Eleven Minnesota School Districts Land on State Debt List

When School District Debt Sparks State Intervention in Minnesota

Eleven schools on the state’s statutory operating debt list deal with debt problems, including seven public schools and four charter schools. Under Minnesota law, a district lands on the state’s Statutory Operating Debt (SOD) list when it spends at least 2.5% more in a year than it actually has in revenue.

The current roster includes seven public school districts and four charter schools for the 2024-25 school year. While the total number of struggling districts remains small, the underlying financial strain carries immediate consequences for classroom instruction and student resources.

The Scale of the Deficit Across Districts

Financial distress varies widely across the state depending on overall budget sizes. Robbinsdale Area Public Schools carries a total debt exceeding $9.5 million, the highest absolute dollar amount on the list. Fridley Public Schools follows closely with a total debt of $8.3 million as of the end of the 2024-25 school year.

When measuring fiscal imbalance by the percentage of budget overspending, however, other districts lead the state. Upsala Area Schools recorded the highest percentage at 28.53%, followed by the Kenyon-Wanamingo School District at 16.47%. Fridley ranked third highest in percentage overspent at 16.18%.

Some districts cycle onto the list repeatedly. Alden-Conger Public Schools previously faced SOD designation from 2010 through 2013 and returned to the list in 2023. Meanwhile, Athlos Academy of St. Cloud closed permanently after appearing on the state’s financial watch list.

Inside the Fridley Public Schools Debt Spiral

The situation in Fridley drew heightened scrutiny from the Minnesota Department of Education (MDE). According to a letter sent October 20, MDE Commissioner Willie Jett announced the state is hiring an outside auditor to examine the district’s financial management. The letter warns that Fridley risks continuing into a “debt spiral” by issuing new debt to pay off old obligations.

“Programs, unfortunately, have to go. You’re seeing, in different districts, where we’re navigating potential school closures,” said Dr. Renee Sbrocco Corneille, executive director of the Educational Leadership, Practice and Policy department at the University of Minnesota and a former superintendent.

Fridley was placed on the state’s statutory operating debt list in March. Despite internal warnings in 2024 from its former budget director and its auditor, Brenda Lewis told the Reformer in an interview last month that district leadership was surprised in December when the state informed the district that the designation was coming. At the same time, the district informed its school board that the fiscal year 2025 audit would miss the December 31 state deadline.

Eleven Minnesota School Districts Land on State Debt List — Photo: minnesotareformer.com

Nearly ten months past that deadline, the 2025 audit remains incomplete. MDE stated it cannot approve Fridley’s current deficit remediation plan because the draft lacks concrete financial information from the missing audit. Moody’s downgraded Fridley’s bond rating to junk status in January, lowered it again in July, and eventually withdrew the rating in September due to insufficient financial data. To maintain cash flow, the district borrowed $11.5 million in short-term aid anticipation credits in January, followed by $23.4 million in new bonds in September.

Rebuilding Reserves and the Tools Left in the Box

Recovery from the SOD list requires difficult administrative choices. Districts must submit formal remediation plans to MDE showing how they will rebuild financial reserves. If the state rejects a plan, it holds the authority to withhold aid payments.

Eleven Minnesota schools land on state’s financial trouble list

Andrew Adams, president of the Minnesota Association of School Business Officials, noted that achieving fiscal stability involves both cutting costs and maximizing revenue.

“Now it’s time to go, ‘All right, how do we right this? Do we reduce headcount? Do we reduce our contracted services? Do we reduce what we’re purchasing?’ And the answer is yes. But then the flip side of the coin is also how do we maximize our revenue?” Adams said, pointing to operating referendums and state funding capture as essential tools.

Minnesota remains one of 15 states without a legal framework for a direct state takeover or administrative intervention in local school districts, leaving state regulators reliant on plan approvals, audits, and credit enhancement programs to guide distressed systems toward solvency.