operating debt” and I’ve already seen some incredibly overconfident explanations about it.
I guess it’s a lucky thing for all of you that I love digging in and understanding all of this stuff. My curiosity is both a gift and a curse, but I just can’t help but break it all down for you!
So what does this mean for our district? How likely is it that we get there? More importantly, how much time do we have before we reach that point?
But first! What the heck is statutory operating debt?
In plain language, statutory operating debt (SOD) is a measure to determine if the district spent more than it took in, and if so, how large that deficit is compared to total spending. The statute (Minn. Stat. 123B.81, subd. 2 ) describes SOD occurring when “the school’s operating debt is more than 2.5% of the most recent Fiscal Year’s (FY) expenditure amount.”
Carrying a small shortfall is fine, but carrying more than 2.5% is a warning sign to the state and requires districts that enter SOD to submit a correction plan to the state.
So how close are we? While it is not misinformation or a scare tactic to say that the district is approaching SOD, it would also be fair to say that, at this point at least, it is not a certainty. Our district’s financial analysis does model a few scenarios in which we enter statutory operating debt, along with how long it takes us to get there.
Per a memo to the board dated February 9, 2026 (updated 2/3/26), from Executive Director of Business Services Lisa Rider, the district “could enter statutory operating debt status in FY29 without a board or voter-approved operating levy.” It is important to note that the word “could” is doing a lot of heavy lifting in this sentence.
Under Appendix 3, Option A, which assumes circumstances remaining as they are today, the board simply renews the existing levy and continues to make $3 million in reductions starting in FY28. With this approach, our fund balance (think of it as the school’s savings account) goes negative in FY29, but as we stated before, going negative is not what triggers SOD. Ending the year at -0.29% is certainly not ideal, but remember the state allows for a small cushion before identifying something as a crisis.
However, when the district’s fund balance hits -8.46% in FY30, that’s the SOD trigger the memo warns about. Again, this is the trajectory with the current levy of $623.97 per pupil renewed and significant cuts of $3 million year over year.
To avoid that outcome, the district would need to consider substantially deeper reductions. Appendix 2’s Option A demonstrates what amount in reductions would be necessary for the district to maintain the board’s policy of having an 8% unassigned fund balance. Starting with the $4.15 million already reduced in the FY27 budget, we would need to reduce $28.62 million more over the next four fiscal years.
I think it’s fairly obvious that the operational toll this would have on our district would be, in a word, catastrophic.
So could the district avoid SOD? Of course. The district’s own memo answers what it would take: “Any 5-year plan leading to financial sustainability would need to include significant institutional and structural changes.”
The good news is that the memo identified other possible scenarios that—while they don’t eliminate the threat altogether—do buy the district much needed time. Appendix 2, Options B and C show the 5-year projection with new voter-approved revenue.
It is also worth a quick mention that the 5-year forecast I’ve referenced here is slightly out of date. At the time, the district had created a forecast using levy amounts of $988 per pupil and $1,386 per pupil. Since that time, the amount being asked for to replace our existing levy has been increased to $1,740.97 per pupil.
Between now and November, you’re going to hear a lot about what this money does or does not do. You will hear a lot about whether this was the right amount to ask for, considering there was a similar ask two years ago. You will hear a lot about affordability and that we need to know what exactly the district intends to spend this money on before voting yes on it.
Those are perfectly fine questions to ask! But it is also worth considering that these decisions were not made overnight. The board has clearly been having these discussions since February. It has discussed many different scenarios, and deliberated on what was the right amount to ask for.
Personally, I think the fact that the board unanimously passed a resolution at its July 20 meeting to put both the $1,740.97 per pupil operating levy and the capital projects levy on the ballot is a darn good reason to support this.
Sometimes I find it helpful to think of all the possible outcomes, as if I am imagining what the future headline would read if that end result should come to pass.
So which headline would you prefer?
PLSAS School District enters statutory operating debt in FY29.
PLSAS School District to cut spending by $32.77 million between now and FY31.
Residents approve operating levy referendum and capital projects levy, preserving current programming and giving PLSAS School District much needed stability to carefully plan for the future.
I mean, sure. That last headline is a bit wordy, but I’d prefer that over the other two in a heartbeat.