Rural Minnesota School Budget Survey Findings 

MREA’s June 2026 survey of rural MN school districts revealed a significant concern among school districts regarding budgetary constraints. These concerns are primarily driven by declining enrollment, changes to compensatory revenue, unfunded mandates, and increasing operational costs.

Overall, 61% of districts responding are reducing instructional staff (teachers and/or paras) and 48% are reducing operational support and/or operational budgets. 19% of districts’ budgets remain the same and only 10% are increasing staff.  This is despite 71% of districts reporting budget increases of greater than 1%, with 31% reporting a 3-4% increase from FY26 to FY27, 11% are experiencing no change and only 17% are seeing declines greater than 1%.

Clearly in rural districts, the pressures of increasing costs, declining enrollment, and the loss of Compensatory Revenue are outpacing the 2.67% increase in the General Education Formula. Superintendents and Business Officials expressed urgency and concern, with many districts anticipating further cuts and expressing frustration over legislative mandates and funding inadequacies.

105 rural districts responded to the survey, which represents 44% of MREA’s 239 rural district members.

Categories of Responses

Budgetary Constraints: Participants consistently highlight the challenges posed by budgetary constraints, with many districts facing increased costs and declining revenues. The perception is that these constraints are exacerbated by unfunded mandates and inflationary pressures, leading to difficult decisions such as staff reductions and increased class sizes. Participants express concern over the long-term impact of these changes on student achievement and district operations.

Enrollment and Staffing: Declining enrollment is a significant issue, impacting budget allocations and leading to staff reductions. For 30 districts it was the number #1 budget driver and 100% ranked it among the top drivers. 25 of the 30 were cutting instructional staff, 20 were reducing instructional support, 11 were reducing reserves. 12 were doing 2 of the 3 strategies and 8 were doing all 3.

Participants express concern over the ability to maintain quality education with larger class sizes and fewer secondary course offerings. The perception is that enrollment changes are a critical driver of budgetary decisions, that PSEO as currently functioning is reducing secondary enrollments, and there is a need for strategies to address these trends.

Legislation and Funding Challenges: There is a strong sentiment that legislative mandates and funding cuts are creating unsustainable conditions for districts. Participants express frustration over the lack of permanent funding for mandates and the impact of compensatory revenue reductions. The perception is that rural districts are particularly disadvantaged, and there is a call for legislative action to address these disparities.

Future Projections and Concerns for FY 28 and Beyond: Participants are worried about future budgetary pressures, with many anticipating further cuts and expressing anxiety over continued funding challenges. The perception is that without significant changes in funding and legislative support, districts will face increasingly difficult decisions that could impact educational outcomes.

Considerations for MREA advocacy

• Compensatory Revenue Reductions: This issue is highlighted by 100% of participants as a major budget driver. The Compensatory Task Force report and ’27 legislative action will be critical to address this issue.
• Unfunded Mandates: The impact of unfunded mandates, such as the Minnesota Paid Family and Medical Leave and Earned Safe and Sick Time, is a recurring concern. Participants express frustration over the financial burden these mandates impose, suggesting a need for legislative review and potential funding solutions.
• Enrollment Declines: Declining enrollment is a critical issue affecting budget allocations and staffing decisions. 100% of participants acknowledged enrollment changes as a major budget driver despite current declining enrollment and small schools revenue streams.
• Rural Funding Disparities The perception that rural districts are disproportionately affected by funding cuts and legislative mandates suggests a need for investigation into funding equity and potential legislative solutions to address these disparities.

MREA will use these insights in producing the Rural Report, which will set the stage for platform development this fall as well as help new legislators understand the issues rural districts face.