MARSHALL — The Marshall school district has been in recent discussion of considering to pursue a local voter-approved operating referendum in sight of projecting a budget deficit of more than $1 million next school year.

The district is using reserves, typically meant for emergencies rather than operational costs, to cover a $1.1 million deficit for the current 2024-25 school year ending balances, and is expecting to see the same shortfall next year. The deficit has mainly come from inflation, state mandates, and increased contract negotiations, with more expected to take place next year.

“One of the reasons that school districts need to generate additional revenue from their tax base is because that General Education formula has not kept pace with inflation,” senior municipal advisor Shelby McQuay from Ehlers Public Finance Advisors said at the April 7 meeting. “The legislature did add inflation to that (general education) formula allowance recently … The Bureau of Labor Statistics passes that on to the Department of Management and Budget, who then passes it to MDE (Minnesota Department of Education), and on to the school districts. It is a nationally calculated number.”

The Marshall school district’s last operating referendum was in 2018 for $675 per pupil, and has not had one in place since.

Superintendent Jeremy Williams and Director of Finance Sarah Kirchner have acknowledged they don’t expect to see an increase of revenues from either the state or federal government to help with funds, forcing the district to make reductions along with the referendum possibility.

The school board has recently directed the district to cut $350,000 from operations to help offset the projected deficit for next year, while trying to sustain educational services with minimal impact to student learning.

Approved at the April 7 meeting for the 2025-26 school year, the district will reduce software purchasing by at least $7,000, reduce supply budgets by 1%, reduce expenditures for high school programming by $5,500 (which could be offering one less course based on student registration), eliminate two media aide staffing positions, while reorganizing staffing in the custodial and nursing departments for a savings of at least $25,000 and $11,000 respectively.

The district will also increase fees for the 3-year-old preschool by $20 a month and increase CTE (Career and Technical Education) levy reimbursement with a target of $75,000 in revenue.

The board has also initiated an early-retirement incentive, which they approved the first four of at the March 3 meeting.

The early retirement plan gives the option to Marshall school teachers who have been with the district for 15 years, and are 55 years of age or older, to retire with an extra monetary incentive. Those who chose to retire are allowed to be employed as a substitute teacher if they wish.

Marshall may also continue to face budget challenges in the continuing years with the possibility of certain state funds being cut.

The State of Minnesota revealed there could be a potential near $6 billion general fund budget shortfall by the 2028-29 biennium in its latest February budget and economic forecast. To which Minnesota Governor Tim Walz created a proposal with various strategies and reductions that may be implemented.

Walz’s proposal includes the idea to close the Alternative Teacher Compensation program, also known as QComp, in fiscal year 2027, which Marshall uses. Williams said the district receives over $700,000 annually from QComp for teacher pay and incentives.

The school board and district administration will continue having discussions about facing the upcoming financial challenges and the possibility of a referendum over the next few months.

The district will have to call for an election by Aug. 12 if they choose to pursue a Nov. 4, 2025, referendum voting day.