District finance director warns state aid cuts, federal grant delays will reduce near-term revenue

At a school board meeting at the District Service Center in Cottage Grove, Chris Blackburn, director of business services, told the South Washington County Schools Board of Education that changes from the 2025 state legislative session and a June 30 federal notice will reduce several revenue lines the district uses for 2025–26 budgeting.

Blackburn said the K–12 combined policy and funding bill passed in a June special session left the basic formula inflation factor unchanged, maintaining the multi‑year minimum/maximum increase set in earlier legislation. He said the district receives a large share of its unrestricted per‑pupil funding from that basic formula and that the lack of a change “does provide stability for us as we budget and project out for future years.”

The presentation then detailed cuts and shifts Blackburn said will lower district receipts: a delay in a compensatory funding formula change (which gives the district roughly $6 million now and delays a new formula to school year 2026–27); reductions in special education transportation aid to 95% in 2025–26 and an additional reduction projected to 90% the following year; a new Blue Ribbon Commission on Special Education charged to develop a plan by Oct. 1, 2026, intended to cut state appropriations by $125 million over the 2027–29 biennium; and reductions to per‑pupil student personnel and school library aid that Blackburn estimated would reduce district receipts by roughly $384,000 and $120,000 respectively for 2025–26.

Blackburn said the special education changes alone create a substantial shortfall: “When I do the kind of I called it my rough math. It's about $3,000,000 each year just with that because it's about a 125,000,000 each biennium is their target,” he said.

He listed smaller but material reductions and shifts: an increase in the Minnesota Department of Education’s administrative retention on achievement integration revenue that he estimated cost the district about $34,000, and a planned cut in the state supplement to school lunch (taking the supplement from 12.5 cents to 6.25 cents per meal) that Wendy Peterson, the district’s director of nutrition services, estimated would amount to roughly $125,000 under current meal counts.

Separately, Blackburn told the board that the U.S. Department of Education notified state education agencies on June 30 that nearly $6,800,000 in federal K–12 funds would not be released on July 1. He said the district’s general fund includes about $5.1 million in federal aid in the FY26 budget and that roughly $453,000 of that (about 9% of the district’s general‑fund federal dollars) is in programs listed as impacted. He presented the local breakdown: Title II‑A (teacher development) about $220,000; Title III‑A (English learner supports) about $203,000; and Title IV‑A (student support and academic enrichment) about $29,000. Blackburn said community education federal funds of about $119,000 and certain adult education grants (roughly $37,000 plus an $83,000 IELCE component) are also currently not available.

The district’s packet and Blackburn’s comments emphasized timing challenges: staffing allocations and many contract decisions are made January–March and the annual budget must be approved by June 30, which limits the district’s ability to adjust after federal notifications arrive. Blackburn said the district planned to absorb most costs for 2025–26 if the federal funds are not restored and to revisit staffing and program adjustments for 2026–27 once more information is available.

The presentation was an information item; the board did not take formal action on the budgetary issues during the meeting.

Local context: Superintendent Nielsen and several board members attended; Blackburn and director of nutrition services Wendy Peterson provided the financial and program details. Blackburn invited questions; none were raised at the conclusion of the information item.